No matter the industry, all businesses occasionally make mistakes. The key is to be aware of them and take steps to avoid them ahead of time. Outlined below are the common legal mistakes brewers make when it comes to their physical brewing space along with the steps to take to avoid them.
When it comes to real estate, contract renewal terms and zoning issues are among the most common areas in which brewers often make mistakes. When reviewing your real estate contract or lease, you should focus on three central areas: rent and escalators, expansion options and exclusivity in your lease.
Rent and escalators: Landlords or managers are allowed to increase your annual base rent during the term of your lease agreement. What is the allowable rent increase for the next lease term? Be sure to negotiate an increase in base rent. Consider what you could actually afford three or five years down the road.
Expansion options: One day, you may need more space for your growing clientele. Who is next door and how long have they been there? Could you take over the unit to expand or are you stuck? Before settling on a location, evaluate the future of the brewery and your potential for expansion.
Exclusives in lease: Your taproom is booming, and you want to add food and become a brewpub. Does your lease prohibit you from selling food? Is there an exclusivity for certain types of food in your area? Maybe you want to sell burgers, but there’s already a famous burger chain three doors down. Odds are, you won’t be able to have burgers on your menu.
Understanding zoning laws and regulations may seem like a complicated endeavor, but with a little prep (and maybe a lawyer’s help), you can ensure that your location is approved for operating a brewery.
Use restrictions: Breweries can be one of the most challenging types of businesses when it comes to zoning because they serve a variety of “uses” all in one building. Depending on the size and type of brewery, it could be considered a warehouse, a distribution center, a restaurant or bar or a retail establishment. Each of these distinctions changes where you can set up your brewery.
Additional zoning restrictions: After dealing with your use restrictions, you may still have a few additional zoning laws that could restrict you from opening in the location you’d prefer. These can include the impact on local traffic, parking, dimensional requirements and wastewater discharge requirements. A careful zoning analysis by the brewers and their attorneys at the beginning of a site acquisition or lease negotiation is worth the investment to avoid future trouble.
Regulatory and licensing
As you know, before you can launch a brewery, you will need to be registered and licensed at both the federal and state levels. Additionally, when it comes to licensing with the Alcohol and Tobacco Tax and Trade Bureau, you will need to apply for a permit. Permits and licensing are often time-consuming and require detailed information. This is where we see brewers getting into the most trouble.
You’ve gone through the paperwork and have been approved (finally!). It’s a couple of years down the road, and you want to change your floor plan. Wait! First, you need to make sure you can legally do so. Check in with your state’s licensing office to see what requirements you need to meet to change the floor plan.
Moreover, it’s not just limited to floor plans. Did you know that if you change anything within your brewery, you will need to ensure you comply with all regulatory agencies? If you decide to change your brewery name or location, change ownership or add a company officer you will have to ensure you update your records with the appropriate licensing office.
The bottom line is to maintain your records, always check in with the appropriate office in your state and ensure you keep both state and federal licenses up to date.
Mistakes happen no matter how much preparation is done, but with a few simple steps, you can significantly decrease your chances of falling victim to these issues.
William F. Jones, is an attorney with Moye White LLP, a Denver-based law firm
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