Ever since I started this amazing and sometimes maddening adventure of opening a brewery I’ve been agonizing over what beers I want to brew. I’ve covered this subject in a few previous posts, so I will try very hard not to repeat myself or say the same thing again (see what I did there?). Well, I’m happy to say I have a much, much clearer vision of what I think will be Panic’s two flagship beers at launch.

First, I’m not going to divulge exactly what they will be because the marketplace is getting more and more competitive and I’d rather wait until the brewery is almost ready to begin operations. Once I’m ready to roll, I’ll go into great detail about the beers and supply enough info that homebrewers will be able to get very close to the final recipes.

How hard can it possibly be to sell another APA in the market place?

The first beer is an American style pale ale. Now that doesn’t sound very interesting, does it? You can’t go outside without tripping over an American craft pale ale (at least at my house, since I just throw all the bottles onto the front porch or into the yard). Who in their right mind would brew one of the most popular styles of craft beer in their start up brewery?  IPA is actually the most popular craft beer style I believe, but APA is up there somewhere. This APA is hopefully going to be quite a bit different than just about any other APA in the Chicago market. I have a very specific hop profile I’m going for and I’m getting close enough now that I’m moving from small prototype batches to regular 5 gallon and soon 10 gallon batches. I’ll cover my prototype process in a later post.

I’ve really mulled over this recipe and brewed it multiple times. Each iteration has gotten a little bit better but I’ve recently learned a few things which will help me to get it exactly where I want it. I should point out that Nate was extremely helpful in formulating and iterating this recipe and brewed a tasty 10 gallon version of it back in March.

The first thing I’ve learned is how to calculate late hop IBU contributions. I didn’t know what the exact theoretical IBU contributions should be and my beers kept coming out more bitter than I wanted. I finally finished reading Stan Hieronymus’ “For the Love of Hops” and about fell out of my chair when I got to the late hopping/whirlpool hopping section. There is lots of good data from Stone and Firestone Walker and others regarding hop utilization at lower temperatures in the book. Then I started an email thread with the creator of the brewing software I use, BeerAlchemy 2 on both Mac and iOS (the syncing feature between Mac and iOS is absolute killer). I asked him about how to calculate IBU’s from late hopping and he kindly pointed to the feature built right into the software (it’s the “Hot Steep/Whirlpool” parameters, which I had never noticed for some damn reason). Since I had never filled in the two fields for whirlpool time and temperature, the software never calculated the IBUs from those hop additions. Duh. These very recent discoveries have been extremely helpful in providing at least some kind of guidance on how much bitterness I can expect in my beers. Remember these numbers are all theoretical, but that’s better than nothing.

The other beer is going to be Englishy. I love English bitters. This beer is not an English bitter. It is absolutely informed by English beer styles and there are other craft breweries doing something like this, but I’m going to make it my own. It will be very low hopped, very low in alcohol, and easy quaffed by the gallon. I’m really excited about this beer.

Oh, almost forgot to mention. My local homebrew club, Square Kegs, has an entry in this year’s Beerfly Alleyfight which will be taking place at Haymarket Brewpub. All competitors will be brewing a porter. I created the recipe with fellow homebrewer Jordan von Kluck based on the ingredients provided and some tweaks to help us bring home the gold or whatever it is. I brewed it a couple of weekends ago, which turned into quite a fun Square Kegs party in my back yard. This is a big, fun competition that’s hard to explain, so go Google it and try to make it if you can. I’ll be there for sure.

As usual, I have lots more to share covering everything from SBA loans to licensing. I’ll blog all this stuff as we continue.

Cheers,

G

Did I say no partners? If the right woman person came along, I might be persuaded. They’d have to be perfect though. And blonde. Very blonde.

The past 6 weeks or so since I announced my partnership with Nate have been very busy and very intense. Within just a few days of Nate saying he was on board we were dividing and executing tasks like mad men, sharing what we learned, making decisions. Lots of stuff knocked out very quickly. (As an aside, we’ve been using Asana to accomplish all of our task management and follow up. It’s free and highly, HIGHLY recommended. Seriously, check it out.)

Nate and I have been a well-oiled machine bouncing ideas off of each other, taking on tasks that best suit our strengths and personalities, compromising on ideas that then turned into better ideas. It’s been great. However, there have been some big issues dividing us.

For me, a big part of this journey, a big motivator to finish this, is leaving something for my kids to take over should they choose (and they damn well better!). That desire has always been at the base of the Panic Brewing pyramid. I want my kids to see that if you work hard, dreams really, truly come true. (Ok, not all dreams, ’cause if they ALL came true I’d be writing this aboard Charlize Theron’s yacht anchored off the coast of Sardinia.) This is a very big deal to me. Well, guess what? If you have a partnership, you can pretty much kiss that goodbye. You partner doesn’t necessarily want to work with your future grown up children, and vice versa. So that means you have to get a partnership agreement together to address what happens if you die or if you want to retire. Do your survivors get the run the business too or do they just get to collect checks from the business? What if the surviving partner runs the business into the ground? What if a partner wants to sell their share of the business because they’re tired of the other partner coming to work naked every day save for the Green Bay Packers body paint he’s sporting?

