Saturday, November 21, 2009

Business Hours are Over! Baby!

If you scan the last year of posts on this weblog, you won't find many progress updates. That's because all Jane and I have done since January, aside from finding a location, is try to raise money. So far, we've only been able to raise about 10% of our project cost via investment capital - including our own contributions - and were rejected by eleven lenders (not counting the ones who ignored us). We considered some alternative business plans...

-Reducing the structural changes to the ACME building and replacing the full kitchen with cold appetizers to reduce the total project cost.
-Relocating to the former Blue Lagoon building to reduce the total project cost, allow us to have a full kitchen and provide an incentive for the Bank of Sun Prairie to loan us money (they own the building, which is now completely vacant).
-Relocating to Sauk Prairie, where there may have been additional investment capital.

...but my need to find a job and stabilize my family's finances hasn't allowed me to really follow through on them. Being burnt out hasn't helped either. After two years of working full-time to get this project off the ground, every option seemed like a futile postponement of my brewing career.

The point I'm slowly making is that I'm cutting my losses and walking away from RePublic. Earlier today, I accepted a job offer for a full-time brewing position at Fratello's in Oshkosh and Appleton. I'll be working for Kevin Bowen, a classmate of mine from Siebel, and I'm pretty damn excited about it. Jane is hoping to find a job in a brewery as well; probably in sales and/or marketing. This industry is simply too much fun to walk away from willingly.

Unless I think of some wise things to say over the next few days, this will probably be the last time I post here. Jane and I are going to leave the site online so future brewery owners can benefit from our experience, and I plan to continue updating the File Cabinet independently. Thanks for reading!

Update: I'm currently the QA Manager at Ale Asylum and write the Five Gallons At A Time feature at Madison Beer Review. In between, I wrote a few articles for Oshkosh Beer that you can find by searching for my name on the website. Jane, aka Robyn Klinge, left her job at Epic Systems to bartend, manage off-premise tap accounts, train employees about beer and host beer dinners at Vintage Brewing Company.

Saturday, November 7, 2009

Return to Geekery

About two weeks ago, my Vermonting friend Shane asked me a question that I thought would be pretty easy to answer: about how much alcohol is present in a batch of cider when honey is added after the original gravity measurement? Estimating the sugar increase is a pretty easy process. Figuring out the change in volume, which affects the density that affects the alcohol content, is the tough part. Thankfully, my recipe spreadsheets are capable of doing that. Unfortunately, the numbers they returned didn't agree with a simple sanity check I performed to make sure I was doing things correctly. The problem, I eventually learned, was caused by several errors:

1. The formula I'd been using to calculate extract, aka the weight of dissolved sugar, didn't agree with the definition of degrees Plato (extract as a percentage of total solution mass). I'm bummed out by this because the formula's source is the wonderful book "Brewing" by Michael Lewis and Tom Young.  If you're dying to find a practical use for an outdated formula, the calculation is Extract = (258.7+degrees Plato)*degrees Plato*barrels/100. If you've wiped your nose with this stuff before, you may have noticed that 258.7 is the density of water, in lbs/barrel, at 39.2 degf. The American Society of Brewing Chemists (ASBC) defines degrees Plato at 68 degf. Reaching for that low-lying fruit by changing the value in the formula was one of the first things I tried. It didn't work.

2. Homebrewers typically measure gravity in Specific Gravity instead of degrees Plato. Additionally, disowning the degrees Plato -> Extract formula requires you to know specific gravity to determine extract. My prior conversions between degrees Plato and specific gravity were third-order polynomials fitted to an ASBC table, but the table is only valid for specific gravities of 1.083 (20.007 degrees Plato) and lower. Not terribly helpful when you're brewing a barleywine, and downright inaccurate when you're trying to determine how adjuncts like honey (gravity of 82.1 degrees Plato for the Wikipedian varietal) affect final liquid properties.

3. I was calculating all of my adjunct additions based on a parameter called "total wort volume", which was essentially the post-boil volume plus the volumes of any adjuncts added afterward (i.e. a yeast starter). Another way of thinking about it is that total wort volume = initial fermentation volume plus kettle wort losses. It's a made-up variable that never physically exists, but I thought it was a clever way to manage the interactions of several adjuncts. The problem? When you add an adjunct to the boil kettle, you lose some of it. When you add it directly to the fermenter, you don't. Since I typically specify adjunct additions as percentages of total extract, equating them to percentages of total wort volume is invalid.

I solved issues #1 and #3 by calculating the degrees Plato, specific gravity, volume, mass and extract for every stage of the brewing process and using those values where applicable instead of using total wort volume everywhere. To do so, I needed to "fix" problem #2 by adding an endpoint to the ASBC table. Since sucrose has a density of 1.587 g/mL and water has a density of 0.9982 g/mL at the ASBC reference temperature of 20 degc, the specific gravity of sucrose is 1.587 / 0.9982 = 1.589. Since degrees Plato is defined as % sucrose by weight, 100 degrees Plato should equal 1.589. One of the curve fits is shown below:


I say "fix" because I don't actually know what the data looks like between 20 degrees Plato and 100 degrees Plato. At least the curve converges on a reasonable endpoint, which is good enough for government work.  Here's how the process works for Shane's cider example (5.0 gallons of cider at 1.052, 4.8 lbs of honey with an assumed gravity of 82.1 degrees Plato, final gravity of 1.004):

1. Water density at 68 degf = 0.9982 kg/L = 8.3316 lbs/gal.
2. Initial cider mass = density*volume = (SG*Dwater)*volume = (1.052*8.3316)*5 = 43.8 lbs. Leave me alone about using lbs as a unit of mass; it's a lot easier than slugs.
3. Initial cider gravity = ((116.716*SG-569.851)*SG+1048.046)*SG-594.914 = 12.9 degrees Plato.
4. Initial cider extract = (degrees Plato/100)*mass = (12.9/100)*43.8 = 5.6 lbs.
5. Honey extract = (82.1/100)*4.8 = 3.9 lbs.
6. Total mass = cider mass + honey mass = 43.8 + 4.8 = 48.6 lbs.
7. Total extract = cider extract + honey extract = 5.6 + 3.9 = 9.6 lbs (5.64 + 3.94 = 9.58, which gets rounded up).
8. Original gravity = 100*extract/mass = 100*9.6/48.6 = 19.7 degrees Plato.
9. Final gravity = ((116.716*SG-569.851)*SG+1048.046)*SG-594.914 = 1.0 degrees plato.
10. Alcohol by volume = 0.516*(original gravity - final gravity) = 0.516*(19.7-1.0) = 9.6%. It should be noted that calculating alcohol content is always approximate; to determine the exact value, you need to perform a distillation test on a physical sample.

Thanks for the mental workout, Shane. Updated recipe and brewlog spreadsheets can be found in the file cabinet.

Wednesday, November 4, 2009

I Need a Job

Since the time when Rachel's maternity leave kicked into unpaid mode (mid-July), my checkbook has lost about 42% of its value. To continue working on RePublic, I need to find a job. Otherwise, I'll need to quit and find a job. I contacted most of the breweries within an hour and a half drive of my house, but nobody's hiring right now. It's too bad that J.T. Whitney's doing its best business in the winter was an anomaly in the local brewing industry. Look for me the next time you're ordering fast food.

Monday, October 26, 2009

Beat to the Brewpub Bill

After a year and ten months of working full-time to open a brewpub, I'm a little jealous that the owners of Vintage were able to snap their fingers and start renovating the old J.T. Whitney's building. It's not a vindictive jealousy, though - I wish them the best and plan on checking the place out once it opens. I'll also say "you're welcome" for turning down a venture capitalist who wanted to do the same thing back in April (I'm friends with the Whitney's folks and didn't want to prevent them from renegotiating their lease).

What's interesting to me is finding out how Wisconsin's ill-conceived brewpub law will apply to them. From what I can gather, a brewpub owner can't own - directly or indirectly - any non-brewpub establishments with Class B liquor licenses. I don't think a restaurant actually has to brew beer to be a brewpub, though, so the Vintage owners could probably just apply for a second brewpub permit to cover their downtown location. If a brewing operation does need to exist, a "brewpub group" probably only needs to brew at one location (see this Department of Revenue form). I'm sort of glad that RePublic won't be setting the precedent on how the law is enforced.

Tuesday, October 20, 2009

Underqualified

Despite having never worked in a commercial kitchen, I'm now a state-certified food manager. I love bureaucracy. My certification expires in September of 2014, so I have plenty of time to reinvent myself as the guy who fires you for doing lines on the prep table.

