There is a price tag for unlimited beer for the rest of your life. It's $1,000.
In reality, the cost for that much beer is a lot more. But for a few dozen people, free beer for life is their reward for investing in a small restaurant called Northbound Smokehouse & Brewpub in a quiet southern corner of Minneapolis.
Amy Johnson and her two business partners needed to raise $220,000 to secure a bank loan and fulfill their dream of opening a restaurant that served beer brewed right there at the pub. They went to investors who offered to give heavily for a voting share in the restaurant. But since the potential investors had no experience in the restaurant industry, the owners backed away.
And then came the idea from some friends and family who wanted to help out. "They were, like, 'I've got a few grand, but I don't have too much money,' " Johnson recalls. "And people kept saying this over and over, and we latched onto the idea. Why not just take a couple grand from everybody and then we'd have all the money we'd need?"
So, that's what they did. People who invested $1,000 receive free in-house beer for the rest of their lives, or as long as the place stays open. People could also receive 0.1 percent nonvoting equity in the company for every $1,000 invested. Or for $5,000, investors get 0.5 percent equity and free in-house beer for life. The brewpub, now a registered LLC, hit its goal of $220,000 through the 46 people who chose the first option, 42 who picked the second, and 30 who took the third, all finding out about the opportunity by word of mouth.
Northbound has now been open for almost two years and is thriving. The investors didn't drink them dry. The restaurant is giving away some 17 beers a day, and the cost is low, at just 40 cents a beer. Plus, investors aren't just going to the brewpub for a beer by themselves—they order food, bring people, or maybe order a scotch after dinner. For the investors, it's also about the sense of ownership. Or, as Johnson explains, "We have an army of over 100 people who are our cheerleaders."
One of those cheerleaders is Andy Root, the owner of the building and one of the investors who decided to give $1,000 to the cause of free beer. His simple reasoning: "Hey, if I live nearby and it's my neighborhood bar, I'm going to pay $1,000, because I'm a beer drinker and show up and drink."
The whole project is a Kickstarter campaign with a twist. Since Kickstarter doesn't allow alcohol as a reward for investment, it's basically useless for a restaurant where the greatest allure is in-house beer.
It's also a model that could help wannabe restaurants across the country. It has already been used in neighboring St. Paul by a struggling coffee shop looking for a fresh start.
Groundswell is a fitting name for this coffee shop in the Midway neighborhood, which has transformed from being in a space and bleeding cash to now operating in three times the space and earning eight times the daily profit. And it all happened in one year, and all from the support of 75 people willing to give $1,000 on a gamble.
To create a complete menu—with food made from scratch, with a beer and wine license—and to take over more of their building, the owners needed to raise $55,000.
The coffee shop decided to use the Northbound model, which it saw working for the brewpub, but with its own spin. Instead of unlimited beer for life and equity, Groundswell offered investors $1,000 for one beer, glass of wine, or cup of coffee per day for the rest of their lives. For $500, the deal lasted two years. For $250, the deal lasted a year. The exact Northbound model wouldn't have worked as well for Groundswell, considering the extra costs for beer in a place that doesn't make it in-house.
"From the business side of it, it was a no-brainer," co-owner Tim Gilbert says. "When someone comes in to have a beer, they're probably not just going to have one, they're probably going to bring friends with them, they're going to be buying food items with it. Even with a cup of coffee, margins on coffee are high as it is."
Groundswell went from making $200 a day last year to now making $2,400 a day. And that was during Minnesota's colder months. Since people are leaving hibernation, the coffee shop is opening up its patio, which offers more space, and with it more business. "The corner of Hamlin and Thomas is now alive," Gilbert says.
It's a model that worked for both of these places, and could work across the country.
Like Northbound, Groundswell thrives primarily because of the neighborhood. They are two, small eateries, two blocks from light-rail stops, with investors living in surrounding homes. Before she started Northbound, Johnson used to live in one of those homes in the Midway neighborhood, grabbing coffee at what is now called Groundswell. In just a few years, her idea that built the brewpub would become the prototype that would save the coffee shop she once regularly visited.
MATT VASILOGAMBROS @MattVas
May 29, 2014