Is Owning a Craft Beer Franchise in a Recession a Good Idea?
Show of hands: how many of you remember the Great Recession of 2008?
For those of you too young to remember (or those of you who are plenty old enough but have chosen to block it out of your memory), here’s a brief recap:
According to Investopedia, the Great Recession is considered the most significant economic downturn since the Great Depression of the 1930s and was partly caused by the housing bubble burst, causing large amounts of mortgage-backed securities and derivatives to lose substantial value. While the Great Recession officially lasted for about 18 months in the U.S., spanning from December 2007 to June 2009, it set a global financial crisis in motion that would continue to be felt for years. Of course, there’s a lot more to it than that, and you can read about it here if you’d like a little more depth, but those are the basics.
We know what you’re probably thinking. “Cool story. But what does this have to do with operating a craft brewery franchise?” Kind of a lot. You see, we speak with prospective franchise investors every day who are interested in opening a Voodoo brewpub in their neck of the woods. These are fun-loving folks who appreciate quality beer and dig the idea of owning their own badass brewpub business that gives them the perfect balance between work and play.
You know what else they are? Smart, savvy businesspeople. Even if this is their first franchising venture ever, they have the soft skills and background to understand what makes something a good investment. Because of this, they also understand that before they go all in on a Voodoo craft beer franchise, they should probably figure out how the industry has historically performed in times of recession. Because, friends, if there’s one certain thing about the economy, it’s that it is constantly fluctuating. Taking time to vet a franchise—heck, the entire industry—before investing is just the smart thing to do, and we encourage it. So, in that spirit, here’s a little bit about how the craft beer industry has historically performed in times of financial hardship.
This just in: people love beer.
It probably comes as no surprise when we tell you that, bear market or bull market, it’s always a beer market. In fact, the alcoholic beverage industry tends not only to survive but to thrive in a down market. That’s partly due to the lipstick effect, a marketing theory that contends that people are more likely to indulge in small, relatively affordable luxuries (like, well, lipstick) during periods of economic downturn when they are less likely to be able to afford larger luxury items like expensive cars or vacations.
Craft beer certainly fits the profile of an affordable luxury whose sales could benefit significantly from the lipstick effect. People trying to tighten their belts and avoid spending during a recession will still make an exception for a delicious beer or two at their favorite local brewpub. In fact, the craft beer industry has an extra ace up its sleeve when it comes to lipstick-effect spending: the inherently social nature of beer drinking. Regardless of the economy, people are happy to gather at their local watering hole with their friends and kick back a few cold ones over a friendly game of darts or pool. And thanks to what we just said about people craving affordable luxury items during times of recession, people seek more value in a craft beer experience than in drinking a commercial beer they could just as easily get at their local grocery store. People who consider themselves craft beer aficionados are far more willing to spend a little extra on a quality product like what we make at Voodoo. When they go out, they want beer that is brewed in small batches and available only at select brewpub locations, not just any random beer.
Voodoo’s Chief Operating Officer, Tom ‘Mr. Clean’ Harper explained concisely in a recent interview how our unique model and destination-brand status have allowed us to grow exponentially, not just surviving but thriving even as other restaurants and bars had to close their doors over the past two years.
“The Voodoo pub unit economics are unlike any in the current restaurant space,” said Harper, adding, “we have embraced new technologies that successfully combat labor availability…Voodoo pubs, on their busiest evenings, can operate with a staff of 10 employees. This is unheard of in any other concept with most needing staffing levels of 20-plus employees on their busiest occasions.”
In other breaking news, gathering with friends is fun.
And then, of course, there’s that elephant in the room that we’re tired of mentioning. But this time, it’s a beneficial thing. We’re talking, of course, about our old nemesis, COVID-19. We’re two years out from discovering what it’s like when the world literally shuts down. (Spoiler: it totally sucked.) Because the experience of not getting to go anywhere is still pretty fresh in our memories, people may place a greater premium on being able to meet friends at restaurants or bars. They may be more likely to splurge on doing so when the opportunity arises.
Fortunately for Voodoo craft beer Franchise Owners, getting friends together is what we’re all about. “We encourage personal face-to-face interactions,” Harper notes. “Put the phone down, except to order something, and talk to your friends about what is happening in your life. We spent so much time talking over computers during COVID that we forgot that humans are essentially pack animals that thrive in numbers. Voodoo venues help us go back to that essential behavioral need of love and companionship.”
As of June 2022, 77 percent of all respondents to this survey said they feel comfortable dining out at restaurants. This number is only expected to climb higher as COVID positivity rates continue to decline and we get even closer to living life as we did in the Before Times. This is a huge plus for any restaurant or bar owner, regardless of what the economy is doing: people are sick and tired of staying home and doing nothing, and getting together with friends over an ice-cold beer sounds pretty damn good right about now!
How owning a craft beer franchise like Voodoo can help you cash in on a recession-resistant industry.
So now you’re probably thinking, “Okay, that’s great data but isn’t it always kind of risky to open a restaurant or a bar? After all, don’t, like, two-thirds of all restaurants fail within the first year?”
Secondly, of those restaurants that don’t make it to their one-year anniversary, the majority are independently-owned places facing issues like an undefined concept, poor staff management, insufficient investment in marketing, or lack of capital.