Monday, October 19, 2009

Lager House

I don't brew many lagers. It's a matter of logistics, not preference: I use the same fridge for lagering and serving, and beer doesn't have much flavor at the near-freezing temperatures necessary for lager maturation. I have the lager bug right now, though, so I'm going to go without for a while and brew a Munich Dunkel. Here's the plan:

-Make a huge yeast starter. I'm talking two steps with a cumulative volume of 1.6 gallons for a 5-gallon batch of beer. Since I don't want to dump that much oxidized starter beer into my delicate lager, I needed to adjust my recipe calculations to decant most of it before pitching (I typically pitch everything because having a lot of healthy yeast usually trumps the drawbacks). You can download the updated recipe spreadsheets at the File Cabinet.
-Mash at 145 degf to create a lot of fermentable sugars, then pull a decoction to raise the temp to 158 degf. My procedure will be similar to the Hochkurz process described near the bottom of Brukaiser's decoction mashing website. I'm leaving out the protein rest and mashout, though, because modern malts eliminate the need for a protein rest and my homebrew system works fine without mashouts (as did every commercial brewhouse I've worked on). I'm not convinced that decoction mashing is necessary either, but it'll introduce less oxygen than performing a step mash on my stove and pouring the contents into my lautering vessel.
-Ferment as close to 48 degf as possible. I'll do so by pitching my yeast at 46 degf (I hope it's cold outside) and setting the fridge to 44 degf. If the beer gets hotter than 48 degf but stays below 52, it's no big deal.

That's my story and I'm sticking to it.

Tuesday, October 13, 2009

Assembly Hearing = Meh

Today's hearing on AB287 pretty much went like this:

-Proponents: alcohol abuse, drunk driving and underage drinking cause a lot of problems in Wisconsin.  We support a beer tax increase so law enforcement and treatment projects can be better-funded.
-Opponents: raising the beer tax will result in job losses, and potential business closures, in the brewing and related retail industries which are vital to Wisconsin's economic health.

I was disappointed that the debate centered around preventing alcohol abuse vs. saving jobs, as though the two are mutually exclusive, instead of focusing on who should pay for the high costs of alcohol abuse.  I was at the hearing for over four hours, but my name hadn't been called by the time I needed to leave.  The point I was planning to make was "my opposition to this tax doesn't mean that I'm against reducing drunk driving or alcohol abuse, or that I'm against using taxpayer money to do so.  The issue for me is where the money comes from.  If issuing fines to problem drinkers only pays for a fraction of the costs they create, you need somebody else to foot the rest of the bill.  AB287 places that burden on responsible drinkers, even though they contribute no more to the problem - nor benefit any more from the solution - than non-drinkers.  If a tax increase is absolutely necessary, then raise the general sales tax (by 0.05%) or income tax (all brackets by 0.03%) so the tax hike doesn't reflect a moral judgment against responsible drinkers."

Thursday, October 8, 2009

Refuting Beer Taxes

The rationale behind Terese Berceau's proposed beer tax increase is outlined on the following website:

How ridiculously low is the Wisconsin beer tax

Below are my responses to some of her claims.

Berceau: the Wisconsin beer tax was created in 1933 (at $1 a barrel).
RePublic: in 1933, Wisconsin implemented a regressive tax that increased at each stage of the state-mandated three-tier supply chain. The tax itself was subject to sales tax.

Berceau: it has only been raised once ― to $2.00 a barrel in 1969 (36 years later).
RePublic: Wisconsin has a pretty good track record of supporting an industry that creates a lot of jobs.


Berceau: if increased to inflation from 1933, it would be $16.12 a barrel.
RePublic: if you believe this number, a six-pack of Spotted Cow would cost you $8.44 per 6-pack before sales tax. Here's the math: $7.99 (current price) + [$16.12 per barrel - $1.33 per barrel (the current average beer tax that New Glarus probably pays)] * 1.3 (distributor markup) * 1.3 (retail markup) / 31 gallons per barrel / 128 oz per gallon * 12 oz per bottle * 6 bottles per 6-pack = $8.44.

Berceau: if increased by inflation from 1969, it would be $10.85 a barrel.
RePublic: Inflation is already included in the cost of beer via ingredient expenses, labor expenses, utility expenses, occupancy expenses, marketing expenses and many other expenses. If we use inflation to justify raising the beer tax this year, will we keep doing it in subsequent years?


Berceau: the Berceau proposal is $10 a barrel.
RePublic: will you continue to support New Glarus when Spotted Cow costs $8.29 per 6-pack or will you downgrade to something cheaper and much less Wisconsin?

Berceau: it has been 38 years since the last increase!
RePublic: would you elect a president who campaigns to raise taxes because it hasn't been done a long time?

Berceau: Wisconsin’s beer tax has lost 83% of its value due to inflation since 1969.
RePublic: this is a good thing. Beer tax = a large number of responsible drinkers pay to reduce problems caused by a small number of irresponsible drinkers, which helps the general public. No beer tax = the general public pays to help the general public. If raising taxes during a recession is really the best way to combat drunk driving, raise a tax that affects the entire population fairly.

Berceau: Wisconsin has the third lowest beer tax in the nation (6.5¢ per gallon)(3.6¢ a six-pack) (0.6¢ a 12-ounce bottle).
-Second lowest: Missouri (6¢ per gallon) (headquarters of Anheuser-Busch)
-Lowest: Wyoming (1.9¢ per gallon).
Our neighboring states charge two to three times more.
- Illinois: 19¢ per gallon
-Minnesota: 15¢
-Indiana: 12¢
-Michigan: 20¢
RePublic: my mom used to ask me "if everyone else jumped off a bridge, would you do the same?"

Berceau: the great majority of Wisconsin beer producers pay very little in state beer tax.
RePublic: that's sort of true because the beer tax is really paid by consumers. Brewers, distributors and retailers can deflect tax increases by raising their prices. If they didn't, they'd go out of business. Unfortunately, most consumers can't just raise their incomes.

Berceau: 79% of all beer producers in Wisconsin pay between $0 and $5,000 annually in state beer tax.
RePublic: 79% of all beer producers in Wisconsin are very small companies.

Berceau: 64% of Wisconsin beer producers pay less than $1,000 annually in state beer tax.
RePublic: 64% of Wisconsin beer producers are extremely small companies.

Berceau: only 4 out of 66 beer producers in Wisconsin pay more than $100,000 in annual state beer taxes. (Miller alone pays over a $1 million).
RePublic: as a startup brewery, RePublic be lucky to sell $400,000 of beer. The business shouldn't be paying anywhere near $100,000 in taxes.

Berceau: over 92% of all beer producers in Wisconsin pay only half ($1.00 a barrel) of the Wisconsin beer tax (because they produce less than 50,000 barrels a year). Only Miller is taxed entirely at the full $2.00 a barrel tax. Leinenkugel, Pabst, New Glarus and Mike’s Lemonade are taxes at a combination of the 50% and 100% rate.
RePublic: wow, reducing taxes to small businesses encourages... small business! Small breweries tend to produce flavorful beer, which discourages binge drinking. When was the last time you saw somebody pound a case of Lake Louie Porter or stagger down the street with a bottle of Sprecher Barleywine in a paper bag?

Berceau: only 31% of all beer produced in Wisconsin is taxed at all! 69% is exported Wisconsin tax free (5.9 million barrels exported of 8.5 million barrels produced).
RePublic: not true! All breweries pay taxes to the states they export beer to. If you start charging taxes for beer that isn't sold in the state, the double taxation will render Wisconsin's breweries unable to compete in out-of-state markets.

Berceau: Miller, alone, generated 77% of all of our beer tax revenue from in-state producers. The top four, Leinenkugel, Miller, Pabst and Mike’s Lemonade account for 95% of all of our revenue from in-state producers.
RePublic: a single Miller brewery - they have several - brews more beer in one day than J.T. Whitney's brewed in its entire fifteen-year existence. This is like saying "a person who makes $200K/yr pays a lot more income tax than somebody who makes $50Kyr."

Berceau: the Berceau proposal is to raise the state beer tax from $2.00 a barrel to $10 a barrel. Or, from the current 0.6¢ a 12-ounce bottle, to 3¢ a bottle. It would raise the state tax from the current, 3.6¢ a six-pack to 18¢ a six pack.
RePublic: these numbers are what the brewers will pay, not what the consumers will pay. To figure out the consumer cost increase, multiply all of these numbers by 1.3 twice.

Berceau: the Berceau proposal would raise our revenue to approximately $50 million.
RePublic: if you assume that every brewery except Miller currently pays $1/barrel in beer tax and that the consumption of Wisconsin-made beer won't change after the new tax, then the increase in revenue will be about $50 million. Those are a couple of huge ifs, though.

Berceau: the average drinker will not even feel the effect of an increase.
RePublic: as long as they're earning the same job compensation as a congresswoman.

Berceau: beer producers are not concerned about the “average” drinker. They know that most of their revenue comes from price-insensitive heavy drinkers.
RePublic: state representatives are not concerned about the "average" constituent. They know that most of their votes come from campaign spending, which is funded by special-interest groups. Seriously, though, who wants their brewpub to be known as the place where drunk patrons get into fights? Who wants their brewery's name associated with fatal car crashes? Who wants to contribute to the alcoholism that tears up families? Not only is promoting heavy drinking an abhorrent character accusation, but it's simply bad business.

Berceau: 10% of all drinkers consumer 43% of all beer. 20% of all drinker consumer 85% of all beer.
RePublic: what constitutes a drinker?  Somebody who's admitted to having a drink in their lifetime?

Berceau: even for a heavy drinker who consumes a six pack a day, the Berceau increase would only cost you an additional $1 a week.
RePublic: Nope, it would cost an additional $1.72 per week ($89.30 per year) after distributor and retailer markups of 30% each. That's a lot, considering we're talking about a tax on a product instead of the product itself.