Yeah, lots of potential problems. Now, as cautious and methodical as I’ve been during this venture, I still manage to make mistakes. The single biggest mistake I’ve made thus far was not really sitting down and thinking about what a partnership means today and more importantly, tomorrow. I’ve never started up a business before, solo or otherwise, so I’m still learning. But I really fucked up when I offered Nate a partnership without considering all the implications.

Now there is NOTHING wrong with Nate. He’s a great guy and we’ve become really great friends (and despite a tough week still are). Nate brings a LOT to the table and any brewery that were to take him on would be a very lucky brewery indeed. He has all the passion, energy, and intelligence required to make it happen.

At the end of the day, however, we have different needs from the business. Not recipe needs, which we were in a lot of agreement on, or marketing needs or anything specifically related to a brewery. As a 45 year old man, I always have an eye looking down the road a ways. Seriously, when you get my age, you’ll completely understand. Things just change, especially with children involved. Nate is in his early thirties and he has a few more good years ahead of him than I do. That alone makes for a difficult path to a partnership agreement.

So Nate and I will not be partnering on Panic Brewing. I will continue solo and will not be partnering with anyone. Nate and I agreed that we should post about this for the simple fact that most brewery start ups involve two or more founders, it seems. We wanted to try to help anyone considering a partnership by letting them know what it was that kept our partnership from becoming a reality. We put far too little thought into the future of the partnership and we were dumb. I was the dumbest. Don’t just think about what your needs are today, really, really think about what you need in the partnership down the road.

And don’t think this is the last you’ve seen of Nate Barth in the Chicago craft beer scene. Oh no. We have some other ideas floating around. It’ll be awhile, but I have a strong suspicion he may be back on the radar down the road.

Nate and I had a great run, we learned an incredible amount of stuff, not just partnership stuff. It’s been a great life lesson and we’re both much better off for having gone through it. Better to figure this stuff out now then when we’re running a 50,000 bbl brewery and I have to keep seeing Nate’s green and yellow dyed junk during football season. Right?

Cheers,

G

Yesterday I posted about how Nate and I have been presented with an “awesome opportunity that will make this journey a lot easier and cheaper”. About an hour after I posted it, Nate called me and told me the deal was approved and we are in business! So what is this deal that we’ve been chomping at the bit to share?

Let’s start at the beginning. Once Nate came on board as a partner about a month ago, we started bouncing ideas off of each other as to how to further mitigate our risk. We’re both married with mortgages and children and despite our passion for brewing beer, we’re not interested in putting any of that needlessly at risk. That meant we needed to seek funding from sources other than just banks and individual investors. Banks are fine and all, but we would have to put up personal guarantees which could put our houses at risk. Investors are a great option but the more investors we bring on board, the greater the risk of someone rocking the boat and expressing dissatisfaction with how the business is going.

So what’s left? Well, there are venture capital firms, but those deals require relinquishing control of the business you’ve built with your heart and soul. That wasn’t an option. What we needed was a partner with lots of cash who would let us run the business our way and trust our judgement and vision. Someone who maybe wanted to get a foothold into the craft beer industry but wasn’t quite sure how to make it happen, and someone who was based in Chicago.

Well, after mining through many business and personal connections, making about 30 phone calls, and with a heaping dose of blind luck we’ve found our partner.

Luckily Nate didn’t notice the clause in the contract regarding who has to wear the obligatory Vienna Beef Man suit to all events.

Ladies and gentlemen, please welcome Vienna Beef, Ltd to the Panic Brewing family!

Wait, what? What do hot dogs and lunch meat have to do with craft beer? Well, perhaps that might seem a stretch at first. Initially it definitely seemed incongruent to what Nate and I are trying to do. Allow me to explain.

One of our mutual friends has a close cousin who is not only a huge craft beer fan, but also happens to be an executive at Vienna Beef. Our friend was at a family gathering and mentioned in passing that she was friends with some guys opening a brewery and they were looking for a business partner based in Chicago. Her cousin’s ears perked right up apparently and by the end of the day, Nate and I were on the phone with her discussing our vision for the brewery.

Well, it just so happens that Vienna Beef, founded in 1893 here in Chicago and still headquartered here is looking to branch out from its ubiquitous hot dogs, Italian beef, and deli meat business. The owner, Josef Schulkerstein, is 5th generation of the founding family and still runs the company as a family business.

Two days after our initial conversation with our contact, Nate and I were sitting in Mr. Schulkerstein’s office discussing brass tacks. We educated him on the economics of the craft beer industry, the capital requirements for starting up and future expansion, and our passion for brewing beer. Josef (I’m tired of typing “Schulkerstein”) was genuinely fascinated by the industry. He freely admitted that he was not a craft beer aficionado but greatly enjoyed new beers whenever the opportunity presented itself. Nate and I shared the same vibe about Josef: a very open minded man with solid business sense. We were hooked. And so was he.

So it’s been two weeks now and we, along with our attorney, have been in intense negotiations with Vienna’s executive team (and their attorney). As of last night, we’ve reached a tentative agreement. The contracts need to be drawn up, reviewed, and signed, but all signals are green and I’m 99.999% confident the deal will happen. Josef is equally confident and gave us permission to share the great news!

