You may adore the slight rush you get from nicotine or the smooth smoke that comes from glass or metal water pipes, but if you plan to open a hookah bar or a hookah lounge, you need to keep in mind that you and your customers are in the minority. Tobacco and nicotine products are deemed by many to be a public menace and lawmakers are constantly reevaluating whether or not your future establishment should be legal.
Know the Law Regarding Hookah Bars
Before you do anything else, before you start looking at supplies, before you start doodling logos, before you even think about clever bar names, you'll need to know the law surrounding tobacco products, non-tobacco products, flavored nicotine products and smoking bars. You'll need to know the law intimately for your state, county and municipality.
The law can vary significantly from one county or state to another. In King County, Washington, for example, hookah bars are illegal. In Massachusetts, you will need a state license for a smoking bar. California laws in 2019 are actually unclear and the state has yet to firmly state whether a smoking bar that serves food and refreshments is legal or not right now. Find out what restrictions there may be for your location, like how close it can be to a school or playground.
This touches on a second important point. You'll need to keep an eye on any potential changes in the law. If hookah bars are legal in your region today, a change in public opinion due to new statistics on teenage smoking or new health warnings about tobacco, nicotine or related products could cause a change in the law, putting you out of business.
Work on Your Business Plan
Your business plan should include your strategy on how you will make money and market your hookah lounge. Because your business will depend primarily on hookah rentals, the most important business strategy evaluation criteria are your costs and rental pricing.
Calculate Your Fixed Costs
Find a good location that you can lease and find out how much it will cost including rent, insurance and utilities each month. Add to this amount how much you will pay your staff each month.
Calculate Your Startup Costs
Estimate how much it will cost you to buy furniture, signage, your initial hookahs and supplies, as well as the cost to decorate your hookah bar. If you're going to finance these costs, add your monthly payments to your fixed costs. If you're paying for this out of pocket, divide the amount by 24 to 60 months. Add this amount to your fixed costs.
Calculate Your Variable Costs
Estimate your variable costs for each hookah you will rent, including the cost of shisha, mouth tips and sales taxes. Calculate how many times you can rent a hookah before it will need to be replaced and then divide the cost of a hookah by that number of rentals.
Add Your Profit
Decide on how much you need to make each month to make your business worthwhile, or to at least allow you to keep a roof over your head. This is your profit.
Calculate Your Rental Price
Determine how many hookahs you can expect to rent each month, then divide your fixed costs and profit by this number. Next, add your variable cost per hookah. This number is how much you need to charge for each hookah rental.
Recalculate as Needed
If the cost of each rental isn't reasonable, you will need to reduce your costs, reduce your profit expectations, or find a way to bring in more business each night. You should definitely do some market research to determine how much other hookah bars charge and what people in your area will be willing to pay.
- To obtain financing, you will need to develop a detailed business plan. Your local Small Business Administration can help. To give your business idea more credibility, hit the streets and conduct market research, which you will include in your business plan. Interview college students and learn what they look for in a hookah bar, such as refreshments, preferred flavors and entertainment.
A published author, David Weedmark has advised businesses on technology, media and marketing for more than 20 years and used to teach computer science at Algonquin College. He is currently the owner of Mad Hat Labs, a web design and media consultancy business. David has written hundreds of articles for newspapers, magazines and websites including American Express, Samsung, Re/Max and the New York Times' About.com.