Best Way to Start a Distillery to Avoid time spent "Dead in the Water"

[RyeWater]

I was wondering if anyone had any advice on how to go about opening an distillery while avoiding paying much in rent during the long permitting period. I was thinking that we could purchase a very small location we don't intend to really ever use, buy a small still we will later use for R/D, get all the permits while we are at that location paying minimal rent and after we are fully licensed move to a final location and purchase a end-game still.

Does anyone know if this idea is feasible or if there is a better way.

Thanks

[Hewnspirits]

Not that simple. It's not just the Fed requirements that you have to deal with but the State and Local municipality....which more often, is the stickier stuff. We started backwards...going for local, then State, then Fed licenses. All will require you to submit some sort of drawing and/or description of the site. My guess is that going the way you are proposing will actually create more paperwork in the filings of amendments, changes, and other red tape documentation. You would be better off finding the place that you want to open your doors from and striking a deal with the seller or landlord that was structured on a sliding scale....less $$ for the first 6 months and then gradually more once you got open. Worked for us.

[Michaelangelo]

WOW. This post is very illuminating. It seems worth a try considering Glacier tanks this size are about $5000.

http://www.glaciertanks.com/Conical_Fermenters-15_BBL_473GL_1_790L_Conical_Fermenter.html

I think that there are quite a few trying this approach

[Kristian]

Seconded... Negotiate with your landlord, ours gave us reduced rent until we were licensed and producing. Of course, this depends on how commercial real estate is in your area.

[MtnMann]

You could try to make this work until your DSP comes through:

§19.32 Experimental distilled spirits plants.

(a) General. The appropriate TTB officer may authorize the establishment and operation of experimental plants for specific and limited periods of time solely for experimentation in, or development of:

(1) Sources of materials from which spirits may be produced;

(2) Processes by which spirits may be produced or refined; or

(3) Industrial uses of spirits.

( Waiver. The appropriate TTB officer may waive any provision of 26 U.S.C. chapter 51 (other than 26 U.S.C. 5312) and of this part (other than §19.33) to the extent necessary to effectuate the purposes of 26 U.S.C. 5312( as outlined in paragraph (a) of this section. However, TTB will not waive the payment of any tax on spirits removed from an experimental plant.

(26 U.S.C. 5312)

§19.33 Application to establish experimental plants.

(a) Application requirements. Any person who wishes to establish an experimental plant for the purposes specified in §19.32 must submit a written application to the appropriate TTB officer and obtain approval of the proposed experimental plant. The application must:

(1) State the nature, extent, and purpose of the operations to be conducted;

(2) Describe the operations and equipment;

(3) Describe the location of the plant (including the proximity to other premises or operations subject to the provisions of 26 U.S.C. chapter 51); and

(4) Describe the security measures to be provided.

( Bond. The applicant must file a bond with the application in such form and penal sum as required by the appropriate TTB officer.

© Approval of application. Before approving the application, the appropriate TTB officer may require that the applicant submit additional information if necessary. TTB will not approve the application and permit operations until the plant conforms to the specifications stated in the application and the applicant complies with provisions of 26 U.S.C. chapter 51 and with any provisions in this part that are not specifically waived.

(26 U.S.C. 5312)

Smiley faces are not my doing.

Edited January 29, 2014 by MtnMann

[Roger]

I also went "backwards". Found the facility, (2 possible locations in same community) , put in purchase offers on both, contingent on receiving approval from all local, state and federal offices for distillation. Then hit the bricks starting with zoning, village and county board meetings, etc.. until I was satisfied that there were no objections. Finally received approval from zoning (aprox 4 months ) then filed for both state and fed DSP 's. After beginning that process and getting initial feedback from both fed and state wherein I knew I would more than likely get licensed, attempted to close on both properties. Lost one to a previous purchase offer, so dropped it from my application as a second location for storage,etc.., and closed on the other.

All of that said, this entire process is very "site specific" right down to your neighbors potential complaints. So I would suggest that you get your location, whether by lease , option or contingent purchase offer, and plan on biting the bullet on some site expense while you await your licenses. But before you spend much money on a specific location, you should find out if it is possible to site your operation there.

The licensing is really two major parts

1) who

2) where

You should pretty much know if you will pass number 1 or not, as all of the things that will cause you to be rejected are listed.

However the hard part is finding an address and facility that can accommodate what you are trying to accomplish, while also complying with the myriad or codes and regulations that you will encounter.

