The hookah lounge (bar) is a facility where patrons share shisha from a communal hookah or nargile. It is a location where tobacco smokers can purchase and smoke tobacco and cigars freely without breaking the law. Most hookah lounges usually provide limited food and alcohol services as a means of increasing their revenue.
Hookahs are water pipes that are used to smoke specially made tobacco that comes in different flavors such as apple, mint, cherry, chocolate, coconut, licorice, cappuccino, and watermelon. Although many users think it is less harmful, hookah smoking has many of the same health risks as cigarette smoking.
The hookah lounge business is part of the global cigar and cigarillos industry and the market size of the industry was estimated at USD 17.45 billion in 2019 and it is expected to reach USD 17.96 billion in 2020. The revenue forecast for 2025 is put at USD 21.02 billion.
Steps on How to Start a Hookah Lounge in Texas
Table of Content
Conduct Market Research
The first step in the market research process for your hookah lounge business will be to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source information that will help you maximize your business, information that will help you know what your potential market will be looking out for from a hookah lounge, and also help you operate your hookah lounge with less stress and of course, build the business to profitability.
a. Who is the Target Market for a Hookah Lounge?
If you are thinking of opening a hookah lounge business, then you should make target demographics all-encompassing. It should include entrepreneurs, celebrities, tourists, and every adult in the neighborhood where your hookah lounge will be located.
b. Is Hookah Lounge Business a Profitable Business?
Yes, the hookah lounge business is very profitable. Statistics show that a small hookah lounge generates an average of $2,109 monthly sales with a monthly gross profit of $728 on a gross profit margin of 34.5 percent.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to hookah lounges because the hookah lounge business is a subset of the cigar industry.
d. Who are the Major Competitors in Texas?
- Velvet Hookah Lounge
- Luxor Hookah Lounge
- Cairo Hookah Lounge
- Hookah Hut Lounge
- Zodiac Hookah Lounge
- Texas Hookah Premium Showroom
- Blue Sky
- Pharaohs Hookah Lounge- Irving, TX
- LUXX Sport Hookah Lounge
- Volume Hookah Lounge
- Vee Hookah Lounge
- King Tut Hookah Lounge
- Abi Hookah Lounge
- Casanova Hookah Lounge
- Uptown Lounge
- Luxor Hookah Lounge Hurst
- Pyramids Hookah Lounge & Bar
- Mirage Hookah Lounge
- Q & J Hookah Lounge.
e. Are There County or State Regulations or Zoning Laws for a Hookah Lounge in Texas?
Yes, the FDA regulates all tobacco products, including hookah, e-cigarettes, dissolvable, smokeless tobacco, cigarettes, all cigars, roll-your-own tobacco, pipe tobacco, and future tobacco products that meet the statutory definition of a tobacco product.
Please note that there are county or state regulations and zoning laws for hookah lounges, and players in this industry are expected to work with the existing regulations governing such business in the county or state where their business is domiciled.
f. Is There a Franchise for Hookah Lounge Business?
Yes, there are franchise opportunities for hookah lounge businesses, and here are some of them;
- Puff City Franchise
- Casa de Montecristo
g. What Do You Need to Start a Hookah Lounge in Texas?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Shop facility
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Suppliers of cigars and related products
- Startup Capital
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a hookah lounge business are;
Creative Hookah Lounge Business Name ideas
- The Lords© Hookah Lounge and Bar, Inc.
- Houston Connect® Hookah Lounge, LLC
- Axle Morph© Hookah Lounge, Inc.
- Smoke Solutions® Hookah Lounge and Bar, Inc.
- Melting Pot™ Hookah Lounge, Inc.
- Jerry Benson™ Hookah Lounge, LLC.
- Drill Blaze© Hookah Lounge, LLC
- Jonny Moore® Hookah Lounge and Bar, Inc.
- Green Leaf© Hookah Lounge, Inc.
- Martins© Hookah Lounge and Bar, Inc.
- Stone Hottie® Hookah Lounge, LLC
- Coast Line® Hookah Lounge & Bar, LLC
- Puff Daddy™ Hookah Bar, LLC
- Thomas Gusto© Hookah Lounge, Inc.
- The Don’s Place® Hookah Lounge, Inc.
- Santos Marcos™ Hookah Bar, Inc.
- Greenish Wrap™ Hookah Bar, Inc.
- Cuban Guys© Hookah Lounge and Bar, Inc.
- One Stop® Hookah Bar, LLC
- Friendly Colony™ Hookah Lounge and Bar, Inc.
