What’s Your Plan For Starting A Winery, Wine Or Hospitality Business?

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grand-business-planEvery business should have a plan. Too often, new business owners fail to commit their business goals and objectives to writing.   Whether your dream is to start a winery, open a restaurant, buy a bed and breakfast, or to create your own wine based or hospitality business, you need a plan.   A well thought out business plan helps you to determine where you see your business headed in the future.

Do you have a business strategy? Do you know who your customers are and where to find them? How will you try to raise money? What do you want your business to look like five years from now? A good business plan sets out your goals and tactics in a measurable way to guide you in achieving your dreams.

A good business plan at a minimum will address key elements:

Business strategy – What is the nature of your business? How will you describe your products and services? What are the elements that make your business a success? What is your geographical location? How consolidated or fragmented is your customer base geographically? Why and how will your business have a competitive advantage?

Marketing and Sales Planning – What’s your commercialization strategy? Who’s your target market? How do you plan to reach your customers? How will you gain market share? What trends and changes impact your target market?

Financial Information – How much income will you need? What are your sources of financing? Do you turn your inventory quickly or slowly? What are your sales projections? Do you have audited financial statements, profit and loss reports, balance sheets?

Management – What is the legal structure of your business? Are you incorporated? Are you a partnership? How will your business be managed? What is the biographical information for your directors/officers?  What are the details of the ownership or your company? Will your family members work in your business?

Operations – What is your company’s organizational structure? How much personnel will be required to reach your goals? What functions will your business require and how will they relate to the generation of revenue for your business? What facilities, equipment and supplies will you need? How will your operations change as your business grows? How will your business operate day to day?

Milestones – What factors will determine when you’ve reached and achieved your goals and objectives?  Are your milestones measurable? What are your short and long term goals? How will you overcome challenges and gage your accomplishments? How will you determine if you are on track?

As you can see, there are many factors to consider.  A well written business plan is your blueprint for success.  It will serve as your guide for your business vision months and even years later. A solid business plan can be critical to ascertaining funding and investors for your business.  A banker or loan officer will require you to produce a business plan.  Your business plan is your calling card.

Are you ready to start a winery or vineyard?  Are you ready to open your restaurant or wine tasting business? Do you have an existing business you want to grow?    If so, commit to writing your thoughts in a logical, organized way. The U.S. Small Business Administration has a useful guide to writing your business plan and a tutorial to guide your through the process.

Plan for the success of your business.  Create your business plan.

Ready…Set…Go!!

What Winemaker Do You Have Your Eye On?

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Do you have your eye on a particular winemaker, executive chef or marketing guru for your winery or13_private_detective_looking_through_magnifying_glass_for_clues_-_sherlock_holmes hospitality based business? Are you looking for ways to attract key talent to your business? If so, your may want to consider an employment agreement as an option for retaining that “must have” person for your business.

Employment agreements are valuable tools to have in your business toolbox. They can be beneficial to both the employer and the employee. The parties enter into these written agreements in order to define their expectations around the employment relationship. These agreements can be very useful for recruiting, attracting, and retaining key employees.

For example, as an employer you may not want your competitors to hire that valuable employee you’ve managed to land, or to lose the intellectual property information about your business that he or she possesses. Thus, the employment agreement can offer you a level of protection that you may not have had otherwise. The employment agreement can be an insurance policy of sorts, protecting against an employee’s failure to act in accordance with the prior agreed upon terms.

Alternatively, your future employee  may want certain assurances in the event of discharge. If the employment relationship begins to crumble, there are typically termination and severance provisions in the agreement that address what are to be the financial payments to the employee in the event of termination.

While these agreements may include provisions that obligate the employer, they can also restrict the employees in areas of key interest to the employer. There are various clauses that may be included in the employment agreement to protect an employer’s interest. A few important provisions to consider in a well drafted employment agreement are as follows:

Compensation Clause: This provision details monetary expectations including salary, bonuses, benefits, relocation and other compensatory items the employer and employee may negotiate.

