business plan - hops and hounds brewing company … plan hops & hounds brewing company, inc. ......

Business Plan

Hops & Hounds Brewing Company, Inc.

4550 Webster Rd. Fredonia, NY 14063 [email protected]

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I. Table of Contents

I. Table of Contents .................................................................................................................................... 2

II. Executive Summary ................................................................................................................................ 3

III. General Company Description ............................................................................................................. 4

IV. Products and Services ............................................................................................................................. 5

V. Marketing Plan ......................................................................................................................................... 6

VI. Operational Plan .................................................................................................................................... 13

VII. Management and Organization ........................................................................................................... 17

VIII. Startup Expenses and Capitalization .................................................................................................. 18

IX. Financial Plan ......................................................................................................................................... 20

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II. Executive Summary

Hops and Hounds Brewing Company will be a brewery and taproom located in picturesque Pomfret New York. While being only a few minutes from the two largest population centers of Northern Chautauqua County, the brewery and taproom will be located in a rural area with beautiful views of the countryside.

In this agrarian setting we will produce world class craft beers. Our ingredients will be locally grown. The hops will be grown on a neighboring farm and the New York State grains will be will be locally malted. Many of our suppliers are certified organic and all of them use sustainable farming methods.

Being close to both Fredonia and Dunkirk many of our customers will be traditional local bar and restaurant patrons. However we also expect to attract craft beer enthusiasts from all parts of Western New York and North Western Pennsylvania. Craft beer drinkers will travel long distances to sample and purchase exotic beers that are not available to them locally.

Hops and Hounds Brewing Company will be a corporation with stock being available to the general public through direct purchase from the corporation. The stock will not be traded on an exchange but the corporation will act as an exchange for corporate stock within one year of opening to the public.

Our management team has decades of experience in brewing, running companies and managing retail outlets. While many new brewery operators have some brewing experience they must learn the rest on the job. Our team will know what they are doing from day one.

Most new breweries have difficulty producing enough beer to meet their demand. We have taken this into account and will purchase a brewhouse that will easily produce enough beer for our taproom. Additionally with the recently created New York State Farm Brewing License, we will have the ability to open five additional taprooms. We also expect our brewhouse to be able to supply these additional taprooms. Once we heavily expand into direct sales it is likely we will need to purchase a larger brewhouse but we do not expect this to be required for several years.

As a whole the craft beer industry is expanding quickly and will likely continue to do so for several more years. As New York State is in the middle of the states when looking at craft breweries per capita, we see plenty of room for expansion in our local market.

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III. General Company Description

Hops & Hounds Brewing Company will be one of the first Farm Brewery in Chautauqua County. We will brew a fine collection of craft beers to be sold on premises through our taproom. Additionally as a New York State licensed Farm Brewery we can operate up to 5 additional taprooms.

Mission Statement: To provide high quality craft beer using the best sustainably and locally grown ingredients.

Company Goals and Objectives: Our goal is to have a healthy, successful company that is recognized worldwide as producing exceptional craft beers. Our objectives are consistent year over year sales growth and winning medals at international competitions such as the U.S. Open Beer Championship and the World Beer Cup.

Business Philosophy: We are all connected to each other and to the earth. When one is raised up all are raised up. To that end we will provide a safe and friendly environment for our employees and pay them a living wage. We will to the best of our ability use, locally and sustainably grown ingredients that are whenever possible organic. Our plants and offices will strive for carbon neutrality.

Initially our customers will fall into two categories, Craft beer drinkers and the patrons of eating and drinking establishments in Northern Chautauqua County. As we grow we expect to broaden our customer base into other categories.

The craft beer industry is a growing industry. More and more people are discovering the diversity of craft beers. We expect the industry to continue growing for the next 5 years possibly longer depending on the economy as a whole. Beyond that there will be a period of contraction brought on by market saturation, then stabilization as the industry matures. By getting into the market now we will have several years of steady growth to establish ourselves and build a strong base to weather the contraction and remain viable through to market stability.

We love beer, we love to make it, we love to drink it and we love to learn about it. For a product that is older than recorded history it is amazing how much we don’t know about the biological and chemical reactions that go into making beer. We at Hops and Hounds Brewing Company are constantly reading new research papers trying to understand the process a little better, then putting that knowledge into practice to improve our product. Not only do we love beer everyone in our management team has hands on experience brewing beer, running a business and managing retail outlets.

Hops & Hounds Brewing Co. is a Corporation. This allows people to not only enjoy our beer but to own a piece of the company that makes it. We have incorporated and approved the issuance of 600,000 shares of common stock and no preferred stock. Ownership of 60,000 shares has been transferred to Scott Bennett as per his contract with the corporation. Ownership of 60,000 shares has been transferred to Christopher Schaeffer as per his contract with the corporation. Ownership of 1200 shares has been sold to Christopher Schaeffer in lieu of rent payments for the property on which the brewery will be build. Stock is being sold for $25.00 per share, we expect to raise $3,000,000 from the sale of 120,000 shares but if demand is higher we could sell as much as 160,000 shares. Any additional shares will remain unissued.

