Ted Zeller: Well, I’m happy to drink out of the well and important occasions of my life. I like to go top shelf. If I’m a business owner going into a highly regulated industry, I think that’s an important time in your life to also considering going top shelf. Welcome to Norris McLaughlin’s top-shelf legal, a limited podcast series where we break down the hard stuff on beers, distilleries, breweries, and spirits.
I’m your host. Ted Zeller, Practice Group Leader of the Liquor Law Group at Norris McLaughlin. In this episode, we’re going to talk about how to build a brewery. So how to build a brewery. Talked to a lot of people in my life about how to build a brewery. While I also have some context and also how to build a winery and a distillery, I’ve spoken more about emerging Brewery owners, prospective brewery owners on how to build one.
And what I tell people, it’s a local state and federal process without starting local first, you’re not going to get anywhere. So, what you want to do is really from the local perspective, you have to choose your site. The site drives everything as far as those applications. When you’re choosing a site, it’s really important to understand the zoning implications in choosing that site.
You have to interact with the local municipality. Certainly, if you hire an attorney, they can do that. But typically it’s just walking to the local municipality office, finding out if you’ve got a site selected, what you can do there. Unfortunately, although breweries have been around for centuries, local municipal zoning laws don’t necessarily embrace them all the time because breweries are now kind of an emerging, new, Business enterprise, almost like cannabis and recreational dispensaries. Breweries used to be just large production sites where you look to for industrial zones for that beer production.
Now, especially in Pennsylvania where I actually wrote a lot of the brewery laws, you can have a production site and you can distribute from that site. You can have a restaurant at that site. You can have tables and chairs. You can sell directly to the public because of that. That implicates many different uses in zoning codes. And that’s where the conflict comes in.
So we’ve seen instances where prospective client has gone in and the zoning offer says, Oh yes, at that site, you can certainly produce beer and you can, you know, get delivery trucks out of there and everything, but you can’t have a tap room there because it’s not zoned for retail, and then even the other side, Oh yes, you can have a brewery there. We will let you produce limited only for what you can sell at that site. Well, that doesn’t do a brewery owner real good if they want to produce beer and sell to the retail trade. So, it really becomes very important to select a site that is going to meet what your business goals are.
In addition, you also have to alert the landlord if you’re not purchasing the property. That they will likely have to be involved with the process. Now this information can really apply nationally, but I will focus on Pennsylvania from time to time, sometimes New Jersey, we represent a lot of breweries nationally, but certainly we represent the most in Pennsylvania and New Jersey.
When you lease a premises from a landlord, the Pennsylvania Liquor Control Board will actually investigate the landlord’s composition. That can get really difficult. I one time had a famous politician’s trust involved with it. And it became an absolute nightmare for my brewery to get that approved by the Pennsylvania Liquor Control Board, because they wanted to see that politicians private trust documents and who the beneficiaries are.
The Pennsylvania Liquor Control Board’s reason for looking at landlords is they want to ensure that there is no what is called conflicting interest with the landlord. What that means, they do not want a landlord who is secretly a beer distributor leasing to a brewery that is our Three-tier system of alcohol that you may have heard in the past.
The three-tier system of alcohol is breweries produce the beer. They enter into contracts with wholesalers to sell the beer and the wholesalers sell the beer then to retail. So, the three tiers are manufacturing wholesale and then retail. Now in Pennsylvania with what Actually in the law, I was able to develop for self-distribution.
All those, in essence, tiers are merged. But when it comes to the Pennsylvania Liquor Control Board application, they will investigate landlords. And so I like to negotiate our lease and include a landlord’s cooperation with that process because it can be somewhat tedious. Once you have your site selected, you can then apply to the state, the Pennsylvania Liquor Control Board. In addition, I also at the same time, or usually within a couple of days of each other, because the information I need for one application is similar to what I need for the other application, is file online with the United States Federal Tax and Trade Bureau, the TTB.
So that is the federal aspect of it. The Pennsylvania Liquor Control Board application. Is more of what I call a notice filing that contains basic information of the entity that you’ve formed to be the applicant, who are the individual owners, and the site. Once that is filed, it sets off an investigation, which is actually quite intensive.
