high five business plan v 20

8/13/2019 High Five Business Plan v 20

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this information as accurate as possible. The authors cannot be responsible for any

inaccuracies or omissions, if any, in this document. All figures in the perfume are

educated assumptions and no return on investment can be guaranteed.

The information contained in this business plan is confidential and is intended

exclusively for the persons to whom it is communicated by the corporation. Anyreproduction of the business plan, in whole or in part, or the variance of its contents

without the written consent of the company is prohibited.

This business plan does not constitute an offer to sell or is it a solicitation of any offer to

purchase securities.

EXECUTIVE SUMMARY

High Five Co-Op Brewery:High Five Co-Op Brewerywill fill an undeveloped niche in the West Michigan

business community. We are a start-up Co-operative brewery which will restore a

neighborhood located in a high traffic/visibility location. Limited production for local

eateries and taverns will also take place at our facility. Our world class beers will be

served professionally in a warm friendly atmosphere. The atmosphere of this

establishment combines modern art gallery styling with the bold contemporary elements

of a gleaming microbrewery. Customers can enjoy snacks or libations while watching

the beer they are drinking being produced less than ten feet away!

Brewpubs are reviving a historic tradition of brewing ales and lagers as part of aregional cuisine. Featuring the in-house brewery and its products (including non-

alcoholic cocktails and root beer). High Five will also attempt to apply its profits to help

better the community through outreach programs including beer drinking/brewing

education and philanthropic efforts at large. Throughout America today there is a

growing trend toward consumption of fresh, preservative free products, including beer.

Students, professors, young professionals, families, and people of all ages enjoy the

atmosphere and product of the brewpub.

The brewpub industry in Michigan has seen tremendous growth over the last two

decades, from three in 1983 to over 126 in 2012! While over 70% of new restaurants fail

in their first year of operation, only 1 in 3.5 brewpubs have failed since they became

legal in 1983. The success of the industry is based on the easily recognizable

superiority of freshly brewed beer, and the low costs associated with this beer. By

retailing the product at the same site it is produced, costly packaging and distribution

costs are mitigated greatly helping to create a more sustainable business. A gallon of

fresh ale sells for $32.00 at the tap ($4.00 per 16oz glass). The product cost to produce


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this gallon of beer is approximately $0.85, or less than 3% of the retail value. This

leaves 97% of the income from beer sales to cover fixed and variable expenses! Sales

through distribution will be less profitable but will create a cash flow.

The conception and formation of High Five Co-Op Breweryhas been supported by

our many members and our Board of Directors. The following individuals have

contributed their time and talent as inaugural board members:

Nicholas LaValle: Currently serving as President of the Board Nick is an extremely

active member of the local brewing community. Hes spent the last 7 years

homebrewing and in the last 2 years he has been an employee of both a homebrew

supply shop and the Hideout Brewing Co. Nick has a Bachelors of Science in

psychology from Grand Valley State and as member of the beer city community he has

hosted TV pilots on beer and taught numerous tasting/brewing classes as well as

having worked with the Community Center to create a documentary centered on one ofhis main interests: philanthropy.

Dallas McCulloch: Dallas got this whole project rolling in 2011 when he presented the

idea for a cooperative brewery to the 5x5 competition panel and was awarded $5,000 in

start up capital. Dallas is an active member of the community of Grand Rapids and is a

part of Bartertown (first worker's collective restaurant in GR) and launched the late night

hours running front of house. He has had thousands of different styles of beers from all

over the world and has visiting breweries extensively across the US, Canada, UK,

Spain, Italy, Costa Rica. Belgium, Germany, and Czech Republic. A true beer advocate

Dallas started the whole High Five venture with a bang (and a dream)

Jorel Van Os: Jorel is a technology professional and social entrepreneur. He holds a

Bachelors degree in Management Information Systems and Certificate in Nonprofit

Board Leadership from Grand Valley State University. In addition to his involvement

with High Five, Jorel has also served as Secretary for the National Organization for

Women greater Grand Rapids chapter (NOWGR) and as Secretary for

WORK+SHELTER, a women's shelter he co-founded in New Delhi, India

Megan E. Smith: A licensed attorney and is the chair of the Legal Committee. She

graduated with honors from the University of Michigan and received her law degreemagna cum laude from Michigan State University. Megan is a consultant for nonprofits

and social enterprises focusing on organization, development, transitional leadership,

and strategic planning. Born and raised in Grand Rapids, Megan is well connected with

our West Michigan community. She is a board member for Young Nonprofit

Professionals Network of Grand Rapids as well as The Geek Group, and she and her


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MICROBREWERY

A brewery licensed to manufacture and sell up to 20,000 barrels of beer per year

(one barrel is 31 gallons). Take-out sales are permitted on premise. Off-premise sales

to retail establishments (restaurants, taverns, beer retailers) must be directed throughdistributors.

