Pedal Pub has its eye on a national expansion

When home-brewing friends Al Boyce and Eric Olson saw a picture of a Fietscafe in Amsterdam, they were hooked.

They bought one of the vehicles — which looks like a trolley car bar and is powered like a bicycle — and in 2006 Pedal Pub was born, launching an industry category in the U.S.

The company now has licensing agreements with more than 40 small and large operations — from Sip-n-Cycle in Rapid City, S.D., to PedalTavern in Milwaukee, Sprock n' Roll in Memphis, Tenn., and Social Cycle in San Diego — that use the vehicles as the foundation of their entertainment or tourism businesses.

Boyce and Olson sold the business last year to Proprietors Capital Holdings (PCH), which is based in St. Paul, and the business is now ready to increase its investment in partner companies by offering full franchises, which also include branding and corporate support. While PCH partner Shane Dunn, who serves as Pedal Pub's chief development officer, would not disclose terms of the deal, the sale gives Pedal Pub access to the capital needed to expand.

"We knew if this fragmented industry — if you could put it under an umbrella brand — that's what would be needed," Dunn said. Pedal Pub is four times larger than its next three competitors.

One of the reasons for Pedal Pub's success, both with its local operation and as a licensee and distributor of Fietscafes, is its timing. The company hit the wave of "experiential tourism." Research shows millennials and Gen Zers want to spend more money on experiences — both on vacations and outings closer to home — than on things, and cities and businesses across the nation are trying to capitalize on that by hosting events from free concert series to pub crawls and foodie tours.

With Pedal Pub, a group rents the vehicle — two hours in Minneapolis for $385 to $440 — or signs up for a curated tour of some sort, like a pub-crawl. Two staff members come along, one to drive and one either to bartend or to make sure the group stays under control and safe. In Minneapolis, it's strictly BYOB, but other operations provide beverages.

The plan is for Pedal Pub to have 1,200 "bikes" operating by 2023, Dunn said. Each franchise starts with two vehicles and could have more, so the number of franchises would be closer to half that.

With the Minneapolis party bike operation being the first in the U.S., Minnesota and Minneapolis laws are a model for other cities. The Pedal Pub founders successfully lobbied the state to put their vehicles in the same category as limousines and tour buses, which allowed for alcohol to be served. As the company grew, and there were both complaints about noise or litter and general concern from the city of Minneapolis about safety, Pedal Pub negotiated the local regulations that it follows.

So one advantage to a potential franchisee in a city that hasn't had a Pedal Pub is guidance on getting the regulations passed — although Dunn said he has been surprised at several cities reaching out to him asking how to get a Fietscafe there to boost their tourism and entertainment options.

In general, the response to the franchising has been positive, Dunn said. Pedal Pub is fielding inquiries from all over North America and even some overseas.

In some markets, there have been more than one prospect, which gives Pedal Pub an advantage as it chooses business partners. For example, the partner needs to be knowledgeable in the experiential tourism field and have the ability to forge partnerships with restaurants and shops. Second, Pedal Pub requires that partners have $150,000 minimum in liquid capital.

First-year startup costs range from $76,959 to $266,999 and include two vehicles plus the costs for insurance, storage, marketing and corporate support costs. Training is done — and drivers certified — by Pedal Pub's Nashville licensee, Pedal Tavern.

Dunn was encouraged at feedback from some franchise conference attendees over the past year who commented on its affordability. Also, unlike a restaurant franchise that may take two years before it's even open, turnaround can be swift with Pedal Pub. At the company's newest franchisee in Helen, a vacation town in northern Georgia, the papers were signed four weeks ago and the operation was up and running July 4.

Pedal Pub has started offering Fietscafe models that have electric motors to help the bikers up a hill. Two of those vehicles will be introduced in the Minneapolis operation over the next year, Dunn said.

Pedal Pub Twin Cities, which offered winter rides for the first time during Super Bowl week in February, is the only tourism operation owned by the parent Pedal Pub.

Catherine Roberts • 612-673-4292