What does this mean to Panic Brewing? Well, it means we’ll be starting off with a larger brewery, 30 barrel brewhouse vs 15 barrel. We’ll definitely have our canning line, we’ll be able to sign a lease on a particular property we’ve been eyeing, and we can be up and running by early 2014 no problem! But wait, it gets better.

Vienna will actively market our beers wherever they have an existing foothold including sports stadiums, grocery stores, you name it. They will also encourage all the various Chicago “hot dog stands” that carry Vienna Beef products to obtain Chicago liquor licenses so they can serve our beers! That’s about 350 outlets in the city of Chicago alone!

But wait, there’s even more! Josef is so excited about this whole new world of beer (to him) that he’s offered really great ideas for unusual ingredients, many of which Vienna Beef uses in their various products. So Nate and I will be experimenting with Vienna’s various spices used in their Italian and Polish sausages! And we’re going to brew a special beer specifically for Vienna Beef outlets called “WeinerBrau”. It will be a traditional German style lager but spiced with sage, fennel, onion powder and garlic powder. Our idea is to have it taste as much like a delicious sausage as possible. So much so that customers will actually want to buy a Vienna Beef sausage product to go with the beer. And more sausage eating means more beer to drink! It’s true honest to goodness synergy.

We have so many ideas in the hopper now so once we have things figured out we’ll announce all the great happenings!

So please, once again, welcome Vienna Beef to the Panic Brewing family! We are thrilled and honored to have them as a partner in this adventure!

-G

Update: April Fools’

Ahhh, the eternal question. Second most popular question we get after “Where is the brewery going to be located?” and “Do I have to call the police on you again?”. I’ve been blogging this journey since October 11, 2011. You would think this thing would be up and running right? I remember back when I first started thinking about opening a brewery. I foolishly assumed that the entire process would take a year. Youth is wasted on the young.

In this artist’s rendering, the City of Chicago will look much like this by the time Panic is operational. Fortunately by then we’ll be able to transport beer directly to customers via the “Ionic-Suds-O-Particleizer 3000″.

Here’s the deal. Nate and I have been presented with an awesome opportunity that will make this journey a lot easier and cheaper. We can’t divulge all the details yet as there are many things that need to happen to make it come to fruition. It will no doubt add a few extra months to our timeline, but it will be totally worth it, trust me. We’re calling this new development “Plan A”. We spent hours coming up with that name. Nate initially wanted to call it “A Plan” but I pointed out that he was stupid and he agreed. Our original plan is now entitled “Plan B”. Nate also wanted to call that plan “A Plan”. Again I pointed out his stupidity and then he parried with “Plan B”. Touché Nathan Barth, touché. We will one day do battle again and you will not be let off so easily.

Regardless of which plan ends up working out for us, and one of them definitely will, we won’t be opening doors until early 2014.

The reasons for this timeline are quite simple: new equipment requires at least 6 months to be manufactured and delivered, business loans require 2-3 months of processing and analysis (especially SBA ones, according to our sources). We can’t buy the equipment until we have secured the loan. Then there are construction timelines, but those in theory would run in parallel with the equipment manufacturing. Oh and the leasing process. That takes some time as well. And then there are some other events that need to occur prior to all of these, adding some extra months as I mentioned previously.

Nate and I have really started to get the loan process figured out and we’ve begun to reach out to all the potential investors who’ve contacted us over the past 18 months or so. So all the financing stuff, the most important part of this process, is really starting to come together. Our ability to get a loan looks fantastic and it appears we won’t have much trouble getting enough investors on board.

I can tell you that between now and opening day, we will be very, very busy. There are so many things we need to do and there will be very, very few lulls during the run up to opening day. We have to update our branding, figure out package design, finish our recipe formulations and trials, conduct investor meetings, legal documents need finalizing (including partnership stuff which is new to the game), planning our hop contracts, the list goes on.

Nate is as big of a fan of having one’s ducks in a row as I am and we are both ruthlessly researching numerous aspects of opening a small business. I can tell you that once we are open, we will have rock solid legal and financial foundations so that we can immediately get to the task of what this is all about: making great beer and getting it to customers.

Cheers,

G

As much as I want to own and run a brewery, of equal importance is gaining independence. I’ve been in corporate America for a very long time and quite frankly, I just don’t fit it. I never have. Whenever I have a moment of doubt about opening this brewery, there are many things I can think of to get myself back on track. One of the best motivators is realizing I’ll finally make my own decisions about what I need to do and not answer to anyone else but my customers. That feeling of total independence is going to be incredibly satisfying to me, so much so that any risks involved are far outweighed by the ability to call my own shots the way I want to call them without anyone else telling me I can or can’t. And no stupid meetings either. Part of this fierce independence I’ve been seeking is to do this alone. No partners. No arguments, no compromises, just me and enough rope to hang myself.

So it came as a surprise to me a couple of weeks ago when I decided that perhaps I’d like to share that independence with someone. Which seems somewhat dependent. The story goes like this:

I have this friend whom I met through one of my homebrewing clubs (shout out to HOPS!) a couple of years ago. Over time we’ve become pretty damn good friends. My passion for craft beer and brewing is equaled by his. So a few months ago I threw the idea out to him that maybe he’d be interested in working for Panic at some point down the road. He liked the idea, but felt it was impractical due to finances. I didn’t put much thought into after that and just proceeded as usual. In the interim, by friend had a bit of an epiphany. So a couple of weeks ago he wanted to know if we could hook up and drink some beers. He came over to my place, we had a couple of brews, then he said something along the lines of, “So you remember you asked me about working for you a couple of months ago….”

