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Is A Hookah Bar Really Profittable?


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#1 KyleTheJustin

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Posted 08 December 2009 - 12:00 AM

So my close friend and I are thinking of starting a hookah bar in our college town to compete with the shitty one that students flood to. Obviously this place is making enough money to stay afloat, and they have a serious number of people working for the place, but does a hookah bar really rake in that much money? I mean, I know a lot of you guys out there can really crank out some numbers, so what kind of profit margin are we looking at for a standard hookah bar? Hypothetically speaking, of course. The reason I'm concerned about this, as any small business owner should be, is due to the fact that I would have to take out a loan to open the bar and would look to pay that money back as soon as possible. Of course there will be fountain drinks available to buy, but we're looking to price the hookahs around 10-12 dollars and we're sort of leaning towards AF or Al Waha for our shisha due to price and reliability. We know that the drinks will bring in a ton of money, at least more than enough to cover the 30 dollar bags of syrup that produce over 300+ glasses of each drink. That being said, what do you guys think? We'll both have our "other," less interesting jobs that we'll do during the day to cover our expenses at home, but do you feasibly think we could pay off a loan of 10k-20k in a years time while still keeping an active stock on products? Oh, and we're leaning toward Coco Naras or some other form of natural coal, purely because we want to give our customers a good smoke first and foremost. Before anyone asks, yes, we'll be using Kalil's, so that expense, along with hoses, shisha, coals, foil, and drinks will be covered by the loan money.

Give me your two cents! We're really looking to put some numbers together this winter, write up a plan, and possibly have our loan and location picked out by summer and open for business:) Anyone who owns a hookah bar and purchases all of their products, your input is HIGHLY valued.
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#2 KyleTheJustin

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Posted 08 December 2009 - 12:01 AM

Oh, and he and I are the only two that plan to work there--at least initially.
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#3 hookah hippie

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Posted 08 December 2009 - 12:28 AM

The amount of profit you stand to make is dependent on of course number of sales. The best way to get the sales is advertising as you said there is another hookah bar that people go to you need to get those customers.

You need to figure out your total cost per bowl and operation and figure out how much it costs you to be open any given day lets say it costs you about 80 dollars a day to keep yourself open. Plus $2 for a bowl and you sell them at $10 you must sell about 10 to break even. But on good nights I would say a big hookah bar could serve close to 100 hookahs if not more.

I also would like to point out that a two man operation will be extremely stressful. I have worked at a hookah bar on busy nights with only one other employee and it was hell.

Good Luck
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#4 Vladimir

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Posted 08 December 2009 - 12:55 AM

Opening a business like a hookah bar is probably not advisable as a college project/hobby, I don't own a hookah lounge, but I do own a [small] business so I do know a little bit what I am talking about.
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#5 Rani

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Posted 08 December 2009 - 01:00 AM

Two people you need to talk to..... Eric and Mushrat. Also Costi. They've all been there, done that, and have the experience to write the book.

'Rani
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#6 Jacob Shock

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Posted 08 December 2009 - 01:12 AM

ive thought about opening a hookah bar. ive been thinking alot and have figured some stuff out. ill give you one tip of advice, then let the guys who actully own one to tell you why you dont wanna do it.

its not something that is to be done just cause you wanna be the guy who people pay to let them smoke. you need to be 100% serious and so do all your friends. as a side project you will probably fail, or end up lossing alot more than you make. if you have competion, they will probably laugh at you for 3 months until you go out of buisness. you need to invest alot of time and money that no college kid has. and you will here this from mushrat, eric, and costi. ive done a massive amount of research and at this point in time in my life it would be stupid.

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#7 liquidglass

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Posted 08 December 2009 - 01:45 AM

Hookah Bars are profitable (if you run them right)

I was about 2 inches away from owning my own bar but only got half the money I wanted (not needed) to open it. I was going to try to get about 50k together for it but the loans I tried to apply to cover what I didn't have weren't partial to tobacco endeavors. Looking back I'm glad but at the same time hate I couldn't get it up and running.

Here's my 2 cents for what it's worth.

1) you'll want to have enough money to cover 6 months to a years worth of rent. Most small businesses don't post profits until 1-5 years into operation. So as long as the loan is low interest this will work to your benefit.

2) also figure out the costs of ongoing costs such as electricity, wifi, water, etc. try to have a few months covered before you even open the doors.

3) costs of hookah and supplies initially are sunk costs. So if you go under, you're stuck with it. Consider if you can afford to lose the amount of money you're spending to open up.

3b) you need to look into air purifiers to keep the air clean enough for those that aren't into smoking to join their friends who do smoke. You shouldn't need anything really expensive just something to clean the place up at night so it's brand new the next day.

4) Look into the various licenses that you'll need along with restrictions based around food products. For example I could serve prepackaged food without needing a health inspection as well as slushies etc. But certain foods/drinks need proper licenses.

5) GET AN ACCOUNTANT!! Most people don't consider this when opening a business. But if something goes wrong with taxes, or you get audited. You're liable even if you have no clue what you're doing. Plus honestly with a 2 person job it's going to be a big deal keeping up with the hookah bar much less keeping an accurate track of receipts and purchases.