As our stock is not traded on the open market, after one year of operation the corporation will act as a no fee exchange for issued shares. As cash reserves grow we expect to begin a stock repurchase plan. The repurchase will begin within 3 to 5 years and allow the repurchase of up to 10% of issued stock per year. No stock holders will be required to sell their shares. The corporation cannot repurchase stock from Scott Bennett or Christopher Schaeffer, they are however able to sell it through the corporate exchange at a predetermined price with the permission of the Board of Directors.

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IV. Products and Services

We will first and foremost be a farm brewery with the goal of producing world class craft beer. To that end we will supply beer in both kegs and bottles. In our tap room we also plan to offer a limited menu of “pub food”, local specialties and simple meals.

We initially expect to offer 6 beers that will be available year round and 10 seasonal beers 2 at a time.

Our 6 year round beers will be

- Sir Jimmy’s IPA ABV 7.5 - Vnder Grene Wode Lyne (Pale Ale) ABV 5.0 - Frankie’s Cream Ale ABV 5.0 - Julie’s Hefeweizen ABV 5.0 - Hops & Hounds Back Deck (Session) ABV 3.5 - Fat Man Stout Porter ABV 8.0

Our 10 seasonal beers will be

- Hops & Hounds Barley Wine ABV 12.0 Available January to March - Chocolate Cherry Brown ABV 6.0 Available January to March - Chautauqua Bell (California Common) ABV 6.0 Available April to June - Light Strawberry Ale ABV 4.0 Available April to June - Light Blueberry Ale ABV 4.0 Available July to September - Hops & Hounds Cherry Wheat ABV 6.0 Available July to September - Jack Pumpkinhead Ale ABV 5.0 Available October & November - Chris’s Sweet Potato ESB ABV 5.0 Available October & November - Solstice ginger ABV 7.0 Available December - Solstice Cinnamon Cherry ABV 8.0 Available December

Our use of locally grown and sustainably grown ingredients will appeal to environmentally conscious consumers. Our use of organically grown ingredients will appeal to health conscious consumers. The flavor of our product will appeal to craft beer consumers.

We will price our beers comparably to other craft beers. We expect that in our taproom our beer will sell for $5 a pint. Some will be slightly more or less expensive depending on ingredients.

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V. Marketing Plan

Economics • Our initial market will be Chautauqua County, New York. As we grow we will expand in to all of

New York and Pennsylvania, then into the rest of North America. According to the 2010 US Census Bureau our initial market has 120,000 adults over the age of 21.

• Nielsen Local reports that 49% of adults over the age of 21 in the Buffalo area enjoy beer.1

• Per a Craft Brewing Business article on May 20th, 2013 by Chris Crowell “Craft beers have found a way to appeal to 49 percent of Millennials and 40 percent of Gen Xers”.2

• According to The Brewers Association while the overall beer market has shrunk by almost 2% the craft beer market has grown by over 17%, with an increase in revenues of 20%.3

• Further New York State is ranked 26th in craft breweries per capita, 21st in economic impact per capita and 19th in craft beer production per capita.4 This would indicate there is plenty of room for growth in this sector of the New York State economy.

• The three largest barriers we face to market entry are capital costs, local laws and licensing.

• We are taking several steps to overcome the high capital cost associated with the craft brewing industry. First we have acquired a 10 year lease of unimproved land to be paid for with stock instead of money. Second we will be erecting a metal building to house our facilities instead of traditional manufacturing facility construction; this will give us a significant construction cost savings. Third we will sell shares of stock in the company avoiding bonds and loans. This will allow us the time required to build the business without needing to make principal and interest payments.

• Local laws will require us to submit site plans to the planning board for approval, building blueprints to the building inspector and follow up with both to insure we comply with all local ordinances.

• Licensing is not so much a barrier as a process. It is an involved multistep process that cannot begin until the production facility is completed and will take several months dealing with both the state and federal governments.

• Our biggest concern for the future is changes in government regulations. Since the repeal of the 18 amendment government regulation has eased over the years and in some cases even encouraged the growth of our market. This trend is unlikely to change but reregulation of the market would have a large impact and could force some brewers out of business.

1 https://www.scarborough.com/services/consumer-insights/local/buffalo-ny

2 http://www.craftbrewingbusiness.com/business-marketing/craft-beer-consumer-stats-how-will-affect-your-business-plan/

3 http://www.brewersassociation.org/statistics/national-beer-sales-production-data/

4 http://www.brewersassociation.org/statistics/by-state/

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Product Craft Beer

• By using locally grown ingredients our customers know they are the freshest available when we brew their beer. Local ingredients also save on transportation, meaning less pollution and greenhouse gasses.

• By using sustainably grown ingredients our customers know we are committed to protecting the environment and ensuring we can provide award winning craft beer for many years to come.

• By operating a carbon neutral facility our customers know we are committed to fighting global warming and doing our part for the future of our planet.

• By using organically grown ingredients our customer know we care about not only what we put into our beer but what we put into our customers. Their health and wellbeing are as important to us as it is to them.

• By creating award winning beers our customers know we not only care about their physical wellbeing but also their psychological wellbeing. Our customers deserve great beer and we intend to give it to them.