A short history of the American brewing scene:

One of the oldest of alcoholic beverages, beer was well known in ancient Egypt.

First brewed mainly in the household and monastery, it became a commercial product in

late medieval times as weary pilgrims enjoyed the wares of brewer monks. It seems

likely that early taverns were located in the breweries themselves; suitable containers

for distribution not being available. The modern brewpub continues this long tradition.

In Europe there are brewpubs that have been operating continuously in the same

location for 100 years, some over 300 years.

Beer has played an important role in the development of this country. In 1609

America's first "help wanted" ad, appearing in a London newspaper, sought brewers to

come to Virginia. The Mayflower stopped at Plymouth Rock instead of continuing on to

Virginia as originally planned because of a severe shortage of supplies. As one

passenger noted in his diary, "We could not take time for further search or

consideration, our victuals being much spent, especially our beere." William Pennerected a brew house on his estate in 1683, and served beer widely, even using it to

promote temperance among the Indians. In 1816, Thomas Jefferson discussed beer in

a letter to a friend, writing: "I wish to see this beverage become more common." It did.

By 1880 there were 2,272 breweries in America, many of them brewpubs. The city of

Boston had over 200 breweries itself and there were almost 100 small breweries in the

State of Wisconsin devoted solely to brewing wheat beer. The decline of the breweries

began in 1892 when the "cork crown" was patented. Beer could now be bottled and

shipped reliably, and by 1910 only 1568 breweries remained. The decline continued

with Prohibition, and by 1930 there were only 231 operating breweries, which hadsurvived Prohibition by producing a variety of non-alcoholic products. Upon repeal of

Prohibition, thirty-eight States (including Michigan) adopted the 3-tier distribution system

(manufacturer-distributor-retailer), making it illegal for the manufacturer to also be the

retailer. The brewpub became history. The decline culminated in the early 1970s when,

through industry consolidation and changing consumer tastes, there were less than 50

breweries in United States.


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Recent History: Craft Brewing

A microbrewing revolution is going on in America. From California to Maine,Michigan to Mississippi, small scale "microbreweries" and "brewpubs" are reviving a

cherished and historic tradition, the brewing of specialty beers. Natural and fresh are

words that reflect the growing interest in premium brews. Much of the credit for the

burgeoning interest in beers of all types goes to the resurgence of small regional

breweries, and the growing popularity of brewpubs.

A microbrewery is a small brewery producing 20,000 barrels of beer or less per year

(one barrel = 31 gallons, or 2 kegs, or 13 cases of 12 oz. bottles). In Michigan,

breweries sell their product to the public by one or both of the following methods:

1. Through the 3-tier distribution system (brewer to wholesaler to retailer)

2. Directly to the consumer through on-premise sales.

Grand Rapids has experienced a boom in craft breweries. In 2012, Grand Rapids was

named Beer City USA (tied with Asheville, NC). Since the opening of Founders

Brewing Company in 1997, more than 30 craft breweries have opened in West

Michigan. While many have put forth unique concepts (Vivants green initiatives, Grand

Rapids Brewing Co. organic focus), none are member and worker owned. High Five is

based on the cooperative model and presents a unique opportunity for community

focused investors.

The sustainable aspects of brewing have been largely ignored in the beer community in

recent years; this is a problem that a Cooperative brewery like High Five can attempt to

resolve. Through paying Living Wages to the employees, promoting largely local

agriculture, and through philanthropic giving back to the community this brewery is

attempting to spearhead a sustainable culture that other breweries have been unable to

achieve because of their profit models.

BREWPUB

A brewpub is a restaurant and bar that has an on-premise brewery that sells its

beer directly to the consumer in draught form and in packaged containers for carry out.

All brewpubs are microbreweries (produces less than 20,000 barrels annually) - but not

all microbreweries are brewpubs (sell directly to the consumer). HIGH FIVE CO-OP

BREWERY will be a combination of four concepts;

1. Microbrewery and brewpub, manufacturing and selling our beer on premise.


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2. Off premise sales through a group of carefully selected distributors.

3. Educational epicenter for all things beer related

4. A Community outreach vehicle allowing member-owners and the community at

large to benefit from the profits

Recent History: Brewpubs

In 1982 the legislature in the state of Washington approved a bill that allowed a

brewery to sell its beer directly to the customer in a restaurant environment; the

brewpub was born. That summer Yakima Brewing and Malting Company, the first

brewpub in modern day America, opened its doors. California amended its law

prohibiting the sale of beer without a distributor in 1983 and two brewpubs opened. The

Mendocino Brewing Company in Hopland and Wild Bill's Brewpub in Hayward both

opened that year. Both are prospering today.