6) Sell hookahs and supplies. Being local you may not get as many customers in the bar but they'll def be back for supplies once they buy their own.

Side notes

- consider a loyalty card (you know 10 bowls = 1 free bowl, etc)

- see if you can partner up with another successful business in the area that is Non-hookah related. I was going to partner up with a local coffee shop that the students here love. They would offer discount cards or just advertisement for me and I would offer the same for them as well as allow their products exclusively to be brought into my lounge.

- think about holding poker/game nights. This is not only a chance to make money but a great way to advertise. Yes gambling in your state is probably illegal. BUT there are ways around it. For example. Have a texas hold-em night. With an entry fee. Then the winner gets a $200 gift card to the resturant/store of their choice. By not having a cash prize it's not legally gambling and should go over great with the college crowd.

- way off in left field is my personal favorite. Roombas. They can clean up the floor each night while you take care of everything else. Plus they even have the scooba which will mop the floor (i have one, it's awesome).
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#8 Bulldog_916

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Posted 08 December 2009 - 05:51 AM

I couldnt open a hookah bar just because it would kill my enjoyment of the hobby. I'd open a little store or something like a cigar store where you can smoke inside as long as you make like 70% of your money on selling the tobacco or supplies. That way I can teach people how to properly do things and have them buy good stuff at a good price and be able to smoke it well.
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seriously, i can't stop holding this thing in my hand. which is scary.

she just likes it harsher then i do.


#9 ih303

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Posted 08 December 2009 - 07:08 AM

Trust me when I tell you it's not as easy as you think.

Also, there are too many variables involved for anyone to give you any real information on how successful you may or may not be. We get people coming into our lounge all the time that think all they need is some couches, a few hookahs, and some tobacco to start a lounge. Simple, right? There are a lot of places that do just this and make some money for a while. But running under the radar like that only lasts for so long and the consequences can be painful. If you do choose the legitimate route, it's expensive and takes a lot of time to set up.

In the end, all you are is another small business owner serving an uber-exclusive market niche. That's why a lot of lounge owners, including ourselves, branch out to food and/or booze. These are all things you have to keep in mind.

If you decide to do it, good luck. Hopefully you won't become just another statistic.
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#10 KyleTheJustin

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Posted 08 December 2009 - 09:37 AM

I mean, to be honest, I've always been interested in opening a bar, but since I started smoking hookah, it just seems like the right thing to do. I live in Ohio, where, to the best of my knowledge, we disown any form of smoking and drinking in the same establishment. I wish it were different, because I would for sure offer drinks and hookah, but with that comes increased risk. It's a lot to think about, and we do know a good deal about how a hookah bar runs, but I'm glad you guys are sensible enough to offer up some good solid advice. As for a college hobby/project, I've done my initial 4 years and I'm onto Grad school, so I'm mostly just looking for something to occupy my time in the evenings and make some extra cash doing something I love!
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#11 cotsi95

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Posted 08 December 2009 - 10:28 AM

1st. Rani its coTSI not STI....sorry its a Mitsubishi vs. Subaru thing tongue.gif

2nd. Before I even start, a hookah bar is a BUSINESS! The purpose of a business is to make the most amount of money while serving your customers. NOT being a place where people can come smoke for nothing. That is why bars charge more then it costs for you to smoke at home, We have to pay taxes, employee wages, employee taxes, Rent, Utilities, AND make enough money to support our own living! That being said id love to answer any questions you might have to the best of my abilities.

3rd. There are a few things you need to figure out law wise before you even start thinking about opening, since the laws can make or break you. In Colorado there is a smoking ban, In all buildings. Now that being said there is also an exemption (99% thanks to cigar bars with big wigs on city counsels that like to go there) that if 70% of your sales come from tobacco and you are a retail tobacco outlet you can offer "in house sampling." Thats not saying that you have to sell 70% shisha to sell a bowl to someone to smoke there, Since when u offer in house "sampling" it is a tobacco sale, so therefore all of you sales can be sampling, (This is where 80% of your profit comes from BTW.)

There are also local laws that you have to look into, such as ventilation regulations, For instance in Fort Collins there is no regulation for ventilation for our lounge, But in Boulder there is. Now that might not seem like a big deal but when its going to cost you around 5k-8k IF YOUR LUCKY to do your ventilation it becomes a bigger deal. Also there is a specific hookah bar ban in Fort Collins, that means us (Narghile Nights) and Algiers are the ONLY 2 bars that will ever be here since we are grandfathered in. If we or they go under, thats it no more hookah here. But in Boulder there is no such law. When i went to the city mangers office they gave me a Hookah Bar regulation sheet. So each State and each City is different.

Now lets say that you looked into the laws, you can have a hookah bar (All it takes is a tobacco retail license in Colorado). There are no laws regarding ventilation, and no out right bans on hookah bars. Sweet! Step 1 done.