Taproom

• We will be convenient, with our location close to the two largest population centers in Northern Chautauqua County and having business hours similar to other purveyors of beer. When our customers want to purchase our product we make it easy for them.

• We will be open friendly and inviting, our customers will enjoy coming to visit us. If a customer does not think as they are walking out our door “That was fun, I want to do that again” we have not done our job.

Customers Our target customers will be men and women age 21 to 55. While all of Chautauqua County is our initial market most of our taproom patrons will be from the city and towns in the area of Fredonia, NY. While there is no income or educational level specific to craft beer drinkers there are some traits that most share. Most craft beer drinkers have a steady source of income and a desire to learn and/or have new experiences.

Competition Most craft brewers do not see other craft brewers as competition. Craft beer is a relatively new market that is growing quickly and most craft breweries cannot produce enough beer to fill their own demand. While the large breweries are losing market share and are trying to cash in on the craft beer market by releasing sample pack or specialty beers, most craft beer drinkers prefer craft beer produced in small facilities.

Our tap room will indirectly compete with local bars but we expect to attract a different type of customer this will not be a direct competition.

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Table 1: Competitive Analysis

FACTOR

Hops & Hounds Brewing

Company

Strength Weakness Ellicottville West B.J.’s Importance to

Customer

Products Craft beer and Taproom x Craft beer and

Taproom Bar with

takeout kitchen 1

Price

Our Taproom will be priced comparably to the local bars

x Similar pricing for taproom

Similar pricing for bar 2

Quality

High quality beer and a

comfortable and nicely finished

Taproom

x

Excellent beer and a

comfortable taproom

Functional space but catering to

college students

1

Selection

We will have a reasonable selection of

beers we produce; our Taproom will

also have a large selection of beers, wines

and liquors from other

farm operations.

x

Large selection of their own beers and full

bar of commercial beers, wines and liquors

Full bar of commercial beers, wines and liquors

2

Service

In our taproom we will strive to give excellent

service.

x Taproom service is good.

Bar service is fair 2

Reliability

Our brewing equipment will be state of the art, supplying a

consistent product from

batch to batch.

x Their product is consistent and good.

na 1

Stability

Once fully funded we will have no debt

with the possible

exception of revolving credit

lines for ingredients.

x

Their brewery has been in

existence for years and this is

their 2nd taproom which has been open for about 10

years

Has been in business in the same location

since 1933 when

prohibition ended.

4

Expertise

Our brewers each have over

20 years of small batch

brewing, and over 15 years management experience.

x

Over a decade brewing and

running a taproom

Has changed hands many

times but never due to poor management

2

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FACTOR

Hops & Hounds Brewing

Company

Strength Weakness Ellicottville West B.J.’s Importance to

Customer

Company Reputation

No reputation yet. x

Good reputation as a good place to

relax and have a pint

Viewed as a college

hangout. 1

Location

Fredonia, NY area, close to the village but

not in it.

x Fredonia, NY In the village

Fredonia, NY In the village 3

Appearance Victorian era gentlemen’s

club x Nice

middleclass bar Grungy college

bar 3

Sales Method Taproom x Taproom Retail 3

Credit Policies

Taproom customers Cash or credit cards

x Cash or credit

cards for taproom

Cash or credit cards 2

Advertising Word of mouth and some local

media x Word of mouth

and billboards Word of mouth 4

Image Harkening back to a bygone era. x

Nice place to go and have a

quiet drink

Hangout for upper classmen

and young professors

3

For our taproom our biggest competitive advantage will be being a local brewery, people from the area can come to the brewery and drink the beers produced by their neighbors. Given that Fredonia is a “college town” there is a higher than average liberal and/or environmentally conscious population, our use of locally, sustainably and organically grown ingredients will appeal to this demographic and give us another competitive advantage. Our location will be a double edged sword. It will supply us with two advantages, first it’s not downtown and some people will appreciate that they don’t have to deal with the drunken college students wandering around; second by not having other bars easily accessible once a patron enters they will likely stay the evening. The associated disadvantage is that some people will go downtown specifically so they can bar hop without having to drive. Some initial disadvantages will be our lack of reputation and our limited selection. We expect these disadvantages to be short lived; we should have a well know reputation within six months and increase our product line with in twelve to eighteen months as our business increases.

Niche Hops & Hounds Brewing Company will be where you go when you want quality beer that is good for you and good for the environment, when you want a relaxing drink away from the bar scene, when you want to drink local.

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Strategy

Promotion Initially we expect over 90% of our business to come from our taproom. Our marketing strategy will be to drive customers onto our taproom. To achieve this we will install a large sign on the building that can be seen from the road. The road we will be located on while not a state highway is a main road that many local people use to avoid the state highway.

Readership of the local newspaper is significantly above the national average therefor we will ensure we have at least three newspaper articles written about our new brewery prior to and soon after our grand opening. Additionally we will purchase half page ads in the newspaper every day the week before our grand opening and weekly thereafter for the first few months. Additional print media advertisement will be purchased in Great Lakes Brewing News on a monthly basis; this is a tabloid newspaper that is published monthly and distributed free to homebrewing suppliers and craft beer purveyors around the Great Lakes. The local AM radio station is played in many professional offices during the day so we will purchase daily airtime the week prior to our grand opening. We will also have a website and use social media to promote our taproom.