That conversation began a whirlwind of phone calls, texts, and emails between us and a dinner at our house with my friend, his wife, and their new baby boy. Another week passed, more messaging, a few fits of panic (see?) and now here we are. In the past couple of weeks I’ve changed my mind about how to get this brewery up and running and successful. I could definitely do it myself, but the problem is I don’t have all the answers and the ones that I do are going to be wrong sometimes. I don’t have a monopoly on good ideas or bad ones. And my stress level is increasing on a daily basis due to more phone calls, more emails, more texts. There are so many moving parts to this process and I have a full time job that I have to balance with family life.

I need a partner. Someone who is passionate about this business, someone who knows how to brew well, someone I can easily work with, someone with an excellent sense of humor, someone who’ll rub my feet when my wife can’t. That someone is:

Charlize Theron Nathan Barth!

Here we see Nate and is lovely wife Rebecca enjoying a cocktail in the tropics. What I haven’t told him is that the only vacations any of us will be taking over the next couple of years will be to Branson, Missouri to see the “Three Redneck Tenors” show.

Nate brings a lot to the table and I think we’ll be great partners. Yes everyone seems to have a story about two friends who became business partners and then hated each other. I have one of those stories as well. There’s a big difference here and that is we seem to agree on just about everything and when we don’t, we are able to complement each other in a way that’s kinda scary. I’m loud, obnoxious, opinionated where as Nate is quiet, unassuming, and thinks before he speaks. Nate is a native Wisconsinite and Green Bay fanatic. I am sports agnostic (and I’m from Indiana).

Nate also brews some bad ass beer including an IPA which won a homebrew competition (in which I also competed) and was then brewed at Haymarket Brewing. We are in a lot of agreement as to where we want to go with our beers and any differences in opinion on ingredients or processes will only make the final beer better. We are both in strong agreement that New Glarus is one of the best breweries on Earth.

I’ll let Nate introduce himself in a future blog post but for now please welcome him to Panic Brewing. Nate will be a full 50/50 partner with me. I’ll be getting him up to speed on all research and we’ll be splitting up tasks and knocking ‘em down twice as fast. We’ve already starting mapping those tasks out, discussing recipe ideas, marketing ideas, lots more.

Nate has already got me thinking about how we can improve the Panic logo and overall branding. There will be plenty of dynamite, but we’re going to head in another direction with it and it’s going to be fabulous. Stay tuned for that.

In other news, I met with an SBA lender last Friday and it was fantastic. Lots of good feedback and well, it looks like we may have ourselves a lender. Lots can go wrong until the deal is signed, but I’m feeling very, very good about where we are. I’ll have lots more to write about that as we figure out the details. This is the single biggest piece of the Panic Brewing puzzle.

Cheers,

G

That’s a lot of balls for one man. I wish someone could help me with my balls. My wife probably wishes I weren’t so childish. Just for that she doesn’t get to touch my balls.

I’m juggling a lot of balls at the moment. It’s hard keeping track of so many balls. But no matter what I’m not going to get testy. Hey! Get your mind out of the gutter! Don’t start reading into those innuendos and start thinking that they’re innuendos. That’s just nuts!

OK, enough of that, let’s get busy. (heh)

Here’s what’s going on in no particular order:

1. First draft of the Private Placement Memo is completed, second draft should be in my possession this week. If not, that’s OK, I have plenty to keep me busy (heh). What this means is all you lovely, wonderful folks who’ve expressed interest in being a part of Panic Brewing will soon have that opportunity. Stay tuned. Speaking of which, if you think you might be interested in investing in Panic please send me a message through the form on the Contact Me page. The minimum investment will be $8,000 and there will be lots of legal documents spelling out precisely what you get, what I get, what you don’t get, and what I don’t get. Everyone will be protected to the best of my attorney’s ability, whom I trust completely.
2. The first draft of my real estate lease RFP (request for proposal) is in my possession and I’m trying to get time to review it. My real estate broker, “Nick”, has created this document which will be submitted to the real estate brokers/owners of the properties I’ve expressed interest in. This RFP spells out what kind of infrastructure I require such as electrical, plumbing, and floor loads. We’ll see who offers some TI and/or abatements. See here for an explanation of those terms.
3. I’ve started the small business loan process. I’ve spoken to several commercial lenders thus far. The response has ranged from extremely enthusiastic to mild irritation. The banks that responded professionally, got back to me, or loaned me money will be lauded on this website. The ones who didn’t will also be mentioned as a warning to others. One lender, whom I spoke with on the phone today was very interested in the project. We will be meeting this coming Thursday. I am very excited.
4. The first batch of beer from my 1 gallon rapid prototype process is ready to bottle. I split it into two different half gallon growlers and dry hopped them slightly differently. Can’t wait to try the final results.

So that’s a quick list of where I am. Still so much to do but things are really coming to fruition.

