Partnering with a hotel owner to run a microbrewery on site

Why hotels and brewers look for each other

A hotel already has the building, the utilities, a kitchen, a bar and steady guests. A brewer who wants to start without a lease and a bar of his own can use all of that. The hotel gains a draw: house beer that visitors cannot buy elsewhere. It also gives the marketing a story.

The mismatch is in what each side knows. Hotel owners understand rooms and covers. Brewers understand fermentation and yield. Neither is likely to understand the other's costs, so the first job is to explain them. Our guide on brewpub versus microbrewery sets out the two formats before you pick one.

Start with the licence question

In India alcohol is a state subject. The licence for brewing and serving on site, the conditions attached to it and the person or company that may hold it differ between states and change through notifications. Rules for a hotel, for a brewpub and for a standalone brewery are not the same.

Find out early which entity will hold the licence, because that party carries the compliance duty and the risk if something goes wrong. A partner who does not hold the licence still has to follow its conditions. Our guide on microbrewery licences in India gives an overview. Confirm the current position with a licensing consultant and let a lawyer draft the agreement.

Three common deal structures

These are patterns, not recommendations.

• Hotel owns, brewer is paid. The hotel funds equipment and licence. The brewer is employed or contracted for a fee. Simple, but the brewer has little upside.
• Revenue share. The hotel funds the brewery and the brewer receives a share of beer sales. Clear to explain, but a share of sales can reward volume over quality.
• Joint venture. Two parties form a company, put in money or equipment and share profit. It needs the most paperwork and the most trust.

Whatever the structure, decide how a bad year is shared, not only a good one.

Who pays for what

List every cost and give each an owner: the brewhouse, fermenters, cold storage, glycol chiller, boiler, floor works, drains, ventilation and exhaust, power upgrade, licences, brewing ingredients, the head brewer, a second pair of hands, cleaning chemicals, lab kit and packaging. Our guide on microbrewery cost in India shows how quickly these add up.

Also settle who owns the equipment. If the hotel pays, it normally owns the kit. If the brewer brings his own, write down a price for removal and what happens if the hotel closes. Equipment is a heavy asset to move.

Quality and brand control

The brewer is judged by every pint, so he needs control of the brew schedule, ingredients and cleaning. A hotel owner who orders 'more of the light one by Saturday' without checking tank space will push the brewer into serving young beer. Agree a simple rule: no beer goes on tap until the brewer signs it off.

Decide who owns the beer names, recipes and logo. If the partnership ends, can the brewer take the recipes? Can the hotel keep the brand? Write it down. Ask a lawyer about trademarks.

Space, utilities and the guest experience

A brewery needs floor drains, a reliable water supply and enough power for heating and chilling. Hotels often have these in the kitchen areas but not in the room you have in mind. Check the load, the water quality and the route for malt deliveries and spent grain. Spent grain is wet and heavy and needs a daily removal plan. A dedicated yard or service entrance keeps it away from guests.

Think about how guests will see the brewery. A glass wall to the brewhouse adds value, but it also means the brewery must always look clean.

Exit terms and what to do next

Agree how either side leaves. Questions to settle: what is the notice period, who buys out whom, how the equipment is valued, how stock is handled and what happens to the licence. Also agree what happens if the hotel is sold. A new owner may not want a brewery.

Before you meet a hotel owner, bring a one page plan with costs, volumes and a monthly cash flow. Brewery Business Management teaches that modelling, so you negotiate from numbers instead of enthusiasm.

Common questions

Who should hold the licence in a hotel brewery partnership?

It depends on the state and on your deal. The licence holder carries the compliance duty, so settle this early with a licensing consultant and a lawyer.

Is a revenue share or a fixed fee better for the brewer?

A fixed fee is safer for the brewer. A share gives more upside but can push volume over quality. Many deals combine a base fee with a share.

Who owns the equipment in a hotel brewery?

Whoever paid for it, unless the agreement says otherwise. Write down ownership and removal terms.

What happens if the hotel is sold?

That depends on your agreement. Include a clause on notice, equipment, stock and the licence.