By 1985 brewpubs had moved eastward opening in New York, Wisconsin, and

North Carolina. In 1983 there were 12 microbreweries and brewpubs, 29 by 1985, 171

by 1989, and 382 at the end of 1993. In 2005 there were over 1,400!

Michigan has more than 115 brewing facilities contributing over $24 million in wages

and $133 million dollars in total economic contribution to the state. A new generation of

consumers is now able to discover the taste and sensation of drinking fresh beer. In the

process they are rejuvenating a great American tradition, the brewpub. The long term

success of Bells Brewery in Kalamazoo, New Holland Brewery in Holland, Founders

Brewing Company points to the rich craft brewing culture in western Michigan.

BREWPUBINDUSTRY OUTLOOK

In 2011, beer drinkers in the United States drank 199.9 million barrels of beer.

Beer is by far the most popular choice of Americans who consume alcoholic beverages.

Nationwide per capita consumption of beer is 21.8 gallons, of wine 2.01 gallons, and of

distilled spirits 1.2 gallons. Total beer sales have been flat in recent years. One reason

is the public's increased consciousness of the drinking and driving issue. It is

interesting to note, however, that production of beer by craft breweries in the United

States in 2011 increased 13%. And, for the first time, total barrels of American craft beerexceeded that of imported beer. People are drinking less per occasion, but now there

are more occasions. The more attention consumers pay to what they drink and how

often they drink away from home, the more likely they are to upgrade their beverage

choices. People feel that if they are going to drink less, they might as well drink quality.

Jim Koch, president of the Boston Beer Company, (brewers of Samuel Adams) said in


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an article in Forbes (April 6, 1987), "Beer drinkers, like everyone else, will buy American

- and pay up for the privilege - if you offer them something better."

Comparisons are often made between the microbrewing industry and two other

industries- wine and coffee. Many call it the upgrading of the American palate. In 1982

only 8% of wine sales were in premium wines, the balance being in jug wines. By 1994sales of premium wines had climbed to 41% of total wine sales. The same

phenomenon has occurred with coffee in a much shorter time span. In 1992 only 2% of

all coffee sold was in the specialty category. This category constituted 18% of all coffee

sales in 1994. As prime examples of this both micro-coffee house roasting and major

local production of roasted coffee have exploded creating such venues as MadCap

Coffee, micro-roasters like Grand Rapids Coffee Roasting and large industrial

complexes like Ferris Coffee and Nut.

David Edgar of the Institute for Brewing Studies writes in the 1991/1992 Brewer's

Resource Directory:

"...The domestic specialty beer market shows no sign of losing momentum.

While there was much conjecture about the temporal nature of the microbrewing `trend'

in the early years of this young industry, the evidence available today fifteen years

after North America's first microbrewery and nine years after its first pub brewery

opened -- clearly indicates this is not a fad."

Continued growth of the brewpub/microbrewery industry is expected and every brewery

opened in Grand Rapids in the last year has experienced greater demand thanproduction. Grand Rapids, Michigan will welcome High Five to the market.

Freshness Key to Craft Beer Quality and Appeal

The key to quality beer is freshness. Unlike most wines, beer deteriorates with

age, especially the lighter styles most popular in America. The capability of the

American people to perceive the superior flavor of fresh beer is clearly reflected in the

immediate acceptance of the more than 1,000 micro and pub breweries that haveopened in the last ten years. When British born beer expert Michael Jackson was

asked what brand of beer he most favored he replied, "a locally produced one".

What IS a CO-OP!?


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Principle 6: Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative

movement by working together through local, national, regional and international

structures.

Principle 7: Concern for Community

Cooperatives work for the sustainable development of their communities through

policies approved by their members.

BUSINESS DESCRIPTION

HIGH FIVE CO-OP BREWING COMPANY

The dramatic alternative to other brewpubs High Five Co-Op Breweryhas

already generated a significant interest in the media, and as a result High Five has been

mentioned in a number of publications that can be found online including:

http://www.mlive.com/news/grand-rapids/index.ssf/2011/12/beer-

brewing_collaborative_win.html

http://www.michiganbeerblog.net/2012/04/high-five-co-op-brewery.html

http://www.imabeerhound.com/michigan-brewery-news/item/484-high-five-co-op-

brewery-is-planning-to-be-the-first-co-op-brewery-in-the-midwest.html

http://www.mlive.com/business/west-

michigan/index.ssf/2012/05/beer_city_usa_poll_new_contend.html

http://www.imabeerhound.com/michigan-brewery-news/high-five-co-op-benefit-at-

mulligans-pub-in-eastown.html

http://www.youtube.com/watch?v=7BMQ6cc5DJs

http://mittenbrew.com/2012/11/high-five-co-op-wheat-ipa/

But we know that converting the initial interest into loyal customers will require more

than microbrewed beer.