Oh, and there are quite a few secret developments happening as well. Really good stuff and I wish I could share, but instead I’ll just tell you that I have some cool things going on and you should be titillated (heh).

Cheers,

G

As I understand it, Russia has this old power plant with plenty of clear height. The commute would be a disaster though. Get it? Disaster? Sigh.

In the past two weeks I’ve embarked on two commercial real estate tours with my real estate agent. We’ll call him “Nick” because that’s his name, but we’ll continue to put his name in quotes because that’s pretty damn funny. Anyway, “Nick” has thus far arranged for me to tour about 20 different commercial real estate properties which he thought would make suitable facilities for a brewery.

Probably the first criterion for my location is ceiling height. In the commercial real estate biz this is called “clear height” and means the distance from the floor to the bottom of the lowest ceiling support. Ideally I’d like about 16′ but I can certainly go shorter, I just don’t want to. Shorter clear heights means shorter fermenters which means, in addition to different fermentation characteristics, more square footage required for a given capacity. This is Chicago and like any big city, things are usually cheaper if you build up. I’ll be starting with 30 bbl fermenters, but in the not too distant future I’ll need 60 bbl fermenters or larger. I’ve toured a few spaces on the North Side with large clear heights, but the number of choices is surprisingly limited, but that’s fine, I’ll make do. There are more on the West and South sides, but those are just too far from my home to make them viable.

Other criteria are obviously price, square footage available now (minimum 5000 SF) and ideally additional adjacent square footage for future expansion, distance from my house, TIF/SBIF availability (we’ll cover that some other time if applicable), build out costs, etc. If you’re not aware, commercial real estate is priced by $/SF/year. So if you’re quoted a price of $10/SF, that means you’ll pay $10/SF/year, not per month. The first time I saw a quote, I assumed it was per month and damn near cried. That is not the case. Also, the price quoted will be either “net” or “gross”. “Net” means the price does not include property tax, maintenance, insurance, etc. “Gross” means all those costs are included in the quote. If you’re quoted “net”, your real estate agent will find out what the “gross” is. One way or another, you pay for all those things, it’s just how it’s quoted by the lessor.

One thing I’ve noticed immediately is that commercial real estate owners (or their real estate agent surrogates) run the gambit from very friendly and helpful, to stubborn, cheap, ass hats. I won’t be dealing with the ass hats. I have too much riding on this to put myself at risk of getting a bum deal with someone who doesn’t want to spend money to obtain and maintain a good tenant. When I say “cheap”, I’m referring to the two main ways that a commercial real estate owner can help a perspective tenant out: tenant improvement funds (“TI”) and abatement.

TI is where the owner agrees to pay for some of the build out costs you require. Obvious candidates for a brewery are: installing 230V 3-phase power on the property, concrete work, trench drains installation. The incentives for an owner to do this could be things such as getting a tenant into a space experiencing extended vacancy or poor condition of the property. The upswing for the owner beyond just getting rent for a previously unrentable space is that they can charge you higher rent to pay for the capital outlay. I’d much rather pay for high construction costs with additional rent payable over years rather than use up precious capital. As part of my business plan, and my overal assumption that nothing will go the way I want it to, I’m just assuming that I will receive little to no TI, but this is obviously based on the state of the property. If it’s a dump, then I will definitely expect TI, if it’s nice and clean, well then we’ll negotiate. The good news is that every space I looked at either already had the proper electrical and water supply or the owner was willing to pay for that in some capacity. This makes sense as all the properties are in commercial or manufacturing zones where appropriate infrastructure is essential.

Another way a lessor can help a tenant get up and running is by “abatement”. Abatement is simply where the tenant pays no rent during build out, permit processing (a fun subject in Chicago), equipment delivery and installation, etc. Once you sign a lease, the lease actually begins on an agreed upon date, perhaps 4 to 6 months after build out begins. This allows you, the business owner to not pay rent when you have no revenue coming in, and it allows the owner to get a good, long term tenant who doesn’t have to use up their precious capital and risk going out of business. Very negotiable and most owners have been very willing to do that. The ones that won’t will not be considered. This especially goes for the ass hat owner (whom was not present) and his douchebag real estate agent (about as personable as a sun dried turd) of a large commercial space on the West Side. The conversation went like this:

“Nick”: “So is the owner willing to offer abatement?”

Douchebag agent: “Oh no, he’s not willing to let someone use the space without paying any rent.”

Me with my sarcasm set to “kill”: “You mean like all the rent he’s collecting now?” (staring over a vast horizon of emptiness)

The space was very large and very empty and had been vacant for many, many months. No renters in sight. Fortunately this turd was an anomaly. Every other agent or owner we met indicated that there was room for TI and/or abatement. That’s just smart.

Another interesting facet of commercial real estate leasing that I was aware of but was reminded by lessors’ agents over and over is that the owner will be doing a detailed analysis of my business plan and business capitalization. Owners don’t want to invest tens of thousands of dollars in TI or abatement only to discover that you are undercapitalized or have a stupid business idea. One interesting location I looked at had been vacated by the tenant in the middle of the night without warning while the lease was still in force. I assume the owner is in the midst of legal action to recover their losses. So there’s snaky-ness on both sides it seems.