Berceau: heavy and addicted drinkers who account for most of the beer consumption in the U.S. rightly pay the most in beer taxes, since their drinking imposes the greatest cost on society.
RePublic: again, how is the claim (heavy drinkers account for most of the beer consumption in the U.S.) substantiated? Is it because people who drink two beers a day are considered a heavy and/or addicted drinkers? If this is really about sticking heavy drinkers with the bill, they should literally bill heavy drinkers when they cause problems and leave the rest of us alone.

Berceau: if a 3¢ per bottle tax causes you a financial burden, you have greater problems to worry about than the beer tax.
RePublic: yes, poor people, the discussion regarding this 5¢ per bottle tax increase is above you. You can add it to your list of problems, but you have no business worrying about it.

Berceau: the moderate-drinking majority of drinkers consume relatively little alcohol and pay a negligible amount of alcohol taxes.
RePublic: moderate drinkers would still be taxed more than non-drinkers to fix a problem that neither of them cause, which isn't right. Even if the proposed tax increase was $0.0000001 per barrel, the principle of it would still be wrong (and a waste of the government's time).

Berceau: alcoholic beverages are cheaper (25% less after adjusting for inflation) today than they were in the 1960s and 1970s. (Institute of Medicine, National Research Council)
RePublic: Finally, a source! Too bad the statistic is meaningless in terms of justifying a tax hike, unless increasing the cost of living is a good thing.

Berceau: the alcohol industry is financially dependent upon underage and pathological drinking.
RePublic: in my year and a half at J.T. Whitney's, I saw exactly one instance of knowingly serving an underage patron - an 18-year old who was with his parents. However, I'll admit that an underage drinking problem exists. It doesn't have much to do with the price of beer, though, and I'd wager that the majority of underage drinkers - like I did when I was underage - consume the cheapest alcohol they can get their hands on. With bottom-shelf vodka already being cheaper than beer on a per-volume of ethanol basis, this tax isn't going to do much to prevent underage drinking.

Berceau: nationwide, 37.6% of alcohol (by cost) was misused or illegally consumed ($48.3 billion). Another study put it as high as 48.8%.
RePublic: these are difficult statistics to track. Can we see who conducted the studies, please?

Berceau: Wisconsin ranks 4th highest per capita for alcohol consumption from beer (Nevada, New Hampshire and Montana rank higher).
RePublic: let's stick to beer here. According to a 2007 article in TIME Magazine, Wisconsinites drank an average of 28 gallons per year. That's 0.8 12-oz bottles per day, folks. Per-capita alcohol consumption isn't the problem.

Berceau: Wisconsin is listed among the “Fatal Fifteen” states for the highest underage drinking deaths by the National Safety Board. Over 60,000 Wisconsin residents receive publicly funded alcohol treatment. Over 44,000 OWIs and PACs (prohibited alcohol content) violations in Wisconsin in 2006. 6,000 alcohol-related driving injuries in Wisconsin in 2005. 369 alcohol-related driving fatalities in Wisconsin in 2005. Alcohol is related to the crimes of about half of Wisconsin’s 22,000 prisoners. 70% of our 22,000 prisoners require alcohol or substance abuse treatment.
RePublic: now we're getting to the real problem - our drunk driving laws are a joke. Apparently we're giving plenty of citations, but they're not helping much. It sounds like an increased beer tax would just fund more of the same (if we assume that our legislators are remotely capable of following through on a proposed earmark).

Berceau: the $9.7 million raised by the state beer tax last year covered only a fraction of treatment costs. That doesn’t even include the $825 million in annual alcohol-related heath care costs that get passed along to Wisconsin taxpayers. It doesn’t count the estimated $2.7 billion in state:
-Policing and court costs
-Incarceration costs
-Traffic crash costs
- Lost productivity costs
-Academic failure costs
-Premature death costs
RePublic: beer tax shouldn't cover the whole treatment cost because every person benefits from it regardless of the amount of alcohol they consume.

Berceau: each Wisconsin resident pays only $1.82 a year in beer taxes.
RePublic: each Wisconsin resident should pay $0.00 a year in beer taxes.

Berceau: but also $18.64 in alcohol treatment costs …and $154 in alcohol-related healthcare costs $500 in alcohol-related criminal justice and societal costs. Alcohol abuse and addiction cost the nation an estimated $220 billion in 2005. …more than cancer ($196 billion) …and more than obesity ($133 billion). …and
RePublic: regardless of the integrity of these statistics, it's common sense that a small number of problem drinkers can add up to big money. Why are we trying to match the costs with unfair taxes instead of doing things that could reduce them?

If you'd like to weigh in on the official debate, go to the State Capitol, Room 417 North (GAR), on 10/13 at 10am.

Monday, October 5, 2009

Big Bad Summary

It's been a couple of weeks since I've written anything here.  What can I say?  Raising money is boring.  In an effort to balance the homebrewing content, here's a timeline of our startup process:

-Summer 2006: loved my job at J.T. Whitney's, but the pay was lousy. Reasoned that if I wanted to earn a decent living, be in charge of a brewing operation and stay in Madison, I'd need to open my own business. Decided it would be a distributing brewery so I wouldn't have to mess around with food service.
-Late 2006 or early 2007: asked Jane to be my business partner. I'd brew the beer while she marketed and sold it.
-February 2007: Moved to Vermont for a 10-month job at Otter Creek Brewing so I could familiarize myself with bottling.
-Sometime in 2007: Vermont was beautiful, my co-workers were great and the pay was good, but the nature of brewpub work was a lot more fun. Jane and I decided the business would be a pub.
-December 2008: contract at Otter Creek ended. Moved back to WI and stupidly decided not to get a job so I could open the business faster.
-January 2008: began researching information and writing a business plan.
-February 2008: decided to call the business RePublic Brewpub.
-May 2008: met with a lawyer about business structure and hired him to write an operating agreement (the LLC equivalent of corporate by-laws).
-July 2008: began looking for locations in Madison. Reviewed projections with an accountant. Started writing a Private Placement Memorandum (PPM), aka a formal investment offering. Registered the business as an LLC.
-August 2008: received our initial operating agreement. Obtained an Employer ID number from the IRS.
-October 2008: Finished the initial business plan. Began meeting with securities lawyers to discuss investor solicitation strategies and ensure that our PPM complied with securities laws.
-November 2008: Started working with a commercial realtor.
-December 2008: retained a securities lawyer to review our PPM. Started working with an architect.
-January 2009: hired a graphic artist and a web designer. Opened a money market account to deposit investor checks. Finished the initial PPM and started looking for investors.
-April 2009: began talking with bankers about loans.
-May 2009: began looking for locations in Sun Prairie.
-June 2009: chose a location and began negotiating our occupancy.
-July 2009: began working with a construction manager and received our initial construction estimate.
-August 2009: secured the location. Registered as a future payer of Wisconsin business taxes. Received our initial floor plan.
-September 2009: registered our investment offering with the Securities and Exchange Commission as exempt under Regulation A, Rule 504.  Wisconsin's "25 or fewer non-accredited investors" exemption didn't require registration. Took a food safety course to comply with state regulations (the business needs a certified food manager. It'll eventually be Jane, but she won't be able to take the course for a while and we didn't want that to slow us down).

Throughout this process, Jane and I gathered knowledge to refine our business plan. Understanding what we're trying to do has definitely been the most time-consuming aspect of this project, and it's become obvious to us how the owners of brewpub chains are able to open their subsequent locations much quicker than their initial locations.

Thursday, September 24, 2009

Britishness

I'm no expert on British ales, but I can't think of any American versions that recreate a fundamental character shared by beers like Fuller's ESB, Samuel Smith Oatmeal Stout and Old Peculier. Oxidation of the British beers is definitely a contributing factor, but it doesn't tell the whole story. Thanks to Ron Pattinson, who shares his research of European brewery logs online, I've learned that a lot of British beers are made with inverted sugar at various stages of refinement. In one of today's posts, he calls out American brewers for applying an all-malt philosophy to British beer recipes.

Not knowing where to buy British brewing sugars, I've been using Belgian Dark Candi Syrup as an alternative. So far, the results have been promising. My latest Old Ale was a step in the right direction, and I brewed a mild last week that I'm pretty excited about. Unfortunately, I won't have anything to compare the mild with because British session beers are too fragile to sell in the states. Maybe I'll be able to visit England in ten years or so, when I've recovered from the financial trauma of trying to open a brewery.

Sunday, September 20, 2009

Brewing with Food

My first attempt at brewing with cherries - a 5-gallon batch of cherry porter - was slightly disappointing. Here's what I did:

-Fermented the base beer for four days.
-Mixed 10 lbs of cherries with enough water to cover the fruit.
-Mashed the cherries with a giant perforated spoon.
-Pasteurized the mixture at 140 degf for 5 minutes.
-Cooled the fruit and added it to the beer.
-Fermented the beer for another ten days.
-Transferred the beer into a keg, leaving the cherries behind.

