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