Leasing space for a brewpub

The site has to pass three tests

Before rent even comes up, a brewpub site needs to pass three tests. Can you get licensed here? Can a brewery physically operate here? Will enough guests come here? Most founders check the third and assume the other two.

Our guide to choosing a brewery location covers footfall and catchment. This guide is about the building and the lease.

Can you get licensed here?

Licensing rules in India are set by each state and change. Ask your licensing consultant to check the site before you pay a deposit. Typical questions include:

• Is the zoning and land use right for a brewery and a bar or restaurant?
• Does the state set minimum distances from schools, places of worship or highways? Does this site meet them?
• Will the landlord sign the consent or no-objection letter that licence applications usually ask for?
• Does the building have the occupancy and fire approvals your licences will depend on?

If the answer to any of these is unclear, make the lease conditional on licences being granted, or agree a short exit if they are refused.

Can a brewery work here?

A brewpub is a small factory inside a restaurant. Walk the site with your brewer or a consultant and check:

• Floor loading. A full 10 hl fermenter is over a tonne of beer before you count the steel. Upper floors need a structural engineer's report.
• Drainage. Hot caustic and acid wash water need floor drains and a legal discharge route.
• Power. Brewhouse, chiller and kitchen together can need a large sanctioned load. Find out what is available and what an upgrade would take.
• Water. Is it municipal, borewell or tanker? You will treat it anyway, but supply must be reliable.
• Height, access and ventilation. Tanks must fit through the door and stand upright. The kitchen needs an exhaust route.
• Back of house. Somewhere to receive malt, store kegs and take out wet spent grain without crossing the dining room.

The clauses that matter most

Have a lawyer review every lease. These are the terms brewpub founders most often need to negotiate:

• Permitted use. It must explicitly allow brewing and the service of alcohol and food during the hours you plan to trade.
• Lock-in period. How long neither side can exit. Long lock-ins protect your fit-out investment but trap you if the site fails.
• Rent-free fit-out period. Installing a brewhouse and getting licensed can take months. Ask for rent to start when you can trade, or as close to it as possible.
• Escalation. How much rent rises and how often. Model it across the full term.
• Security deposit. The amount and the conditions for getting it back.
• Exit and reinstatement. What you must remove or restore when you leave. Taking out a brewhouse and sealed drains is expensive.
• Registration and stamp duty. Longer leases in India generally need to be registered. Stamp duty varies by state. Your lawyer will advise on the right form.

Model the rent against the beer

Rent is a fixed cost that arrives every month regardless of the weather, the monsoon or a slow IPL season. Before signing, put the full lease cost, including escalation and maintenance charges, into your financial model. Ask what share of expected revenue it represents in a quiet month as well as a good one.

Our guide to microbrewery costs in India shows where rent sits among the other big numbers. If the site only works on optimistic sales, it is the wrong site, however good it looks.

Remember the months before you trade. Rent during fit-out and licensing comes straight out of your startup capital with no sales to offset it. A rent-free period of a few months can be worth more than a small cut in the monthly figure.

Get everything in writing

Landlords may agree to many things in a friendly meeting. Only what is in the signed lease counts. That includes permission for signage, outdoor seating, a chiller on the roof and access for a malt truck. Ask for the property's title documents and approvals early, so your lawyer can confirm the landlord has the right to lease it for this use.

This guide explains the process and the questions to ask. It is not legal advice. Use a property lawyer and a licensing consultant for your site.