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Starting Your Own Hookah Lounge

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Category : > Retail cigarette & Tobacco License
Posted On : Mon Jan 21st,2019

We will discuss in this article the general regulations to start a Hookah Lounge, but it varies state to state because each state in the USA has different requirements to open a hookah lounge. The permits for the hookah lounge obtain from the local and state authorities.

What is a Hookah Lounge?

Hookah Lounge is kind of a bar which is also called a Shisha Bar like a liquor bar where people come and drink, whereas in the Hookah Bars people come and taste Shisha. It is an interesting business where little food is served along with Hookah and alcohol.

The concept of Hookah Space lounge bar is to provide a high-quality service, so all the customers would completely satisfied and you will be able to get only positive feed-backs from the clients.

Food items generally have a low profit margin business, whereas the liquor and hookah components are the high profit margin businesses, and the combination of all the above components makes it a profitable business.

Choose a right place to open a Hookah Lounge:

An ideal place to open a Hookah Lounge is important like any other business; young people neighborhood is considered an ideal place to start a hookah lounge where people can visit to relax and socialize.

Why a Hookah Lounge is profitable business?

A hookah lounge is a combination of multiple components; such as alcohol, smoking and food items and each component contributes revenue;

  1. Food items motivate people to visit the place, though it is not a full service restaurant.
  2. Smoking components has a low cost of goods and a high profit margin.
  3. Alcohol items have a decent profit margin to make a hookah lounge a profitable business.

Regulatory requirements Business Licenses and permits to start a Hookah Lounge:

Check your local law requirements for indoor smoking regulations, as each state has different regulations for smoking in public places. Some states recognize hookah lounges as exempted businesses that are especially for smoking, but not all states will allow smoking if the business serves food or drinks. You can operate the hookah lounge as an only smoking parlor to make the business work.

Following are the some of the license, permits and documentation requirements for starting hookah bar business.

  • If you will have food or alcohol, you will need a food license and an alcohol license.

  • Legal Entity Setup like Sole Proprietorship Firm/Partnership Firm/Limited Liability Partnership Firm/Private Limited Company

  • Department of Health (DOH) Certificate of Exemption: Check with your State DOH if this exemption exists for you.

  • Occupational License: Obtain this license from the state county where your business will be located.

  • Federal Identification Number:

  • Seller’s permit from the state.

  • Alcohol, Tobacco & Firearms Stamp (ATF): As hookah is a tobacco product, you will be needing it.

  • Tobacco License: In order to sell Hookah services, you need to have a tobacco license properly displays at your business place.


Taxation Requirements:

Taxation on Tobacco Consumption is now very important and increasing in many states. The Food and Drug Administration has recently introduced new warning labels for Tobacco products. Taxes on Hookah consumption includes Sales Tax, Value Added Tax, Excise Tax and Duty Tax. You should carefully take into account the relevant taxation regulations in your state.

Business Insurance requirement:

Since Hookah lounge equipment is more prone to damage due to frequent repetitive use, asset insurance is a must for your business. Further, if you have staff then, workers compensation insurance is required for your business.

Making a Feasibility Plan to decide on various factors:

To become profitable in the market, it is needed to prepare carefully a feasibility plan, which provides detailed explanations of how business management will take place in order to ensure its profitability, as well as return on investment. Therefore, before running a business, it is crucial to have a detailed written plan that indicates the final goal, the path to that goal, and all the difficulties and tricks that can be met on the way to it. The plan provides an opportunity to think about future actions. You also need to include the following in your plan:

  • What infrastructure you already have

  • Where you want to build it

  • What kind of customers you are expecting

  • What's the competition around.

Marketing Strategy:

Create a website or online marketing through any social media platform. This website will present an interface for users to connect with each other. Advertising can also be done on local radio, newspapers and magazines of the locality.

Financial Requirements:

  • It is essential to include the location and the whole thing that is related to starting a new business like layout, furniture (what sort of couches or chairs you are going to provide), carpets, wall hangings and wall decorations, repairing works, other equipment, kitchen, and so on. It is also crucial not to forget about payments for purchasing numerous licenses, permissions and registration procedures.

  • Operational costs have to be considered too. They consist of expenses for public utilities, network facilities and internet providing.

  • It is important to make estimation about expenses for rent, in general location maintenance and wages for staff. Start-up requirements, besides legal help, permits, music license, stationery and rent, consist of expenses for insurance, health and safety regulations.

  • Calculate the predicted break even analysis and projected profit and loss for your newly established business incorporating all estimated costs and anticipated revenue.


Cash Flow For A Hookah Lounge:

The cash flow is very important to run a Hookah Lounge like other businesses, because besides the initial investment for the infrastructure and permits, there should be at least 12-18 cash flow projection. Based on my personal experience, any business is a two year cycle. The first year you learn and the second year you earn. There is fixed and variable monthly cost is involved, such as monthly rent, staff salary, utility bills, permit renewals and other maintenance cost.

How to arrange funds to start a Hookah Lounge?

There are many ways to raise capital or professionals' contributions to start and run a successful business. Few fund raising methods are share below:

Financing/Loan: Loan can be acquired from a bank or the other financial institution which carries a lot of risk, such as if the new experience does not work out, it may push you back years to recover the losses. The interest rate is generally very high and the conditions are tough which may damage your credit if you do not comply it.

Grant Programs: These programs are available on the federal, state and local levels. It is a free money, but has a lot of requirements to fulfill to be eligible for the program. Generally, the waiting period is too long.

To acquire money from the investors to open a Hookah Lounge: A business plan is created to motivate the investors to invest money in the business.

Crowed funding: It is a new concept of generating funds to start a business. It will be like a contribution against selling products and services in the future or help with a community.

Offer a guaranteed compensation to professionals: A certain percentage of the gross receipts can be allocated for the permanent staff and professionals to promote your business. It will create jobs and will motivate the existing staff to stay with you.



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