To encourage patrons to return we will have a “Drink Local Club”, a $10.00 annual membership entitles the patron to a $0.50 discount on Hops & Hounds draft beers purchased in our taproom, and a 10% discount on merchandise. Also when any customer cashes out at the end of the evening they will receive a coupon for a 50% off their first drink on a subsequent visit.

Promotional Budget Signage will be constructed from simple materials and the cost of installation and illumination will be negligible. Our biggest promotional expense will be paid advertising prior to opening for which we have budgeted $10,500. This amount will cover both radio and newspaper advertising in the week leading up to our Grand Opening.. There will be very little ongoing paid advertising expense after our Grand Opening.

Pricing Our prices will be comparable to other craft brewers. Generally the price will be determined based on a set cost of production per unit e.g. pint or half keg added to the product of the ABV (Alcohol by Volume) and a multiplier. This will allow us to properly price our beer based on process costs which are fixed and ingredient cost which will vary based on recipe. While most craft beer customers do not base their buying decisions solely on price, being significantly over priced compared to the market would limit sales and repeat customers.

Proposed Location Craft beer drinkers are accustomed to going off the beaten path to find their favorite beers. So long as we are located near the village our location will be acceptable to our patrons. We will be conveniently located near the village with plenty of parking. Our taproom will be large enough to accommodate a large number of customers while still feeling comfortable. When we furnish our taproom it will be in a manner consistent with our image and in line with the expectations of our customers.

While we will be the only full scale brewery in the area there are several bars, restaurants and one tap room in Fredonia. While many of the bars and restaurants are located within walking distance of each other there are several very successful bars and restaurants that are not close to any others.

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Distribution Channels We will first and foremost be a farm brewery with the goal of producing world class craft beer. To that end we will supply beer in both kegs and bottles through two lines of distribution.

Our first line of distribution will be through our tap room. We also plan to offer a limited menu of “pub food”, local specialties and simple meals. Initially we expect 80% of our beer sales and almost 90% of our income to be generated through our tap room. That is why this document focuses primarily on our taproom operation. As our tap room reaches full capacity we begin sight planning for our second taproom.

Our second line of distribution will be direct distribution, as a Farm Brewery we are allowed to distribute our own products without a wholesale distributer. This line of distribution will have two types of customers. The first will be local bars and restaurants. The Second is based on our designation as a farm brewery. Farm breweries, wineries and distilleries in New York State by their license can offer for sale the products of other farm breweries, wineries and distilleries. We expect to set up reciprocating agreements with other farm entities.

Sales Forecast

Twelve-month sales forecast Best Guess Hops & Hounds Brewing Co. Fiscal Year Begins Jan-17

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17Annual Totals

TaproomPints 5000 7000 9000 11000 13000 15000 15000 15000 15000 15000 15000 15000 150000Sale price @ unit 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00PINTS TOTAL 25,000 35,000 45,000 55,000 65,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 750,000

Pub Food 500 700 900 1100 1300 1500 1500 1500 1500 1500 1500 1500 15000Sale price @ unit 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00PUB FOOD TOTAL 5,000 7,000 9,000 11,000 13,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 150,000

Dinners 200 280 360 440 520 600 600 600 600 600 600 600 6000Sale price @ unit 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00DINNERS TOTAL 4,000 5,600 7,200 8,800 10,400 12,000 12,000 12,000 12,000 12,000 12,000 12,000 120,000

Self Distribute1/2 Kegs 0 20 20 25 30 35 40 45 50 55 60 60 440Sale price @ unit 124.88 124.88 124.88 124.88 124.88 124.88 124.88 124.88 124.88 124.88 124.88 124.881/2 KEGS TOTAL 0 2,498 2,498 3,122 3,746 4,371 4,995 5,619 6,244 6,868 7,493 7,493 54,945

1/6 keg 0 20 20 25 30 35 40 45 50 55 60 60 440Sale price @ unit 41.63 41.63 41.63 41.63 41.63 41.63 41.63 41.63 41.63 41.63 41.63 41.631/6 KEGS TOTAL 0 833 833 1,041 1,249 1,457 1,665 1,873 2,081 2,289 2,498 2,498 18,315

Cases (4 six packs) 0 25 50 50 75 75 75 100 100 100 100 100 850Sale price @ unit 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63CASES TOTAL 0 741 1,482 1,482 2,223 2,223 2,223 2,963 2,963 2,963 2,963 2,963 25,189

Monthly totals: All Categories 34,000 51,671 66,012 80,444 95,618 110,050 110,883 112,456 113,288 114,121 114,953 114,953 1,118,449

12-month Sales Forecast

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Twelve-month sales forecast Worst Case Hops & Hounds Brewing Co. Fiscal Year Begins Jan-17