Register Your Business
a. What Type of Business Structure is Best for a Hookah Lounge in Texas?
Although there are several options when it comes to the business structure of a hookah lounge business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Hookah Lounge in Texas?
- General Business License
- Health and Safety Permit
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections
d. What Type of Certification is Needed to Open a Hookah Lounge in Texas?
You don’t need any certifications to open a hookah lounge.
e. What Documents are Needed to Open a Hookah Lounge in Texas?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a hookah lounge business, usually you may not have any need to file for intellectual property protection or trademark. This is so because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Hookah Lounge in Texas?
To be truthful, the cost required to open a hookah lounge may vary significantly. But on average, you should budget anything from $120,000.
b. What are the Costs Involved in Starting a Hookah Lounge Business
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services – $1,200.
- Marketing promotion expenses – $1,200
- Insurance (general liability, workers’ compensation, and property casualty) coverage at a total premium – $2,400.
- The cost of accounting software, CRM software, and Payroll Software – $1,500
- The cost for payment of rent for 12 months at $1.76 per square foot – $65,600.
- The cost for facility remodeling – $25,000.
- Other start-up expenses including stationery – $500
- Phone and utility deposits will cost – ($2,500)
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $30,000
- The cost for start-up inventory – $16,027
- Storage hardware (bins, utensil rack, shelves, glasses case) – $3,720
- The cost for serving area equipment (glasses, flatware) – $3,000
- The cost for store equipment (cash register, security, ventilation, signage) – $3,150
- The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, Sound systems, tables and chairs et al) – $8,000.
- The cost of launching an official website – $600
- The cost for our grand opening party – $3,000
- Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Hookah Lounge Business in Texas?
- The size of the hookah lounge business
- The choice of location
- The required licenses and permits
- The type of facility
- The brands of cigars and accessories
- The cost for branding, promotion, and marketing of the hookah lounge
- The cost of furnishing and equipping the hookah lounge
- The cost of the insurance policy covers
- The cost of registering the business
- Source of your supplies and ongoing expenses
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the lounge
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
Actually, it is not compulsory to build a new facility for your hookah lounge, but if you have the required finance, it will pay you to build your own facility. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.
e. What are the Ongoing Expenses of a Hookah Lounge Business?
- Supplies (inventory expenses)
- Utility bills (internet subscriptions, phone bills, signage, and software renewal fees et al)
- Salaries of employees
f. What is the Average Salary of your Staff?
- Shop Manager (Owner) – $45,000 Per Year
- Cigar Rollers – $29,630,000 Per Year
- Sales Boys and Sales Girls – $26,100 Per Year
- Security Guard -$24,000 Per Year
g. How Do You Get Funding to Start a Hookah Lounge in Texas
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Source for soft loans from your family members and friends.
Write a Business Plan
a. Executive Summary
Our hookah lounge is a neighborhood hookah lounge that will be located in a fast-growing community in San Antonio, Texas. We have been able to secure a one-year lease to a vacant shop within the city’s largest shopping mall. We are fortunate to secure a facility that has an option of renewal for 5 years, a rate that is favorable to us.
Our hookah lounge is designed to meet both the health and safety standards recommended by the local authority. Our customers are going to be treated with good music at all times.
b. Products and Service
- Sales of traditional and herbal shisha
- Sales of cigars
- Sales of tobacco-related accessories
- Sales of other tobacco products
- Sales of food and drink
- Providing a cigar-friendly smoking environment
c. Mission Statement
Our mission is to establish a hookah lounge that will make available different types of shishas, and all the brands of cigars, tobacco products, electronic cigarettes, accessories et al at every given time.
Our vision is to establish a standard and secured hookah lounge in San Antonio, Texas that will be the melting pot of all lovers of cigars and other tobacco products.
d. Goals and Objectives
The goals and objectives of a hookah lounge are to provide a retail outlet where smokers can go to smoke shisha and buy their preferred cigar brand and smoke freely without the fear of being embarrassed, arrested, or fined.
e. Organizational Structure
- Shop Manager (Owner)
- Cigar Rollers
- Sales Boys and Sales Girls
- Security Guard
a. SWOT Analysis
- Ideal location for a shisha bar
- Highly experienced and qualified employees and management
- Excellent and detailed customer service
- Wide range of assorted cigarettes, tobacco, and cigar accessories
- Excellent facility, ambiance, and perfect location for a shisha bar
- Lack of economies of scale which may slightly affect the prices of our products
- Financial constraints
- A new business that will be competing with well-established bridal shops.