Non Compete Clause: This provision protects the employer from employees accepting employment with a competitor, starting their own competing venture, or working for the competition while they are still employed with you.

Non-Disclosure Clause: A non disclosure or confidentiality clause prohibits an employee from unauthorized disclosure of confidential or proprietary information, trade secrets, inventions created or known as a result of their employment.

Ownership of Intellectual Property Clause: This provision details who owns the intellectual property created by the employee during the duration of the employment period.

Non-Solicitation Clause: This provision is designed to prevent your employees from soliciting your valuable assets such as other employees, customers, suppliers or clients away from your business when they leave.

Arbitration Clause: This provision provides for the arbitration of employment disputes versus court litigation.

So, the next time you have your eye on hiring that very special winemaker, executive chef, marketing guru or …better yet…your own idea of that “must have” talent for your business, carefully consider an employment agreement.

What Wine Or Hospitality Business Are You Creating? Forming A Partnership

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Are you a great team player? Can you make a marriage work? Do you recall telling your co-type of business formationworker, friend or loved one, “let’s sink or swim together” ? If so, perhaps that idea or concept that you and another have been incubating over time is ready to take flight and evolve into a General Partnership.  Whether you are considering pursuing a winery, restaurant, catering, event planning, bed and breakfast, wine based or hospitality business, the type of business structure you choose will be determinative of the potential tax and liability issues you will face.   In my earlier posts in this series, we discussed the Sole Proprietorship business entity.   In today’s post, we’ll consider three basic types of partnerships.

General Partnership

A general partnership is a business enterprise where two or more people co-own a business. Each person in the established entity is a “partner” who share fully in business’s profits and losses. Each has liability for the debts or obligations of the business. A partnership can be created based on a handshake, oral agreement, or by formal written agreement. Typically each “partner” can individually bind the business to a contract, business deal, or other third party actions that create liability for which the other partners can be personally held responsible. Thus, this kind of business arrangement requires a great deal of trust between the parties. (Think marriage vows !)

Although not legally required (an oral agreement will do) its wise for you and your other partners to consider signing a partnership agreement that identifies the rights and responsibilities of the partners. While organizing documents are not required by the Commonwealth, registration of a fictitious name ( a name different from your name and the name of your partner(s) is required in addition to publication of an advertisement in two newspapers in the county where your business is located.

Limited Partnership

A Limited Partnership is one that limits the liability of certain partners for debts beyond their partnership investment. A Limited Partnership is formed with at least one general and at least one limited partner.  As an advantage, the limited partner is considered “passive” and is not personally liable for the management and actions of the partner(s) and does not participate in the management decisions. Conversely, the general partner can be held personally liable and has no such protections. Excepting the limited partner, legally a partnership is inseparable from its owners.

Limited Liability Partnerships

Both General Partnerships and Limited Partnerships may form a Limited Liability Partnership. The Limited Liability Partnership is a form of general partnership wherein state general partnership laws statutorily relieve the partners from all or part of their personal liabilities, debts, and obligations. A partner in an LLP may not be individually liable for the the misconduct or wrongful obligations of another partner.  However, the partner may remain liable for their own actions, traditional partnership obligations and liability for those  persons under their direct control.   An LLP is created by filing a registration statement as specified by state statue.

A Partnership is easy to form as a business entity and offers a great deal of flexibility.  A Partnership can end by the death, bankruptcy or withdrawal of the partner from the Partnership.  Much like the Sole Proprietorship, the taxes of the business “pass through” to the partners. The partners pay income tax on their proportional share of the income based on their individual tax rates.

Are you ready to walk down the aisle (excuse me–path) to form a business Partnership? If so, a Partnership may be in your future.   In the next post of this series, we’ll consider other forms of business structures.

What wine or hospitality business are you creating?