The finished beer wasn't bad, but the cherry contribution was pathetic. It should come as no surprise that the spent cherries were largely whole when I removed them from the fermenter. Next time, I'll either need to mash the cherries before adding water - both so they don't "swim" away from the spoon and so I can watch my progress - or let the beer age on them for months.

The next beer I brewed was a Belgian "Pumpkin" Ale. Spiced beers require fresh spices, so I bought new cinnamon and ginger the previous day. As a firm believer that pumpkin doesn't contribute any flavor to beer, I used butternut squash instead (credit for the idea goes to Mike Ball, a gifted Madison-area homebrewer). Butternut squash is a joy to work with: just cut it into cross-sections, cut off the peels, grate the meat with a cheese grater and add it to the mash. No seeds, no guts, no hassle. I chose not to roast the squash because I don't think it accomplishes anything. The beer is still fermenting, so the final outcome is unknown.

Wednesday, September 16, 2009

Electronic Filing

To the Securities and Exchange Commission:

-If your software is only compatible with Internet Explorer and Netscape, your electronic filing system shouldn't be mandatory.
-If you require duplicate paper files with notarized signatures, your electronic filing system shouldn't be mandatory.
-If you accept faxes and uploaded PDFs but not emailed PDFs, your electronic filing system shouldn't be mandatory.
-If your software doesn't recognize file paths on Macs, your electronic filing system shouldn't be mandatory.
-If your tech support person says "this happened yesterday" but doesn't even pretend to care about knowing how to fix it, your electronic filing system shouldn't be mandatory.
-If your signature page doesn't contain space for a notary's information... well, that doesn't really have anything to do with electronic filing.

Hopefully Jane will be able to upload the required file from her PC.

Monday, September 14, 2009

Work/Life Balance

I take care of Mia, my 3-month old daughter, on Mondays. Today, while holding her on my shoulder after a feeding, I had a phone conversation with a banker. It went something like this:

Banker: Thanks for calling me back. Unfortunately, we're not going to be able to...
Mia: BAAARRRRRFFFFFFF!!!
Banker: give you a loan due to your equity...
Mia: BAAARRRRRFFFFFFF!!!
Banker: situation and the...
Dog: lick, lick, lick, etc.
Banker: state of the economy.

Thanks for telling the banker what I was really thinking, Mia.

Swimming in Money

Well, not really. We did receive some funding last week, though. The city's Community Development Authority approved our application for a facade design assistance grant. Once we renovate the building, the city will give us some money to offset the costs of designing the facade (50% of the design cost or $5,000, whichever is less). We also deposited our first investor check*. Woooo!

*I need to submit a Form D to the Securities and Exchange Commission this week.

Monday, September 7, 2009

That Time of Year

Rachel and I celebrated our 5th wedding anniversary on Saturday. After a great dinner at Sardine, we drank our 4th bottle of anniversary beer while the baby slept. Once again, the beer had improved after a year of aging. The fruit flavor had subsided to the point that it tasted like part of the ester profile, and the color looked more like a beer than a wine. Our first glasses were remarkably clear, but our second servings were hazy with yeast. Operator error!

Monday, August 31, 2009

Airtime

I'll be on Beer Talk Today tomorrow. The station is 91.7 FM, aka WSUM, and the show starts at 9pm. I'm looking forward to finding out if my voice still sounds like Mickey Mouse.

Saturday, August 29, 2009

Lenders

Thanks to a new Sun Prairie connection, I was recently able to talk with a woman who works at the Small Business Administration. She was surprised that my latest loan application was rejected without being submitted to the SBA. When I told her the bank's primary concern was a lack of collateral, she basically told me that was crap because the SBA isn't a collateral lender. The SBA is currently guarantying 90% of each loan they approve, and they've waived their guaranty fees until at least the end of the year. What that means (I think) is if a bank loans RePublic $850K and the business fails, the SBA will give the bank $765K. The $85K in bank losses could easily be recovered by selling the brewing equipment, which is in high demand these days, and the building. Buzzards will take the restaurant equipment.

Following the advice of a banker, I went on a lender-contacting bender last week. I'll be meeting with two of them next week, another two are reviewing my business plan, and I'm waiting to hear back from a bunch more. I need to be careful, though, because the SBA will automatically reject multiple applications for the same business. Hopefully I'll have to sign some government documents to authorize any applications to the SBA. Too many banks wanting to work with me would be a funny way to fail.

Tuesday, August 25, 2009

Positive Legislative Experience

It's been a busy couple of weeks for team RePublic. Between design meetings, filling out applications, meeting city officials, a fast-approaching investor commitment deadline and needing to find a new lender (boo to rejection), I haven't had much time for day-to-day tasks such as sleeping or responding to friends' emails. Yet here I am. It's a good thing that very few of my friends read this weblog.

Yesterday morning, I received a notice about a public hearing about Assembly Bill 67 that was scheduled for this morning. The bill would revoke establishments' liquor licenses if their licensed bartenders or liquor agents are caught three times with blood alcohol levels above 0.0 while working. The bill is bad news for several reasons:

-The beers sold at brewpubs and specialty beer bars are available at very few places. As such, employees need to taste the beer to be able to describe it to customers and make educated recommendations.
-I could lose my liquor license if an employee consumes one drink (or some cold medicine) before coming to work.
-As an owner, I'm always considered "at work". If I can't have a drink at my own pub, what's the point?

So I went down to the capitol and testified against the bill. Thankfully the bill's sponsor, Josh Zepnick, intends to revise the bill to better accomplish its intent: punish irresponsible tavern owners who allow their staff to drink excessively, therefore reducing their ability to reduce over-consumption and prevent intoxicated patrons from driving drunk. In fact, he was surprised by the last-minute call for a public hearing and admitted that the bill wasn't anywhere close to being ready. He hopes to gather a lot more feedback before trying to push anything through.

Thank you, Wisconsin legislature, for proving my cynicism wrong on this occasion.

Monday, August 17, 2009

What's Next?

To-do list:

-Apply for a liquor license. The $10K price tag is pretty hefty, but the business will probably get $9,500 back after a 30-day trial period. The good news is that the money won't be due until the business is ready to receive the license.

-Apply for a conditional use permit. The building is in a commercial zoning district, but restaurants and taverns require special approval. The permit will remain in effect even if RePublic fails, so Jane and I will need to write in some provisions that protect nearby residents from future bar owners who may not be as respectful as us.

-Talk with the city's building inspector, police chief and fire chief. The liquor license application will automatically trigger their involvement, but I'd like to meet everyone beforehand. Ditto for the county health inspector and city wastewater treatment superintendent.

-Raise money. Tons and tons of money. This is still our biggest obstacle.

Saturday, August 8, 2009

The Location

Remember all that nonsense about how Jane and I would walk away from RePublic if we couldn't raise enough equity capital by May 29th? Here's what happened.

Jane and I originally wanted to locate our pub on Atwood Ave. The smaller of the two Atwood Community Center buildings would have been perfect in terms of geography, but receiving deliveries would've been a nightmare. Aside from ACC and the old Bunky's building, which the landlord wouldn't even let us look at because we weren't fully funded, there wasn't anything available. So we branched out and shifted our focus to the areas near Sherman Ave and Northport. We liked Northgate enough to make it our fallback spot, but it still didn't have the neighborhood accessibility we were looking for. Meanwhile, our May deadline was approaching and we hadn't raised anywhere near the amount of equity capital needed for banks to take us seriously (at least 25% of the total project cost).

Things changed when I received an email from Neil Stechschulte, the Economic Development Coordinator of Sun Prairie. The city's been trying to get a brewpub for years, and it's willing to provide financial incentives to make it happen. After touring some downtown locations with Neil and learning all about tax increment financing and revolving loan funds, Jane and I were sold. After all, our options at that point were (a) give up because we couldn't raise enough capital or (b) hope the money from Sun Prairie would make up the difference. The big surprise was how much better downtown Sun Prairie fit with our concept than any of the non-Atwood places we found in Madison.

After considering a few spots, we ultimately decided on the former ACME Automotive building at 117 Columbus Street. Those garage doors would make an excellent spillway to an outdoor seating area, wouldn't they? Anyway, we hadn't been able to talk about it until now for two reasons:

-We didn't want to motivate anybody else to buy the building.
-We wanted the neighbors to be the first to know about the project.

We were initially going to try and lease the space, but the owner preferred to sell. Assuming we could raise the extra money needed for a down payment, it made a lot more financial sense to buy the place. We'd been negotiating the purchase terms over the last three weeks and finally reached an agreement last Tuesday. Jane and I now have 60 days (from 8/4) to raise about 80% of our required startup capital. During that time, the building owner can't accept another offer. If we're unable to raise the money in time, which is expected (our original offer gave us 90 days), we'll have the option of "buying" another 60 days by making our earnest payment non-refundable. Or we can just walk away and make another offer once we have the money, effectively gambling on the owner not being able to sell the building during that time.

On the neighborhood front, I sent letters to the owners of nearby houses and adjacent businesses. The few responses we've received have been a mix of enthusiasm and concern. Hopefully Jane and I will be able to spread the word about how well-behaved craft beer consumers tend to be, how our atmosphere and pricing will keep out the "pound twelve Budweisers" crowd, and how our business will have a much smaller impact than a giant establishment such as Great Dane.

