Q: Do You Have A Location Yet?

A:YEEEEEEESSSSSSSSSSSSSSSS!

Ladies and gentlemen, I present the home of PanicAlarmist Brewing: 4055 W. Peterson Ave., Chicago, IL

11,000+ square feet of Chicago industrial goodness. Here's the kicker. Wanna know who had this built and then had their home here from the 1950's up til the 1990's? Go on, guess. Give up? The Siebel Institute of Technology. America's oldest brewing school. I know right?!!!! Yup, this was Siebel's home until they moved down by Goose Island on Clybourn in the 90's. This is a piece of Chicago brewing history and PanicAlarmist fully intends to add to that history!

Here are some photos. Note the outdoor courtyard. Yeah, Panic's courtyard. Oh lordy. So much going on. I'll share more when I can. As always, check out the PanicAlarmist Brewing Facebook page for the latest scoop.

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Cheers!

G

Where You At?

Chicago Craft Beer Week is over and what a week it was! My favorite part of the whole week was meeting new Panic Alarmist fans and admirers. I've lost count how many people came up and thanked me (I was wearing my Panic T-shirts all week) for sharing so much and offering wonderful words of encouragement at the four events I attended. My wife, Bridget, who isn't usually a big beer festival fan, accepted that beer events would be a part of our lives from now on and joined me for all of them. She really got to see first hand how much all this work I've done has started to pay off and she's more excited than ever to get this brewery up and running. And as usual, people liked my wife more than they liked me. I'm used to it. This is what I hope to be the home to Panic Brewing. There's lots of space, but the other tenants are either a bit insular, pregnant, or dead.

Let me start with the biggest news thus far: I've found a space I'd like to lease. I like it a lot. It's almost perfect. I say it's "almost" perfect as there are some potential zoning issues I'm trying to hash out with the alderman's office for the location. I want to be able to open a retail store first, and then a tap room down the road. There could be some problems with the current zoning, but like everything else, it will all work out. As much as I'd love to reveal the address, I can't let the cat out of the bag just yet. There's a lot that has to happen before I can sign the lease and it will definitely be several weeks or more before the deal is done, but I REALLY want this space. I'll gladly share the ins and outs of leasing once I have it signed.

Another big deal for me was opening a business checking and credit card account, which I did last week. Yes, it's easy to do (you need to be a registered business entity with your state and get your EIN from the IRS, which is easily done online here), but I had put it off as I thought it might be an additional expense I wasn't ready to take on yet. Turns out, it's pretty cheap and actually free if you maintain a certain balance. An easy task, but it's checked off the list, and that's a good thing.

Now, the big question is, where is Panic Alarmist now in the process? It seems like I'm always saying, "almost ready to fund raise", or "finishing up the legal investment documents". Well, I'm almost ready to fund raise. I'll officially begin once we finally finish up the legal documents. I spent 2 hours on the phone with my attorney last week to go over the damn near final versions of the operating agreement and PPM. We've agreed to have these 100% completed by mid June. Monday, June 17 to be exact. I'm sure I'll have to go through at least a couple more reviews before then, but that is my focus right now. I want this shit done NOW!

I have some final tweaking to the business plan that I will be finishing up over the next two evenings and then that's it. No more business plan changes. Over the past couple of months I've received some new equipment quotes and learned some new info that has allowed me to make some pretty significant changes to my financial analyses ranging from start up costs to ongoing monthly costs. Some changes are required due to how some banks underwrite loans. I'll go into painful detail on bank loans, especially SBA backed ones once I have my loan in place.

Let me go into my business plan process real quick. I finished the plan months ago. Since then I've made numerous revisions both big and small. This is how I operate. When I am learning something new, I iterate over and over until at some point I feel comfortable with the result. I'm not looking for perfection with the business plan, but I'm definitely looking to not commit any egregious errors. Perfect example: there are so many things that could go wrong during the construction process that my costs could be way beyond what I've budgeted. I've tried very hard to mitigate that. But at some point, you have to let it go, roll the dice, and do your best. Most people would've started the dice rolling much sooner than me. That's ok. Everyone is different and I'm very comfortable with how I learn and execute. It's now time to execute.