They look at, as I just had reviewed the landlord, the lease, um, and we’ll personally interview the, all the owners of the applicant entity. Those will be either in person or they’re still doing them over the phone from COVID. You have to supply your driver’s license. You have to also supply a snapshot, headshot photo of yourself.
In addition, there is a site investigation at some point when you’re filing with the Pennsylvania Liquor Control Board, there’s two ways that you can file. One is on what’s called a prior approval basis where you’re doing it on plan. You know, if you’ve got a big project where you’re putting 500 to a million dollars into a facility and you want to make sure before you’re spending that money that the Pennsylvania Liquor Control Board is going to approve it. You can apply on a prior approval basis, give them the plans, they’ll check out the landlord, they’ll check out your entity, they’ll check out to make sure your finances are clear, which is a part of the investigation.
Meaning that, you know, you have your own funds or you bought it from a licensed bank and they’ll look at your plan and say, yeah, You’re good. So, when you build it out to plan, let us know, we’ll come and bring your license to you. The other is you’re ready to go and the investigator can come out and take, you know, the measurements and draw their own plan. And, it goes through the approval process that way. There’s a lot of nuances to this investigation. You know, our podcast is informational and trying to give you real good guidance on how to get started, but getting into the weeds on a lot of these things, it’s just really not possible, but you know eventually.
You know, you will get your Pennsylvania Liquor Control Board approval. Everybody always asks me, well, how long does that take? You know, well, you know, it could be dependent upon a whole bunch of factors. You know, are you trying to do this yourself? And did you get assigned an agent from the Pennsylvania Liquor Control Board that’s new and might not have had too many brewery applications?
And then between the two of you, you’re just not getting the information necessary, reporting to Harrisburg where the Pennsylvania Liquor Control Board is, is situate and giving them enough information that they can approve the deal. So that can be a raw deal. If you don’t hire counsel who has dealt with the Pennsylvania Liquor Control Board before, that can also be a factor.
But honestly, you know, you get a real good agent. It knows what they’re doing and you’re prepared. You can get through it yourself. It might take longer, but you know, I’m typically telling folks that it’s, you, you’re looking at a four-to-six-month process, uh, when you’re filing with the Pennsylvania Liquor Control Board.
And if you get stuck because you’re trying to do it yourself or you’ve got an inexperienced agent from the Pennsylvania Liquor Control Board, I’ve seen that take a year. And that can absolutely devastate folks. And that’s unfortunate. The TTB process is a little bit different. It contains most of the same information.
You don’t need all the level of detail for minority owners that you do with the Pennsylvania Liquor Control Board process, but it’s an online filing. You can actually go online. At the TTB and search for processing times currently available and you will actually see all sorts of different processing times and that will give you a good indicator of how much time your process will take from the date you file the application processing times, I think right now we’re about 45 to 55 days for brewery licenses, but they can change. I’ve seen them as low as 27, 28. I’ve seen them as high as over a hundred. You know, the government shutdowns are really a problem sometimes because TTB agents are not considered essential employees so that can muck up the whole system.
But, you know, there is a science to making sure that you file everything correctly with the TTB because here’s the one TTB rule that is, can be difficult to manage. If you think you filed everything and then you get a notice from the reviewer that you need this document or you didn’t provide this piece of information, they will give you a short window of time, like 15 days to respond.
And if you do not, they abandon your application, which means that you’re going to have to refile, and you go to the back of the line all over again. So, building a brewery takes focus on local first, and that is by far your site selection, the most important part of the process, and then state and federal.
Just the one thing to keep in mind is you’re trying to get licensed to produce an album. Alcoholic beverage, which surprisingly is an industry that’s more heavily regulated than almost any industry, uh, you know, in the United States. I mean, it’s almost more, uh, heavily, more heavily regulated and taxes, cannabis, and guns.
It’s really quite remarkable. That is somewhat of a vestige of our prohibition years, but unfortunately, it is the process that you have to go through. So I wish you luck on your journey, and just keep in mind, start with that site first.
This has been a Norse McLaughlin Top-Shelf Legal, limited podcast series, where we run through the topics of beers, distilleries, breweries, and spirits. I want to thank you the listener for being a part of the conversation. Be sure to tune in next time for a brand-new episode. If you would like to learn more about our work, be sure to check out my legal liquor blog, or email me at topshelflegal@norris-law.com. That’s topshelflegal@norris-law.com.