Saturday, August 1, 2009

Construction Estimates

A few weeks ago, I met with Paul from Harmony Construction Management to get the lowdown on estimating construction costs. To my surprise, he told me he could make a couple of trips to the site and prepare an estimate in less than two weeks - free of charge. The budget he created was downright eerie: it only differed from my prior estimate ($100 per square foot) by $3,000. His projected schedule was pretty close to my expectations as well.

Paul was a recommended to me and Jane by Melissa. As usual, her advice was good. Paul has built a lot of restaurants, including the Great Dane in Fitchburg, and he's been very straightforward in educating us about the build-out process. Unlike most general contractors (so I've heard), he shares his itemized expenses with clients and pays himself a fixed percentage of the final cost. That means a few things:

-He can't exploit his clients' ignorance to pad his bottom line.
-Change orders don't allow him to grossly violate his estimates.
-His clients have a healthy amount of control over the final cost.

Jane and I were very impressed with Paul and we're looking forward to working with him as our project progresses.

Wednesday, July 22, 2009

Session Beers Are Only Part of the Plan

Between many meetings and occupancy negotiations, I was able to sneak in a brewday last week. The beer - a massively strong blond farmhouse ale for my brother's wedding anniversary - is still fermenting at a moderate pace. If the beer turns out to my liking, i.e. dry as hell with subtle saison-like flavors, I may use it as the base of my Grand Cru. Here are some pictures of the brewing process.

A 1.1-gallon yeast starter:


My mash tun capacity limited the total batch size to 4.5 gallons:


First wort hops:


An unreadable pre-boil gravity of 1.091 (after temperature correction):


It was only 0.003 below my target, which is pretty close for such a strong beer. It means the lautering efficiency curve in my recipe spreadsheet is valid near the upper end.

Monday, July 20, 2009

Yeast vs. pH

I bottled my sour red ale last month. Forgetting that low pH inhibits most brewers' yeasts, I pitched some into the year-old beer beforehand. Two weeks later, the beer was tasty but dead flat. Hopefully the souring microorganisms will consume the aftermath of the impending yeast autolysis, benefiting from the extra nutrition as they carbonate the beer at a leisurely pace. I plan to crack open the next bottle in about five months.

Wednesday, July 15, 2009

Vague Good News

Jane and I have found a bank that's willing to apply for an SBA guaranty on our behalf. Before we can submit the application, we'll probably need to provide the following information:

-Location. We've chosen a space and are in the process of negotiating our occupancy, but securing a building with financing contingencies is tricky business.
-Detailed estimates of construction costs. We're currently using a ballpark dollar per square foot number, but the SBA will likely want to see an itemized list based on a specific location. I recently met with a construction manager and learned that it can be done much faster than I expected.
-Accountant's contact info. I figured we'd retain an accountant when we're ready to select the pub's bookkeeping and point of sale systems, but we may have to do it sooner. I know who I'd like to hire, but I need to make sure that Jane agrees.
-Insurance (physical damage and fire) on loan collateral. Hopefully some of the pub's assets will suffice for collateral. After all, the SBA could provide a guaranty for up to 90% of the loan's value. The potential problem is that the pub won't have any assets until we receive a loan. Will an insurance estimate on future assets suffice? We hope so!

There's a lot more, but we already know most of it. Our past diligence is paying off.

Monday, June 29, 2009

The Restaurant Business

Last November, I noticed this ad near the back of an issue of Restaurant Startup & Growth magazine:


When I followed web address, I was shocked at what I saw:

-No mention of boiling the wort.
-No mention of tank cleaning.
-No mention of oxygenation.
-No mention of how to deal with the CO2 produced during fermentation.
-No mention of how to troubleshoot problems without a qualified brewer.
-A requirement for a hot water source, but no warning that the water can't be softened.
-A 7-day fermentation cycle that includes two days of cooling. No maturation.
-A claim that three tanks equals five beers on tap at all times ("ask about mixing beers to produce additional flavors").
-A claim that ingredients alone cost $0.26 per pint, which makes a total cost of $0.30 per pint highly suspect.
-A claim that SPI's beer won a bunch of awards from a competition that I can't find any record of.
-A claim that a book written by Leigh Beadle, the company founder, started the US homebrewing revolution.

That's the short list. It's possible that Specialty Products International conducts itself with the utmost integrity and addresses all of these issues in their dealings with individual customers. I doubt it, though. If their system was really a convenient solution to a whole host of brewing problems, I'd expect to find at least find one mention of it in a search of brewing industry publications. One thing is certain: SPI isn't marketing its products to people who know how to make beer.

That bothered me quite a bit, but what bothered me more was RS&G's response when I wrote to one of their publishers to point out that the ad was likely exploiting their subscribers' ignorance: no acknowledgment of any sort. A "thanks for the info, but we need to honor our current agreement with SPI" or "you're biased and have insufficient credentials for us to take action on" or "we care more about ad revenue than actually helping restaurateurs" would have been fine. Pulling the ad would've sufficed as well, but it's appeared in every single issue since. I'm sure it brings in more money than my subscription, which will hopefully expire soon.

Does anyone who reads this weblog have firsthand experience with a Beadle Brewing System? I'd call SPI and ask a bunch of questions myself, but doing so with no intention of becoming a customer would make me feel dirty. That's why reporters are paid the big bucks.

Thursday, June 25, 2009

Multivariable Equations

When I was working as an engineer, I came up with a way to combine two physical dependencies into one equation (I'm sure a lot of people have figured the same thing out, but I'm still proud of myself). I think my original intent was to predict a jet engine's maximum thrust at a given temperature and pressure, but I don't remember for sure. Whatever it was, the method works beautifully for determining a beer's carbonation level at a given temperature and pressure. Here's how to do it:

-Plot the values from a carbonation table (I used an American Society of Brewing Chemists version) and create linear equations of CO2 volumes vs. pressure at each temperature. It should look like this, but without the haphazard legend order:


-Each equation has a first order coefficient and a constant. We'll call those values x1 and x0 respectively. Note that CO2 volumes = x1*P + x0 at a given temperature.
-Plot the x1 values vs. temperature and create an equation that describes the relationship:


-Do the same thing with the x0 values:


-Replace the coefficients of the pressure equation with the equations that describe x1 and x0. The result is this:

CO2 volumes = x1*P + x0 = ((0.00000981*T-0.00229169)*T+0.16809729)*P+(0.00024826*T-0.04710192)*T+2.87424296

You could just look up CO2 volumes in a table instead, but what fun is that?

Monday, June 22, 2009

Sour Beers

I apologize for the lack of activity around here. Things are happening, but not the types of things I should be publicizing yet. I'm not terribly paranoid about people having sinister motives, but securing a location for the pub is a big exception. In my mind, the threat of somebody buying a site for the sole purpose of preventing me from moving there is very real. So is the threat of somebody opening a brewpub right next door and, more importantly, beating me to opening day because they don't have to deal with such time-consuming nuisances as raising outside capital.

In less fear-mongering news, I bottled my year-old sour red ale last week. The one I talked about here. The acidity is smooth, but it's primarily lactic. I was hoping for more acetic acid, but that's the way things go. Once carbonated, it should be a refreshingly tart session beer for these hot summer days. The beer didn't have any wood character, which means the vodka (and subsequent boiling of the wood chips) did its job. The woody vodka was nasty, by the way. It tasted like whiskey to me, but it probably tasted worse than whiskey to people who like whiskey.

Wanting to keep my souring microbes healthy, I brewed an old ale two weeks ago. After bottling the sour red ale a week later, I pulled a gallon of old ale from its fermenter and added it to the wood chips. I dry hopped the remaining beer in the fermenter and will bottle it next week for fresh, bacteria-free consumption. New ale, if you will. Around this time next year, I'll brew another batch of old ale and blend it with the wood-aged gallon. Hopefully the result will be a complex ale with a subtle sourness and - if I'm lucky - some controlled oxidation.

Monday, June 8, 2009

New Briess Organics

The latest New Brewer has a press release for Briess Organic Pale Ale and Black malts. Finally! Briess must have listened to me. I use their specialty malts almost exclusively, but Gambrinus is winning the battle for organic base malt supremacy. I'm looking forward to finding out how the new Pale Ale stacks up (I'm already sold on the Black).

Friday, June 5, 2009

Hopping Methods

Before I dive into the geekery, I'd like to announce that Rachel and I are parents! Our daughter was born last Sunday and words can't express how happy we are! Whoops, I think we just entered Extreme territory.

Back at the Craft Brewers Conference, I attended a seminar about maximizing hop flavor and aroma. The speaker was Van Havig, QA/QC manager of the Rock Bottom brewpub group, and his presentation detailed a company-wide experiment to assess the effectiveness of various hopping methods. Essentially, 30-some breweries produced the same baseline IPA recipe with varying late hopping procedures (yes, Miller's advertising department, we all add hops several times throughout the process). The experiment was loosely controlled, which was both good and bad. For example, differences in water treatments between breweries led to some interesting data. However, the fact that each brewery was allowed to use its own house yeast strain was - in my opinion - in direct conflict with the purpose of the experiment. Even with its flaws, the investigation was the most ambitious and informative of its kind that I've seen in the craft brewing industry.