SALES REVENUE


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Sales revenue will come from four major areas:

House Beer, Non-Alcoholic Beverages:

House Beer

The specialty of the house and the focus of the entire operation are the house beer.Brewed and fermented in view of all patrons, the beer is then transferred to the aging

cellar (also visible to the public) where it ages. It is then pumped directly to the bar and

the customer one glass at a time.

The economics of the house beer are exciting. A gallon of house beer sells for $32.00 at

the tap (at $4.00 per 16-ounce glass). Material costs to brew that gallon of beer are

$0.75 which represents less than 3% of the retail value, leaving 97% to cover fixed and

variable expenses! Also grouped with the house beer are the non-alcoholic sodas (root

beer, ginger ale, cream soda). They have an equally attractive product cost and are a

great draw for non-beer drinking adults. The soft drinks offer a craft made beverage for

all of those under the age of 21. People appreciate the effort of the brewery to create a

non-alcoholic alternative.

Non-Alcoholic Beverages

Although the profit margin is not quite as attractive as the house beer, it is still very

good. These items are necessary for several reasons. Some people will be reluctant to

change to the house beer from their old standby (Budweiser, Miller, etc.). With

education and exposure these people can converted to loyal fans of the house

products. Not everyone is a beer drinker. A nice selection of non-alcoholic mixeddrinks, soft drinks, and gourmet coffees all provide attractive alternatives for non beer

drinkers.

In staying consistent with our image and niche, all of the above will be of the

highest quality and a highly perceived value. Handcrafted, pure beer that is fresher,

tastes better but is priced less than imported beer provides an excellent perceived

value. The other beverages sold are a minor part of sales, but will be priced no higher

than similar restaurants in town. The majority of beverage sales will come from the

focus of the operation: the in house brewery.

The brewpub concept is a unique business combining retailing and manufacturing. A

successful brewpub start up requires several key ingredients: business experience,

brewing experience, project management experience, substantial capital, the right

location, and local community acceptance. Although the success rate of brewpubs is

impressive, there have been some failures. These failures can be attributed to projects

that did not have all of the key ingredients mentioned above. The ownership of High


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Five Co-Op Brewerywill be a group of no less than 500 member-owners. The team

of consultants provides the necessary experience in business planning, and brewery

operation. All of the key elements are in place to make High Five Co-Op Brewerya

highly successful business venture.

OTHER SALES SOURCES

Off-Site Sales of BeerDistribution is designed to accommodate considerable increase in production

with minimal capital investment. We envision a 5-10 barrel system and bottling facilities

will allow the brewery to utilize its full capacity. The brewery will sell bottles and kegs

through distribution to other restaurants and to the public for special events such as

weddings, holiday celebrations, and parties. Such keg and bottle sales - in addition to

generating revenue - become an effective marketing tool for the pub, expanding the

brewery's reputation throughout the community. Another effective method used to

maximize production capacity and increase sales is the "beer-to-go" market. Many

brewpubs have been able to do significant amounts of beer sales in 1/2 gallon

containers (Growlers) and small kegs. These containers require initial container fees

for the jugs and deposits for the 5-gallon kegs. Growlers have become conversation

pieces and collector's items, furthering the growth of the brew pub's reputation.

Merchandise Sales

One remaining source of income is merchandise sales. Hats, T-shirts, gift items, and

glassware with the High Five Co-Op Brewerylogo on them will be available from a

retail area adjacent to the bar. These items have proven to be very successful in otherbrewpubs and will quickly become collector's items and gifts for tourists, students, and

residents of Grand Rapids. These items also present the unique advantage that people

are actually paying for the privilege of advertising the brewery.

Imperial Pint Club


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Membership in our Pint Club will be included with owner benefits. Benefits include

discounted beverages and a Pint Glass with their name, or nickname, etched on it. This

will create not only loyalty to the brewery, but will also be a valuable revenue stream.

MANAGEMENT TEAM

High Five Co-Op Brewery -

Brew TeamThe brewing Operations will be overseen by a Brewing Community that

reports to an Operations Director hired by the Board of Directors to ensure the Co-Op is

making the best beer in Grand Rapids. The Ops Manager will also be responsible for

training the brewing staff and will work with the front of house manager to ensure the

beers being produced meet demand and are represented properly

Front of House ManagerA person with Restaurant experience will be hired by theBoard to head up the staff and rotation of management in the Front of House. This

person will also function as a trainer in the presentation of the beer and he/she will

educate the staff on the beer styles on tap

Admin support: The administration staff will be limited to a few individuals and will be

responsible for the distribution of beer and the rental of space at the brewpub as well as

special events and bookings of art commissioned for the brewery. In addition to the

aforementioned responsibilities the administration will be in touch with the Co-Op

Community to help organize High Five member-owner voting events and special

members only taste parties/competitions.