One other aspect worth mentioning and closely related to the previous point is a security deposit. Lessors might demand a bigger deposit from a start up such as myself. If that’s the case, then I’ll expect the lessor to release some of that security deposit back to me over time as the business matures and the owner becomes comfortable with my status as a reliable tenant. My business plan assumes a 6 month security deposit as recommended by “Nick”.

Side note: I can’t tell you how many lessor agents told me something along the lines of, “There’s a lot of you brewery guys looking at spaces.” My response was, “Yes, I probably know all of them”, which is true. Small world, even in Chicago.

There is much, much more to this commercial real estate leasing game than this, but this is just a primer based on what I’ve learned in the past couple of weeks. It’s a whole new world for me and I will tell you it’s been a source of stress, but I’ll get through it like everything else. As I learn more I’ll share. I’ll be very glad when a suitable location is found and the lease is signed.

Oh, and I found about five locations that I liked. I didn’t LOVE any of them, but all could work fine, just not ideal. I’m not done searching yet and I’m hoping to find a diamond in the rough. I won’t be revealing any location information due to the aforementioned note about other breweries looking as well. I’m here to share as much as possible, but some things are best left on the down low until the time is right.

Cheers,

G

A friend of mine who owns a well known craft beer bar here in Chicago posted something on Facebook recently which really caught my attention for a variety of reasons.

These are the last three men on earth who have never drank a craft beer. The craft beer movement ends on the day they order their first IPA.

The gist of his comment was that he’s seeing a huge influx of beers coming to him from sales reps each and every week. Reps from distributors come in, bring in loads of bottles of craft beer and “craft beer” to try and he decides if he’ll try selling them in his bar. The problem is quite simple: he has limited space in his bar for bottles and kegs. Bottles sit in refrigerators, kegs sit in a walk-in cooler (which I’ve seen, and it is very cozy in there). He has a finite number of taps to go with those kegs. These are the same issues that any purveyor of goods has to deal with. Target stores can only put so many products on their shelves and if you have a new product you want to sell there, it takes a lot of sales effort to get in the door (I know both through personal work experience in another life, and through a friend who is doing this very thing).

So my craft beer bar owning friend wanted to know if other bars, restaurants, retail stores were seeing this same issue which he described as “putting 20lbs of beer in a 15lb bag”. After he posted this, many folks commented, many of them are in the beer business in some way, either as brewery owners, distributor reps, bar owners, etc. The comments ran the gambit but they reinforced what is an underlying question I think about all the time: What is the future of the Chicago craft beer market and the entire craft beer market in general?

There are so many moving parts in the answer to this question, if there actually IS an answer. How many breweries can Chicago support? How do we compete against non-Chicago craft breweries who are moving into our fine city fast and furiously? How do we get Chicago to support its hometown breweries first, much like Portland, Seattle, and all of Wisconsin? When will the growth slow? Is this the crest of the wave? If so, is it wise to open a brewery now?

I’ll just answer that last question right now. For me, yes. Even if we had 500 breweries in this city, I’d do it. To me, this isn’t about riding a wave. I got in on the ground floor of the craft beer movement in this country. I wasn’t the first, but I was definitely there close to the beginning. This isn’t a fad to me, this is my life. There is nothing I’d rather do for a living than own a brewery. There’s nothing else I CAN do for a living. This is it. I have to do this. I have no choice. So anyone who thinks there are too many breweries in Chicago or in the U.S. or thinks that any new brewery that is coming on board is just following the herd….well…they can fuck off. Do you say, “Another restaurant in Chicago? We already have too many!” No, you do not. We’re Americans, we crave choice. The more choice the better. Why would having choices in beer be any different? And specifically in a great metropolitan city like Chicago, I personally EXPECT to have a wide variety of choices for just about everything: food, beverage, entertainment, culture, porn. If I didn’t want so many choices, I’d live somewhere with a lower damn cost of living. I should clarify that none of this is referring to my friend, as that was not his point. It’s more of a reaction to some of the comments which conveyed, in my opinion, an obtuse understanding of what opening a brewery means to those of us who are doing it or have done it. Let’s move on.

Let’s talk about supporting local breweries. A few months ago, my friend Jessica Murphy had an excellent post about this on her blog, Girls Like Beer Too. Go into any craft beer bar in Chicago and you will find that almost without exception, Chicago breweries are a minority on the tap handles. Lots of California and Colorado beers, lots of imported beers, but a relatively small number of Chicago beers. And I don’t recall being in any craft beer bar where all Chicago breweries were represented at the taps. Bottles maybe, but I personally judge a beer bar by its taps. (I never order bottles. I can get bottles at the store and drink at home for far less money.) So why the lack of support for Chicago breweries compared to Portland et al? Where is the allegiance to the home team? Where is our pride in our Chicago beer culture? Well, I think there are several answers here. First: wait for it….there aren’t enough breweries in Chicago! Portland, OR has 40 breweries (including brew pubs) and a population of 1 million. Chicago has 2.8 million people. That would mean we would need approximately 40*2.8 = 112 breweries to have the same breweries/capita. We have less than 20, I believe. Does Chicago have the same appreciation for well crafted beers like the west coast? It should. Chicago was brewing commercial beers before any of those fuckers were!