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17Annual Totals

TaproomPints 2000 3000 4000 5000 5000 5000 7500 7500 7500 10000 10000 10000 76500Sale price @ unit 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00PINTS TOTAL 10,000 15,000 20,000 25,000 25,000 25,000 37,500 37,500 37,500 50,000 50,000 50,000 382,500

Pub Food 133 200 267 333 333 333 500 500 500 667 667 667 5100Sale price @ unit 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00PUB FOOD TOTAL 1,333 2,000 2,667 3,333 3,333 3,333 5,000 5,000 5,000 6,667 6,667 6,667 51,000

Dinners 53 80 107 133 133 133 200 200 200 267 267 267 2040Sale price @ unit 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00DINNERS TOTAL 1,067 1,600 2,133 2,667 2,667 2,667 4,000 4,000 4,000 5,333 5,333 5,333 40,800

Self Distribute1/2 Kegs 0 2 2 4 6 8 10 12 14 14 16 16 104Sale price @ unit 93.89 93.89 93.89 93.89 93.89 93.89 93.89 93.89 93.89 93.89 93.89 93.891/2 KEGS TOTAL 0 188 188 376 563 751 939 1,127 1,314 1,314 1,502 1,502 9,765

1/6 keg 0 2 2 4 6 8 10 12 14 14 16 16 104Sale price @ unit 31.30 31.30 31.30 31.30 31.30 31.30 31.30 31.30 31.30 31.30 31.30 31.301/6 KEGS TOTAL 0 63 63 125 188 250 313 376 438 438 501 501 3,255

Cases (4 six packs) 0 5 5 10 10 15 15 20 20 25 25 25 175Sale price @ unit 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63CASES TOTAL 0 148 148 296 296 445 445 593 593 741 741 741 5,186

Monthly totals: All Categories 12,400 18,999 25,199 31,797 32,047 32,446 48,196 48,595 48,845 64,493 64,744 64,744 492,506

12-month Sales Forecast

The Best Case quantity numbers for Pints and Self Distribute are based on craft brewery forum discussions from the past few years. As markets, production capacity and marketing strategies vary greatly these numbers are a best guess based on many threads on several forums. We tried to weed through and find breweries that are similar to our plan and used a low average of their production numbers. For the Worst Case quantity numbers we took the lowest numbers we could find (using the same criteria) and reduced them an additional 10%.

The quantity numbers for Pub Food and Dinners were arrived at in the same manner except the forums were for restaurants.

The Taproom prices we use in our scenarios are based on bar and restaurant prices in the Fredonia area.

The Self Distribute prices were arrived at after a few discussions with a local wholesale distributer who explained how pricing is arrived at, at the wholesale, customer and consumer levels.

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VI. Operational Plan

Production Our brewery in the town of Pomfret, New York will consist of a 2 vessel 20 BBL (beer barrel, 1 BBL equals 31 US gallons) brewhouse, three 20 BBL fermenters and six 20 BBL serving tanks.

Our brewing process: Malted grain is lightly ground and mixed with hot water in a process called mashing. Mashing is an enzymatic process that converts the complex sugars (starches) in to simple sugars which the yeast can act on. The resulting liquid is drawn off and the grains are rinsed with more warm water to extract the remaining sugars. These liquids called sweet wort are combined in the brew kettle and boiled, the hops are added at various times during the boil, imparting different qualities based on when they are added. The wort (now called bitter wort) is cooled and placed in a fermentor with yeast. The yeast consumes the sugars and produce alcohol and CO2, the CO2 is vented off as the beer ferments and conditions for several weeks in the fermentor. After the beer is conditioned it is transferred to the bright tanks (serving tanks) where it is carbonated and either served from the tank or transferred to bottles and kegs for distribution.

The production of one 20 BBL batch of beer costs approximately $ 2,823.81 in material, energy and labor. If sold through our taproom the gross profit per batch would be approximately $ 20,139.15. When sold as half kegs through direct distribution the net profit after packaging and labor would be approximately $ 2,171.23 per batch. If we sold this same batch through a wholesale distributer the net profit after packaging and labor would be approximately $ 931.86 per batch.

The management team will be very hands on, being personally involved in every aspect of the business from brewing to packaging to serving. This will ensure the highest quality product and highest level of service. This will also allow for production planning, cost control, proper ordering and storage of raw materials and finished product.

With our test kitchen and small 1 BBL brewhouse, we will have the ability to develop new products on a small scale and perfect the recipe before going into full scale production.

Location We need a location that is suited to both operating a brewery and a taproom. These functions while not mutually exclusive each have a very different set of requirements. The brewery side of the operation will need functionality similar to a food processing facility. The taproom however will need functionality more akin to a bar & grill.

The site we have available to us is located 2 miles from downtown Fredonia, New York and 3.5 miles from the city of Dunkirk, New York. The site is located on a well-traveled road. The lot is approximately 6 acres, with plenty of room for future expansion. We will be building a new facility and as such there are no utilities currently on the property. There is electric and gas on the road and we only need to tie into those utilities. There currently is no municipal water or sewers and this is taken into account for in our planning. We will likely need to sink 2 wells to supply sufficient water, install a water treatment system and have an engineered septic system.