Board: Responsible to the voting membership to employ and fire according to the

businesss best interests. The Board is elected annually and is comprised of people

who care greatly about the success of High-five, its amazing beers, and its community

and philanthropic involvement.

DEMOGRAPHIC INFORMATION

GRAND RAPIDS, MICHIGAN

Demographic info for GR

According to the 2010 census the population of Grand Rapids is approximately

188,000 people. Within one hour drive you can be in the communities of Muskegon,

Grand Haven, South Haven, Kalamazoo, and Holland. The combined population

of those communities well exceeds one million people. Within three hours drive

you can be in the heart of downtown Detroitand Chicago. Given the logistics, Grand


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Rapids (Beer City USA) is well placed geographically to draw customers from large

urban areas

The average beer drinker in America today is between the ages of 21 and 35. The

average age of residents inWest Michiganis relatively young. Beer drinking covers

the entire economic spectrum without concentrating on any income level or geographic

region.

The brewpub will fill a very definite niche in the Grand Rapids business district

and with its inexpensive yet unique service, affordable menu prices, and an

atmosphere that lends itself to drinking responsibly. High Five will provide the residents

of GR a distinct alternative to the choices presently available.

BREWERY OPERATIONS

High Five Co-Op Brewerywill produce several styles of high quality ales and

lagers ranging from light ales, designed to be an introduction to microbrews, to the richexciting and diverse assortment of experimental and extreme styles of eccentric ales

west Michigan is known for. Specialty beers, seasonal beers, Wild ales, and even fruit

beers will also be produced.

By working with regional flavors (many brewpubs make green chili, spruce,

pumpkin and other regional specialty beers) High Five Co-Op Brewerywill develop

a reputation as an innovative and exciting place to enjoy unusual beers. What follows is

a compilation of possible house specialties, open to revision and expansion, with at

least 4 beers available at any given time. Beer names are a great opportunity to tie our

business to the community. Local landmarks, historical figures, regional wildlife, etc.are ways to name our beers.

Wheat IPA - A light ale made with Pale and Wheat malts our IPA will consist and

persist due to its reliance on local produce!. Light and refreshing with a KICK, its the

perfect IPA in a land of breweries.

Black Ho le Imp erial StoutA Dark and heavy concoction made with a variety of malts

and hops meant to provide the rich bitter tastes of black chocolate one desires from a

full bodied stout.

Helles Lager:A traditional style with a bit of a sweet twist. the Co-Op is the

perfect place for brewers to implement more challenging fermentation techniques to

achieve both a more commercial and also more sophisticated product.

So many beers its hard to name due to the vast community brewer population of Grand

Rapids, High Five will allow home brewers to execute their recipes on the larger scale


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temperatures to encourage proper growth of the yeast. During the fermentation

process, yeast is metabolizing sugars in the sweet wort, converting them to alcohol.

After fermentation is complete (approximately seven days for Ales and 2 weeks for

Lagers) the beer is moved to conditioning tanks in the aging cellar.

The aging cellar, located in view of the public behind the bar, is divided into tworooms. These rooms are kept at different temperatures to allow each beer style to be

aged and served at the appropriate temperature. The beer ages approximately two

weeks to develop complexity of flavor. When ready, the conditioning tank is hooked

directly to the serving lines of the bar

A variety of beers can be made using this basic process. The initial

concentration of carbohydrates in the wort and the strain of yeasts used control relative

sweetness and alcohol content of the finished product. Bitter flavors are generally

acquired by the variety of hops used during the boil. Other flavors come from esters

produced by the yeast, different barley types, mashing time, fermentation, and various

other factors.

MARKETING PLAN

Since the last part of the 1980's a trend has emerged indicating a shift in the

tastes of the beer drinking public to imported and premium beers. While sales from

large domestic breweries remained flat in recent years, microbrewery sales have

increased by leaps and bounds in the last ten years and over 400% in the last four

years alone. Consumers searching for an alternative to the watery tasteless brandsmass marketed throughout the U.S. are willing to pay a premium price for a quality beer.

Imported brands showed impressive growth every year from 1980 through 1988 and

then as microbrews became popular, showed four years of flat or negative growth.

However, import sales are once again on the rise, growing every year since 1991, once

again illustrating the American publics desire to find alternatives to the beer produced

by the large American Breweries. Because of the trend away from hard liquors, and the

growing awareness of microbrewed beers, these beers are now a sophisticated,

upscale beverage with strong appeal to men and women.