Wine Law, Wineries and the Yellow Rose of Texas

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Last week, I had the very good fortune of traveling to San Antonio Texas to attend Law Seminaryellow-rose-of-texas International’s Winery and Wine Law Distribution Conference. (You should know right off that I previously resided in Texas for 13 years but have long since moved from the state). While things had very much changed, the best of my memories of Texas still remain the same. I soon realized upon my arrival why it was that of all the places I’ve ever lived (KS, Mo., Oh, TX, NY, PA) I always enjoyed my time in Texas the most. There’s much to be said about “southern hospitality”. I was barely off the tarmac when I took note of how everyone in the airport was more than helpful to assist me in getting to my right destination.

Upon my arrival to the hotel, I quickly discovered that my hotel was conveniently located two blocks away from San Antonio’s famous River Walk and the Alamo.   Unable to resist grabbing some real authentic Texas Mex (hint hint Taco Bell), I quickly tossed my heels aside, donned my nikes and headed straight for the River Walk. There I found a quaint restaurant called The Original Mexican Restaurant.  I ordered my very favorite Tex Mex meal–cheese enchiladas, refried beans, spanish rice and guacamole.   Despite the fact I found myself over dressed and melting from the heat, my momentary discomfort was offset by an extremely attentive wait staff who were eager to please. The congenial waitstaff waited on me hand and foot while a trio of Mariachi singers enticed me to chip in for a song.   A tough negotiation later, we settled on the $5 dollar rendition of a serenade of the “Yellow Rose of Texas”. With a big smile on my face watching the passerby’s and tourists pausing to listen, I quickly emailed a 30 second iphone video of my personal serenade back home to my kids.  Predictably my children responded with giggles and text messages to each other saying “Mom’s down in Texas on a roll”. (Meanwhile I was momentarily kicking myself for at least not extending my visit another day longer). I enjoyed the rest of my evening and planned for my highly anticipated conference the next day.

Day 1 of the conference was everything I hoped it would be and more. I started my day putting a name with a face with conference planner Bonnie Clark of Law Seminars International. Bonnie and I had previously spoken on numerous occasions from different coasts (she’s in Seattle) with her assisting me with useful information about the conference and the industry players.  Arriving at the registration desk and formally identifying myself, there was Bonnie.   We were like two kids in a candy store. Bonnie and I smiled, hugged each other and delighted in the fact we were able to finally personally meet after many coast to coast emails and phone conversations.

Two hours into the morning session, I was convinced that  Day 1’s agenda was well worth the investment of time, resources and money. Program event co-chairs were Lou Bright, General Counsel of the Texas Alcoholic Commission, and Kimberly Frost, a very able regulation attorney at Jack Martin & Associates.    Attendees at the conference included not only attorneys with interest in wine law, but winery owners and operators as well. Lou proved to be the voice of authority as most everyone in the room seemed to know him. I found him to be very colorful, knowledgeable, and warm.   Lou Bright’s passion about the wine industry and his eagerness to help his regulatory clients through a very complex process was obvious.  The morning’s agenda included modules on Setting Up Business Partnerships, Employment Issues for the Wine Industry, Water Rights, Brands, Trademarks, Labels, Selling Wines Online, and Legislative Updates. Speakers arrived from Texas, California, Illinois and other parts of the country to educate the attendees on the latest hot topics and emerging trends in the industry.   It was great to actively participate in the back and forth exchange between regulatory leaders, winery owners and legal community participants with different points of view and perspectives.

By meal-time, things got even more rewarding as I was invited to join attendees, Ken Feagins, Esq. founder of Gaucho Wines, LLC and Haile do Valle Peixoto Director of Gaucho Wines. The three of us hit the road and ended up on a BBQ mission finding ourselves at the infamous County Line BBQ. (Again, now I know why I missed Texas). Ken, a resident of Oklahoma and Haile a resident from Montevideo-Uruguay were launching an import/export business specializing in wines from Uruguay. We engaged in a lively conversation about the permitting process in the context of the import export process. After our meal, we all agreed to stay in touch. Ken suggested we take pictures of ourselves on our iphones so that when we call, we’d have a face to put with the name. (I’ll remember that tech savvy tip for future reference).   By the end of Day 1, most all the attendees were commenting on how great the conference was going. (Kudos to LSI).

