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Dogfish Head to Open Restaurant Chain

Feb 21, 2005 - Dogfish Head Craft Brewery has entered into a licensing partnership with four restaurateurs to create six Dogfish Head Brewhouses in the Greater Washington, DC area, with the first site scheduled to open in Silver Spring, Md. this June and a second to follow in the fall.

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The brewery's partners currently own all the Mid-Atlantic sites of the Baja Fresh Mexican-theme chain which has more than 300 restaurants in 27 states across the country. "We've licensed them our beer brands, our spirit brands, our menu, our decor and permission to use our logo and image and sell our merchandise," Sam Calagione said today. "These are not brewpubs. We will make Dogfish beers and spirits for them.

"There will be 12 taps at each location, plus a cask beer. Our birch beer will be on one of those taps and the other 11 will pour 60 Minute, 90 Minute, Shelter Pale, Raison d'Etre and Chicory Stout (nitrogen pour) as standards, various Dogfish seasonals and at least one beer which will be available only at our brewpubs in Rehoboth Beach and, when it opens, Milton, and these affiliated restaurants.

"Plus, our spirits will be the high-end ones sold at the brewhouses for all the styles that we make."

The agreement became public in a business story about Dogfish Head in the current Forbes Magazine. Calagione promises that the partnership will not change Dogfish Head's approach to business and addressed the likelihood that Dogfish fans may initially have some concerns about the partnership.

"At the end of the day, this is a relationship which is going to strengthen our company and expose more people to good beer. And I think it's pretty difficult to make the argument that we're 'going corporate' when we're one of the fastest growing breweries in the country and the average alcohol content of the beer leaving our facility is 9% and our flagship beer is a 60 IBU, continually hopped IPA. If we were achieving this growth by refocusing on bland lagers and golden ales, that would be one thing, but we're going to keep doing what we love to do."

The goal is to create the six Dogfish Head Brewhouses over three years, Calagione said. The basic agreement is for one year and covers the two locations set to open in 2005. "If either side is not happy with the relationship after one year, we just shake hands and move on and they'll have only the two locations. If things go well, we work out getting the next four locations open."

Why these partners and why now? "We've been approached by restaurant groups before," Calagione acknowledged, "but two of the four partners we're involved with have vacations homes along the Delaware beaches and have frequented our Rehoboth pub for years. They've seen what we do and understand it; better yet, they like and appreciate it. Plus, they see our beer exploding into the DC market and see that we have a brand identity down there, which means carrying the Dogfish logo helps reduce the risk.

"It's a symbiotic relationship. They get the recognized Dogfish name and we get additional outlets to show people what we're all about."

Dogfish Head's initial income stream will consist of 2% of the gross income for the first brewhouse, with that rate to be renegotiated for subsequent locations based upon how the first site performs, and, of course, the sale of its beers, spirits and merchandise to and through the brewhouses.


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