For anyone thinking about opening a craft brewery, in the process of opening one, or just opened one, “Don’t under estimate the Tap Room”! When in the planning stages for the brewery I have an interest in, pro forma budgets were drawn up and they did include and budget for a tap room. However, the tap room was grossly under budgeted regarding the revenue and profit it would generate. Granted there are worse problems to have, but had we more accurately estimated the cash flow the tap room would generate they possibly would have started with more square footage because they could have afforded it. As it turns out, it outgrew the original space in just 3 years and we are now expanding.
Now back to the tap room topic. It is easy to see how a tap room goes unappreciated at first. When estimating your sales you are focused on the core of your business, and that is likely keg distribution to restaurants, bars, catering companies and the like. True those sales will definitely make up the vast amount of volume and total revenue but a successful tap room can generate a very healthy profit on a fraction of the beer sold. Why you ask? Well because breweries have the opportunity to sell beer at or near retail prices while paying cost. When cutting out the wholesale middleman you can tripple or even quadruple the profit margin.
The tap room is invaluable when it comes to other merchandise sales including glasses, hats, T-shirts, etc. The tap room is also a key marketing tool, allowing your customers and potential customers the opportunity to sample every beer you make at anytime. The tap room also provides for a built in focus group facility. You have customers and potential customers in your tap room every day and you can use their feedback on sample batches or seasonal beers before going into full production. If you get negative feedback you can scrap it altogether before spending production run money on a recipe that is destined to fail.
Listen folks, the tap room has a TON of value and I encourage you to embrace it and look closely at the profit potential and marketing value as you plan the business. To the consumers out there, remember the brewery can more than afford to offer their local clientele prices a bit south of retail, at least regularly, if not always, and I believe they should.
Who has your favorite tap room and why?