- Inability to retain our highly experienced and qualified employees longer than we want.
- Increase in the number of people who are interested in trying out hookah
- Online market, new services, new technology, and of course the opening of new markets.
- San Antonio is one of the cities in the world where social life is at its peak.
- The arrival of a new hookah lounge and smoke shop within our market space
- Unfavorable government policy and regulations.
- Steady wage expenses and increasing prices of gas will reduce industry profitability.
- Economic uncertainty
- Liability problems.
b. How Do Hookah Lounges Make Money?
Hookah lounges make money by selling the following products;
- Traditional and herbal shisha
- Tobacco-related accessories
- Food and drink
- Providing a cigar-friendly smoking environment
c. Payment Options
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your hookah lounge by sending introductory letters alongside your brochure to corporate organizations, transport companies, households, socialites, celebrities, and other key stakeholders throughout the city where your hookah lounge is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, and LinkedIn to get your message across
- Create a basic website for your business so as to give your business an online presence
- Directly market your products.
- Join local hookah lounge business associations for industry trends and tips
- Provide discount days for your customers
- Advertise our business in community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Product/Service?
Customers can be charged about $10 for a single-person smoking experience, $15 for a three-person smoking experience, and $20 for a four-person smoking experience. Each smoking “experience” includes one hookah to be smoked.
b. How Much Profit Do Hookah Lounge Business Owners Make a Year?
It depends, but available reports show that hookah lounge owners make over $55,000 annually.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the hookah lounge business
- The types of products retailed in the shop
- The location the hookah lounge business is covering
- The management style of the hookah lounge business
- The business approach of the hookah lounge business
- The advertising and marketing strategies adopted by the hookah lounge business
- The number of years the hookah lounge is in business
d. What is the Profit Margin of a Hookah Lounge Business?
The profit margin of a hookah lounge business is not fixed. It could range from 25 percent to 55 percent depending on the type and brand of cigar and other tobacco products retailed in the shop.
e. What is the Sales Forecast?
Below is the sales forecast for a Hookah lounge business. It is based on the location of the business and other factors as it relates to such startups in Texas;
- First Fiscal Year: $220,000
- Second Fiscal Year: $360,000
- Third Fiscal Year: $440,000
Set Up your Shop/Office
a. How Do You Choose a Perfect Location for Hookah Lounge Business?
- The demography of the location especially as it relates to people that smoke shisha and cigars
- The demand for shisha and related tobacco products offered by hookah lounges in the location
- The purchasing power of businesses and residents of the location
- Accessibility of the location
- The number of hookah lounges, vape shops, and cigar lounges in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What City is Best to Open a Hookah Lounge Business?
- Plano, Texas
- Dallas, Texas
- Austin, Texas
- Fort Worth, Texas
- Houston, Texas
- San Antonio, Texas
- El Paso, Texas
- Arlington, Texas
- Corpus Christi, Texas
- Grand Prairie, Texas
c. What Equipment is Needed to Operate a Hookah Lounge Business?
You should be prepared to purchase hookah bowls (also known as the hookah head or shisha head), cigarette holders, cases, shelves and racks, cigar accessories and receipt issuing machines, Sound System (For playing music), Point of Sale Machines (POS Machines), CCTV Cameras and Flat Screen TVs.
You will also need computers (laptops), internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst others and all these can be gotten as fairly used.
When it comes to hiring employees for a standard hookah lounge business, you should make plans to hire a competent shop manager (owner), cigar rollers, sales boys and girls, and security guard.
Launch the Business Proper
No hookah lounge business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.
With a proper launching of the hookah lounge business, you will officially inform people in your city that your hookah lounge is open for business.
a. What Makes a Hookah Lounge Business Successful?
- Choose a good location to launch the business
- Make sure your shop is stocked with different flavors of shisha, brands of cigars, tobacco, and cigar accessories
- Throw an open house grand party before officially opening the hookah lounge
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your hookah lounge
- Leverage all available online and offline platforms to promote your hookah lounge
b. What Happens During a Typical Day at a Hookah Lounge Business?
- The hookah lounge is open for the day’s work
- Customers are attended to
- Deliveries of orders are made
- Stocks are taken and reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Hookah Lounge Business?
- Customer services skills
- Interpersonal skill
- Accounting and bookkeeping skills
- Business management skills
- Bargaining skill
- Work experience in a bar environment
- Experience in managing people
- Experience in business administration
- Experience in handling hookah bowls and tobacco-related products.