My son-in-law is set on opening a brewpub. He's looking to me for an investment. I may invest in him, but I know nothing about the industry (other than helping to fund several as a customer). If you are a current or past restaurant or bar owner, what advice do you have? What are the gotchas? What are the key metrics? What makes a place successful? What makes one fail?

Just buy him the box set of Bar Rescue on DVD and he should be fine.





Joking, obviously. Good luck. He's lucky to have a FIL that would even consider it.

When you say 'brewpub" do you mean he's really going to be making a beer that he is brewing on premises?

GE said:

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Just buy him the box set of Bar Rescue on DVD and he should be fine.

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If I was going to open a bar, I've always thought I would just bring John Taffer in from the start.

http://tafferdynamics.com/our-services/#new-operations

RAB83 said:

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My son-in-law is set on opening a brewpub. He's looking to me for an investment. I may invest in him, but I know nothing about the industry (other than helping to fund several as a customer). If you are a current or past restaurant or bar owner, what advice do you have? What are the gotchas? What are the key metrics? What makes a place successful? What makes one fail?

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Know nothing about owning a restaurant or bar, but I'm sure you know or can quickly confirm the % that close up within a year or two of opening. If I had to guess, I would say 1) location 2) ambience 3) food.

Really there HAS to be a differentiator. Businesses that are accesssible to anyone and everyone I these categories have such insane competition.

RAB83 said:

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My son-in-law is set on opening a brewpub. He's looking to me for an investment. I may invest in him, but I know nothing about the industry (other than helping to fund several as a customer). If you are a current or past restaurant or bar owner, what advice do you have? What are the gotchas? What are the key metrics? What makes a place successful? What makes one fail?

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Does he have significant experience working in and possibly managing a bar/restaurant- even working as a waiter? If none, then proceed with extreme caution.

A venture that is statistically destined to fail doesn't seem like one that a FIL should help float. Just a gut feeling.

This idea you have of investing in your SIL's business.....it is a horrible one. It doesn't matter the business or the SIL

Hth

Och26-58-87 said:

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RAB83 said:

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My son-in-law is set on opening a brewpub. He's looking to me for an investment. I may invest in him, but I know nothing about the industry (other than helping to fund several as a customer). If you are a current or past restaurant or bar owner, what advice do you have? What are the gotchas? What are the key metrics? What makes a place successful? What makes one fail?

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Does he have significant experience working in and possibly managing a bar/restaurant- even working as a waiter? If none, then proceed with extreme caution.

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This, times 1000! If the chef or cook quits with a room full of diners on a Friday or Saturday night can he cook?

Do your daughter and SIL have children or do they want children? The bar business can be tough on marriages with late night closings.

Does he have an accounting background?

Concepts can be great but having top to bottom experience cannot be overlooked not to mention location.

The SIL may be referring to a brewpub specifically because of the type of license that he wants to pursue. The law in TX has changed in that if you license your brewery as a brewpub, that you can sell packaged beer to go directly to the customer. Typical breweries still cannot, which is why you can only buy beer by the glass, no growlers, cans etc to go.

I just want to point that out because you guys are only focusing on the restaurant part of the situation. I don't know if he does want a focus on food, I just want to point out a subtle nuance there.

Someone above mentioned that the craft beer market is saturated in many markets. However, I think the consensus that neighborhood breweries are still the ones seeing success and growth.

So, if the SIL just wants to start a small neighborhood brewery that can sell beer to go to customers and doesn't want to grow very big (also part of the brewpub restrictions is total volume sold), does that change your opinions?

I own and have owned multiple bars/restaurants in multiple sized markets (mid and large). It has to be one of the top 3 hardest businesses to make money and a number of people break even or lose money and consider it their hobby. Here are a few items I would consider the first 3 of 100 that jumped in my head:
- Outsource your accounting. There are a number of 3rd parties that will now take a cloud based point of sale (POS) and complete your month end close and file all of your state paperwork.
- Serve Food - The number of "bars" that have zero food is dwindling. You can make it when you have a lot of hype (a year or two) but eventually you have to pivot to food + booze.
- Taxes and Fees - The sales tax + liquor tax + licensing fees are outrageous. Prepare accordingly

cappycap said:

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I own and have owned multiple bars/restaurants in multiple sized markets (mid and large). It has to be one of the top 3 hardest businesses to make money and a number of people break even or lose money and consider it their hobby. Here are a few items I would consider the first 3 of 100 that jumped in my head:
- Outsource your accounting. There are a number of 3rd parties that will now take a cloud based point of sale (POS) and complete your month end close and file all of your state paperwork.
- Serve Food - The number of "bars" that have zero food is dwindling. You can make it when you have a lot of hype (a year or two) but eventually you have to pivot to food + booze.
- Taxes and Fees - The sales tax + liquor tax + licensing fees are outrageous. Prepare accordingly

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Out of curiosity, what are your thoughts, if any, on new counter service only style pubs? Food might be dropped off from the kitchen to the bar-counter and you are buzzed or paged. I think this would keep head count lower for total staff require.

