Friday, February 25, 2011

Drawing, Permits & Timelines

Even thought most of our equipment is on its way there is still a ton of stuff that needs to happen before we are going to be in a position to brew any beer.  Major projects like modifying the floor in our brewing area, installing a steam boiler, running water and electrical lines, etc.  In order to start this work we need work permits from the town.  Permits require detailed plans that are signed and sealed by licensed engineers.  That’s where we run into a problem.

When we started this project we knew the town would require a set of plans before they would issue work permits, however we underestimated the detail that would be required.  Our vendors have been providing us with drawings of the equipment, specifications and schematics along the way.  We assumed since we were not doing any major structural work to the building but just installing some equipment in an existing space we could use these plans to pull permits from the town.  Once we received the final drawings from our suppliers and brought these to the town to discuss permits, we were told they would not be enough.  It’s our own fault and just one of the things you learn the first time you manage a project like this. 
We realized that we needed to get some local engineers on board to produce a set of detailed plans for this project that would address local building codes.  This issue now is time.  We started working with an engineering firm a few weeks ago.  In addition to producing a set of plans for plumbing and electrical based on the specifications and schematics provided by our vendors, there is a host of other issues that they are addressing.  Building structure and classification, weight limits of our current concrete floor, mechanical issues surrounding the new boiler and head locations on our fire suppression system to name a few.  Producing a full set of plans that met local codes for a project like is a ton of work and takes a pretty large group of engineers.  We’ve been really pushing to get this done as fast as possible since this is the bottle neck right now, but these things take time.      
We expect to have the drawings back from the engineers by early next week. Once the drawings are submitted to the town, we’ve been told to expect a two to four week review period before the permits can be issued.  Once they are issued we can start work on the building and install the brewing equipment.
We were originally planning to have all this work done before the equipment arrived so we could just move the brew house and tanks into position when they got here.  Since that is not going to happen it’s a good thing we have extra space in the warehouse right now to store the equipment while we get the work done.
In the meantime, we have been meeting with masons, drain experts, and floor covering specialists to make a final decision on the materials in the brewing area.  Since the floor in the brewing area will be in contact with hot water, chemicals, and some heavy equipment we are looking into different ways to protect the concrete.  From what we hear an epoxy coating will not stand up to the thermal shock of our environment for very long.  Most people are recommending poly urethane flooring systems.  They seem bullet proof, but like anything else they come at a price.  No decision has been made on that yet.  Besides that we have been in full restoration mode.  Cleaning, spackling, painting, hanging fiberglass panels; anything we can get done while we’re waiting for our drawings.  

Thursday, February 24, 2011

A View From The Boardwalk

We finally got our business cards printed.  We agree it’s really not that interesting.  The only reason we decided to mention it is that we were surprised how difficult it was to find a printer to recreate the color blue we used in our logo on other formats.  

Apparently there are a bunch of different color systems and printing methods that can complicate the process.  As if that wasn’t enough, we were told that blue is difficult to print...what ever that means. 

Anyway, we found a printer that knows what he's doing, resolved our problems with the color blue, and finally have some business cards.  Hats and pint glasses are on order with tee shirts, stickers, etc. to follow.       

Wednesday, February 23, 2011

Brewer's Notice and The TTB Interview

In the beginning of February we received an unexpected call from the TTB.  The analyst assigned to our application was calling to conduct the phone interview portion of the Brewer’s Notice approval process. 

The interview took about 30 minutes and went well.  Surprisingly enough, our application was basically correct.  We numbered one of our forms incorrectly, so she fixed that for us and we needed to submit a statement regarding a speeding ticket that was received back in 2003.  Apparently speeding is a misdemeanor in North Carolina.  Those were really the only two issues. 
With the application reviewed and the interview completed, it’s our understanding that the remaining steps in the federal licensing process are just waiting for a few signatures.  The analyst said it could take two or three weeks to get the application processed and potentially another two or three weeks to get the appropriate signatures, but then we would be issued our license.
We were a little surprised by the time of the call because we didn’t expect it so soon.  We were told the application process would take about 90 to 100 days.  We submitted our application on December 21, 2010.  Since it was 43 days from submission to interview, and we were told that the application should be signed in about 28 to 42 days following the interview, the total processing time would be in the range of 71 to 85 days.            

Of course this is great news and we appreciate the speed that TTB is able to process our application considering the large volume they are processing and the fact that we submitted our application right before the holidays.  Our analyst said our application was pretty well organized and complete, so we think that helped the process.  Now we just need to keep on track with the rest of the process.  
What kinds of questions do they ask?  Hess Brewing in California recently went through the process and posted the questions they were asked during their interview at  

