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SYWTOABP 4: How much does it cost to open a brew pub?

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A lot. More than you think. Six figures, seven figures, big bucks.  This is not a ma and pa or hobby business, at least not anymore. Opening a brew pub is a major investment of time and money. Competition is significant, profit margins vary, startup expenses are considerable and ongoing operating costs can also be steep, especially in some locations.  Estimating all these costs and expenses is a complicated and time consuming process. No book or blog posting will detail everything you need to purchase or rent, nor estimate perfectly your startup and ongoing costs.

Despite that I’m going to try to do some of the work. I’ve written several business plans, including a number of restaurant business plans. Some restaurants are run more like bars, but I’ve never installed or ran a commercial brewing system. I’m relying heavily on folks who do have first hand experience in this crucial aspect of getting a brew pub open.

I always intended to contact vendors to get a relatively good estimate of the many costs that go into opening a brew pub. They can be broken into several broad categories:

  • Tenant Improvements
  • Bar & Glassware
  • Kitchen & Tableware
  • Brewing Equipment
  • A/V Equipment
  • Opening Stock

Lets look at each of them briefly in order. It will be necessary to devote an entire post to some of these costs and I’ve resigned myself to creating minimal spreadsheets summarizing the costs of various equipment needed to run a bar, a brewery, a commercial kitchen, and even a stage. That’s right our imaginary brew pub will have a stage for live music. The Howe Sound Brewery/Inn/Pub has one and I decided to add these costs in. If you decide instead to plaster your pub with flat screen TVs that has its own significant costs. The price of flat screens has come way down, but mounting them all is not cheap.

TVs, lights, carpets, tables, chairs, signage these all fall under tenant improvements. These can vary significantly from one location to another. How fancy your interior is, what the previous use of the building was, whether you do a lot of custom woodwork or millwork all affect costs greatly. Some tenant improvements can be negotiated but even opening a small cafe can cost hundreds of thousands of dollars in tenant improvements, a pub seating in the 100s will cost more. And if you choose to build a dedicated facility, that is a several million dollar endeavor in all likelihood. Tenant improvements and interior decor will not be calculated in detail but should not be underestimated.

The next post in this series will deal with the cost of the bar itself.  Bars vary in size, but hotels, restaurants, and pubs all have bars and estimating how much it will cost to install one to serve a pub of between 100-200 is something you can get a head start on from a book or this blog. What type of bar surface, what style of taps and cooling system, how vast of a glassware collection you assemble affects your total costs. I plan to do a decent estimate of the average requirements for a bar this size. It is true you possibly can get some equipment from a supplier but as a brew pub, your sales volume of any one vendor will be reduced due to brewing a significant portion of your draft beer sales.

Not all pubs have kitchens. In the UK it isn’t that common, but in North America people expect to be able to get more than a pack of crisps with their beer. British Columbians are no exception and any brew pub I’ve visited in the province serves hot food from their own kitchen. It is possible your location has a kitchen already, or you can get some used equipment, but I’ll assume the worst and that you need to calculate and pay for the costs of installing a full kitchen. In a future post I’ll prepare a sample list of equipment and  a token spreadsheet tabulating the costs.

Regular pubs and restaurants don’t need to buy and install brewing equipment. They also don’t need to buy hops and grains or deal with storage issues. Brewing equipment takes up a fair amount of space and when full weighs a lot. So in addition to the cost of the equipment itself you need to budget for engineering and architectural consultants, plus probably some structural improvements and significant alterations and upgrades to your plumbing and electrical systems. Another future post will estimate the cost of necessary equipment to brew beer in sufficient volume, but installation will be a rough estimate.

A stage and the corresponding lighting and sound equipment is something I decided to investigate as well. Some may view this as a totally unnecessary expense, but I decided to devote some time and effort into it, as Vancouver needs more live music venues and someday I may help open one.