So here's kinda how the rest of this story unfolds, as I see it:

  1. I get the completed investor documents from my attorney (which is my current primary focus)
  2. I contact all the folks who've expressed interest in investing (there are quite a few), email them the operating agreement, PPM, and some other stuff.
  3. We meet or talk on the phone, I answer any questions investors may have. (more on this when the time comes, which is SOON)
  4. Investors invest, money goes into an escrow account and stays there until a certain funding level is reached
  5. Once a certain funding level is reached, I continue my conversations with the banks I've been dealing with. They see I have investor money and personal investment, they analyze the business plan, they approve, the SBA agrees to guarantee it, loan gets funded. This takes several weeks.
  6. As soon as the loan is funded, I order equipment. Brew house and fermenters require about 6 months to arrive.
  7. Also, as soon as loan is funded, lease is signed. This will take a few weeks of negotiation.
  8. Once lease is signed, contractors allowed to bid, contractors hired, work is completed. How much and what type of work will depend on the space I lease.
  9. On the day the lease is signed, I will submit my paperwork to the TTB (Federal agency in charge of breweries amongst other things). I will have begun completion of this paperwork way before this. TTB approval takes about 2 months. Could be more, could be less.
  10. Once TTB approval is received, I can then start the Illinois state approval process which can take up to 2 months. It would be nice to start this process in parallel with the TTB, but that would make Illinois business friendly.
  11. Construction finishes, equipment is installed, licenses all received, brewing begins.
  12. Beer is brewed, packaged, and sent to a distributor in the Chicago area. I will not be self distributing.
  13. Once operations are smoothed out and cash flow is good, I'll begin the process of opening up a retail store or tap room, depending on zoning and Chicago liquor license bull shit.

So, that's the plan. There are lots of mini tasks in there as well, but this is a good overview of what's involved yet. From the day I get the loan, we're looking at at LEAST 6 months to opening day, most likely 7 or 8. Who knows?

But this I can promise you, it's moving along better now than ever before. It feels very real and there's no stopping.

Last note: My latest batch of Panic Pale Ale is finally in the ballpark of what I'm looking for. There's a lot of tweaking yet to do, I'll be experimenting with some hop schedules, but it's close. Very close.

Cheers,

G

When Is Alarmist Brewing Going To Open?

In this artists rendering, the City of Chicago will look much like this by the time Alarmist is operational. Fortunately by then we'll be able to transport beer directly to customers via the "Ionic-Suds-O-Particleizer 3000".

In this artists rendering, the City of Chicago will look much like this by the time Alarmist is operational. Fortunately by then we'll be able to transport beer directly to customers via the "Ionic-Suds-O-Particleizer 3000".

Ahhh, the eternal question. Second most popular question we get after "Where is the brewery going to be located?" and "Do I have to call the police on you again?". I've been blogging this journey since October 11, 2011. You would think this thing would be up and running right? I remember back when I first started thinking about opening a brewery. I foolishly assumed that the entire process would take a year. Youth is wasted on the young.

Here's the deal. Nate and I have been presented with an awesome opportunity that will make this journey a lot easier and cheaper. We can't divulge all the details yet as there are many things that need to happen to make it come to fruition. It will no doubt add a few extra months to our timeline, but it will be totally worth it, trust me. We're calling this new development "Plan A". We spent hours coming up with that name. Nate initially wanted to call it "A Plan" but I pointed out that he was stupid and he agreed. Our original plan is now entitled "Plan B". Nate also wanted to call that plan "A Plan". Again I pointed out his stupidity and then he parried with "Plan B". Touché Nathan Barth, touché. We will one day do battle again and you will not be let off so easily.

Regardless of which plan ends up working out for us, and one of them definitely will, we won't be opening doors until early 2014.

The reasons for this timeline are quite simple: new equipment requires at least 6 months to be manufactured and delivered, business loans require 2-3 months of processing and analysis (especially SBA ones, according to our sources). We can't buy the equipment until we have secured the loan. Then there are construction timelines, but those in theory would run in parallel with the equipment manufacturing. Oh and the leasing process. That takes some time as well. And then there are some other events that need to occur prior to all of these, adding some extra months as I mentioned previously.

Nate and I have really started to get the loan process figured out and we've begun to reach out to all the potential investors who've contacted us over the past 18 months or so. So all the financing stuff, the most important part of this process, is really starting to come together. Our ability to get a loan looks fantastic and it appears we won't have much trouble getting enough investors on board.

I can tell you that between now and opening day, we will be very, very busy. There are so many things we need to do and there will be very, very few lulls during the run up to opening day. We have to update our branding, figure out package design, finish our recipe formulations and trials, conduct investor meetings, legal documents need finalizing (including partnership stuff which is new to the game), planning our hop contracts, the list goes on.

