Do you want to start a brewpub business and want to know the cost? If YES, here is a cost breakdown for opening a brewpub and the profit margin / ROI.
A brewpub is a bar that is owned by a brewery, and this bar serves beer directly to consumers from the brewery. A brew pub basically is a microbrewery that has a restaurant attached to it and predominantly brews for onsite consumption.
The main thing here is that once a brewery has a restaurant or bar attached to it, it is now a brew pub. In a brewpub, the manufacturing process is in view of customers, separated by a glass or something similar for security reasons. In this way, the consumer can observe where and how the beer he is drinking is made.
But even more important than this visual appeal is the fact that customers know that they are having beers with the maximum possible freshness, which do not suffer the damages associated with transport and storage such as; inadequate temperatures and humidity conditions, sudden movements, loss of aroma and flavor, etc.
None of this occurs in a brewpub, since beer is consumed directly from the ripener itself, where it rests after its manufacture at a controlled temperature.
One of the benefits to a microbrewery or brew pub, is that since both venues brew for on-site and small batch enjoyment—although microbreweries do have a distribution model to plan for—beer makers can get creative with ingredients and infusions, try new brewing processes and provide consistent and quality beer for those who are clamoring for the next best thing in craft brews.
How Much Does It Cost to Open a Brewpub?
Before you can estimate profitability, you need to figure out the cost of doing business as a brewpub. To do this, you have to take a lot of variables into consideration. You have to figure out average costs for food and beverages plus operating expenses such as wages, utilities, entertainment, marketing, and more.
You can manipulate all of these averages based on your particular situation. Will your menu be up-scale or pub food? Will you have a full bar or serve only your own beers? In addition, many brewery equipment manufacturers offer potential clients formulation sheets describing the general costs of brewing an average beer.
You’ll probably want to take one further step and try to gauge how much it’s all going to cost you. After all, the amount of profit that you get to take home will depend greatly on how big your bills are. These are areas that would help you estimate the startup cost of a brewpub.
- The Building
One very important factor that can take up a lot of your startup cost in your brewpub is your building. Will you be renting, and if so, is the rent comparable to your competitors’ costs? Are you planning to own your own building? Either way, try to keep this expense between 5% and 7% of gross sales. That should give you some kind of budget based on your sales projection to shop around with.
When you find a location for which you’re willing to negotiate, consider hiring a broker to represent you. If you don’t stick to your guns and negotiate for a reasonable rate, you may easily get taken. Furthermore, brokers can be real estate hound dogs for you, saving you time. Give them the parameters of what you’re looking for and let them have at it. Many will do it free of charge.
- Your Brewery
This is the other half of this equation — how big should the brewery be? The brewery can be the single most expensive part of the brewpub. Estimating the correct size is crucial to an efficient operation. Many brewery equipment manufacturers will tell you they have a “rule of thumb” to go by that ranges from 7 to 10 bbl maximum annual production per seat.
So let’s say your sales volume projections have led you to plan a 200-seat brewpub:
- 200 seats X 7 bbl/seat = 1,400 bbl per year
If you have a 7-bbl brewery, you will be brewing 285 times in 52 weeks, or 5.49 times per week. Now remember, that figure represents the maximum consumption capacity. That means that if you have the perfect location, great marketing, and brew fantastic beer, life will be great and you might sell 7 bbl per seat.
The number of brews per week and your brewing style and cycle will determine how many fermentors and serving tanks you will need, as well as what you need in the way of brewery personnel. If you are not a brewer and cannot figure this out, find someone who can immediately. Tanks can be expensive.
Rent is a huge part of your equation. You would have to pay rent on the location, unless you applied for a lease. This money though may not factor into your startup costs, but can influence how much you can make from the business.
Equipment is another huge cost to consider when setting up a brewpub because brewing equipment is expensive. Buying new equipment has its benefits despite the higher cost. Some manufacturers have great support programs. If you are not too experienced in professional brewing, this route can save you a lot of beer as well as your reputation.
Nothing’s worse than opening a new brewpub and serving off-flavored beer. Remember: You only get one chance to make a first impression. You also have to decide whether to buy new or used equipment. Cost differences between the two can be sizable.
Some people have managed to set up functional breweries for $10,000 (or less!), but their operation looks like an overgrown home brewery. If you are going to brew professionally, be serious about the quality of your equipment. You are only as good as the tools that you work with. If you are a competent brewer, mechanically inclined, and you know what you are doing, used equipment can be a good alternative.
- The Restaurant
Furniture, fixtures, and restaurant equipment costs must also be detailed and priced out when estimating the cost of starting your brewpub. Be conservative and don’t go crazy. If you are not a public company and do not have several million dollars to put into a place, you have to set your priorities. Open first, expand and grow later.
In terms of staff costs, a brewer will cost you about $60,000 a year, and an assistant depending on their skills and how many hours they work will cost around $30,000 a year at base rate. When you get a good brewer, you’ll pay more than that as they are basically responsible for the end product. They can do a lot of damage to your business if they are not doing their job properly.
When calculating your beer costs, factor in rent, labour, ingredients etc. It can cost around around $3-4 per litre depending on the type of the beer that you’re making. The higher the alcohol content the higher the excise.
An average keg of craft pale ale is probably selling for around about $280 ex GST, so depending on your overheads and set-up, you can create it at a cost of $200. So the best thing about a brewpub is the margins you’re making on selling your own beer, as opposed to paying more for an external keg of beer.
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