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Surly Brewing Co. to close its destination beer hall in Minneapolis

Surly Brewing Co., creator of the phrase “destination beer hall,” is pulling the plug on its enormous southeast Minneapolis restaurant, bar and event center.

The plan is to close “indefinitely,” and the final day will be Nov. 2. About 150 workers will lose their jobs.

“Today is another dark day, in a dark year,” said Surly owner Omar Ansari. “This space is built for a lot of people, for socializing and getting together with friends. That’s not the way the world is working right now. There’s a pandemic going on, and there’s just no way for places like ours to make it in a COVID world.”

The announcement that Surly’s 350-seat beer hall, beer garden, pizzeria, events center and retail store all will close came a day after Butcher & the Boar in downtown Minneapolis closed its doors.

“In the last 24 hours, two groundbreaking hospitality businesses have been forced to close as this industry continues to collapse,” said Liz Rammer, chief executive of Hospitality Minnesota. “We’ve already seen other permanent closure announcements ramp up, and we fear this is just the beginning as we face the coming lean fall and winter months.”

A survey done by Hospitality Minnesota found that 40% of hospitality businesses in the state are in danger of closing by the end of the year under the current working conditions.

The group — which advocates for restaurants, hotels and resorts — is pushing for state leaders to increase capacity limits to help hospitality businesses “before it’s too late,” Rammer said.

Restaurants were forced to close for the spring months under state mandates to reduce the spread of COVID-19.

When the mammoth Surly facility reopened in June under new restrictions, its capacity was severely reduced to a fraction of the 1,800 people that the fire code allows indoors and out. Ansari said that the results initially looked encouraging.

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“We were busy,” said Ansari. “But despite all of the hard work of everyone on the team, when we ran the July numbers, we discovered that we weren’t profitable. We didn’t make any money this summer. That’s how restaurants work, they make their money in the summer so they can make it through the winter.”

On-site food and beer sales are down 82 % over last year.

Another major issue emerged on Monday, when a group of Surly kitchen and hospitality employees announced their intent to unionize as part of Unite Here Local 17, which represents more than 6,000 workers in Minnesota hotels, restaurants and other hospitality establishments.

Ansari said that the timing of the union announcement and the closure is unplanned.

“Obviously, the timing isn’t good, and I understand what people will think,” said Ansari. “We’ve been talking about this and making plans for weeks. The announcement on Monday was not expected. I get it, this is a big deal. We’ll have to show that this is the plan that we’ve been working on for a while.”

Sheigh Freeberg, secretary of Unite Here Local 17, said he believed Surly’s announcement to close the brewery’s hospitality functions was a direct response to some of its workers announcing their goals to unionize.

“We think this is a clearly illegal and disgusting act intended to intimidate and retaliate against the employees for forming a union,” Freeberg said in an e-mail. “Up until Monday, the employer let the employees know the intention was to stay open over winter. We have filed an unfair labor practice charge and will fight this as hard as possible.”

Unite Here recently worked with employees at Tattersall Distilling — including bartenders and some of the distillery’s production staff — to unionize as workers critiqued the establishment on its COVID-19 preparedness and other issues.

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Last month, workers made it official with a vote and made Tattersall the first craft distillery in the nation to unionize and also the first distillery of any kind in Minnesota to do so, according to Unite Here.

Jack McCraine, director of accounting and advisory firm Baker Tilly’s beverage practice in Minneapolis, told the Star Tribune in July that Tattersall’s union talks had alarmed local and national craft brewery and distillery owners.

“They need those doors opened, and they are fearful that their employees are going to hold them hostage and want to unionize,” McCraine said.

Breweries, similar to restaurants and others in the hospitality industry, have suffered greatly during the coronavirus pandemic as state rules forced them to close for the spring months to help stem the spread of the virus. When they could reopen in June, capacity limitations and health guidelines have continued to restrict the businesses.

As the coronavirus pandemic continues to devastate the hospitality industry, Freeberg said the union has received increased interest from other brewery and distillery workers.

“I can say that this is the most interest I have seen in organizing,” he said.

Surly, founded in 2006, has played an outsize role in the state’s craft brewing industry.

The company backed a legislative lobbying effort that allowed the state’s breweries to sell their product on the premises.

The so-called Surly Bill became law in 2011 and sparked a taproom boom. Surly’s $30 million facility — which received about $2 million in federal and county grants for site cleanup — opened four years later.

Lauren Bennet McGinty, executive director of the Minnesota Craft Brewers Guild, said Surly’s taproom had been an attraction for locals as well as out-of-state visitors.

“I think Surly closing their beer hall just demonstrates that no business is immune to the impacts of the pandemic,” she said.

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Smaller breweries have really suffered due to the coronavirus since it is hard for them to properly social distance in their beer halls, Bennet McGinty said. Some brewery owners in Greater Minnesota have told her that they are operating with taprooms 25 to 30% full instead of the allowed 50%.

Going into the colder months when breweries won’t be able to use their patios, business will get even worse, Bennet McGinty said. Taprooms are critical for many brewery operations and can account from anywhere from 20% to 100% of a brewery’s sales if they haven’t secured distribution, she said.

“Even with distribution, a loss of sales in a taproom may still be a significant loss for a brewery,” she said.

Many breweries were already just one to three months from closing for good earlier this year during the state mandated closure of bars and restaurants, Bennet McGinty said.

Some breweries like Bauhaus Brew Labs were forced to pour hundreds of gallons of unsold beer down the drain. An attempt at a state bill to get reimbursement for breweries’ dumped or spoiled beer didn’t gain much traction.

Going forward, Ansari said the plan for Surly is to focus on brewing.

“That’s the core of our business,” he said. “We need to focus on where Surly started, which is the brewing business. … We have to stay whole. That’s the reality.”

By invoking “indefinitely,” does that mean that Ansari sees a time when the five-year-old facility will reopen?

“I guess when COVID is over,” he said. “But I’ll be honest and say that I haven’t had a lot of hope in the last few weeks. Until people can gather — because that’s the way that this place is designed — we can’t keep losing money.”

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