Nate is as big of a fan of having one's ducks in a row as I am and we are both ruthlessly researching numerous aspects of opening a small business. I can tell you that once we are open, we will have rock solid legal and financial foundations so that we can immediately get to the task of what this is all about: making great beer and getting it to customers.

Cheers,

G

Lots Of Balls (In The Air)

That's a lot of balls for one man. I wish someone could help me with my balls. My wife probably wishes I weren't so childish. Just for that she doesn't get to touch my balls. I'm juggling a lot of balls at the moment. It's hard keeping track of so many balls. But no matter what I'm not going to get testy. Hey! Get your mind out of the gutter! Don't start reading into those innuendos and start thinking that they're innuendos. That's just nuts!

OK, enough of that, let's get busy. (heh)

Here's what's going on in no particular order:

  1. First draft of the Private Placement Memo is completed, second draft should be in my possession this week. If not, that's OK, I have plenty to keep me busy (heh). What this means is all you lovely, wonderful folks who've expressed interest in being a part of Panic Alarmist Brewing will soon have that opportunity. Stay tuned. Speaking of which, if you think you might be interested in investing in Panic please send me a message through the form on the Contact Me page. The minimum investment will be $8,000 and there will be lots of legal documents spelling out precisely what you get, what I get, what you don't get, and what I don't get. Everyone will be protected to the best of my attorney's ability, whom I trust completely.
  2. The first draft of my real estate lease RFP (request for proposal) is in my possession and I'm trying to get time to review it. My real estate broker, "Nick", has created this document which will be submitted to the real estate brokers/owners of the properties I've expressed interest in. This RFP spells out what kind of infrastructure I require such as electrical, plumbing, and floor loads. We'll see who offers some TI and/or abatements. See here for an explanation of those terms.
  3. I've started the small business loan process. I've spoken to several commercial lenders thus far. The response has ranged from extremely enthusiastic to mild irritation. The banks that responded professionally, got back to me, or loaned me money will be lauded on this website. The ones who didn't will also be mentioned as a warning to others. One lender, whom I spoke with on the phone today was very interested in the project. We will be meeting this coming Thursday. I am very excited.
  4. The first batch of beer from my 1 gallon rapid prototype process is ready to bottle. I split it into two different half gallon growlers and dry hopped them slightly differently. Can't wait to try the final results.

So that's a quick list of where I am. Still so much to do but things are really coming to fruition.

Oh, and there are quite a few secret developments happening as well. Really good stuff and I wish I could share, but instead I'll just tell you that I have some cool things going on and you should be titillated (heh).

Cheers,

G

What I've Learned About Commercial Real Estate Leasing

As I understand it, Russia has this old power plant with plenty of clear height. The commute would be a disaster though. Get it? Disaster? Sigh. In the past two weeks I've embarked on two commercial real estate tours with my real estate agent. We'll call him "Nick" because that's his name, but we'll continue to put his name in quotes because that's pretty damn funny. Anyway, "Nick" has thus far arranged for me to tour about 20 different commercial real estate properties which he thought would make suitable facilities for a brewery.

Probably the first criterion for my location is ceiling height. In the commercial real estate biz this is called "clear height" and means the distance from the floor to the bottom of the lowest ceiling support. Ideally I'd like about 16' but I can certainly go shorter, I just don't want to. Shorter clear heights means shorter fermenters which means, in addition to different fermentation characteristics, more square footage required for a given capacity. This is Chicago and like any big city, things are usually cheaper if you build up. I'll be starting with 30 bbl fermenters, but in the not too distant future I'll need 60 bbl fermenters or larger. I've toured a few spaces on the North Side with large clear heights, but the number of choices is surprisingly limited, but that's fine, I'll make do. There are more on the West and South sides, but those are just too far from my home to make them viable.

Other criteria are obviously price, square footage available now (minimum 5000 SF) and ideally additional adjacent square footage for future expansion, distance from my house, TIF/SBIF availability (we'll cover that some other time if applicable), build out costs, etc. If you're not aware, commercial real estate is priced by $/SF/year. So if you're quoted a price of $10/SF, that means you'll pay $10/SF/year, not per month. The first time I saw a quote, I assumed it was per month and damn near cried. That is not the case. Also, the price quoted will be either "net" or "gross". "Net" means the price does not include property tax, maintenance, insurance, etc. "Gross" means all those costs are included in the quote. If you're quoted "net", your real estate agent will find out what the "gross" is. One way or another, you pay for all those things, it's just how it's quoted by the lessor.

