Owners-in-common model growing

Around our region, some brewery owners are finding a smart way to add sales through off-site taps. Instead of building another small brewpub with all the expensive brewing equipment it requires, you are seeing more beer sold through external taprooms, bars, and restaurants that have some owners-in-common with a brewery.

These owners-in-common retail outlets tend to maintain a good selection of the brewery’s beer on tap. Having a steady source of beer sales gives brewery operators more stability in today’s  competitive craft beverage market. These kinds of arrangements are helping boost the craft brewing industry.

Some states do not allow breweries to own off-site taprooms. Others allow one or more off-site locations in addition to the one at the brewery. The state of West Virginia does not allow a brewery to own any off-site beer-licensed retail operation. Brewery owners here must set up a separate company/legal entity to own the tavern/bar/restaurant and keep it independent of the brewery.

The owners of two West Virginia breweries currently have some ownership connections to beer-licensed restaurants. Mountain State Brewing and Bad Shepherd Beer Company each see their beer sold at networks of on-premise licensees that have owners-in-common with the brewery.

Mountain State Brewing develops the model

Mountain State Brewing was the first West Virginia brewery to go down this path. In 2005, it originally opened a brewery with a small in-house taproom in Thomas. Several years later, new companies, organized by the brewery’s owners, opened two restaurants operating under the Mountain State Brewing name. One is in Morgantown and the other is near Deep Creek Lake, Maryland. While they are legally separate businesses from the brewery, both are outlets for Mountain State beers. Recently came word of a third Mountain State Brewing restaurant that is being built in Bridgeport at the Charles Pointe development. This business is owned by a group of partners, which includes the majority owner of the brewery.¹

In 2014, the owners of Mountain State Brewing also established the Iron Horse Tavern in downtown Morgantown. Earlier this year, Iron Horse Tavern announced it will open a second location in nearby Granville. While Iron Horse Tavern also sells beer from other breweries, some Mountain State products are normally available there.

With its large brewing capacity (largest in WV), Mountain State Brewing is wise to take advantage of outlets that favor the sale of its beer. Its brewing capacity could easily support many more taps. Of course, operating independent restaurants is quite risky in itself, so it’s not a smart option for everyone. However, the Mountain State folks have proven themselves to be solid restaurant operators. Both their Mountain State Brewing and Iron Horse Tavern restaurants are popular places for food and beverage. Mountain State Brewing products are also available statewide to all beer retailers through a network of beer distributors.

Bad Shepherd enters through acquisition

This connection began in 2016, when the owner of the Black Sheep Burritos and Brews purchased Charleston Brewing Company’s brewery and renamed it Bad Shepherd Beer Company. Bad Shepherd began supplying beer to all the restaurants that the brewery owner is also involved in. Initially, those were the two Black Sheep Burritos restaurants in Charleston and Huntington and the V-Club in Huntington.

In the past year, the Bad Shepherd owner opened two more restaurants: Bahnhof WVrsthaus & Biergarten and Honey Bones, both in Huntington. These restaurants feature Bad Shepherd beers, while also offering many other beer brands. Bad Shepherd Beer Company also sells its beer to many other non-affilliated retail accounts.

Owners-in-common business model not without challenges

For those brewery owners with the assets to invest and a stomach for operating bars and restaurants, this model can be a beneficial one. Likewise for those folks who may already own several bars and restaurants, adding a small brewery to your portfolio could be an attractive investment. If you happen to be good at operating both restaurants and a brewery, you could find success here.

Even with the added complications and complexity, we wouldn’t be surprised to see more brewery and restaurant owners-in-common in the coming years.

UPDATE, Dec. 2019: Short Story Brewing in Rivesville opened a taproom in Deep Creek Lake, Maryland.

Mountain State Brewing website
Bad Shepherd at Black Sheep link

¹ Business ownership information in this article came from the West Virginia Secretary of State website and from WV Alcohol Beverage Control Administration license data.