Opening stock encompasses both the beer you brew yourself and all the other alcoholic and non-alcoholic products you plan to sell. Assuming you plan to offer a selection of wines, coolers, grain alcohols, plus of course all the little things you need to run a bar: lemons, salt, sugar, cream, mix, fresh fruit juice, straws, napkins, even beermats. Starting inventory will run 10-20 thousand to significantly more if you plan on carrying a lot of premium products. Variables for Market Research Spreadsheet

There once you pay for all that you may be finally getting close to opening your brew pub. You did budget an extra 10,000 dollars or more for opening day promotions right?

Future posts will attempt to list some of the equipment and costs needed to open a brew pub. Market Share Worksheet

I also took the time to make a small spreadsheet that covers the math done during Market Research.  It is pretty bare bones.  You will want to do a much more detailed cost breakdown and sales projection.  You adjust all the values in the “Variables” worksheet, then choose a market size goal in the “Market Share” worksheet and voila it outputs some useful numbers.

Update January 2013

I got talked into making another general purpose business planning spreadsheet. Keeners may want to skip ahead and download that, or continue reading through the original series of posts in order. The spreadsheets introduced later are brewpub specific, the general one will work for most any business.

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Written by Muskie

July 3, 2011 at 3:27 pm

7 Responses

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  1. Anyone who can pull off the brewpub is doing alright. I have had three friends try in the past few years, and it simply is not as easy as it looks. Best of luck for those who attempt it.

    Jim

    July 14, 2011 at 11:26 am

  2. Thanks for stopping by. And congratulations you’ve left the first comment of the whole series. The next edition is mostly done. I agree that it is difficult, which is why I kinda volunteered to do some of the leg work for the community of craft beer lovers. It isn’t impossible. There are several brewpubs in Vancouver and most reasonable sized towns in BC seem to have one. Duncan has one now. I lived 15 or so years in Duncan growing up, so if Duncan is large enough to support a brew pub, then that bodes well for some other towns and ventures.

    muskie

    July 14, 2011 at 1:07 pm

  3. […] SYWTOABP 4: How much does it cost to open a brew pub? […]

    • I am in the process of opening a brew pub/restaurant. I will brew on site and have live music as well. So this study has helped me…..it is in planning/inception right now. I have developed artwork, recipes and beer names, the business name, theme, demographics for the area and more. I will also launch social media and a splash page to pump it up and get people anticipating it’s opening. It is a lot of leg work, but I want to start reasonably, then expand later. Prost!

      Lyle Valentich

      July 1, 2012 at 9:03 pm

      • Glad you enjoyed the series. I’m always curious what people spend time on first when starting a business. For a brewpub the single biggest decision is location. Without a location you can’t apply for a license to brew beer. Finding and securing the right location can make or break a retail business, whether you sell beer or widgets.

        Good luck!

        muskie

        July 2, 2012 at 10:35 am

  4. Any updates on the brew pubs who opened in the last year?

    Sarah

    September 10, 2013 at 10:21 pm

    • Not from me. The big thing in Vancouver now is really small breweries which I alluded to in my series as being if not easier to open, at least simpler as you’re in a single line of business, the brewing of beer. A brewpub falls under tourism and hospitality aka the restaurant industry orgs and regulations. Of course now that we have all these small batch breweries in Vancouver, people want to drink at the breweries themselves and supposedly the city of Vancouver is going to create a new class of liquor license to allow that. So these small breweries will partially be back in the hospitality business. Off sales in the form of growlers is also a revenue stream for both brew pubs and these small batch breweries. I never concentrated on that much as it is difficult sales data to get. Maybe I will write an update, people must be still reading the articles… Liquor licensing laws are changing and that may see some new entrants to the market but it still costs a lot to open a brewpub. A small brewery is cheaper to open in most cases because real estate and even staffing costs are lower. The ingredients and manufacturing costs are very similar between a large brew pub and a nano brewery brewing beer. Beer is mostly water. But the nano-brewery has lower overhead. The big problem with a nano-brewery is distribution, particularly getting in the BC Liquor store system and higher volume restaurants or bars. So things have changed but the challenges I identified in the series largely remain. More competition is of course good for the consumer, not necessarily so good for the incumbent brew pubs and micro breweries.

      Muskie

      September 11, 2013 at 12:04 am


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