Starting a Brewery in Colorado
Interested in Starting Your Own Brewery in Colorado?
You are not alone. One of the fastest growing businesses in the United States today is the opening of a “brewery”. Our nation has more than 4,200 breweries with the most beer styles and brands to choose from than any other market in the world.
More than 3,000 of these breweries are “craft breweries” which include brewpubs, microbreweries and regional craft breweries. Not too surprising, Colorado comes in as third in the nation for more breweries per capita (Vermont is first, Oregon is second). Some of Colorado’s top breweries are New Belgium, Oskar Blues, Odell, Breckenridge and Left Hand Brewing.
We, at Gantenbein Law Firm, are firm believers in owning your own business. There are challenges and successes in brewing, but with pre-planning, brewing can be one of the most profitable businesses today. Our Denver small business lawyers can help make sure your brewery is a success.
They say the best way to make a fortune in brewing is to start with a fortune. Startup costs can range from $50,000 for a ‘nanobrewery’ (make less than 3 barrels of beer in one batch) to over a million dollars.
To determine how much capital you’ll need, figure out how many employees needed, distributing costs, production costs, equipment costs, cleaning costs, infrastructure (such as electrical capacities) and location costs/leasing. Add in what will be needed for licenses, permits, bonds, insurance, miscellaneous fees and how much to build your brewery. Don’t forget zoning and regulating laws, treating wastewater, determining yeast health after harvesting and repitching. A rule of thumb is to determine a dollar figure and add another 30%.
Planning is the most important piece of the puzzle into having a profitable and successful business. You should have a one, three and five-year strategic business plan.
You will and should also have a good business law attorney to help you set up the company and help you with your plans. The attorney will guide you in the formation (LLC? Corporation?), tax liability, your operating agreement (if you have shareholders, you’ll need a Shareholders agreement), a myriad of licenses, other documents, loans and financial agreements, a lease for your building, tax numbers (federal, state, city, county), taxes, and background checks on investors/shareholders.
A huge part of your planning has to include the ‘future’. Success has been one of the most overlooked problems. Brewers constantly complain they never thought they’d run out of beer and they underestimated the capacity of demand. They underestimated the popularity their brewery would bring to the community. Within months, they had to upgrade to bigger systems. Many wished they had looked again at the location, making sure there was plenty of room to expand the brewery including more parking for future growth. Having a good business attorney and with a specific plan for the future, your dreams of owning a brewery may bring you the fun and success you’ve always wanted.
If you are starting, or expanding, your brewery in Colorado, contact our Denver business attorneys (and beer aficionados!) to help. We assist businesses both big and small. For more information on our other business law legal services we provide, please visit our Business Law webpage.
If you need an experienced business attorney to assist you in all the legal aspects of starting, owning, or expanding yor Colorado brewery, contact our Denver business attorneys immediately: 303-618-2122.
5 Tips From Successful Brewery Owners:
Plan For Expansion From The Beginning:
You are going to be successful, so plan for it! Positive thinking? Of course, but also a necessary component to a successful business. Plan to rent or buy a space that can expand with your business. Maybe it has room for a patio, garden space for hops and beer games, or an area to add more infrastructure when the time comes to increase beer production. If you can't grow out, could you grow up? Perhaps a rooftop patio option? Carefully check the requirements of renting brewery equipment. Are you in a long-term lease? Is there an option to void the rental equipment or add to it if you need a larger or more-complicated brewing system than small-batch kegs? Are you protected if your rental equipment is faulty? Does that cover lost profits if it leads to decreased beer production? How about your commercial lease agreement- are there options to rent space next door if you expand? Do you have an air-tight agreement when your landlord sees how successful you have become and raises your rent? A qualified business attorney can assist with these agreements to make sure you are protected.
This is a small sample of things to be considered for expansion. Which leads us to...
Have A Business Plan:
Again, you should use an attorney for this process, or at least for part of it. While coming up with the ideas for your business is a process all your own, you will want to use an experienced business attorney for much of your business plan. For example, is your business structure formed correctly: do you form a corporation? An LLC? What business formation protects you from being sued? Is this the same business formation so you don't have to pay the IRS the majority of your profits at the end of the year? Don't worry- we have the answers for you.
Make sure your business plan includes expansion. (See above. You are going to be successful, remember?!) Not only for you (time to consider a trust- you want to protect your hard-earned profits!), and your business, but also for your employees. Does your expansion plan include stock options? Shareholders? Public trading? An updated business formation that protects your growing business and decreases your also growing tax liability? New employee agreements as you add staff? Yes, get an attorney for this, too. You'll actually save thousands, if not more, by making sure everything is running smoothly from the beginning.
Plan For A Complicated And Lengthy Permitting Process:
Yep, you should use an attorney for this process, too. The average timeline for obtaining all your permits for your brewery in Colorado is days- IF everything is done correctly the first time around. This is already a rather long process, and a mistake during this process could cause lengthy, and costly, delays.
Colorado is a dual-licensing state: that is, you must first obtain licensing from both the city in which your brewery is located and then from the State of Colorado. For instance, if you are planning on starting a brewery in Denver, you must obtain licensing from the city of Denver and then the State of Colorado. Colorado law requires approval from the city first, in order to meet the needs of that city. That city must also conduct a background check of the person(s) starting the brewery. According to the Colorado Liquor Enforcement Division, "for new license applicants, this typically requires showing the neighborhood needs and desires for each new liquor license. Local government will typically conduct an initial background investigation of the individuals involved with a retail liquor license application."
Many cities also require zoning permits and zoning compliance statements, as well.
Most cities also require a public hearing before granting approval of your liquor license.
If you are planning a special event or a tasting event- a great way to showcase your new brewery and garner publicity for a grand opening- you must also obtain special permits for these events through the city in which your brewery is located.
Liquor licenses must be renewed annually. Failure to do so could result in revocation of your license.
Research, Research, Research:
Thankfully, Colorado is a great place for researching all things beer. Colorado has always been at the forefront of the craft beer movement, even before craft beer exploded onto the mainstream scene. That gives you ton of options for research! Research what types of beer people love drinking. Maybe that changes during the seasons or changes depending on your location in Colorado; a dark porter may be more popular at higher altitude than downtown in the heat of summer. Research who your client base will be at your brewery location. Reasearch if there are development plans nearby and if that will change your client base. Research what beers are the most profitable to make and sell. Research what beers will be the most popular and keep them on your menu throughout the year- perhaps a drinkable session beer or solid stout?
Research every possible option that could affect your brewery operations- and then take that knowledge, and do just a little bit better than everyone else. Learn from our beer ancestors and evolve!
Time to Get Brewing Yet? No, Not Really...:
Paperwork, administrative work, and cleaning. Repeat.
Yes, this is boring- but a necessary evil. Paperwork (see Plan for Lengthy and Complicated Permitting Process, above) will consume most of your time in the beginning. Once you have completed this process (and don't forget to annually renew!), it is time for ... more administrative work. This include lease agreements, employee handbooks, contracts, equipment leases, purchase agreements, construction contracts, employment agreements, non-compete agreements, trademarks, copyrighting, trade name registration, stock options, operating agreements, shareholder agreements, waiver and release agreements, payroll, profit and loss statements...and more. Is your head spinning yet? Much of your adminstrative work is ongoing. Consult with your local business lawyers to both expediate this process and to make sure everything is done expertly.
Perhaps most importantly is the cleaning process involved with your brewery. Cleaning the brewery, cleaning the brewing equipement, cleaning the brewery tap lines...it is a neverending process! You want to always pass inspections with local health code, but also to always have superior and great-tasting beer your customers will rave about!