A few weeks ago, my friend Nick Nunns returned from the Craft Brewers Conference (which I’m going to next year, dammit!), and proceeded to rock my world. In a good way.
Nick told me about the idea of an Alternating Proprietorship, or an AltProp. It’s not a new idea. I’ve probably mentioned it in some post on here, or in the comments somewhere. I’ve almost always just brushed it aside. I think this was mostly due to not seeing the difference between contract brewing and an altprop. My biggest difficulty with the idea of a contract option was that I wouldn’t be brewing. I didn’t want to just give a recipe and instructors to another brewery and say “Here, make me beer.” And that idea just sort of stuck.
So when Nick got back and we talked about AltProps, that idea got rocked out of its place. Basically, and Alternating Proprietorship is an agreement with an existing brewery in which we go in and rent out excess capacity on their system. While we’re brewing, we technically own the equipment. It’s our own license and our own beer. It’s much more complicated than that, and the agreement can be a lot of different things, but that’s the basic idea.
Anda, one of the owners of Funkwerks in Fort Collins, and the author of LegalLibations.com and LegalBrewing.com, wrote an article about this idea in January: http://www.legallibations.com/2010/05/alternating-what.html. Check it out, it helps to clarify this whole thing.
The TTB defines an alternating proprietorship:
An “alternating proprietorship” is a term used to describe an arrangement in which two or more people take turns using the physical premises of a brewery.
Generally, the proprietor of an existing brewery, the “host brewery,” agrees to rent space and equipment to a new “tenant brewer.” Alternating brewery proprietorships allow existing breweries to use excess capacity and give new entrants to the beer business an opportunity to begin on a small scale, without investing in premises and equipment.
This idea could get us started much, much sooner, for much, much less money. If we work out an arrangement with a new brewery in town, where we buy a few tanks, rent out the time and space, and start making beer, we can be on tap this year. Depending on the arrangement, we could hopefully work something out where we buy 2 fermenting tanks, use the space for 6-12 months (or however short / long it takes), and then “leave” the tanks there, as payback. Or maybe we open at the same size, and take the tanks with us. Or maybe a brewery just doesn’t have the need for some of their tanks, and it’s a pure rental agreement.
I started talking to a few of the newer breweries in town about this. It’s a win-win situation for a brewery with excess capacity. Our presence lowers their liability, since we’re paying them for their time. And for us, it lets us start today, rather than tomorrow.
Part of the TTB’s rules on this scenario is that the business plan must include not only the altprop, but the exit into a full brewery. This is a temporary situation, where we can make sure the market likes our beer, make sure we know what the hell we’re doing, get a few accounts up and running, and have something solid (well, liquid) to show investors.
This is the current plan. We’re exploring our options and writing down the numbers. I’d love to know what you think of it!
Hey PJ,
AltProp is the way to go. That’s the way we are getting started and its so much easier to get the ABC and TTB licenses when you work with a brewery that already has them. Which brewery will you approach?
Bryan
Hey Bryan,
I’ve approached most of the newer / not quite open breweries in Denver. For some reason, I’m hesitant about revealing who those breweries are just yet. Not sure why..
We’re contemplating getting a brewpub license now so we can offer this service to serious homebrewers who want to go to the next level. PJ could you please contact me. James Bertini, Denver Urban Homesteading
http://www.denverurbanhomesteading.com
Email is james at [name of business]
Hey James. Just saw this comment and your email at the Wagon. I’ll get back to you shortly. Thanks!
I think it’s definitely an intriguing idea that, when all parties are on the same page, has a good chance for success (in the fiscal sense).
Community Beer Works comes to mind. It’s a cool concept if you’re into minimizing the overall bottom line while still allowing yourself to brew and make a name for yourself.
I imagine you’d definitely get interested brewers in the Denver area – much more than other areas.
Good luck!
Hey dude nice work on the blog.. I just stumbled upon it. I am going through the same thing you are but I am in the Southeast (Alabama) where the breweries are far and few between. I am in the same process you are but you are a little ahead of me. I like the idea of an Altprop. Even when I open up my brewery, I think I will leave some excess capacity just for the option of allowing another brewery to come in and help offset some of my costs. Keep up the hard work and hit me up some time and we can discuss our paths! teaguehollow at gmail . com
I think that, because it’s technically a temporary arrangement, if an AltProp gets your brewing sooner, go for it! It seems only logical to get your brew to market faster. When you really consider the ROI on something like that, I don’t see much of a down side, especially if you consider that people may not like your brews…
Not many breweries in the Denver area have excess capacity, and in fact most are expanding like mad or running around the clock. You might work it out with a newer brewery though.
My husband & I are working on getting a brewery going in the armpit of Illinois. We could go so many different directions in terms of size, but it sure would be nice to be able to run a test scenario in an AltProp situation. Unfortunately, we don’t have any breweries in town, but maybe we can spearhead the concept for other brewers in the area. In the meantime, we’ve got a great new sustainable business center in town (www.sustainablebusinesscenter.com) that has a commercial kitchen available for rent. They also provide mentoring in many aspects of business start-up and are marketing their project as a business incubator. So…..we’re thinking of starting super small and just renting the kitchen 3 days a week with the homebrew equipment he already has. He could probably brew about 20 gallons per day/60 week to get started. We’ve got a lot of local interest in getting this brewery going and we could probably get some serious capital to go with at least a 6 barrel system. But it seems like incorporating this tiny startup phase into the overall business plan really couldn’t hurt. At least it could get us brewing & selling a hell of a lot sooner. It seems like a great way to get a handle on things, like licensing & label requirements.
Hey,
I was wondering if you had any information with the costs associated with an alternating proprietorship? Like the average rental costs or any thing else. The business is to take place in Calgary, Alberta but any industry average would be great.
This is for a fourth year university project so any information would be helpful!
Thanks for your time, Happy Brewing!
-BF
I don’t have that info, sorry 😦
I’m guessing it differs drastically case by case. Different agreements with different sized breweries would alter the costs quite a bit. Best bet: find a brewer you want to work with, and ask.
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