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

Surly Brewing Co. — the epitome of the phrase "destination beer hall" — is pulling the plug on its enormous southeast Minneapolis entertainment complex.

The plan is to close "indefinitely," with the final day on Nov. 2. About 150 workers will lose their jobs, learning of the brewery's plans days after a group of them informed management of their intent to form a union.

"This space is built for a lot of people, for socializing and getting together with friends," said Surly owner Omar Ansari. "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 impending closure is yet another crack in the state's hospitality industry, hurt by state-mandated measures to help stem the spread of the coronavirus.

Surly's on-site food and beer sales are down 82% over last year, and the business failed to make a profit in July, Ansari said.

The announcement that Surly will close its 350-seat beer hall, beer garden, pizzeria, events center and retail store 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."

With mandates still restricting operations, 40% of hospitality businesses in Minnesota are in danger of closing by the year's end if conditions do not change, a Hospitality Minnesota survey found.

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.

Several dozen Twin Cities restaurants have already closed. Besides Butcher & the Boar, three other four-star restaurants have closed: Bachelor Farmer in Minneapolis, Bellecour in Wayzata and In Bloom in St. Paul.

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 complex — which received about $2 million in federal and county grants for site cleanup — opened four years later.

When the mammoth Surly facility reopened in June under new restrictions, its capacity was reduced to a fraction of the 1,800 people that the fire code allows indoors and out. It had received a Paycheck Protection Program loan for between $2 million and $5 million, according to the Small Business Administration.

Ansari said that the results initially looked encouraging.

"We were busy," Ansari said. "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."

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.

Megan Caswell, who has worked behind the bar at Surly for more than five years, has been a vocal supporter of unionization.

"I was very surprised," she said of the e-mail Wednesday morning informing her of the layoffs. "I anticipated some backlash from the union announcement. I didn't think they would lay us all off and close the beer hall."

Caswell is suspect of the timing of Surly's announcement. The brewery had still been hiring in the past two weeks.

"People are devastated," she said. "They are kind of waiting to see what happens."

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

"Obviously, the timing isn't good, and I understand what people will think," he said. "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."

But Sheigh Freeberg, secretary-treasurer 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.

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.

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.

Lauren Bennett 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.

Smaller breweries have really suffered due to the coronavirus since it is hard for them to properly social distance in their beer halls, Bennett McGinty said.

Some brewery owners in greater Minnesota have told her that they are operating with taprooms 25% to 30% full.

Going into the colder months when breweries won't be able to use their patios, business will get even worse, Bennett 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, Bennett McGinty said.

Some breweries like Bauhaus Brew Labs in Minneapolis 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.

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. … 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."

Rick Nelson • @RickNelsonStrib

Nicole Norfleet • @nicolenorfleet