It will be important to distinguish High Five Co-Op Breweryfrom its competition.In order to do this a clear and well-constructed marketing plan will be implemented.

High Five Co-Op Brewerywill be quite unique in regards to its unusual pub fare, open

source design, and atmosphere, but the initial marketing strategy will focus on the most

unique aspect of the operation: the Cooperatively run in-house brewery and the

products themselves. The following underlying ideas are key concepts to the marketing

plan:


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TASTE

Brewed on the premises, brewpub beer simply tastes better than other beers because it

is brewed with basic ingredients. It has more body, flavor, and color. Fresh beer

brewed at High Five Co-Op Brewerywill taste better than any canned, bottled or even

other draught beer.

FRESHNESS

Although freshness is the primary reason for superior TASTE, it can be marketed as a

separate attribute. Brewpubs can capitalize on the consumer's concern for health and

suspicion of chemical additives. Beer is best -enjoyed fresh. It does not improve with

age. Major breweries typically pasteurize their products to stabilize them for shipment.

Imported beers are treated the same way and typically reach the consumer months

after being brewed and only after traveling thousands of miles. Freshness and quality

are unavoidable casualties. High Five Co-Op Brewerywill produce beer that is fresh

and chemical free. Remember that our distribution system is only fifty feet. Foaming

agents, head stabilizers, taste-enhancers, colorings, antioxidants, emulsions, and

preservatives will never be used, nor will rice, corn, sugar or other additives unless used

by the brewers for specific stylistic attributes. By not pasteurizing our beer, a far greater

portion of the vitamins and minerals from the original ingredients are retained. In

Ireland, unpasteurized Guinness Stout is often referred to as "liquid" bread. High Five

Co-Op Brewerywill produce ales and lagers worthy of the same praise.

PRICE

Brewpub beers offer the freshest beer available. This high quality product is

priced competitively with import draughts, which can be several months old by the time

they reach the glass.

ORIGINALITY

Although the number of brewpubs increases by a large percentage each

year, they are still unique to many parts of the country. In addition to brewing a better

beer, they offer an alternative to the typical bar scene. The key here is fresh beer in a

comfortable atmosphere. Add to that a Co-Op business model and High Five Co-OpBrewerywill be a one-of-a-kind business in Michigan.

The brewpub has wide appeal in an age where people are reacting against the

impersonal nature of large corporations and mass production. The appeal of handmade

pasta, fresh bread, handcrafted ice cream, fresh roasted coffee, and small boutique

wineries are examples of unique upscale quality driven businesses that consumers


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today feel good about supporting. People you can meet make brewpub beers on

premise, in full sight of the entire restaurant and bar. Beers named for famous people

(both fact and fiction) and local landmarks give people a product they can identify with

and are proud to share with friends. Developing local pride is the first step to a loyal

local support.

MULTIPLE BEER STYLES

The small brewery design allows for the production of many styles of beer.

Specialty and seasonal beers can be produced while maintaining a constant supply of the most

popular beers.

MARKET SEGMENTS

High Five Co-Op Brewerywill attempt to capture four distinct market segments:

the downtown professional, residents of Kent , Allegan, Ottawa, and Van BurenCounties, students from Grand Rapids Community College, Kendall, Hope College and

Grand Valley State University. Students, families, couples, and individuals from

throughout the region will provide a lunch and dinner business and late night bar

clientele. These groups will supply the brewpub with a stable financial base, which will

be augmented by steadily increasing numbers of tourists due to high interest events

such as Art Prize and the upcoming 2014 National Homebrew Competition.

High Five Co-Op Brewerywill take advantage of its local presence to tie into all

festivals and celebrations, as well as creating a few of its own. Special celebration ales

will be brewed for most holidays and appropriate tank tapping ceremonies will announce

these specialty brews. Well-publicized seasonal festivals such Oktoberfest, or Irish on

Ionia festivals will occur on a regular basis with announcements sent to an ever-growing

mailing list of beer enthusiasts.

TOURISTS AND CONVENTIONEERS

Grand Rapidsdoes have a very active tourist business largely because of its history in

furniture, significance in brewing and, artistic culture. Tens of thousands of people

visited the area last year. According to the Convention and Visitors Bureau these

people spent significant money per person per day on eating and drinking alone. Grand

Rapidslargest tourist attractions are Art Prize, Breweries, immense contemporary

convention centers, and downtown shopping, Every effort will be made to market with

these assets.


