Oct 23, 2019
By bike or by boat, it is the best pub crawl in town. The Milwaukee Pedal & Paddle Tavern has become the #1 tour in town in just a few, short years. Our guest, Derek Collins shares the ups and downs of a start-up business and how he and his partner, Ryan Lloyd have expanded their bike and boat bars.
Pedal Tavern Origins
When Derek’s partner, Ryan, called him to tell him about a bike bar up in Minneapolis they needed to have in Milwaukee, Derek thought his friend had gone nuts. Ryan replied, “it’s super fun and people will pay to do it.” So, in 2010, Derek and Ryan invested in their first bike bar and began operating the Pedal Tavern.
The Pedal Tavern is a 16-seat, BYOB bike bar that is powered by riders who must pedal. The two-hour tours take riders to three to four pubs and restaurants of their choice in the Third Ward and Walker’s Point. Derek says they have partnerships with about 20 places that offer drink and food discounts to Pedal Tavern visitors.
In the beginning, Derek operated every tour and business boomed, so the partners put all that money into a second bike tavern and kept reinvesting until they had five.
Controversy Threatens Business
When the Pedal Tavern applied for their fifth liquor license in 2012, the City of Milwaukee took notice and pulled the company’s liquor license. According to Derek, they were in a gray area that allowed the company to fall under the category of a “green limo.” The city argued since the bikes were not motor operated, they could not be considered a limo.
The Milwaukee Journal Sentinel printed this news on the front page with the headline, “Tapped Out.”
The news was devastating to the company. People wanted to be able to drink on the Pedal Tavern tours. In 2013, business dropped by 50 percent. At the same time, Derek and Ryan were buying drink tokens from the bars to attract ridership. With minimal profit margins, they were not going to able to operate much longer.
A compromise with the City of Milwaukee saved the fate of the Pedal Tavern. It was agreed to limit the number of drinks to three per person and no hard liquor. With their liquor license reinstate, the Journal Sentinel ran another front-page story and by 2014, ridership was back up and the company was back doing business better than before.
Reinvestment Ignites Growth
Last year, the company expanded to have boat tours as well. They added Paddle Taverns that, like the bikes, were BYOB and took riders on tours down the Milwaukee River, originating at a local bar, called the Harp. Each boat is manned with a captain and first mate. Riders are encouraged to pedal the boats; however, the boats also have a motor. Fifteen to 20 minutes into the tour, the riders typically stop pedaling, turn up the music and enjoy the tour and each other.
Derek says they continue to invest back into the company. They’ve started an electric, Duffy boat company that individuals can rent and take out on the water. They also offer kayak rentals and have entered into another partnership with John Revord, owner of the Boone & Crockett bar and Mitch Ciohon, owner of Taco Moto, to purchase the Cooperage at 820 S. Water St. The building has three floors. The first floor has 11,000 sq. ft., and includes the Boone & Crockett Bar, a commercial kitchen and event space for weddings and concerts. The second and third floors are both 5,000 sq. ft. The second floor has an Air BnB, personal office space an art studio. The third floor is currently vacant, but Derek says they plan on creating a co-working share space.
One of the beauties of having such a unique business is the buzz it creates. The controversy over the loss of the liquor license may have hurt at first; however once reinstated, it also created a lot of awareness for the company. Derek says they started their company with on Groupon offer in 2010, when Groupon was new and very popular. These days, word-of-mouth, visibility on the street and water and user-generated content on Facebook and Instagram. The company does advertise on Google AdWords and Yelp, and more recently radio ads within radio auctions.
Derek says investing in the bike and boat tour business isn’t cheap. The pedal taverns are about $45,000 each and the boats are roughly $120,000, plus an additional $20,000 in operating expenses for each business. If you are interested in doing this in other markets, he says there are some requirements you need to consider. The first is city approval for a liquor license. This concept doesn’t work without alcohol on board, even when the tours take you to neighboring pubs. The second is street access. In Chicago, the pedal tavern would not be allowed because the streets are too busy. And third, you must have the participation by the neighboring bars, restaurants and residents.
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