The area is zoned Ag/Residential and the site is not with in several miles of a church or school. There will need to be permits and board approval but neither a special use permit nor a variance will be required.

Being located on a main road will facilitate trucking both in and out, and will be convenient for our customers. There is ample room on site to construct adequate parking and maneuvering space for large trucks. The site is 1.5 miles from US Highway 20 and 4 miles from Interstate 90.

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The total cost of facility construction will be $1,758,000. The cost of equipment and furnishings will be $753,300. The annual cost of utilities and insurance will be $59,000

Our hours of operation will vary based on production needs, generally most production activities will take place between 11 A.M. and 3 P.M. on weekdays, however if additional production is required we will expand our hours to 7 A.M. to 3 P.M. on an as needed basis. The taproom will be open from 4 P.M. to 2 A.M. weekdays and 11 A.M. to 2 A.M. weekends except certain holidays.

We expect to begin our search for a location for our second taproom in our second year of operation and have construction complete in year three. Taproom 2 will likely be located in the city of Jamestown New York. Taprooms 3 & 4 will be brought online in year four likely in Olean and Elmira New York. Taprooms 5 & 6 will be brought online in year five likely in Ithaca and Binghamton New York. The expected cost of each taproom is $600,000 for purchase of property, renovations and equipment purchase. Profitability for each taproom is expected to be similar to the taproom at the brewery.

Legal Environment We will need to be licensed through both the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the New York State Liquor Authority. Additionally we will need to carry a Federal Brewers Bond registered with the Department of the Treasury. In addition to the Brewers Bond we will need to carry liability insurance, workman’s compensation insurance, motor vehicle insurance, inventory insurance and insurance on the building and its contents.

As a brewery we will be required to comply with OSHA regulations and as a taproom we will be required to comply with Health Department procedures. Additionally our waste stream will need to comply with health regulations.

Zoning and building code requirements for our operation are minimal. The facility will be engineered to comply with all local and state building codes. Our facility will be within the use by permit category of the zoning laws, which means neither special use permit nor area variance will be required. We only need to apply for the permits, follow the zoning codes and file the appropriate plans and studies to be approved. The only exception will be signage which due to size will require a use variance from the ZBA.

We will be trademarking our corporate name and the names of our products.

Personnel Before we begin construction we will have a President and a Vice President who will both act as General Managers. Once construction is completed and we have all required license we will hire a Kitchen Manager. Shortly before opening we will hire 1 Office Manager, 1 Cook, 2 Bartenders and 3 Wait Staff. As demand grows we will add additional staff in both the brewery and taproom as needed.

Needed employees will be found through our social networks, we are located in a small town and skill levels, attitudes and aptitudes are readily discernable. Pay levels will be based on the prevailing wages for the various positions in Western New York. Wait Staff and Bartenders will receive $10/hour, Cooks will receive $12/hour, the Kitchen and Office managers will receive a salary of $40k/year and the General Managers will receive a salary of $60k/year.

Wait Staff and Bartenders will be trained by a General Manager with assistance from the Kitchen Manager. Running the brewery and Taproom are the responsibility of the General Managers, who will also have oversight of the kitchen and office. The Kitchen Manager has full responsibility for the kitchen including menu development, ordering, hiring, scheduling and training kitchen staff. The Office Manager has full responsibility for the office including accounts receivable, accounts payable, government filings, correspondences, hiring, scheduling and training office staff.

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Inventory Our raw materials are commodities therefor we do not need to keep large quantities on hand and our lead times are fairly short. Initially we will be brewing once a week and will know several weeks ahead what our brewing schedule will be, we will order inventory one week before brewing to be delivered the week we plan to brew. If there is a savings to be had with a larger order we might order a full month’s of inventory at a time.

Our supplies such as bottles also will be ordered as needed, but special orders such as labels will be ordered in large quantities and stored until needed. Also consumables such as cleaning supplies will be ordered quarterly.

Most beers are a perishable product and should not be in inventory for more than 2 months. However if we are brewing once a week and have 8 beers available at any one time, we will need to ensure we have enough of each to last until we brew that beer again.

At any given point we should have in inventory

• $ 1,700 Ingredients • $ 2,000 Bottles • $10,000 Labels • $ 1,000 Cleaning Supplies • $90,000 Beer

Suppliers

Malt New York Craft Malt, Llc 8164 Bank Street Rd Batavia, New York

Farmhouse Malt 2 Whig Street Newark Valley, New York Valley Malt Hadley, Massachusetts

Hops Label Peelers 211 Cherry St

Kent, Ohio Bulk Apothecary 125 Lena Drive

Aurora, Ohio Midwest Supplies 5825 Excelsior Blvd. Minneapolis, Minnesota Adventures in Homebrewing 6071 Jackson RD Ann Arbor, Michigan

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Kegs & Bottles

BeverageFactory.com 8060 Arjons Dr. San Diego, California Ardagh Glass Inc. 16401 Swingley Ridge Road Suite 525 Chesterfield, Missouri

As New York State farmers are just beginning to produce crops for the brewing industry finding stable instate suppliers could be a challenge. Therefore we will be setting up accounts with as many as feasible. The state is committed to the Farm Brewers License and will make allowances for the purchase of out of state supplies if instate supplies are not sufficient to meet demand. As our ingredients are a locally grown commodity we do not expect large short term fluctuations in price but slight changes year to year are expected. These changes will affect the entire market and will not leave us at a competitive disadvantage if we need to adjust our prices.

