Brewery Law 101: Key Contracts for Breweries
We continue our Brewery Law 101 series by exploring some key contracts to consider when opening a brewery. Below we’ve highlighted a few key contracts for breweries. These agreements are importnat to have in place and understand in order to keep your brewery as protected as possible.
Commercial Lease Agreements
When you get to the point that it is no longer feasible to brew batches of beer in your basement, backyard, or garage, it’s time to begin exploring a commercial space to house your operations. Some important considerations (among others) to sort out as you begin hunting for the right space include: how large of a space do you need? Will you operate a tasting room or just brew beer to distribute elsewhere? Do you plan to expand your operations in the near future? Will you need a certain type of space that includes a unique floor plan?
Finding the right space is only half the battle. You’ll find out that reviewing and negotiating your commercial lease can be an involved process. We usually recommend working with a commercial leasing broker to help guide you through the leasing process, and it is generally best to have an attorney review your commercial lease to make sure you understand your rights and obligations prior to signing. Your commercial lease is one of the highest value contacts you will sign early in your brewery’s development. And the last thing you want to do is to get locked into a long-term lease with unfriendly terms for your brewery.
You’ve locked in your commercial space, purchased your brewing equipment, dialed in your recipes, and now it’s time to begin distributing your beer to restaurants, bars, and other distributors. When you’re ready to distribute your beer through other companies, it is important to nail down the terms of the relationship between your brewery and the distributors in a distribution agreement. These agreements often include details about the distributor’s ability to use your name and logo to market your beer—this would be some form of licensing agreement that grants limited rights to use your brewery’s IP for marketing. Other common terms of a distribution agreement include restrictions on distribution rights (e.g. limited to a particular restaurant, neighborhood, city, state?), price of the beer, term of the agreement, delivery of the beer, how the agreement can be terminated, and how disputes will be resolved if something goes awry between the parties.
As you grow your brewery, you’ll inevitably need to hire additional hands to help brew and distribute your beer. When you do, you’ll want to make sure that you put together employment agreements for your employees to sign. The employment agreement will lay out the terms of the relationship between your brewery and the employee, including the employee’s pay, their role in the brewery, non-compete and confidentiality provisions, and clear terms regarding the company’s IP. The employment agreement should also make clear whether the employment is “at-will,” which means the employee may be terminated for any reason or no reason at all.
If you hire contractors, you’ll want to consider putting together an independent contractor agreement that will look fairly similar to your employment agreement, but will include details about the fact that the person is a contractor and not an employee of your brewery. This is an important distinction to make for several employer-related obligations.
You will no doubt be required to purchase equipment, supplies, and ingredients to run your brewery. It is important to avoid any ambiguities and unnecessary conflicts, which means it is a good idea to get written contracts in place with your key suppliers. These contracts can help you avoid and more efficiently resolve situations where you are left high and dry by a supplier or there’s a complication with delivery of your order. Suppliers often have their own purchase orders and terms and conditions that you will be required to sign. It is important to review the terms closely to make sure you’re aware of your rights and obligations under the contract. Depending on the size of the order and whether this is a one-time order versus an on-going relationship, a detailed contract may be overkill. However, it’s important to at least hash out in writing the key terms of the order and what happens if either party doesn’t perform its obligations.
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