But I don’t think sheer numbers is the complete answer. I believe it’s a huge part of the answer as it limits what kinds of beers we have access to locally. There’s another part of this answer that Chicago breweries need to address: make great beer. Now, we have great breweries. Metropolitan Brewing has carved a fantastic niche with clean German style lagers, which is quite unique not only in Chicago, but for the U.S. in general. Their “Crankshaft Kölsch” is just fantastic and can easily compete with any German version. Half Acre‘s “Daisy Cutter” is awesome. Revolution is making some terrific beers in their production brewery and shipping them all over the place. But we’re competing against Stone, Firestone Walker, Lagunitas (who will soon be a hometown beer), Oskar Blues, and now Deschutes, all well established and universally loved breweries. I see plenty of those beers on tap at any bar, not just craft beer bars. So what does that say? Are their beers better than ours? I guess that depends on who you ask. I love, love, LOVE Firestone Walker and Lagunitas. Two of my absolute favorite breweries, but I would love to replace them with hometown beers of similar styles. The problem is, for the styles of beer they make, I like theirs better. If there’s a hop centric beer, I’d take FW or Lagunitas over a hometown beer any day. They’re just terrific. They don’t make all styles of beers, but the ones they do are just superb. Where’s my allegiance to Chicago? The same place everyone else’s is probably. I want to drink the best beers I can get. I drink plenty of Chicago beers, don’t get me wrong, my larger point is we absolutely have to brew beer that is as good or better than the big guys out west or wherever. I don’t expect a bar to offer Chicago beer on tap just because of some sense of hometown allegiance. Bars are a business, just like a brewery, and they have to make money. If they can sell more Firestone Walker than a local beer, then that’s what they’re going to do, and I don’t begrudge them at all.

(Case in point: Deschutes Brewery just made a massive splash in Chicago last month. Hell, I found their beer at a local large chain grocery store on the very limited shelf space dedicated to craft beer. No Half Acre, no Metropolitan, but yes to a brewery that just entered our massive market a few weeks ago! What the hell? Where’s the Chicago love?)

Update 2/18/13: I just read Good Beer Hunting’s excellent post on Wirtz Beverage Group, the IL distributor for Deschutes. I have to say I am well impressed with their marketing and logistics savvy given that this is their very first craft beer brand. I think Wirtz is going to be teaching other established craft beer distributors a few lessons on how it’s done.

Now it seems that everyone and their brother is opening a brewery in Chicago. I keep finding out about new ones in planning all the time. It’s going to be a much more crowded marketplace in the next couple of years. I won’t lie to you and say it doesn’t worry me a bit but in the end, it’s going to push me to constantly improve my beers, my processes, and my marketing. That’s how capitalism works and regardless of who’s left standing, the craft beer drinker will benefit.

So what’s going to happen to the craft beer movement in general? Is this a fad? Will we turn back to wine or go cheap and drink the yellow fizzy stuff? Will people get tired of talking about hop profiles and malt backbones? Will the lines at Dark Lord Day ever get shorter? I don’t think it’s a fad, but honestly I have no idea. The number of breweries opening in the U.S. is at a fever pitch. The rate continues to accelerate. Obviously the rate of growth will slow down and when it does, what then? Can all of these breweries survive and grow? I doubt it. I foresee a lot of closings and consolidations. Typical business cycle stuff. I also foresee the day when craft beer loses its cachet and becomes, well, normal. Growth will continue but slow dramatically. Some breweries will continue to aggressively expand, but mainly, I see cities and town supporting their local breweries much like the days of yore in Europe. Nothing special, just normal and delicious and expected.

Oh, and the big guys will continue to fight off the craft beer onslaught by trying to further put a stranglehold on distribution, completing mergers, producing more fake craft beers with aggressive marketing. The usual. They’ll lose, but not for lack of trying.

So that’s my viewpoint. I’m sure I’m wrong on several fronts, correct on others. Only time will tell. Regardless, I will continue with this journey and I will make sure that Panic Brewing is nimble and ready to adapt to a changing craft beer marketplace. If that means hot models wearing nothing but dynamite themed body paint, well, so be it. No wait, I’m doing that anyway. Never mind.

Cheers.

G

Funny how things change in just a few weeks. Two weeks ago, I couldn’t stop wearing pantyhose and now I want nothing to do with them! No wait, that’s not what changed! I mean, yes it did. No, no…oh never mind!

Here we have a metaphor in which the turtle is Panic and the turtle is panicked. That last bit isn’t actually a metaphor. The turtle really is quite terrified, and rightfully so.

What’s really changed is that my glacial pace, as mentioned here, has become more of a missile-like pace! A high speed bullet train-like pace! A Millennium Falcon-like pace! Some other analogy regarding something really quite fast-like pace! One reason for this change is that with the increased rate of global warming, glacier references won’t be very meaningful to people who should happen on this blog in a couple of years. Another reason is, well, I’m in my zone and it’s time to finish this up. I have beer to brew and people who want to drink it! At least I hope people want to drink it.

