Gypsy Brewers: Contract or Alternating Proprietorship?
It's an exciting time for craft beer in Texas, and the industry is growing like wildfire. One of the benefits of being a brewer in Texas is that new laws regarding gypsy brewing have opened the playing field to all comers. But gypsy brewing, like any new business, needs careful structure and contracts in place before the excitement of hops and fermentation takes over.
Gypsy brewers are craft beer brewers without their own brewery. They rent space and equipment in a functioning brewery under one of two models. Some gypsy brewers are just starting in the business, and some prefer to remain "on the road" rather than tied to their own, very expensive, structure. Either way, the contract between the gypsy brewer and the brewery regarding space, equipment, supplies, and staff determined if the relationship will be a contract brewery or an alternating proprietorship.
In an alternating proprietorship, the gypsy brewer brings all of their own supplies, uses their own recipes, and has staff to do all of the work involved in brewing the beer. The brewery allows them to use equipment and fermentation and storage tanks. In this model, the gypsy brewers keep the most control over their own product, including fermentation, bottling, shipping, and distribution.
Contract brewery means anything less than this, with specific guidelines that detail who is responsible for what. There are some new models being trialed in other states with brewery incubators, specifically designed for craft beer startups who don't have infrastructure or resources. Texas has North Texas Brewing Company, a full-service brewery specifically designed for the new gypsy brewer, with a full range of contracted services. They are also providing extra brewing space for smaller operations who are expanding to meet the new demand.
Jake Posey, managing shareholder of The Posey Law Firm, PC, explains that regardless of the amount of assistance and service gypsy brewers get from their contracted brewery, each small business needs to have a license to brew beer and a thorough understanding of the regulations regarding crafting for sale a product containing alcohol. Distribution and shipping are more complicated when craft beer is sold over state lines. Understanding clearly the structure a new gypsy brewer will need to fit within is critical.
Homebrewers without a license can brew up to 200 gallons of beer for the use of their family. While it can't be sold, this home brewed beer can be shared with others as part of tastings or for a review. While this may be one way to trial new recipes, a license is mandatory once beer is being produced in larger scale or for sale to the public. The contract or alternating proprietorship agreement does not include legal use of the brewery's license to brew beer.
Before signing a standard contract or proprietorship agreement, consider discussing the complex issues involved with opening a business making, distributing, and selling beer. For more information, please contact us.
ABOUT THE AUTHOR: Jake Posey
The Posey Law Firm PC, led by Jake Posey, is a sharply focused government relations and business law firm based in Austin, Texas. The firm’s government relations practice advises clients and advocates for the successful development of public policy in the legislative, judicial, and executive branches of Texas government.
Representing Fortune 500 companies, respected market leaders, and some of Texas’ leading state associations, Mr. Posey’s mission is to diligently deliver strategic business, political and legal solutions for his clients.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.