Credit Policies The majority of our sales will be through our taproom and we will accept only cash and credit cards there. The credit terms for direct distribution accounts will be net 30 or cash in advance. Credit determinations and limits will be based on a customer’s credit history, size and sales volume determined through D&B.

If a credit customer is past due their account terms will automatically changes to cash in advance until the past due is resolved, a collection letter is also sent at this time informing them of the change. After 45 days we will call the customer to attempt to resolve the delinquency. After 60 days a demand letter will be sent, after 75 days a second call will be made trying to resolve the past due. After 90 days the account will be suspended and no further purchases will be allowed until the account is paid in full and the account will be forwarded to our lawyers for litigation. If the account is later brought current the customer’s terms will be cash in advance for 6 months before reevaluating their credit worthiness.

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VII. Management and Organization

President Scott Bennett Brewmaster Oversees kitchen, taproom & brewery Manages accounts payable Interacts with payroll service Responsible for government filings

Mister Bennett’s experience includes over 30 years as a brewer, 5 years as a restaurant manager and 20 years managing real estate for both clients and himself.

Vice President Christopher H. Schaeffer

Braumeister Oversees office & brewery Sales manager Manages accounts receivable, credit & collections

Shipping Manager Public relations manager

Mister Schaeffer’s experience includes over 25 years as a brewer, 4 years as a credit and collections manager, 5 years as a retail manager, 6 years as a politician, 15 years in sales (retail & B2B) and 12 years overseeing his property management businesses.

Professional and Advisory Support

• Board of directors Chairman/Vice President Christopher H. Schaeffer President/Treasurer Scott Bennett Secretary Sean Connolly Board Member Julie Schaeffer

• Attorney Sean Connolly • Accountant Jolie O’Donnell • Insurance agent Steve Strothman • Banker Kelly Cave

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VIII. Startup Expenses and Capitalization

Startup ExpensesHops & Hound Brewing Company, Inc.

SOURCES OF CAPITALOwners' Investment (name and percent ownership)

30,000$ Sources- Building Construction http://buildingjournal.com/construction-estimating.html

3,000,000 Well Ehmke Well Drillers- Water Treatment http://www.filterwater.com/pc-441-19-commercial-

3,030,000$ reverse-osmosis-system-10000-gpd.aspxSeptic george ortolano excavating

STARTUP EXPENSES Brewhouse http://jvnw.com/beer/Buildings/Real Estate http://www.alibaba.com/trade/search?fsb=y&IndexArea=

30,000$ product_en&CatId=&SearchText=1BBL+micro+beer+brewing1,728,800 Grain New York Craft Malt LLC1,758,800$ Hops http://www.bulkapothecary.com/

http://labelpeelers.com/http://www.midwestsupplies.com/

300,000$ http://www.homebrewing.org/10,300 Labels http://www.uprinting.com/roll-beer-label-printing.html

310,300$ Bottles https://buyourbottles.com/amber-glass-bottles/glass-12oz-pinnacle

Capital Equipment List Kegs http://www.beveragefactory.com/draftbeer/kegs/27X-40,000$ KEG15-DI_drop_in_D_valve_keg_pallet.html85,000 Kitchen Equipment http://www.inc.com/articles/201111/business-start-up-

298,000 Serving Equipment costs-restaurant.html20,000 Tables & Chairs

443,000$ Bar & StoolsBeer & Soda systems

Location and Admin Expenses Bar Back29,061 Food4,944 Permits & licenses

Property Insurance 1st year 2,000 Utilities National Grid28,000 National Fuel77,487 Insurance http://discussions.probrewer.com/showthread.php?

141,493$ 6381-Brewery-InsuranceAdvertising http://extras.observertoday.com/advertising/2015/2015

Opening Inventory RateCard.pdf12,762$ http://www.gaebler.com/WDOE-AM-NY-Radio-2,700 Advertising-Costs++19895

15,800 29,250

12 oz. bottles 4,643 22 oz. bottles 4,505 labels 6,000 Our goal is to raise $3,000,000 through stock sales; this will allow us to fully fund the

75,659$ business as described in this document. We have contingency plans for funding milestones from $1,000,000 to $4,000,000. We have no reason to believe we will

Advertising and Promotional Expenses need additional funding. We expect all future expansions to be funded through profits.10,500$ 10,500$

200,000$

90,248$

SUMMARY STATEMENTSources of Capital

3,030,000$ 3,030,000$

Startup Expenses1,758,800$

310,300 443,000 141,493 75,659 10,500

200,000 90,248

3,030,000$

Lease 20 years renewableConstruction

Total Buildings/Real Estate

Christopher Schaeffer 30,600 SharesScott Bennett 30,000 SharesStock Holders 60,000 Shares

Total Investment

EquipmentMachineryTruck

Total Capital Equipment

Restaurant EquipmentWater treatment

Total Leasehold Improvements

Furniture

IngredientsFood1/2 kegs1/6 kegs

Total Inventory

Utilities 1st yearLegal and accounting fees

Liability Insurance 1st yearPre-opening salaries Total Location and Admin Expenses

Leasehold improvementsCapital equipment

Working Capital

Owners' and other investments

AdvertisingTotal Advertising/Promotional Expenses

Contingency fundWorking capital

Total Startup Expenses

Leasehold Improvements

Location/administration expensesOpening inventoryAdvertising/promotional expenses

Total Source of Funds

Buildings/real estate

Reserve for Contingencies

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Startup Expenses With Lower CapitalizationHops & Hound Brewing Company, Inc.