Franchising with Voodoo takes all of that risk off the table from day one. Being part of a craft beer franchise means getting to work with industry heavy-hitters like Harper and having a clearly defined concept, a small, easy-to-manage staff of enthusiastic employees, a strong marketing strategy, and a dedicated executive leadership team to ensure that staff members at each location are being trained and managed to uphold brand standards.
First off, when it comes to a strong, solid concept, it’s hard to mistake our unique, eclectic feel for literally any other craft brewpub out there. “Voodoo pubs do not look or feel like any other restaurant establishment on the market today,” says Harper. “Our interiors are hip and cool; our beers, cocktails, and food items taste amazing and have a shareable vibe.”
Additionally, we don’t like to brag, but we’re going to go ahead and say it: Voodoo fans love Voodoo beer, and nothing will stop them from getting it. The reason we got these rabid fans behind us in the first place is that they know they can count on a fantastic experience every time they visit. When people walk into a Voodoo pub, they know precisely the level of quality they’re going to get, and they are happy to pay for their experience. “Whether in difficult or prosperous times, quality will always remain in high demand,” says Harper.
This may not be the case at other restaurant or brewery franchises, who might use some smoke-and-mirrors tactics or “shrink-flation” strategies to get people in the door for a lower price. Harper notes, “While most concepts will engage in deep discount strategies, usually unsuccessful attempts to retain market share, Voodoo will never devalue the brand by engaging in a price war. Consumers will be reassured that they will get only the highest quality ingredients when consuming Voodoo branded products.”
Also, our brewery franchise model allows Owners to keep a tight ship with a minimal staff, which makes managing employees easier. Harper points out, “Our pubs do not require a large staff, and people want to work in a craft beer establishment.” And, of course, when you’re selling an amazing product like Voodoo craft beer, it’s hard NOT to attract die-hard beer lovers who want to work there as much as we want them to. “We are opening pubs, and when we source talent, we generally have too many applicants and turn folks away,” says Harper.
Finally, with a starting investment of just $331,750, a Voodoo craft beer Franchise Owner could be looking at a lot less than the average startup cost of an independently-owned bar, which can run you up to $850,000. This explains Harper is primarily due to Voodoo’s strategy of sourcing second-generation real estate in hidden-gem locations.
“We do not target very expensive ‘A’ real estate,” he says. “Occupancy costs have increased disproportionately with revenue and have taken an unhealthy piece of available costs. Additionally, Voodoo is a destination brand, and people will travel to ‘B’ and ‘C’ locations to enjoy our products and services.”
Simply put, a Voodoo craft beer Franchise Owner will likely need to worry a lot less about making money and keeping the doors open than a typical independent pub owner. Or, as Harper puts it: “Managing labor and occupancy can provide Franchise Owners with healthy margins and, more importantly, strong enterprise valuation models which become very attractive to new investors.”
Work = Love for Voodoo Franchise Owners
Look, we’re not going to sit here and tell you that owning a craft beer franchise is easy. Our Franchise Owners are as dedicated as they come and put a crap-ton of time and energy into making their Voodoo locations the coolest places in town. But it’s a labor of love, and that’s not something many people can say about their 9-to-5 corporate gig.
Harper notes, “Working for someone has its benefits; however, true personal and professional satisfaction comes from being a true entrepreneur. This means individuals get to see and feel exhilaration, sorrow, frustration, joy, and inspiration at levels previously missed. THAT is what life and franchise ownership are all about—feeling and experiencing every emotion available. Given the incredible shortness of human life, there is no greater journey.”
Also, having an amazing support system to back them gives Voodoo Franchise Owners an instant leg up on any competition they may face. When you’re part of the Voodoo crew, you can rest easy knowing that folks like Tom ‘Mr. Clean’ Harper himself, along with our Founder Matteo Rachocki, Master Brewer Curt Rachocki, and our president Jake Voelker are behind you every step of the way, from pre-opening to ongoing marketing and operations support. After all, we’ve got the good Voodoo name riding on your success, and we want more than anything to see your location become a hit in your market and get a whole new crop of beer lovers to fall in love with our liquid gold.
Harper says Voodoo Franchise Owners can count on “Knowing full well that my team and I will be there, 24/7, to help fulfill whatever is necessary to ensure the success of their business. Franchise Owner candidates must always remember, Voodoo success is entirely dependent upon their success, not the other way around!”
The Bottom Line
Yes, the beer and alcohol industry has historically performed well in times of economic downturn. No, not every craft beer-related investment will pan out over the next several years. However, owning a craft beer franchise with Voodoo can help mitigate a lot of the headaches and stress that come with owning a pub or restaurant, regardless of the state of the economy.
What does Tom Harper foresee for Voodoo and its craft beer Franchise Owners in the coming years? While he doesn’t have a crystal ball, his decades of franchising experience and deep understanding of business economics have led him to predict growth, prosperity, and plenty of good vibes. “Consumers will find comfort in the Voodoo line of products during challenging times and will also enjoy these same products during times of celebration and joy,” he says, adding, “I do believe that whichever direction the broader U.S. economy travels, in this instance, the journey is entirely man-made; largely driven by post-COVID corrections that will be resolved very quickly, with the underlying economic base remaining very strong.”
In short, he notes, “I am very excited about the prosperous times coming in 2023 and 2024.”
Want to own a craft beer franchise with Voodoo? Talk to us here.