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Beer

Enth

usias

ts

X XX XXX XXX XX

XXX Denotes highest level of activity X Some interest (enough totarget)

XX Good potential NA Not a target market at this

time

OPENING MARKETING STRATEGIES

BIG REVIEWS ABOUT US

One of the single largest advantages in opening a Cooperative brewpub is that it

is a unique concept to Michigan; a concept the media loves because it is part of the"Restructuring the community trend in our Grand Rapids. Microbreweries and

brewpubs continue to be the subject of numerous articles in the media, including the

Wall Street Journal and USA Today. If other brewpub openings throughout the country

are any indication, local media will follow the progress ofHigh Five Co-Op Brewery

from the beginning, with an announcement of the building lease and plans for the

space. They will be kept involved during key times in the opening process such as the

beginning of construction, the granting of the brewery license, the delivery of the brew

equipment, etc. Trade journals and industry-oriented newspapers will also be sent

press releases at these times. In addition, as grand opening approaches press

releases will be sent to all regional and college papers as well as those in surrounding

towns. The underlying theme in all publicity will be the unique concept of the Co-

Operative brewpub!

Initially no other marketing will be done. The initial press coverage has provided the

brewpub with a steady flow of curious people eager to try the new place in town - "The


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Cinderella Syndrome." All restaurants go through the "Cinderella Syndrome" when

everyone in town wants to try "the new place." This is the most difficult time in the

business. Construction has just barely ended, systems and people are new, but the

customers expect a quality product and are judging the restaurant (and telling their

friends) by the quality of their first experience. Retaining the curiosity seekers as

regular customers depends on serving a quality product in an enjoyable atmosphere.

This is a crucial time in our development, and every effort will be made to make sure

that each customer leaves ready to tell his/her friends about the quality experience they

had at HIGH FIVE CO-OP BREWERY.

PROMOTIONAL PLANS

Initial promotional plans will evolve around the focus of the operation, the house

beer. Tank tapping parties can be diverse and effective.

Specific strategies are in place to attract predetermined target markets. One example is

a guest brewer, where a professional brewer or celebrity is invited to brew a uniquely

collaborative beer with High Fives Counsel of Brewers. Publicity is gathered not only on

brew day, but when the beer is served.

High Five Co-Op Brewerywill strive to be visible and active in the community.

Through contributions, promotions, and sponsorships of various non-profit,

humanitarian programs (Community and Educational Foundations etc.) as well as in

house events for local causes, High Five Co-Op Breweryfurther enhance its

reputation as a business tied to local roots, always willing to give something back to thecommunity. The management and owners of High Five Co-Op Brewerywill play an

active roll in the community by volunteering for local organizations.

COMPETITION IN GRAND RAPIDS

High Five Co-Op Breweryhas a distinct opportunity in the local beverage

community, the in-house brewery. Not only will this brewery produce a superior

product; it offers a unique marketing edge. Parties, festivals, and tank tapping

ceremonies can become the anchor of the marketing program. The visibility of thebrewery enhances this image. People will come to the brewpub to watch the brewers at

work.

Although there are many restaurants and bars in Grand Rapids most of these are

downtown; They will continue to draw large crowds, and probably sell our beer. We

have been approached by several event placing organizations and distributors to


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assess when our beers will hit the market. This encouraging atmosphere in the West

Michigan community lends itself to optimism that tap handles will be ready for the

brewery as soon as it can distribute (with our first priority always to the taps at the pub

itself). By not offering food we will distance High Five Co-Op Brewery from being

perceivedas a competitor. Brand awareness will be established during the formative

years and High Five Co-Op Breweryenvisions rapidly carving its own niche in the

Grand Rapids beer scene by the second year of operation.

The aesthetics of the business will be designed to make the customer feel comfortable .

High Five Co-Op Brewerywill be a place to talk business, visit with old friends, meet

new friends, or bring the family; an energetic, fun pub conducive to the enjoyment of

hearty food and delicious ales

It is the philosophy at High Five Co-Op Brewerythat competition is good and

cooperation is even better. It keeps the business constantly trying to operate more

efficiently.

High Five Co-Op Brewerywill also generate business for the production

brewery from the local bar and restaurants by offering to brew special private label

beers for their own establishments. The business owner will be invited to come brew a

batch of beer and create a special name and label. This then becomes their

house beer and the owner has a great story to tell about the brewing process and his

special recipe.

COMPANY OVERVIEW

PERSONNEL

Quite often the success of the independent restaurants and bars is based on one key

ingredient, the owners themselves. Their style, dedication, knowledge, ethics, and

unwavering desire to provide the customer with the best dining and drinking experience

possible, while providing a fun and fair working environment for their employees are

more crucial than any other aspect of the business. These beliefs are shared by every

member of the High Five Co-Op Breweryteam:

The Staff is our most valuable asset.

There are no customers, only guests.

The guest is always right (with few rare exceptions.)

The service industry is one to be proud of.