One thing I've noticed immediately is that commercial real estate owners (or their real estate agent surrogates) run the gambit from very friendly and helpful, to stubborn, cheap, ass hats. I won't be dealing with the ass hats. I have too much riding on this to put myself at risk of getting a bum deal with someone who doesn't want to spend money to obtain and maintain a good tenant. When I say "cheap", I'm referring to the two main ways that a commercial real estate owner can help a perspective tenant out: tenant improvement funds ("TI") and abatement.

TI is where the owner agrees to pay for some of the build out costs you require. Obvious candidates for a brewery are: installing 230V 3-phase power on the property, concrete work, trench drains installation. The incentives for an owner to do this could be things such as getting a tenant into a space experiencing extended vacancy or poor condition of the property. The upswing for the owner beyond just getting rent for a previously unrentable space is that they can charge you higher rent to pay for the capital outlay. I'd much rather pay for high construction costs with additional rent payable over years rather than use up precious capital. As part of my business plan, and my overal assumption that nothing will go the way I want it to, I'm just assuming that I will receive little to no TI, but this is obviously based on the state of the property. If it's a dump, then I will definitely expect TI, if it's nice and clean, well then we'll negotiate. The good news is that every space I looked at either already had the proper electrical and water supply or the owner was willing to pay for that in some capacity. This makes sense as all the properties are in commercial or manufacturing zones where appropriate infrastructure is essential.

Another way a lessor can help a tenant get up and running is by "abatement". Abatement is simply where the tenant pays no rent during build out, permit processing (a fun subject in Chicago), equipment delivery and installation, etc. Once you sign a lease, the lease actually begins on an agreed upon date, perhaps 4 to 6 months after build out begins. This allows you, the business owner to not pay rent when you have no revenue coming in, and it allows the owner to get a good, long term tenant who doesn't have to use up their precious capital and risk going out of business. Very negotiable and most owners have been very willing to do that. The ones that won't will not be considered. This especially goes for the ass hat owner (whom was not present) and his douchebag real estate agent (about as personable as a sun dried turd) of a large commercial space on the West Side. The conversation went like this:

"Nick": "So is the owner willing to offer abatement?"

Douchebag agent: "Oh no, he's not willing to let someone use the space without paying any rent."

Me with my sarcasm set to "kill": "You mean like all the rent he's collecting now?" (staring over a vast horizon of emptiness)

The space was very large and very empty and had been vacant for many, many months. No renters in sight. Fortunately this turd was an anomaly. Every other agent or owner we met indicated that there was room for TI and/or abatement. That's just smart.

Another interesting facet of commercial real estate leasing that I was aware of but was reminded by lessors' agents over and over is that the owner will be doing a detailed analysis of my business plan and business capitalization. Owners don't want to invest tens of thousands of dollars in TI or abatement only to discover that you are undercapitalized or have a stupid business idea. One interesting location I looked at had been vacated by the tenant in the middle of the night without warning while the lease was still in force. I assume the owner is in the midst of legal action to recover their losses. So there's snaky-ness on both sides it seems.

One other aspect worth mentioning and closely related to the previous point is a security deposit. Lessors might demand a bigger deposit from a start up such as myself. If that's the case, then I'll expect the lessor to release some of that security deposit back to me over time as the business matures and the owner becomes comfortable with my status as a reliable tenant. My business plan assumes a 6 month security deposit as recommended by "Nick".

Side note: I can't tell you how many lessor agents told me something along the lines of, "There's a lot of you brewery guys looking at spaces." My response was, "Yes, I probably know all of them", which is true. Small world, even in Chicago.

There is much, much more to this commercial real estate leasing game than this, but this is just a primer based on what I've learned in the past couple of weeks. It's a whole new world for me and I will tell you it's been a source of stress, but I'll get through it like everything else. As I learn more I'll share. I'll be very glad when a suitable location is found and the lease is signed.

Oh, and I found about five locations that I liked. I didn't LOVE any of them, but all could work fine, just not ideal. I'm not done searching yet and I'm hoping to find a diamond in the rough. I won't be revealing any location information due to the aforementioned note about other breweries looking as well. I'm here to share as much as possible, but some things are best left on the down low until the time is right.

Cheers,

G