But the best was yet to come. A blind tasting was planned for the evening. Attendees were invited to bring a Texas wine to the tasting. While running out to buy a Texas wine (I bought a Peregrine Hill 2008 Cabernet Sauvignon), I wondered how much fun it would have been if a Pennsylvania wine could have been included in the tasting. Ken Feagins commented on how much he would have liked to have seen a Uruguay or Oklahoma wine in competition as well.   We were just a few of the attendees crossing interstate lines and therefore could not bring our state’s wines.

The Wine Tasting was great fun. Many of the winery owner attendees brought wines from their estates. We each were given a questionnaire to fill out quick facts and points of interest in the Texas Wine Industry. The winner would be announced the following day. Tables were set up across the room with various red and white varietals tucked nicely in brown bags next to plenty of food choices to clear our palettes and spit buckets nearby.  This proved to be a great opportunity to get acquainted with other attendees.  There were awesome stories and great tales being told by some of the attendees on how they made their entree into the winery business.   My favorite story came from Ronald F. Yates, owner of Yates Law Firm. He was a lawyer/winery owner and told his personal story of how he happened into a purchase of a seller -financed winery two years ago.

But the day would not be complete without my having met winery owners Alphonse A. Dotson and his wife Martha Dotson.  Mr. and Ms. Dotson are owners of the AVA Hill Country’s Certenberg Vineyards. To my surprise Mr. Dotson, a 6 foot 4 former professional football player and I soon discovered we had “Kansas City” in common.   I being born in Kansas City and he having signed with the Kansas City Chiefs, we chatted about our love for the infamous Ollie Gate’s famous Gates and Son BBQ chain restaurant.   Of course we got a good laugh out of the fact that he spent time with Mr. Gates, while I was tooling around in high school with Mr. Gate’s kids.

As a Day 2 speaker, Mr. Dotson spoke on the challenges of  Texas Agriculture, mother nature’s climate curve balls and how both impact the viability of Texas wineries and the wine industry.  Mr. Dotson shared  a very compelling story of a three days and three nights toil one easter weekend utilizing his entire water reserves to protect his vineyard from an unexpected freeze.  By late afternoon, our guest speakers were covering topics ranging from how to survive a TTB compliance Audit to Finding Money to Finance Your Winery. The day was not complete without Chicago Illinois Director Steve Gross of the Wine Institute covering the hot topics of Shipping Compliance and the State of the Nation.  Director Steve Gross and I later spent some time discussing the fact that Pennsylvania was still one of 18 states in the nation with no direct to consumer shipment laws and where he thought litigation and legislative actions on the issue currently stand.

Finally the day ended with the annoucement of the winners of the Wine Tasting.  That ended up being a tie between the only two attendees who took the time to write about the wines as opposed to drinking them.  Their prize of course was a bottle of Texas wine!

All in all, it was an action packed conference that fulfilled its every promise of providing up to date information from recognized experts in the field of wine law.  It was a vibrant and stimulating exchange of information that left me wanting more.   I met a lot of wonderful folks with whom I hope to forge long lasting business relationships in the future.

As I boarded my plane back to Philadelphia International, I reflected yet again on how happy I was to be in a position to have married my passions for wine and law.   It was hard to think of my experience as work.   And while I was happy to be returning home, I couldn’t help but noticed that I was still humming “The Yellow Rose of Texas” in my head.   So I turned on my iphone and watched those mariachi players once again, taking my Texas memories with me.

As for Pennsylvania winery and hospitality owners, I’m back in the saddle, locked and loaded with new information and emerging trends of interest to post that you may find useful to your winery, wine and hospitality based businesses.  Do stay tuned.

A Winery Gone Green!

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If passed, House Bill 80 has beneficial application for winery owners looking to use the latest technology in solar or geothermal heating.  Staff writer George Mattar of the Bucks County Courier writes an interesting article on renewable energy and its benefits to a local Bucks County winery.   For more information read: Some grapes are purple, but this winery has gone green.