Our questions were basically the same ones that Hess was asked.  There were a few differences so we listed the questions we were asked below.  These are not the exact questions, but you get the idea.              
  1.  Am I taking over an existing business?
  2.  What is my prior business experience?
  3.  When do I plan to start brewing; what is my timeline?
  4.  Is my equipment on premise and is my building construction complete?
  5.  What type of materials are the following constructed of: building walls, roof, floors?
  6.  Describe the equipment that will be installed or that has been ordered?
  7.  Describe security at the facility?
  8.  Are there any windows that can be opened in the facility?
  9.  Are you leasing the building; if so does the owner know you will be brewing beer?
  10.  Will there be a tasting room / hospitality suite on site?
  11.  How is the tasting room secure from the brewing area?
  12.  Will there be a fee to enter the tasting room or for parking at the site?
  13.  Are there any shared services on your site; i.e., will any other businesses be operating out of your space?
  14.  Will any of our production take place at another site?
  15.  Will there be a gift shop on site?
  16.  How are you separated from adjacent businesses?
  17.  Is the building more than 50 years old?
  18.  Are you aware that TTB agents have the right of entry to your site?
  19.  What type of products will you be making?
  20.  Will you be selling product in other states?
  21.  Will you be exporting or importing any products?
  22.  Will you be participating in alternative premise brewing?
  23.  Are you aware the brewer’s bond expires every 4 years?
  24.  Are you aware the federal excise tax is $7.00 a barrel?
  25.  Where will your records be kept?
  26.  Will these records be examinable by agency representatives?
  27.  Are you aware of the when and how taxes are to be filed?
  28.  Are you compliant with state and local zoning requirements?
  29.  How you met with your local fire marshal to review the site?
  30.  Are you aware you need to register with the FDA as a food facility?
  31.  Do you or any owners own stock in companies that licensed by the TTB?
  32.  Are any of your responsible parties associated with other companies licensed by the TTB?
  33.  Does anyone other that you have a financial interest in the business
  34.  Are there any other parties that will partake in the profits?
  35.  Has anyone associated with the business lived in a foreign country in the past 10 years?
  36.  How much money has been invested in the business?
  37.  What is the source of these funds?
  38.  What is the source of your working capital?
  39.  Have you received any loans to fund the business?
  40.  Will you have cash flow sufficient to cover excise tax responsibilities?
  41.  Will you have cash flow sufficient to pay the premium on your bond as long as you are operating?
  42.  Are you aware of the site?
  43.  Are you aware of the COLA system?
  44.  Do we give them permission to make any small changes to the documentation?

Wednesday, February 2, 2011

You Need a Kettle to Brew

You can’t open a brewery with out some brewing equipment.  We ordered our system back in August, right after we signed our lease and its scheduled to arrive later this month.

We decided to go with a new brewing system made up of a 20 barrel, steam-fired, two-vessel brew house, three 40 barrel fermenters, one 40 barrel bright tank and one 40 barrel hot liquor tank.  Each of our brew house vessels serve dual purposes; one tank is a combination mash and lauter tun and the second is a kettle and whirlpool.  We ordered our system from Diversified Metal Engineering (DME), a vendor on the east coast of Canada.  The equipment is built to order which is why the lead time is so long. 
Like most start-up breweries we initially planned to purchase a used brewhouse and several used fermenters.  The most obvious advantage to purchasing used equipment is cost.  Most start-ups (including this one) are on a tight budget and the used market is a great way to save some cash when opening a capital intensive business like a brewery.  One of the main problems with the used market is that you are limited to what is available at the time you are ready to make the purchase.  

We found that there wasn’t a deep supply of used brewing equipment on the market at that time we were in a position to make the purchase.  The craft beer segment has continued to see solid growth over the past few years limiting the amount of used equipment coming into the market.  At the same time there have been a substantial number of new breweries entering the market looking for the same equipment.  We were finding that any used brew houses sized in the start-ups range would be sold almost immediately and a discount to new equipment that was relatively narrow.

What we liked about purchasing new equipment was that you can customize the system and size to your specific needs.  As a production brewery we were looking for the largest brew house that would fit our budget since there is very little difference in the amount of time required to brew a 20 gallon batch compared to a 20 barrel batch of beer.  With that in mind we began getting quotes on two-vessel, 15 and 20 barrel brew houses.  What we found was that there was about a 20% increase in price (give or take 5% depending on vendor), when stepping up to a 20 barrel brew house from a 15 barrel one.  Based on our plan and budget we decided that the increase in output per batch was worth the increase in price.  

Once we decided on the size of the brewhouse we needed to determine the size of the fermentation tanks and how many we would need.  Generally, fermentation tanks are sized in multiples of your brew house capacity.  Since we were getting a 20 barrel brew house, we would want 20, 40, 60, etc. barrel fermenters.  

We wanted to start with enough tank space to reach an annual capacity of between 1,500 and 2,000 barrels.  Based on the fermentation cycles of the beers we are planning to make and the size of our brew house we originally planned on ordering four 20 barrel fermenters.  However, from a cost and planning perspective it made more sense to go with three 40 barrel tanks.  The total cost of the three 40 barrel fermentation tanks was only a few thousand dollars more than four 20 barrel tanks but gave us additional fermentation capacity.  With the 40 barrel tanks we have between 2,000 and 3,000 barrels of annual capacity depending on our fermentation schedule and the mix of beer styles we produce.
Our only concern with 40 barrel fermentation vessels was our ability to do small batch beers.  We plan to produce some smaller volume bottle conditioned beers.  These beers we plan to produce in the 20 barrel batches because of the extra labor involved with bottling.  Fortunately we have the ability to produce 20 barrel batches in these tanks with no problem.   

We are still in the process of sourcing the rest of the equipment we will need to make the brewery operational, like a steam boiler to heat our water and kettle, a chiller system to control fermentation temperature, packaging equipment to keg our beer, etc., but this is the heart of the brewing facility and we can’t wait to get it in our warehouse and start brewing some beer.