For the experiment, each brewery utilized one of the following late hopping methods:

-Method 1: add 1 lb/bbl of hops at the end of the boil.
-Method 2: add 1 lb/bbl of hops at the end of the boil and wait an extra 30 minutes before cooling.
-Method 3: add 1 lb/bbl of dry hops after primary fermentation.
-Method 4: add 0.5 lb/bbl of hops at the end of the boil and wait an extra 30 minutes before cooling, then add 0.5 lb/bbl of dry hops after primary fermentation.

Mr. Havig used formal sensory evaluations, laboratory tests and statistical analyses to determine the impacts of the various methods. Here are some highlights:

-Methods 2 and 4 tied for the strongest hop flavor, which implies (1) that brewers can reach a point of diminishing return with kettle additions and (2) that hot residence time increases hop flavor.
-Methods 3 and 4 tied for the strongest hop aroma, which implies that brewers can reach a point of diminishing return with dry hopping.
-There were significant positive correlations between perceived bitterness, perceived hop flavor and perceived hop aroma.
-The correlation between perceived bitterness and measured IBUs (International Bitterness Units) was insignificant, which implies that our senses measure bitterness differently than industry-standard lab methods.
-There was a significant negative correlation between perceived hop character (flavor, aroma and bitterness) and sulfate concentration, which directly opposes the "Burtonize your water for hoppy beers" theory.

Being the good pseudo-scientist that I am, I decided to brew a Summer IPA using some of these new hypotheses. Here's what I did:

-Raised my water's calcium content with primarily calcium chloride instead of calcium sulfate.
-Added about 65% of the beer's IBUs at the end of the boil.
-Allowed the wort to sit for 30 minutes before cooling (on my homebrew system, I usually start cooling immediately after the boil ends). With the high evaporation rates of most homebrew kettles, DME formation shouldn't be a concern.
-Added 0.5 lb/bbl of dry hops after primary fermentation.

The results: a clean and refreshing beer, but HOLY HOPS!! It blew my previous Pale Ale out of the water. I'm a convert.

The beer was destined for a wedding, so it required a label:


The wedding isn't until June 28th, but the beer is already on the road. Hopefully its massive hop character will pass the tests of time, travel and temperature swings!

Tuesday, May 26, 2009

Foiled Again (in a Good Way)!

Go ahead and disregard any past mention of May 29th, 2009. Jane and I may be able to fund the business with less than 25% equity, but it's going to take some time to figure out. Hopefully it won't take a lot of time, i.e. weeks instead of months, but I'd say we're fairly committed to applying for bank loans.

In other news, the most recent House Ale turned out very well. Score one for brewing session beers with low mash temps and lots of Munich malt. I have a couple more recipe tweaks to try, but I'm not sure when I'll get the chance. My appointment to the high office of 'dad' could happen any day now!

Tuesday, May 19, 2009

Decision Time

Five months ago, Jane and I decided that May 29th would be a good deadline for raising capital. If we could find enough startup money by then, the business would move forward. If not, we'd move on with our lives. We're almost at the magic date, but the option of bank financing has made our strategy slightly more convoluted:

-If we can fully fund the business with equity capital by May 29th, great!
-If we can fund at least 25% of the business with equity capital by May 29th, we'll give ourselves three months to raise the rest of the money through a bank loan.
-If we're unable to do either, we'll shelve the business and I'll start looking for a brewing job in the area.

So how close are we? It's very hard to say. We've learned that when you give people a fixed deadline, they wait until the the last possible moment. At least, that's what we're hoping. If I had to guess, I'd say the odds of winning the lottery are better than funding the business entirely with equity capital. I'd also say that funding 25% of the business with equity capital is an attainable goal. We'll see how it goes.

The uncertainty brings me to the point of this post: If you want to start a business where investment capital is required, have your potential investors sign documents that say something like "I intend to invest in RePublic. Upon written notice from Joe and Jane, I will contribute $25,000 within 14 days." I imagine it would be a powerful tool for both planning and persuasion. When it was suggested to me, I chose not to do it because I had already set a fixed deadline and was concerned that a call for commitments would be seen as a desperation move. Learn from my mistake!

In other news, we recently found a very strong candidate for a location. If we're still alive after May 29th, we'll let you know where it is as soon as we notify the appropriate government officials and neighborhood associations of our intent.

Tuesday, May 12, 2009

Musical Analogy

I've seen a number of beer/music analogies, but mine includes wine and spirits:

-Wine is classical music. Elegant, intricate and carefully-crafted. The culture and the products themselves can be somewhat inaccessible to the uninitiated.
-Spirits can all be lumped together as 'Tom Waits'. Relatively narrow but massively deep. If you can get past the burning, there's a wealth of treasure underneath.
-Industrial light lager is the Top 40. Very well-produced, but designed to appeal to the widest possible consumer base.
-Craft beer is everything else, and not just within the confines of western music. Some is truly good, some is truly bad, and a lot is simply misunderstood. Regardless, the variety is staggering. If you want honest expression, craft beer can touch your soul. If you're a pretentious snob, craft beer has a scene for you to own. If you like it heavy, light, loud, quiet, fast or slow - craft beer does it all.

This list begs the question "what is craft beer?" I'm not going to answer that.

Monday, May 11, 2009

Brewing Education

Last year, MillerCoors donated a beautiful little brewing system to the UW Department of Bacteriology. Last Friday, I attended a brewing education summit to help the University figure out what do do with it. A healthy cross-section of brewing industry folks were there, and I felt that we were able to provide a lot of useful insight. Being there reminded me of my former life as an aerospace engineering student at the University of Michigan.

Back then, my undergraduate program was ranked #2 in the country (behind MIT) by some group that decides those sorts of things. After my third year of school, I was hired as the summer intern for an R&D department of a jet engine manufacturer. During my first day on the job, I shadowed one of the technicians as he disassembled an engine. Pointing to the next part to be removed, I asked "what's that?" "The high pressure compressor." There I was, one year away from supposedly being qualified to help design an engine, and I couldn't even identify one of its major components. As my co-workers taught me how to be an engineer over the next four years, I began to realize that my education was completely inadequate at preparing me for a job. If that's true for such a well-regarded program, is it true for most of them? Are the rankings out to lunch or do they measure something completely different?

Dan Carey (New Glarus) and Tom Porter (Lake Louie) seem to believe the same thing about formally-trained brewers, and they were able to articulate it much better than I could. Breweries need people who can fix broken shit. They need people who can weld. They need people who already know the difference between a pump's input and output fittings. They need people who can step into a new operation and physically produce wort, as opposed to being trained for a month while asking questions about things like optimizing enzyme activity. With a physical brewery in its Microbial Sciences Building, I think the University is in a great position to provide both theoretical knowledge and practical experience for future brewers. If it succeeds, the school's graduates will be very well-received by the industry.

Monday, May 4, 2009

Conference Cleanup

I'm finally starting to process the info I brought back from the Craft Brewers Conference. Just like last year, Jane and I learned a lot and had a great time. If you're looking for inspiration and controversy, you can watch the welcome reception video here. If you'd like to learn something geeky, you can check out the Draught Beer Quality Manual here.

The following week, I brought two bottles of Belgian Blond to an MHTG social meeting and received some very interesting feedback. Club members' reactions to the first bottle were overwhelmingly positive, but the second bottle received a lot of comments like "this is way too phenolic - maybe it's because I'm not big into Belgian beers." One guy thought he was drinking beer from two separate batches. Once his second sample warmed up, he realized what was going on and pointed it out to me. I learned two things that evening:

1. My ice pack is a bit overzealous.
2. Near-freezing temperatures enhance the perception of phenolic flavors. Big time!

When I'm a crotchety old brewmaster, I hope I can still say that continuous improvement is more important than my ego.

Thursday, April 30, 2009

What is a Restaurant?

A few days ago, Jason from WKOW's Brew News weblog asked me what I thought of the brewpub bill. After unloading my usual tirade about its injustices, my lawyer asked me "where is this 50% food/beer thing coming from?" Oh, that's easy. I'll just pull up the Wisconsin statutes and run a quick search... where the @#$% did it go!? I was under the impression that if you wanted to open a restaurant in Wisconsin, alcohol could account for no more than 50% of your total sales. That doesn't seem to be the case, which I confirmed by calling the Department of Health Services. The woman on the phone sounded offended that I was asking about alcohol and directed me to the Department of Revenue, which has nothing to do with restaurant permits. So here's what the brewpub law really says about food sales:

-A brewery can't sell food at all.
-A brewpub must sell food, but the amount isn't specified.

This realization makes me hate the brewpub law a lot less. I still hate it, but the alcohol sales restriction is a Madison issue. As far as I can tell, receiving a Food and Drink license from the city doesn't depend on alcohol sales. However, the city's alcohol ordinances (item 38 at this website) define a restaurant as having alcohol sales that account for no more than 50% of gross receipts. Using that definition, as well as an additional definition of "bona fide restaurant", the city makes liquor license approval much easier for establishments that sell a lot of food.