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Each time a guest comes in contact with any member of the staff, or the

business in any form, they have a chance to form a positive or negative impression.

Each of these 'moments of truth' is critical to the success of the business.

If you are not directly serving the guest, you better be working for someone that

is.

The restaurant business is known for its high turnover rate. High Five Co-Op Brewery

realizes that the staff is the most valuable asset of the company. While our philosophy

is to provide a better working atmosphere than other restaurants, monetary rewards are

also very important. Quite often the hourly employees are overlooked when it comes to

sharing the success of the company. AtHigh Five Co-Op BreweryThe Cooperative

Workers Assembly concept will ensure that employees are more than just hourly staff,

they are owners and have control over operations at the pub. This vested interest model

has helped co-ops succeed in Grand Rapids (such as Bartertown) and around the

globe. At High Five Co-Op Brewery, these employees will earn their pay based onsales volume. While this model has a monetary cost to the brewpub, it is also the spirit

and heart of the co-op model. A brewery for the people, by the people.

PROFORMA Financial Statements

The following proforma statements have been developed to estimate the economic

feasibility of a 4-6,000 square foot facility encompassing a brewpub and a production

microbrewery. Two profit centers are identified; the Brewpub and the Microbrewery.

Sales volume projections were based on industry averages, the results of first hand

knowledge of other Michigan breweries, and from a similar operation in a similar town.Because establishing the brewery is the first priority we have not included estimates on

a restaurant business. A full restaurant proforma will be created if and when a Phase-2

building site is identified.

Projected monthly sales range from first month startup of $5,000, to a peak

month of almost $50,000 in the first year. Our initial labor figures were calculated at a

high rate, as the first few months of operation will see more systems streamlined, thus

reducing initial high labor requirements. Labor figures in the worst-case scenario will

have operating costs reduced by having the General Manager or even assistant

brewers work some shift positions during the slow periods. Labor figures have been

increased in the best-case scenario by making appropriate adjustments in staff.

These worst, most likely, and best case scenarios were used as a basis for the

yearly proforma. Adjustments were made where needed. Media advertising was not

included in the first few months of operation, as pre-opening publicity will serve this

purpose. One factor significantly affects the proforma. The cost of making beer is

approximately $0.005 per ounce. At $3.00 per 16-ounce glass of beer, a gallon of beer

sells for $24.00. Product cost to produce that beer is 4%, leaving 96% grosses profit to


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Taxes $ 4,080 12,240 12,240

Water $ 400 1,200 1,200

Electricit

y $ 1,000 3,000 3,000

Gas $ 1,000 3,000 3,000Supplies $ 800 2,400 2,400

Licence $ 1,680 5,040 5,040

Trash $ 400 1,200 1,200

Phone/In

ternet $ 600 1,800 1,800

Insuranc

e $ 4,000 12,000 12,000

Office

Expense

s $ 2,000 6,000 6,000

Guessti

mate on

Health

Insuranc

e $ 4,802 14,406 14,406

Guess

on

Unknow

ns $ 12,000 36,000 36,000

Total

Operati

ng

Expens

es $ 102,276 310,346 312,953

Operati

ng

Savings

/Loss $ -30,589 80,672 208,405

Operatin

g Margin -42.67% 20.63% 39.97%

Other

Income

New

Member $ 45,000 22,500 22,500


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Joining

Fees

Investme

nt

Member

Income $ 60,000

Other

Expens

es

Start-up

Costs $ 143,500

Investor

Share

Dividend

s (6% of

investme

nt) $ 3,600 3,600

Investor

Share

Sell back

(% of

shares

sold

back per

year?)

MemberPerks

(3%

revenue) $ 2,151 11,731 15,641

Perk

Dollars

per

Member $ 7 26 26

Federal

Income

Tax $

State

Income

Tax $

Savings

/Loss $ -$71,240 $87,842

$211,66

4


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PreTax

Revenue -$71,240 $87,842

$211,66

4

Taxes $0 $10,541 $25,400

NetProfit/L

oss -$71,240 $77,301

$186,26

4

LICENSING PROCESS

Licensing is required on three levels; Federal, State, and City. Our first license,

known as a Brewers Notice, will be issued by the U.S. Alcohol and Tobacco Tax and

Trade Bureau and we anticipate no difficulties with that. Our next step will be to work

with the State of Michigan Microbrewery licensing agency known as the MLCC to

formally create a Co-Op model that will work for High Five and other Co-op breweries in

the future. The Board of Directors has already been in contact with the MLCC agency

and they are prepared for High Fives business model. Finally a license will be issued by

the Michigan Department of Agriculture which will inspect the actual facility to ensure

that the brewery is following all health code requirements for a business of our type.

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