Thinking of Starting a Brewery? Here’s What You Need to Know.

With the craft beer industry booming, many beer connoisseurs and entrepreneurs are looking into starting their own brewing business. But starting a brewery or brew pub can be a complicated process, especially in Georgia. The state ABV (alcohol by volume) limit is 14 percent, and breweries are prohibited from directly selling their beer on-site. These limitations, along with tangled legal and permitting requirements, can make the establishment of a brewing business painfully difficult and costly. A little research and planning, however, can help ease the pain.

Choosing the Right Facility

Given the popularity of craft beer today, breweries often need to expand quickly to meet demand. A brewery’s future state, therefore, must be planned carefully—and a facility chosen accordingly. If a brewery’s goal is to attain 40,000BBL (barrels) per year, for example, it must plan for its facility, site, and systems to accommodate that expansion.

Choosing the right location and facility involves a number of factors. One of the first decisions to make is whether to concentrate on production—in which case an industrial location is best—or on foot traffic, which might require an in-town location. Rental rates are higher in town, but sales revenues will ideally compensate for that expense.

The facility itself must be able to accommodate the equipment needed for brewing craft beer. Potential craft brewers should learn everything they can about the equipment they plan to use and then search for a facility that provides the necessary ceiling heights, utilities, floor space, noise abatement, cold storage, and—if the brewery will offer a tasting room—parking space. Potential landlords should be informed of the expected utility usage; breweries need access to copious amounts of water, for example.

“The building ideally should have extensive plumbing and enough gas for boilers,” says Mike Loy, a Cresa Project Manager with experience in managing brewery projects. An experienced project manager can help set up the brewery’s equipment for maximum efficiency.

According to Todd Ohlandt, Senior Vice President at Cresa Consulting Group, some questions to consider when choosing a facility include:

1. Size: What do you expect your needs for brewing capacity to be, both now and in the future?
2. Water: What are the access, capacity, and reliability of your local water sources?
3. Utilities: What are the access, capacity, and reliability of your local power companies?
4. Supply Chain: Where will your supplies come from? How will they get to you, and at what cost?
5. Distribution: Where are your customers and distributors? How will you get them product, and at what cost?

Dealing with Legal Issues

Craft brewing is a highly regulated industry, especially in Georgia.  Craft brewers have to deal with federal, state, city, and local agencies. Many city officials and inspectors are unfamiliar with the brewing industry and its operations. The entire process can be a long, bureaucratic ordeal.

To help ease the process, Taylor Harper, attorney at Taylor, Feil, Harper, Lumsden, &  Hess, P.C.,  offers several suggestions for those contemplating starting a brewery:

1. Trademark: Spend the time and money to make sure that the name you want for your brewery will not infringe on an already existing brand. Hire a professional to complete a comprehensive search and to apply to the USPTO for registration of your mark.
2. Facility: When choosing a facility, make sure that the local jurisdiction’s zoning ordinance allows manufacturing, and that its alcohol ordinance does not impose any distance requirement affecting the facility’s location. When entering into a lease agreement, negotiate for an alcohol licensing contingency provision—a provision that gives you an out if you are unable to obtain the necessary alcohol licenses to operate a brewery.
3. Securities laws when raising capital: Raising capital to start a brewery usually involves issuing some form of a security—a financial instrument that represents some form of ownership in a company.  It is important to comply with both Regulation D and state securities laws when selling ownership interests in your brewery.
4. Distribution agreement: For a brewery to distribute beer into the marketplace, it must designate an exclusive wholesaler for each brand and for each territory in which the brewery’s products will be sold. There are two primary aspects to alcohol distribution in Georgia:  1) the regulatory designation, and 2) the distribution agreement. For the regulatory designation, every brewer who sells beer to a Georgia-licensed wholesaler must designate with the Georgia Department of Revenue the brands it is designating to that wholesaler and territory.  The distribution agreement is a contract governing the relationship between the brewer and wholesaler.  Terminating a distribution agreement can be difficult; carefully evaluate all distribution options before settling into a relationship.

There is some good news in all of this legal talk: potential tax incentives. In Georgia, “economic incentives are typically based on the number of jobs created, the level of salaries associated with those jobs, and capital investment,” Ohlandt notes.  While many micro-breweries may not meet all of the minimum requirements, aspiring brewers should look into available state and local programs and present their optimal growth scenario up front, as incentives are much more difficult to obtain after a business has been located.

Ready, Set, Go

Once they have chosen their facility, brewers need to be ready to sign a lease and to present their case to the landlord. In today’s low-vacancy market, landlords have room to hesitate about taking on a start-up business. A commercial real estate broker with brewing experience can help to convince the landlord and listing broker that entering into a lease arrangement will be mutually beneficial.

Then, as soon as the lease is signed, the legal and permitting must get underway. As Reid Ramsay, founder of the Beer Street Journal, advises, “City permits, state alcohol permits, and federal brewing permits should be submitted as soon as possible. If you miss a deadline, you may have to wait months for the next available court date. The legal and permitting process can take as long as a year after signing a lease.”

After this arduous process is completed comes the pay-off. The brewery—and its taps—can finally open. Let the beer flow!

Blog contributed by Trevor Smith, Vice President, Cresa Atlanta. Trevor specializes in office and industrial tenant representation. Trevor is co-owner of Beer Street Journal and has experience in the brewery industry. For more information, please contact Trevor at 404.446.1571 or tasmith@cresa.com.