Sunday, April 19, 2009

Lautering Efficiency

Ever wonder why your brewhouse efficiency decreases as your target gravity increases? It's because you're leaving extract in your lauter tun. The following graph approximates the lautering process for 500 lbs of grain with a continuous sparge:


The chart shows that the same grainbill can be used to make about 15 barrels of Bitter, 8 barrels of IPA or 4 barrels of Barleywine. The areas beneath the curve and to the right of each mark represent the amounts of extract that don't make it to the kettle. No matter how strong or weak of a beer you're making, the mashing and lautering processes don't change very much. The only major difference is how much wort you collect from a given amount of grain.

Tuesday, April 14, 2009

Pursuit of Information

Jane and I will be spending next week in Boston for the Craft Brewers Conference. Last year's event was well worth attending and indirectly saved RePublic about $8K in legal fees (for a private placement memorandum). I don't expect the trip to pay for itself this year, but Jane and I should benefit from having narrower objectives this time around. Continuing my drinking sabbatical at the conference will be pretty awkward*, but it'll be a small price to pay in the grand scheme of things.

I forgot to talk about the Midwest Hop Production Workshop I attended last month. In short, the information was solid and the turnout was much larger than I expected. A lot of Midwest farmers are interested in growing hops! Gorst Valley Hops is planning on hosting a second workshop on May 30th. Visit their website for more info.

*If Rachel can convince me that it won't bother her at all if I drink at the conference, I may indulge. Words won't be enough, though. I'm fluent at reading her nonverbal cues.

Friday, April 10, 2009

Hard Work: a Trivialization

My friend Scott shared this on Google Reader yesterday:

Study Finds Business Plans a Waste of Time

The golden nugget of wisdom: "Social connections trump business plans by a long shot". Boy howdy, can I attest to that. It makes me hope that the commenters' claims (about venture capitalists falling on hard times because they don't read business plans) are true.

The concept of networking is completely abstract to me. Essentially, two people create a relationship of little substance so they can trade business favors. It's absolutely nothing like genuine friendship, and realizing that Jane and I will either have to play the game or fail at raising money is somewhat soul-crushing. It reminds me of the Radiohead song "Paranoid Android". The fact that it's illegal for me to publicly advertise my investment offering is immensely frustrating. Is networking much different, aside from being less efficient?

Thursday, April 9, 2009

Wednesday, April 8, 2009

Designing Session Beers

Low-alcohol beers that are suitable for extended drinking sessions, i.e. session beers, are challenging to brew. Their reduced grain usage makes them prone to wateriness. They're easy to overpower with hops, fermentation flavors and carbonation. Their shelf lives are short and their low levels of alcohol make them easy targets for contaminating microorganisms*.

It's become conventional wisdom in the U.S. that brewers should decrease the wateriness of session beers by mashing (mixing the grain and water) at higher temperatures. Doing so increases the ratio of unfermentable sugars to fermentable sugars, which results in higher final gravities, but I disagree that it's a good way to build body in session beers. I don't want to get into heavy brewing geekery here, so I'll keep my reason simple: I've never brewed a wonderful session beer by doing so. For me, high mash temperatures always lead to a syrupy viscosity that reduces drinkability without making the beers more interesting.

The best session beer I've made, by far, was my first batch of House Ale. I intended to follow the "mash high" advice of my peers, but I accidentally mashed at a slightly lower temperature. However, because I had recently switched base malts, the beer was also stronger than I was shooting for (4.2% abv instead of 3.5%). How much did each variable influence the beer's deliciousness? We may never know.

For my second batch of House Ale, I reduced my grain usage and mashed at the designed high temperature. I hit the target alcohol content and the beer tasted ok, but it wasn't nearly as excellent as its predecessor. A syrupy character was present, as were watery undertones, and the beer didn't invite me to drink more.

I'll be brewing House Ale #3 on Friday, and I'm going to mash at a medium temperature this time around. I reduced the amount of caramel malts in the recipe and added a bunch of Munich malt, which I believe will increase the malty backbone more than a high mash temperature. Stay tuned to find out how it works!

In other news, the Chocolate Porter turned out very nice. It's flavorful and has a light body, but it's not watery at all. It has a relatively low alcohol content (4.8% abv), but I wouldn't consider it a session beer. It'll be tough to decide whether the Chocolate Porter or the Cardamom Coffee Stout will be the pub's year-round dark beer.

*I'm talking about organisms that can ruin a beer's flavor, not make you sick. No known pathogens can grow in beer because the pH is too low and the alcohol content is too high (even in session beers).

Monday, April 6, 2009

Napoleon Complex

I totally have it. I don't pick fights or put giant tires on my Dodge Stratus, but I do have a vague suspicion that people would take me more seriously if I were six inches taller. Fellow "Underachievers", do you feel the same way? Tall people, is it sort of surreal to have adult conversations with your gravitationally-enhanced peers?

Thursday, April 2, 2009

Sense of Urgency

Jane and I recently met with a banker to talk about loans. We already knew that a Small Business Administration (SBA) guaranty would probably be required, and that it would take a while for the government to process our loan application. What we didn't know was that we'll need to be sufficiently funded, and have a location picked out, before we apply.

According to the SBA, banks typically like to see equity account for at least 25% of financing. That means if our expected startup cost is $800K, Jane and I will need to come up with $200K before we can apply for an SBA loan.

Location-wise, we won't be able to sign a lease until we've received a loan. We'll definitely need to have a place picked out, though, and have it thoroughly inspected (with the help of our trusty architectural team) so we'll be able to claim a specific renovation expense instead of a broad range.

To meet our goal of being fully capitalized by the end of May, Jane and I have a lot of work to do. The SBA can process a loan application in two weeks, but they're swamped with applications right now. Hopefully we'll be able to raise enough investment capital and choose a location by the end of this month, and hopefully the following month will be enough time for the SBA to make a decision. At least we picked a suitable political climate for audacious hope.

Wednesday, April 1, 2009

What Kind of Smoke?

When I first caught wind of The Brewpub Bill in July of 2007, I emailed my state senator (Mark Miller) to outline some of the proposal's consequences and request that he withdraw his support. Four months later, I received the following email:

Thank you for your email. I appreciate your patience. It is my understanding the new law change included in the state budget will allow an establishment like the one you describe – no food requirement. You may want to consider opening as a brewer, rather than a brew pub. There are higher limits on the amount of beer you can sell. I look forward to hearing about your opening.

In my opinion, it said "thank you but F you." I replied to say that I was disgusted with the legislative process but would rather move forward than make enemies.

Last month, I emailed Senator Miller to voice my support of a statewide smoking ban* but urge him to reject any state budget that contains non-budgetary items (such as a smoking ban). The point of my email was "I'd like to see a statewide ban, but let's give it a proper approval process instead of taking the path of least resistance." Yesterday, I received a typed letter from his office that essentially said this:

Thank you for your support of a statewide smoking ban. Tobacco causes a bunch of problems. Governor Doyle included a smoking ban in his budget proposal. I support a statewide smoking ban.

Umm... ok. May I hit that bong, senator?

*While I enjoy the lack of smoke in taverns and recognize that second-hand smoke is a public health concern, I'm not entirely sold on smoking bans. In fact, I'd love to exploit an unregulated market by opening a smoke-free brewpub. The reason I support a statewide ban is because it's less unfair than municipal bans, which already exist and aren't going away.

Wednesday, March 18, 2009

Information Overhaul

I moved The Dork Pages from Google Pages, which is no longer supported, to here:

RePublic Brewpub on Google Sites

The new website automatically tracks changes, which will make it easier for you to figure out when your copies of files are outdated. This presents a challenge to me because I'm in the habit of reloading the files whenever the mood strikes. From now on, I'll need to be more selective in order to avoid bombarding you with pointless (from your perspective) updates. If this process makes me less anal-retentive, I'll consider it a success.

Recent updates include the carbonation calculator, the capping gravity calculator, the homebrew inventory tracker, both brewlogs and both recipe calculators.

Thursday, March 12, 2009

Staying Focused

When Jane and I started this weblog, our goal was to document the startup process so interested parties could follow our progress and future business owners could learn from our experiences. Lately, I've been ranting about politics and drawing poop jokes. The temptation to mention the aftermath of a British beer tax increase (bottom third of the article) and Large-Scale Sustainable Agriculture is so great that I can't resist.

With that out of the way, I'm all about reform. Here are some FAQs written in the tradition of websites where questions aren't actually asked:

"Do you have a location yet?" Nope, but we're constantly looking. We've found a few sites that would be suitable, but we still have a couple of months to find a place that's truly wonderful. Know of any? We need about 3,000 square feet and 11' high ceilings. A place that nearby residents could walk to would be awesome. So would a place that's already plumbed and wired for a bar or restaurant.

"How's raising money going?" Pretty poorly, to be honest. Jane and I aren't rich, we don't know many people with the means to invest, and securities laws prevent us from soliciting investments from people we don't know. Madison bankers: every single one of you is going to know my name by the end of next month.

"What are you brewing?" We have House Ale, Belgian Pumpkin Ale and Chocolate Porter in bottles. A Pale Ale is in the fermenter and I'll be brewing a Belgian Blond next. I hope to repeat and perfect the four regulars (the beers listed above minus the Pumpkin), but I won't be able to stop myself from mixing it up with some special brews. The brewery that I recently helped with their financial projections just sent me about two and a half pounds of Cascade and Columbus hops, so we're in for a bitter and citrusy summer.