[RyeWater]

Not that simple. It's not just the Fed requirements that you have to deal with but the State and Local municipality....which more often, is the stickier stuff. We started backwards...going for local, then State, then Fed licenses. All will require you to submit some sort of drawing and/or description of the site. My guess is that going the way you are proposing will actually create more paperwork in the filings of amendments, changes, and other red tape documentation. You would be better off finding the place that you want to open your doors from and striking a deal with the seller or landlord that was structured on a sliding scale....less $$ for the first 6 months and then gradually more once you got open. Worked for us.

Seconded... Negotiate with your landlord, ours gave us reduced rent until we were licensed and producing. Of course, this depends on how commercial real estate is in your area.

You could try to make this work until your DSP comes through:

§19.32 Experimental distilled spirits plants.

(a) General. The appropriate TTB officer may authorize the establishment and operation of experimental plants for specific and limited periods of time solely for experimentation in, or development of:

(1) Sources of materials from which spirits may be produced;

(2) Processes by which spirits may be produced or refined; or

(3) Industrial uses of spirits.

( Waiver. The appropriate TTB officer may waive any provision of 26 U.S.C. chapter 51 (other than 26 U.S.C. 5312) and of this part (other than §19.33) to the extent necessary to effectuate the purposes of 26 U.S.C. 5312( as outlined in paragraph (a) of this section. However, TTB will not waive the payment of any tax on spirits removed from an experimental plant.

(26 U.S.C. 5312)

§19.33 Application to establish experimental plants.

(a) Application requirements. Any person who wishes to establish an experimental plant for the purposes specified in §19.32 must submit a written application to the appropriate TTB officer and obtain approval of the proposed experimental plant. The application must:

(1) State the nature, extent, and purpose of the operations to be conducted;

(2) Describe the operations and equipment;

(3) Describe the location of the plant (including the proximity to other premises or operations subject to the provisions of 26 U.S.C. chapter 51); and

(4) Describe the security measures to be provided.

( Bond. The applicant must file a bond with the application in such form and penal sum as required by the appropriate TTB officer.

© Approval of application. Before approving the application, the appropriate TTB officer may require that the applicant submit additional information if necessary. TTB will not approve the application and permit operations until the plant conforms to the specifications stated in the application and the applicant complies with provisions of 26 U.S.C. chapter 51 and with any provisions in this part that are not specifically waived.

(26 U.S.C. 5312)

Smiley faces are not my doing.

I was actually just looking at the today, I feel like they would not appreciate it very much if I did this as it seems to me this is intended for a company who wants to study some aspect of distilling for research non related to establishing that exact business. Dont want to anger anyone at the TTB before I start! Has anyone else done this with success?

I also went "backwards". Found the facility, (2 possible locations in same community) , put in purchase offers on both, contingent on receiving approval from all local, state and federal offices for distillation. Then hit the bricks starting with zoning, village and county board meetings, etc.. until I was satisfied that there were no objections. Finally received approval from zoning (aprox 4 months ) then filed for both state and fed DSP 's. After beginning that process and getting initial feedback from both fed and state wherein I knew I would more than likely get licensed, attempted to close on both properties. Lost one to a previous purchase offer, so dropped it from my application as a second location for storage,etc.., and closed on the other.

All of that said, this entire process is very "site specific" right down to your neighbors potential complaints. So I would suggest that you get your location, whether by lease , option or contingent purchase offer, and plan on biting the bullet on some site expense while you await your licenses. But before you spend much money on a specific location, you should find out if it is possible to site your operation there.

The licensing is really two major parts

1) who

2) where

You should pretty much know if you will pass number 1 or not, as all of the things that will cause you to be rejected are listed.

However the hard part is finding an address and facility that can accommodate what you are trying to accomplish, while also complying with the myriad or codes and regulations that you will encounter.

It seems that you Hewnspirits, and Kristian are saying pretty much the same thing, try and find a good location that the owner will work with you on your situation and a location that fits the bill. I think the same way as you guys so i dont consider it going backwards to start with the county, then move to state then federal. That is the route we are going and have been meeting with economic development corps from the various counties around us. Luckily it seems most of the counties are rally backing this stuff (they want the tax money bad) and have established meetings to make sure that the permitting goes through quickly and without holdup.

We are also fortunate enough to be friends with a large commercial real estate owner in the area who already said he would do deferred and reduced rent for us so looks like we will pursue this route a little harder. His properties are not the optimal location and couldn't support a tasting room probably but they could work for the first year or two then we can move if all is well.

[John McKee]

If you're working with a bank on financing, negotiate an interest only payment plan until you're officially open. That way you can save money from retained principle payments.