I've also seen a lot of pubs/bars carve out a little spot for a food truck partnership.

To be honest, I'm loving the coffee and bar combinations.

I consistently work out of two places that naturally progress from coffee to beer and cocktails around 5-6pm. It would also diversify revenue.

as others have said, experience in the industry is huge


I would say that 70 percent of the bars on Northgate are all owned or run by former managers of Don Ganter establishments(dixie chicken Inc.). I also worked at a couple of them, never a manager though.

People may have personnel opinions and the chicken definitely benefited from being one of the first in the area, so they are lucky in that regard, but the bars always turned a profit.

It is very much a a game of margins, I would expect little to no profit for the first year especially if doing food(at least planning wise, make sure SIL has living expenses set aside before hand)

It is also a very hands on business, owner/manager needs to present and focused

Find a non-chain bar and talk to a successful owner/manager

edit: margins

food and booze are profitable

booze, the bar owes tax on a per bottle basis. So you need straight staff that pour honest drinks, NO FREEBIES!!!! At the end of the day the taxman is going to get their money. If you take a 1 liter bottle, thats
almost 34 oz, a shot is 1.5 oz, or about 22.5 1 shot servings per bottle and @ 3 dollars a shot thats a potential 67.50 a bottle(well liquor) minus state tax, minus wages, minus mixers, minus consumables

food is the same way, I think base margin would be final cost of product being maybe 2 to 3 times food cost

You want things that are profit rich. Cheese fries, potatoes are cheep, cheese is not.

Every item at the bar should be viewed as a representation of potential profit or loss. If you have a sack of potato's or a bottle of whisky it needs to be viewed as what do I need to sell to pay for the product, and how much do I sell before I turn a profit.

Spoilage, you can't make money on things you can't or don't sell so you have to order in quantities that match your demand, this comes with practice and time.

OP, with neither of you having experience in the hospitality industry, I'd be VERY wary. I work for a few successful gastropubs in Houston and there is a lot more work than what most people realize. I agree about the food + booze requirement.

Key metrics:

• food cost ratio
• booze cost ratio
• location, location, location
• lease agreement terms - is there is percent rent above a certain threshold?
• online reviews (this can kill a bar/restaurant nowadays)

What a horribly awkward situation. Can't imagine approaching my FIL and asking for him to invest in me.

Evan
Good questions.....
1. We are 2 weeks away from trying the counter style service at one location (I will have a better answer in a month or two). We are having a top 50 Texas Monthly BBQ company cook for us and using the bar to distribute. Still requires more staff and equipment (for things like steam treys and holding meat) than I would have thought.

2. Food Trucks - We went down this path initially. It was a bust for us. We ran into a few problems. First, the food trucks were very inconsistent in showing up. We would schedule days with a particular food truck and sometimes they would show up and sometimes they would not show up. Second, as bar crowds fluctuate based on events and promotions, this directly impacted the food truck sales. There would be nights the food trucks ended up losing money due to lack of crowds. We offered food truck minimum buy outs to solve this problem and they still ended up not showing up (Example: Minimum of $500. If they sold $250 of food we would "buy out" the other $250 and give it away).

Thanks to everyone for their input. Let me add a little color based on the comments and questions...

The concept is based on one I saw in a midwestern city. The bar had a place where a dozen pony kettles were set up, including all of the necessary ingredients, and recipes. Typically, a group of three to five guys would get together to brew beer. What do guys do when they brew beer? They drink beer.

The facility stored the beer for a couple of weeks to ferment. The group returns to bottle the beer and create labels. What do guys do when they bottle beer? They drink beer.

The facility charges to brew. They charge for the bottles. They charge for the beer. There's also a restaurant and bar.

The location sucked. It was in a nondescript strip center. The guys I know who brewed the beer were middle managers who bragged and strutted about the beer they made, even though the facility made it really easy to make home brew without the mess.

Here's the part that caught my attention... there was a six month waiting list, which turned into a year long waiting list, with two shifts per night. The owner was printing money (even though I don't think he charged enough) and didn't feel the need to expand, so he sold, moved to Florida, and now, can't be found. I do want to take the son-in-law to the place that was sold.

I told the son-in-law about this when he expressed an interest in starting his own restaurant. The kid managed a bar in college, paying his way through school (he had no help from his parents... impressive). After he graduated, he managed a coffee shop with P&L within an upscale hotel before becoming assistant manager of the hotel's upscale restaurant. He was then offered a manager's slot at a restaurant owned by a famous chef I never heard of, though a bunch of other people I respect were familiar with the chef and were impressed. He may have been the manager, but he didn't get a look at the P&L. The location stunk and the place closed, which accelerated his desire for the brew pub. I still don't know the story behind the restaurant because it was packed when I ate there despite the location. My business spidey sense is pinging, but that's a different issue.

His degree (not A&M) is in restaurant and hospitality management. My daughter says he has a gift for working with and managing stupid people (something she's missing, which is likely my fault).

Here's where I'm at...