"Are you hiring?" I wish. Check back in November.

Sunday, March 8, 2009

Tavern Sales

Recently, the Brewers Association released its 2008 Craft Brewing Statistics and the National Restaurant Association (NRA) released its 2009 Restaurant Industry Forecast. Last week, I updated RePublic's business plan to reflect the new information. Diving back into the numbers got me thinking about whether or not my sales assumptions are reasonable.

Every year (I think), the NRA conducts a nationwide survey of restaurants and publishes the results in a document called the Restaurant Industry Operations Report. In the most recent edition, the median sales per seat for restaurants with average checks of $10-$14.99 was $9,859. I've been using that figure as the basis of RePublic's expected revenue, but one thing about the number bothers me: the median food sales reported by the NRA was 85.4% of total sales, but I'm only expecting food to account for 50% of RePublic's total sales (the NRA considers non-alcoholic beverages to be food, so 'beverage' equals 'alcohol only' throughout this discussion). Common sense suggests that bars without food will typically have far lower sales than $9,859 per seat. Unfortunately, I don't know of any published data that describes the sales of establishments with less than 70% food. I also suspect that sales per seat will drop for restaurants with no alcohol, which should cause a bar/restaurant sales prediction to look something like this:


I know that one former tavern in town sold about 50% food and generated around $5,500 per seat in annual sales. The place wasn't open seven days a week, though, and I wouldn't describe their operation as "busy". Returning to industry-wide data, the NRA provides five data points that I feel are useful (all for restaurants with average customer checks under $15):

-Median sales per seat (checks of $10-$14.99) = $9,859/yr
-Median food sales (checks of $10-$14.99) = 85.4%
-Median sales per seat, no booze = $8,345/yr
-Maximum reported beverage sales = 27.9%
-Maximum reported beverage sales per seat = $2,500/yr

Assuming the 27.9% and $2,500/yr figures are from the same establishment, the total sales per seat would be $8,961. That allows us to describe three scenarios based on NRA data:

-Sales per seat with 100% food = $8,345/yr.
-Sales per seat with 85.4% food = $9,859/yr.
-Sales per seat with 72.1% food = $8,961/yr.

Using that data, a linear graph can be drawn that looks like this:


It's not pretty, but at least it acknowledges that total revenue will depend on the food-to-beverage sales ratio. The result is that RePublic's projected sales per seat would drop from $9,859/yr to $7,469/yr. I'm aware that every market is different, but the raw NRA data should be in the ballpark. Comments from bar/restaurant owners on how I'm interpreting that data, or on sales per seat vs. food/beverage mix in general, would be most welcome!

Thursday, March 5, 2009

New Obsession

Lew Bryson wrote a great piece about excise taxes today. I'd imagine that smuggling beer is harder than smuggling cigarettes, but I've seen Fat Tire for sale around here before.

Friday, February 27, 2009

Hydrostatic Pressure

Siphoning liquids between vessels is a common process in homebrewing. Yesterday evening, I was unlucky enough to discover another use for it: stopping a basement flood. To illustrate, here's a typical view of the northeast side of my lot:


This is a cross-section of the space between the dog and the house, which shows what happens during a heavy rainfall or snow melt (or, in the case of yesterday, both):


After wasting some time trying to bail out the window well with a pitcher and a bucket, I decided to try my luck with a garden hose. Here's what I did:

1. Routed the hose from the patio to the low side of my lot.
2. Put a nozzle on the downhill end of the hose.
3. Attached the other end of the hose to a spigot near the window well.
4. Opened the spigot and nozzle. Once the air in the hose was pushed out, I closed the nozzle.
5. Closed the spigot, removed the hose and submerged its end in the flooded window well.
6. Opened the nozzle.

To my surprise, it totally worked! Controlling the flow of the water was a minor problem, though (if it's too fast, the window well temporarily dries up and the siphon loses its prime). It was too slow with the nozzle and too fast without it, so I partially restricted the flow by attaching the 'water in' tube from my wort chiller to the hose. Yet another reason to brew your own beer.

Wednesday, February 25, 2009

Nerd Convention

About a month ago, a startup brewery out west asked me to help them prepare their financial projections. My instinct was to do it for free out of the goodness of my heart, but Rachel helped me realize that sharing the work I've already done is completely different than working specifically on somebody else's project. So a couple of weeks and a couple hundred bucks later, I became a bona fide brewery consultant. In the course of doing the job, I made a generic financial spreadsheet for packaging breweries. You can download it from The Institute of Needing to Get Out More.

Tuesday, February 24, 2009

Meet and Meat

My friend Lizz, who was in town from New York City last weekend, briefly mentioned using LinkedIn as a tool in her animal rescue efforts. Until then, I thought LinkedIn was one of those automatic websites that tried to create profiles of businesspeople by compiling search engine information. Despite my hatred of social networking websites, I accepted a coincidental invite from my lawyer yesterday. Today, I imported the address book from my email server and sent a mass invite to the 50 or so people who already use the service. Within two minutes of hitting the 'send' button, I had eight confirmed contacts. After ten minutes, I was in the upper teens. It was a grisly spectacle. I think I found the virtual water cooler.

To bring closure to the excise tax storyline, I leave you with a letter from PETA to an Oregon legislator. Even though I'm a flaming carnivore, I'll give PETA credit for being deliberately hilarious on this occasion. Common ground is everywhere.

Sunday, February 22, 2009

Mistakes Were Made

I wrote my last post under the following misconceptions:

-Oregon breweries pay Oregon excise taxes on all the beer they sell, including beer shipped to other states.
-Oregon excise taxes don't apply to beer shipped into Oregon from elsewhere.

Both of those statements are false. Here's how it really works:

-Oregon breweries pay Oregon excise taxes on beer they sell in Oregon.
-Wholesalers (aka distributors) pay Oregon excise taxes on beer shipped into Oregon.
-Wholesales pay the excise taxes of other states where Oregon beer is sold.

As such, Oregon beer won't be taxed at higher rates than out-of-state beer. Instead, the price of beer to consumers will simply increase across the state. If you assume resale markups of 30% for wholesalers, 30% for liquor stores and 350% for bars, an excise tax increase of $49.61 per barrel (the tax would increase by that amount, not to that amount as I had previously thought) will result in consumer price increases of $1.52 per 6-pack and $1.17 per draught pint.

If you're a brewery manager, how do you lessen the blow? Simple: focus on selling really strong beer to Oregon residents. Excise taxes apply to volumes of beer, not volumes of alcohol, so the amount paid on a 12-oz glass of 10%-abv barleywine is less than the amount paid on a 16-oz glass of 6%-abv pale ale. The same holds true for 40-oz bottles of St. Ides vs. 6-packs of Miller Lite. You can probably see where I'm going with this.

If you're a problem drinker, how do you lessen the blow? Simple: switch from beer to Five O'Clock Vodka. If you hadn't already done so, welcome to the next level of alcoholism.

As a responsible beer enthusiast, how do you lessen the blow? Aside from moving to another state, there isn't much you can do. Even though you're not a target for behavior modification through taxation because your relationship with alcohol isn't harmful to yourself or anybody else, one option is to drink less beer. Another option is to give more money to the government. Otherwise, I hope you like barleywine.

Monday, February 16, 2009

Some Math

Madison Beer Review dropped a doozy this morning: some brain donors in the Oregon state legislature just proposed raising the beer excise tax to $49.61 per barrel. Let's look at two examples that illustrate why such a move would destroy one of the top craft beer industries in the country.

First, let's assume a brewpub generates $1.5M per year in sales and that its net income is 5% of total revenue. In other words, the profit is $75,000. We'll also assume that 60% of revenue is from food, 30% is from house beer and 10% is from other stuff (wine, spirits, merchandise, etc). That means the brewpub's house beer generates $450,000 in revenue. At $4 per pint, that translates to 454 barrels of beer sold. Oregon's current beer excise tax is somewhere around $2.60 per barrel. By raising it to $49.61 per barrel, the brewpub will owe an additional $21,342.54 in tax revenue each year. That will drop the net income to $53.657.46, or 3.6% of total revenue. It would make economic sense for this pub to stop brewing and turn the brewery square footage into additional seating.

Next, let's assume a production brewery sells 10,000 barrels of beer at $80 per half-barrel keg. That's $1.6M in revenue. If we assume the brewery's net income is 10% of total revenue, it annual profit is $160,000. The change in excise tax would force the brewery to pay the government an additional $470,100 per year. Whoops, that's $310,000 more than the brewery can afford! If I owned this brewery and was suddenly faced with paying the government $24.805 for every keg of beer that I sold for $80, I'd liquidate the company's assets immediately and find another way to make a living. Seriously.

In short, brewpubs will suffer and production breweries will die if this bill is passed. Total excise tax revenue from beer will drop and people in the state will drink imported beer. I think public outcry will force this bill to be efficiently rejected. Oregonians, be ready to get on your legislators' cases as soon as some special interest whore slips this tax hike into your state's next budget proposal.