What Wine Or Hospitality Business Are You Creating? Forming the Sole Proprietorship

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In my recent travels along the Pennsylvania wine trail, I met an entrepreneurial minded young lady who expressed an interest in forming a “wine-tasting business”.   We briefly explored her needtype of business formation to create the right business structure.   Thus, I thought I would  discuss the various business structures for those of you who are considering opening your own winery, restaurant, catering, event planning, bed and breakfast or hospitality business.  The type of business structure you choose is determinative of the personal liability and tax consequences you will face. You will need to consider the amount of control you wish to have as well as your business exposure to lawsuits.

There are advantages and disadvantages to each form of legal business structure.   The different types of business entities include: Sole Proprietorship, Partnership, Corporations, and Limited Liability Company. I will discuss the differences in these legal structures in a series of several posts.   As you consider starting your own wine or hospitality based business, think about how you want your business to be structured.   In today’s post, I will begin with the Sole Proprietorship.

Sole Proprietorships

The most simple of business structure is the sole proprietorship.   There are no multiple owners in this form of business structure.   The sole proprietorship is the easiest and least expensive business structure to operate.  In this type of business formation you are in sole control of the management of your business.  This is one of the advantages of operating as a sole proprietorship.   There are no organizing documents to be filed with the State.   First, name your business.   You should determine that the name you select is available for use and that you are entitled to use it.   Any sole proprietorship conducting business under a fictitious name (a name other than your own) must register this name with the Pennsylvania Department of State Corporation Bureau.   In the Commonwealth of Pennsylvania if you operate your sole proprietorship under a name other than your own, you are required to publish an advertisement in two newspapers in the county where your business is located. You must state that you have filed or intend to file a fictitious business name registration. While you are not required to do so, you may want to give consideration to registering your business name as a federal and or state trademark.

Every business subject to employment taxes is required to have a Federal Employer Identification Number (EIN) to identify the business with the Internal Revenue Service (IRS) and Social Security Administration (SSA).  You may apply for an EIN even if you have no employees.   This will make it easier for you to establish your business’s bank accounts.  You should preferably keep your business finances and record-keeping separate from your personal accounts.

While the sole proprietorship is the simplest form of legal structure, do not sleep on your obligations.   As a sole proprietor, you can personally be held liable for all financial obligations of the business.   This also includes any unlawful acts of your employees.  You ask, what does this mean?  It means that if you don’t pay your suppliers, fail to pay your creditors, or you lose a lawsuit, then the business (which is you) has to pay.    If you fail to pay, your creditors could legally come after your home or your possessions.

Tax filing for the sole proprietorship has easy reporting requirements.  Legally, the sole proprietor is not separate from the individual who owns it.   Business income or losses are reportable through the IRS Tax Form 1040, Schedule C with the sole proprietor’s personal income tax return.  Sole proprietorships avoid double taxation often associated with certain corporations.

You should ensure that you have all licenses or permits required to operate your business as most counties or cities require sole proprietorships to obtain local zoning, seller’s permits or business license and tax registration certificates.

In the next post of this series, we’ll consider the other forms of business structures.   What wine or hospitality business are you creating?

What Are You Doing With Those Eco-Friendly Corks?

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With all the fan fare these days about “boxed wines”  I love the fact that there are still great arguments to be made on behalf of the cork.    The Huffington Post hosts author Jennifer Grayson, founding editor of theredwhiteandgreen.com. Ms. Grayson, an avid environmentalist has written a great article on the eco-friendliness of corks and why you may want to recycle them.  For more information read: Eco Etiquette: Can I Recycle Wine Corks?

What’s Your Wine’s Pedigree?