First, let me explain that even though I’m not blogging every day or even every week or even every year (it seems), I am constantly writing quick status updates on the Panic Brewing Facebook page. So if anyone is interested in very up to date news, that’s the place to be. If you’re not interested in reading what I had for breakfast or why Panic will not be brewing any beer with turnips, well, I can’t say I blame you.

Now, onto the news….

Here’s what I’ve done since the last brewery related blog post (not the post about correspondence, that one is boring):

1. Worked with my attorney to finish up the operating agreement. It is now 99% completed. There will be amendments once the financial picture becomes clearer, but the hard part is almost complete.
2. Hired a CPA to review the financial statements in my business plan for accounting accuracy (balance sheet, profit and loss statement). I will also be hiring her for all general accounting and tax issues for Panic as well. She has my latest business plan in her possession and I should have that wrapped up next week.
3. Received feedback from my CPA and made lots of tweaks and changes to my financial analyses. Most changes were simply accounting related, but I want to ensure that any would be lender or investor is confident in my business plan, and that confidence is directly proportional to the accuracy of the business plan finances.
4. Requested and received an updated quote from DME, one of the brewing equipment manufacturers I’m strongly considering. They are the manufacturer of choice by no less than three brand new breweries here in Chicago and all three breweries have told me nothing but good things about them. I also have a lead time from DME as of yesterday. That lead time is 18-20 weeks, meaning the amount of time from the date I order to the time it arrives. Pretty typical timeline and not as long as some other manufacturers.
5. Started the real estate search. That’s right, you heard me. Real estate. The location of Panic Brewing. The answer to the most oft asked question about Panic will soon be answered. I am searching for a space to lease somewhere on the North/Far North/Northwest/Far Northwest side of Chicago. Nothing fancy, just your standard commercially zoned area. I have a commercial real estate agent looking for me. We’ll be doing our first tour tomorrow. I’m very excited.
6. Decided that Panic will definitely have a retail store before a tap room. Eventually both, but due to probable capital limitations (the bane of all start ups) at the outset, I will only be able to do one or the other. After talking to Gabriel and Matt, owners of Half Acre Beer Company, which has both, it became obvious that the retail store was the way to go. I think when they said, “Retail store, not even close” was probably what won me over. Why a retail store first? Revenue. Money. Cash inflow. I’m going to be a nervous wreck until this brewery is cash flow positive and then profitable. Until that time, I will be focusing on figuring out how to maximize revenues. Based on Half Acre’s experience, a retail store generates much more revenue than a tap room because of sheer volume. Fear not, there absolutely will be a Panic tap room, but first I gotta make sure the business is healthy.
7. Decided to begin a new fast recipe prototyping process with 1 or 2 gallon batches using “brew in a bag”. I spent a couple hours working out the water calculations in my fancy brewing spreadsheet that I’ve been using for a couple of years. Now I simply click the “Brew in a Bag” check box and all volumes convert automagically. This involves using a single brew pot for both the mash tun and kettle. No sparging, no pumping. I’ll ferment in growlers which will allow me to try different yeast strains, fermentation temperatures, and/or dry hop schedules. I’ll then bottle/carbonate the finished beer in 22 oz bombers. I thought of doing this months ago and finally getting around to doing it. Should be interesting.
8. Received the first draft of the Panic Brewing PPM (Private Placement Memorandum) from my attorney. This is the second of three documents required to execute the LLC member interest offering. That’s the correct legal term for “investors” in an LLC.

Lots of big stuff happening all at once. Yes, it’s stressful, yes I’m busy, but I love it and this train isn’t stopping until the beer is brewing. There is oh so much more to share and I will when I can. Again, for quick updates, check out the Panic Brewing Facebook page.

Cheers,

G

I’ve been very humbled by all the responses I’ve received from everyone over the past 14 months or so. It’s been overwhelming, in a good way and as we get closer and closer to launch, the number of correspondences I receive seems to be going up exponentially. I just wanted to say to anyone who contacts me through the blog contact form (which sends me an email immediately), Facebook, or Twitter that I read absolutely everything. I TRY to get back with everyone as soon as I read the message, but sometimes I don’t. If I don’t, that usually means I have something else I have to tend to (like two children fighting over Legos). Consequently, if I don’t get back immediately, there’s usually a delay as my attention gets drawn in a million different directions it seems.

So please don’t be offended if you contact me and I don’t get back to you immediately. I promise I will. If I don’t get back to you in say… a week or so, then feel free to contact me again.

Ok, fine. Since you asked me 346 times, I’ll go ahead and buy life insurance on my poodle. I didn’t even know I had a poodle. Thanks for helping!

The one exception to all of this is salespeople. While I appreciate and understand the need to find new customers, please, please only contact me once. If I’m interested, I’ll get back with you. If I’m not, I won’t. And the easiest way to ensure that I won’t buy your products or services it to repeatedly contact me. I promise that I read your correspondence the first time. I disdain pushy salespeople and you won’t get the response you want from me. Trust me on this. The normal aggressive sales rules to not apply with me. Seriously. Don’t. Do. It.

Enough of the negative stuff. Again, thanks for the really positive messages and such. I get contacted from people all over the country who are also interested in opening a brewery who tell me how much my efforts here are appreciated. It is these responses among other things that make me know I’m on the right track here.

Cheers,

G