SOURCES OF CAPITALOwners' Investment (name and percent ownership)

30,000$ We have several contingency plans for various funding levels.- We are including this example with a funding level of $1,000,000

1,000,000 as it is the lowest option while still purchasing the optimal size 20 BBL - brewhouse. However if necessary and funding did not reach this level

1,030,000$ we could start with a smaller brewhouse and still remain profitable.

STARTUP EXPENSESBuildings/Real Estate

30,000$ By changing our building from 2 story 16,000 sq. ft. building251,550 to a 2,000 sq. ft. pole barn we would save over $1,000,000281,550$ in construction costs.

We would no longer offer food in the taproom and would have no10,300 need for any restaurant related expenses.10,300$

Capital Equipment List20,000$ The taproom will be smaller and require less furniture.

In addition to not requiring restaurant serving equipment we would278,000 not have an onsite test kitchen, nor a 1 BBL test brewhouse.20,000

318,000$

Location and Admin Expenses6,365 With out the restaurant we would have a significant savings on 4,944 utilities.

Property Insurance 1st year 2,000 28,000 72,250

113,559$

Opening Inventory6,010$ By changing to just in time ordering of ingredients we would pay

slightly more per bag of grain but would have a lower starting15,800 inventory cost.29,250

12 oz. bottles 4,643 22 oz. bottles 4,505 labels 6,000

66,207$

Advertising and Promotional Expenses10,500$ 10,500$

200,000$

90,248$

SUMMARY STATEMENTSources of Capital

1,030,000$ 1,030,000$

Startup Expenses281,550$ Operational savings would also be achieved by only10,300 employing 1 Bartender in addition to the President

318,000 and Vice President.113,559 66,207 10,500

139,636 90,248

1,030,000$

Lease 20 years renewableConstruction

Total Buildings/Real Estate

Christopher Schaeffer 30,600 SharesScott Bennett 30,000 SharesStock Holders 20,000 Shares

Total Investment

EquipmentMachineryTruck

Total Capital Equipment

Restaurant EquipmentWater treatment

Total Leasehold Improvements

Furniture

IngredientsFood1/2 kegs1/6 kegs

Total Inventory

Utilities 1st yearLegal and accounting fees

Liability Insurance 1st yearPre-opening salaries Total Location and Admin Expenses

Leasehold improvementsCapital equipment

Working Capital

Owners' and other investments

AdvertisingTotal Advertising/Promotional Expenses

Contingency fundWorking capital

Total Startup Expenses

Leasehold Improvements

Location/administration expensesOpening inventoryAdvertising/promotional expenses

Total Source of Funds

Buildings/real estate

Reserve for Contingencies

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IX. Financial Plan

12-Month Profit and Loss Projection

The Revenues are the same as those in the 12 Month Sales Forecast Best Guess and the assumptions are explained there.

The Costs of Sales for beer are based on ingredient cost for a 20 BBL batch, the brewhouse manufacturer’s estimate of labor, energy and water, the utilities prices for said energy and our expected labor rate. The Cost of Sales for food is based on our labor rates and an expected 30% ingredient cost.

Our major outside service will be for landscaping, as all of our equipment will be new we do not expect to have any larger repair expenses, our advertising will be mostly word of mouth. The truck we use for deliveries will run on diesel fuel and we expect all of our direct distribute customers to be local. We will have no rent; the lease for the land will be paid up front with stock. Utility expenses are for the taproom and office, brewery utilities are accounted for in the COGS. Insurance expenses are an estimate based on restaurant financing articles and brewery forums. Bad debt is estimated to be 5% of direct distribution sales.

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Three-Year Profit Projection

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Projected Cash Flow

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Opening Day & Projected End of Year One Balance Sheets

Note: We expect to be on Cash In Advance terms with our suppliers and all taxes to be payable and paid by the end of the month, therefore AP and Taxes Payable are expected to be $0.00 at EOY. The only exception could be utilities but we plan to make all utility payments before EOY to make accounting easier.

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Break-Even Analysis

The Fixed Costs for Beer Sales include all operating expense except those specific to the taproom.

The Fixed Costs for Food Sales include only those specific to the taproom.

The breakeven point for Beer Sales is approximately 13 batches sold through the taproom.

In our first year of operation we expect Food Sales revenue to be $270,000.

business plan - hops and hounds brewing company … plan hops & hounds brewing company, inc. ......

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