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The geographic location where your wine is grown, can often signal quality  or baby grapesadd pricing value to your customers.   Commercial advantage can be gained from a consumer’s appreciation of wines originating from a particular “viticultural area.”    The tagging of a wine from an “American Viticultural Area” or AVA can be an important factor to both the wine buyer and the wine seller.    While viticultural areas are not government endorsements of quality, to the consumer the AVA labeling can mean that the buyer can expect a higher quality of wine for the price.   To the seller, the AVA identification on the label can mean an important recognition of value, distinguishing a winemakers products from wines made in other areas.

An American Viticultural Area is the American system of identifying wines in a manner similar to the French “Appellation d’Origine Contrôlée (AOC) system.   A concept  created in 1978, an American Viticultural Area (AVA) is a designated wine grape growing region distinguishable by geographic boundaries as defined by the U.S. Department of Treasury Alcohol Tobacco Tax and Trade Bureau (TTB). The TTB defines these regions at the requests of wineries and other petitioners who use the AVA designation on the wine label to denote the geographic origin of the grapes used to produce a wine.   To establish a viticultural area, it must be determined by the TTB that the geographic area is different from the surrounding areas.   The TTB designates these region decisions based on an area’s unique characteristics.    These areas include distinctive soil type, topography, climate, elevation and historical evidence that the region’s boundaries are legitimate. The viticultural area as regulated can encompass more than one county or more than one state.   An established AVA indicates that at least 85% of the grapes used to make a wine must be grown in the specified area.

Pennsylvania’s American Viticultural Areas include the following five regions:

Central Delaware Valley (NJ, PA)

Cumberland Valley (PA, MD)

Lake Erie (PA, OH, NY)

Lancaster Valley (PA)

Lehigh Valley (PA)

The next time you’re having a locally produced wine, check out its pedigree and find out whether you’re enjoying a Pennsylvania “AVA ” wine.   If so, what’s your favorite?

Pennsylvania Wineries: Are You Getting Wine Lovers To Your Wine Or Your Wine To Your Wine Lovers?

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When marketing your winery’s wine this harvest season, you may be creatively thinking of ways toPhiladelphia Festival 2
get wine lovers to your wine, or your wine to your wine lovers.   If your marketing efforts include the latter, you may wish to plan to host or participate in an event outside your winery’s usual business. That said, what are the requirements for a winery to participate in such an event?

In Pennsylvania, participating wineries in such events, should be properly licensed limited wineries in the Commonwealth of Pennsylvania.  Limited wineries are licensed by the Pennsylvania Liquor Control Board that may produce alcoholic ciders, wines and wine coolers (subject to certain exceptions).  Because the sale of alcohol without a license is illegal in Pennsylvania, limited winery event participants would need to obtain a Wine Exposition Permit. A limited winery licensee may apply for and obtain a Wine Exposition Permit from the Pennsylvania Liquor Control Board (PLCB) in order to participate in wine and food expositions off the licensed premises.

The permit may be issued to a licensed limited winery for expositions, not to exceed five consecutive days. The total number of days may not exceed 40 days in a calendar year.   The permit allows the holder to sell its alcoholic ciders and wine by the glass, bottle or case. Tasting samples of one fluid once or less may be provided for free or for sale.

The exposition may be held indoors or outdoors with the primary purpose of educating the attendees of the availability, nature and quality of the Pennsylvania product wines and alcoholic ciders in conjunction with suitable food displays, demonstrations and sales.   The exposition may include arts and crafts, musical activities, cultural and agricultural exhibits and similar activities. The permit fee is thirty dollars ($30.00) per day.

The next time you’re looking for ways to get your wine to your wine lovers, start with a Wine Exposition Permit and get your wine on!!

Does Drinking Red Wine Have A Protective Effect for Women With Breast Cancer?

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healthReporting for Reuters Health News, author Michelle Rizzo wrote a “must read” article on a study of how women with breast cancer are being aided in their radiation treatments by consuming red wine. The article discusses the findings on how drinking red wine can prevent radiation induced toxicity. You may find the article an interesting read on the the numerous therapeutic benefits of red wine consumption for women with breast cancer. Read the full article here: Wine May Curb Toxic Effects of Radiation