Looking to pay down short-term debt and jump start construction projects, Portland, Oregon-headquartered brewpub and hospitality chain McMenamins announced it is seeking to raise $20 million from private investors.
“We are inviting you to be part of an investment offering to shift the company’s capital structure away from short-term bank debt incurred by the coronavirus and toward a greater reliance on equity,” co-founders Brian and Mike McMenamin wrote in a letter to potential investors. “The larger purpose of the offering, however, is to provide working capital for projects.”
McMenamins, Inc. is seeking between 150 and 200 investors to make minimum investments of $100,000 each, marking the first time people outside the McMenamin family have been able to own shares of the company.
Investors must have more than $1 million in net worth, value of their primary residence excluded, $200,000 or more in annual income over the past two years, or $300,000 in income when combined with a spouse. All shares sold to investors are of non-voting class, and investors can expect to earn a 3% annual cumulative dividend and up to 6.5% overall return over five, eight or 10 years.
Projects named in the press release include transforming the company’s Cornelius Pass Roadhouse brewpub in Hillsboro, Oregon, into a multi-functional property with lodging, meeting space and a bottle shop; and building more hotel rooms at the company’s Edgefield resort in Troutdale, Oregon. Both projects have been discussed for a decade or more, Brian McMenamin told Brewbound.
“We have a lot of stuff that we’ve been talking about and planning and it’s just the thing that holds you back is just the short-term debt,” he said. “So, this is a vehicle to get us moving on those things.”
McMenamins previously brought on investors for two large projects in Washington state several years ago and was pleased with the results, so revisiting outside investment felt right.
“For years people were saying ‘I want to invest, you guys are awesome,’ so that was an option up there to get some people involved. We did it up there on two different projects, and it worked really well,” McMenamin said. “So now, coming out of the crisis, it was time.”
McMenamins operates 56 properties in Oregon and Washington, which include brewpubs, hotels and event venues. Many locations are converted historic buildings, which can lead to complicated construction projects.
Once the pandemic subsides, McMenamin believes consumers will eventually return to the on-premise and hospitality channel, but with unknown, marked changes.
“We’ve been bombarded with the media saying stay home, stay safe, and for good reason,” he said. “I think it’s going to take some time for people to get used to being outside again, and I think it’ll be different…. For the 40 years I’ve been in this business, I always had answers, and this is the first time I don’t have answers.”
All but one location — McMenamins 23rd Avenue Bottle Shop in Portland, Oregon — shuttered in March due to the COVID-19 pandemic, and the company was forced to lay off nearly 3,000 employees.
“It was horrifying — to have to let your entire staff go or close to it, down to a skeleton,” McMenamin said. “It’s been 40 some years putting this thing together, and all of a sudden it disappears overnight.”
After a few weeks of total shutdown, some locations pivoted to takeout service and the company ramped up its packaged beer production, which allowed for staff to be rehired, McMenamin said. The company also received a Paycheck Protection Program loan, which McMenamin said “really helped.”
“You have a business built on cash flow, and you have to close out of the blue,” he said. “The cash is gone, but the bills keep coming.”
As counties hit benchmarks in Oregon Gov. Kate Brown’s reopening plan, about 10 McMenamins locations have reopened for on-premise consumption. In Oregon, restaurants in counties that have progressed to Phase 1 can reopen for on-premise dining, but tables must be six feet apart, employees must wear masks and service must end by 10 p.m. McMenamin said he expects about 10 or 15 locations to reopen next week.
“The response is really good,” he said. “People are just excited that we’re open again, and they have somewhere to go, so that’s nice. I’m really focusing on outside seating because, right now, to get over the initial trepidation, I think it’s important to have.”