Cheers.

McKee

[Dehner Distillery]

Look here is the deal.

I have a distillery (making whiskeys and rums, and a vodka), and another company called "Red Boot Stills" www.redbootstills.com

We do allot more than build distilling components and stills.

We do

1, consulting work from start to finish

2, logo and label design with an in house design team

3. custom labeling and bottling

4. build custom equipment

5. build stills and other distillery equipment (bottling machines and labeling machines coming out soon)

if ya need help with something just ask.

I don't think I would ever pay for a "fermentation engineer" There a lot of variables but there are so many resources out there! I use "lallemand", they can help you with anything. They are the best! I also use "specialty enzymes", they will help max out your yeilds!

Take care!

[mendodistilling]

All you need is a copy of a lease, so first you need to get your use permit at the city/county level pre-approved, figure out your septic cost and red tape, water source and,issues as well as connection fees, then find out whether you have a sprinkled building and if not, the cost involved in doing this. If the landlord is not willing to hold off on rent for a prospective client, look for another who is bc rent is common and nothing is so unique that you can't make it work any other way.

[mendodistilling]

You only have to satisfy the county/city, the feds don't care about anything but a lease, which is all you need to get a use permit, however, without approvals or a knowledge of your states issues you could end up walking a long line down research the hard way road and find your building will cost too much.

If i I were looking and not building I would go through this checklist.

1. 8000+ sq.ft mandatory sprinkled fully. Outside fenced parking lot a bonus.

2. Septic or city waste treatment give me a bid on connection fees and operational costs

3. water, same as 2.

4. Find out if #2 and #3 are paid for by state development stimulus funds which you can find out by speaking to your local sba consultant for free.

5. visit SBA score and find out what they think of your idea and who may be able to be there to help that they know. They are great net workers generally.

6. Get everything figured out, then approach a commercial real estate agent and ask him to narrow down potentials. They can save huge amounts of time and tell you what is reasonable. Always ask them to try the unreasonable, it finds out what true market conditions are and owners needs, sometimes they need longer term tenants and will take less from a more secured tenant vouch by the agents involved. The owners too look to them for advice.

7. Never be afraid to tell the county you need the money for connection fees wwaived or your 35 employee distillery (;exaggerate the number because it will be higher than just yourself at some point.) Will not be able to open under such heavy opening costs imposed by the city. How can we resolve this. This is when score becomes your friend. They are successful local business owners. They know the ins and outs and know how to find out what is possible. Not everyone gets treated fairly, that is a face JACK.

[boognish]

You only have to satisfy the county/city, the feds don't care about anything but a lease, which is all you need to get a use permit, however, without approvals or a knowledge of your states issues you could end up walking a long line down research the hard way road and find your building will cost too much.

If i I were looking and not building I would go through this checklist.

1. 8000+ sq.ft mandatory sprinkled fully. Outside fenced parking lot a bonus.

2. Septic or city waste treatment give me a bid on connection fees and operational costs

3. water, same as 2.

4. Find out if #2 and #3 are paid for by state development stimulus funds which you can find out by speaking to your local sba consultant for free.

5. visit SBA score and find out what they think of your idea and who may be able to be there to help that they know. They are great net workers generally.

6. Get everything figured out, then approach a commercial real estate agent and ask him to narrow down potentials. They can save huge amounts of time and tell you what is reasonable. Always ask them to try the unreasonable, it finds out what true market conditions are and owners needs, sometimes they need longer term tenants and will take less from a more secured tenant vouch by the agents involved. The owners too look to them for advice.

7. Never be afraid to tell the county you need the money for connection fees wwaived or your 35 employee distillery (;exaggerate the number because it will be higher than just yourself at some point.) Will not be able to open under such heavy opening costs imposed by the city. How can we resolve this. This is when score becomes your friend. They are successful local business owners. They know the ins and outs and know how to find out what is possible. Not everyone gets treated fairly, that is a face JACK.

+1 would read again

[dhdunbar]

I will hop into this late. I consult and if anyone calls me and asks about help with a federal application, I tell them they do not want to get involved with a federal application until they have ALL of the local and state issues worked out. Everyone who says they work "backwards" are actually working "forwards" as far as I am concerned. Any reaonable plan begins with local zoning and development and goes down the list from there. Generally, we can find a solution to any TTB problem that might arise with a location - unless you propose locating it in a tent. So I tell clients pay me nothing until you have your ducks in a row.

And you are correct, you are not contemplating an experimental DSP within the intent of TTB's regulations.