I think funding the business in toto would be a huge mistake. First, he needs to learn the principle of frugality, which comes when you are worried about cash flow from day one. Second, it would make for some awkward family gatherings if I give him a bunch of money and he blows it. Third, if I give him a bunch of money, I will be more involved than either of us wants.

I might be interested in investing in real estate that I lease to him at below market terms, believing that I can get the investment back if everything blows up. My causing, who owns a chain of restaurants in another part of the country believes that buildings tricked out for restaurants are easier to lease and sell.

I want to see my son-in-law pitch people from the restaurant industry and persuade them. It will make him refine his concept. If people who know the business are willing to invest, I might match them. I do believe in the kid, but I don't know the industry.

Thanks in advance for the input. This is where the anonymity of TexAgs is beneficial.

Ask him to seek investors elsewhere. If he's not willing to go out there and hustle to find people to invest in him, then I have my doubts that his business would ever work out anyways. I don't know the guy, but it seems like asking your FIL for an investment is just the lazy way out.

Where does he want to do this and how much money are we talking?

Looks like a cool idea. In the right location that could be a good idea. Almost feels like painting with a twist for men. I've passed on investing in three bars, but I fundamentally disagree with everyone saying that his asking you is awkward or inappropriate. If he knows you have the ability to invest then he should inquire. The fist of the three F's is family, and when that stops being theoretical that is where you start.

On the flip side you should feel zero pressure (I know, he's your SIL) to invest. If you pass just explain to him your reasoning. Raising money at this level is hard. He'll hear "no" a lot, but you just keep plugging.

To clarify my point.

If you want to GIVE the sil the money to get this idea off the ground, do it.

If you want to INVEST in your sil's business, that is a terrible idea.

This is just a higher stake version of "you never loan money to family,you just give it to them".

Successful bar and restaurant owners have one thing in common: An experienced, good, and trustworthy manager. The rest grind it out till failure.

Go buy a brew pub from one of the grinders.

We had a restaurant that failed miserably. I suggest your SIL, if he hasn't done so, start working in a bar and REALLY assess the business. There is so much competition in the food and beverage space that it is incredibly difficult to succeed. Plus restaurants face competition that most other business don't. Think of all the places in town that sell food: restaurants, gas stations, grocery stores, etc. Plus the food business is in crippling completion with itself. Most patrons a looking for restaurants to give food away. The younger folks won't go into a restaurant unless something is free.

I live in CS and travel quite a bit for business. I'm acutely aware of foot traffic in all restaurants. We went to Mad Taco (Southern CS location) last night. It is one we frequent pretty much once per week. It was raining pretty hard but there were only 15 or so patrons at 6:30 in a very good restaurant that offers good value (we got one taco free and the Marg was cheap). Across the street is the new Brazilian steakhouse. My guess is 8-10 cars in the parking lot. That just won't cut it.

There are literally a billion better investment opportunities out there that do no require 100% of time and worry and work. The facts are the place will likely fail. If I was dying to get into the food business, I would start with a truck. That will be a lower entry point and you can always sell the truck when/if it fails.

In addition to significant experience working different positions in a restaurant/bar, another critical item is whether SIL can set limits with friends and family. Couple of friends who owned restaurants and bars always said that friends and family show up - especially near closing - and expect open bar. One friend who had a hard time telling them no essentially had all profits consumed by friends and family with free drinks/food.

Not a good idea for many reasons listed above....also a shrinking middle class (more moving to the bottom than top) means less disposable income to spend 5 bucks on a beer.

A brewpub is a very specific endeavor, because you need 3 key people; a restaurateur, or someone who can manage it successfully, a chef, to ensure you have good food, and a brewmaster, to ensure you have good beer.

If he does none of those, now you have 4 people that want a real paycheck.

Chef's don't typically manage a restaurant, and a brewmaster doesn't usually run a brewery, let alone deal with food. So you really need the 3 person team.


Good luck. My town just had a brewpub open up (in a hot market, denver, but smaller town without any saturation yet), and it lasted 8 months. They had a really well procured taplist from around the state with trendy beers and really good beer they brewed in house, but the food wasn't up to par. The best beer in the world can't keep a failing restaurant alive.

Gut a good location and do a bare bones good bar with TONS of TV's....Don't spend a ton on it.

If you start to do well you can add onto it and make things nicer.

Don't have a kitchen, if you can for sure have people there are tons of food trucks that will show up for free and its a win/win for you. Don't have to worry about food inventory/staff/supplies and your customers can get food there and drink. They can also have food delivered if they want.

This formula is for one of the most popular bars I go to and they do extremely well.

Kirby Ice House?

Good guess but no


Those guys are killing it though - great ROI. Kirby Ice House was good amount more $$$ invested than what i'm describing (that land i'm guessing wasn't cheap).

8th row flint in the Heights is an example of how to operate a bar/restaurant.

Just keep in mind that if the economy tanks:
1. A decent amount of these craft brew bros who patronize this type of place will be out of work
2. While people always need to eat, something like going out to make your own beer might seem silly in a different economic context.

I'm not predicting the economy here but we've been in pretty good times for awhile now.

Don't invest. Consider it a gift if you want to give him money.