Step 2! How are you going to pay for this? Get a business loan DUH! WRONG!!! 95% of the banks wont even look at you if its a tobacco related business. Because if you go under what are they going to seize to repay your loan? Shisha, hookahs?! ya no. So your only options for getting the money is 1. Private investors and 2. Personal loans. Private investors are hard to find but if you know the right people then it can be relatively easy. You also need to look into how much this is going to cost. The biggest thing you are going to spend your money on is rent. Because when you sign a lease you not only are responsible to pay rent every month. But if the business goes under you PERSONALLY are responsible for the rent. So if you pay 3k a month in rent, which rent differs WIDELY by state/ city, and your sign a lease for 3 years with an option to renew at the end you personally owe your landlord $108,000 over the next 3 years. That is a HUGE burden, and it takes a lot of balls to sign that lease knowing that if you fail you pretty much have to declare personal bankruptcy to get out of the lease. But lets say you found the money to start! YAY! then you found a place where the landlord will let you start it with a decent location and decent rent. Awesome! now what?

Renovation time! Bet you didnt think of this when you we deciding what shisha, coals and hookahs you were gonna have! The MOST important thing when it comes to hookah bars is ATMOSPHERE! There are shitty looking bars out there with the BEST hookahs that close down because no one wants to go sit on an old dirty couch, and there are hookah bars out there with the NASTIEST tasting hookahs but the best seating and atmosphere that are raking it in. Why? ATMOSPHERE! Now this is one of the many areas where I cant really help you, since its a personal preference on what you think the area wants more in a hookah bar. Do they want a nice homey/ chill vibe? or do they want a classy night club/ modern vibe? Its up to you but choose wisely because if your wrong it can be disastrous. So you've gotten your space renovated, youve ordered your lounge shisha, coals, hookahs, and your retail stuff! Now what?

Pricing this can make or break you. You start out too high and noone will come, your start out too low and everyone will be there but you wont make a dime. And it is VERY hard to raise prices on college students. VERY HARD! I personally recommend charging per person vs. per hookah with a max # of people on a hookah. You make more money per hookah and its alot easier when it comes time for people to pay. i also recommend including tax in everything you sell. It streamlines things tremendously! Imagine a group of 5 people come in to smoke. 1 lounge offers a hookah at $10 with a max of 3 people on it, after 3 people you have to buy a 2nd hookah. The other lounge offers a hookah at $7 per person and if you come in with 3-5 people you get 2 hookahs. Which bar are you going to? One that makes you pay for 2nd hookah or the one that GIVES you a 2nd one for free?

Now if you look at the business side of it both are sending out 2 hookahs but the lounge that makes them buy a 2nd is only getting $20. Where as the one that gives the 2nd hookah is making $35 for the same amount of people that are smoking. Remember this is a business not a charity, the objective is to make the most money you can without sacrificing what is important to you.

There are so many other things that you have to decide when opening a lounge, Advertisement, How many employees are you going to have, coals, shisha, drinks, music. Etc. Its very time consuming. But the MOST important thing you have to remember is have fun. This is a fun job, stressful yes! but FUN. In the end do what you love, I think i can speak for Mush and Eric when i say that they do what they love everyday! And that is the most important thing.

If you have any other questions that I can help you out with fell free to PM me or ask them here. I didnt cover 70% of the things that you will have to decide on if you decide to open a lounge, but theres enough there for you to see what truly does go into opening a lounge. Its a lot more then a bunch of hookahs and a couch.

-Wade


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#12 ih303

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Posted 08 December 2009 - 10:46 AM

+1 on what cotsi said. Although I disagree on the pricing. The easiest way we have found to do it is to charge per hookah with no limit of people. It generally works out pretty well. Charging per person is far too complicated, at least for us. We have a lot of people coming and going which would make it very difficult to track. We handle everything like a resturant where you order when you get there and pay for everything at the end of the night. We have a pretty good system. Still working out some minor kinks, but ultimately it's really worked for us.
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#13 cotsi95

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Posted 08 December 2009 - 10:55 AM

well it all comes into your staff, We do the same, order when u get there pay when you leave. Yes it can be difficult to track whos smoking and whos not but if you have a good staff it works well. We charge per person simply for the fact that you make more money per hookah and people dont stay all night. If you have a group of 10 come in and order 1 hookah that costs $20 you only make $2 per person smoking so of course there going to stay all night and smoke and in the end it might only cost them $6 per person. Now we can make that in the time frame of 1 hookah as opposed to 3 by a per hookah pricing. But every hookah bar is different and NONE of them are perfect....we besides Odyssey of course smile.gif
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#14 Bulldog_916

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Posted 08 December 2009 - 02:24 PM

All that stuff is why I'd rather open a shop under the same laws as a cigar bar and have people be able to sample the smoke after they purchase. We have tobacco shops here that allow smoking inside them all day long. There arent even really ventilation requirements for some of the places. You get the best of both worlds. People can come in, buy a hookah or some tobacco and stay and smoke if they want.
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seriously, i can't stop holding this thing in my hand. which is scary.

she just likes it harsher then i do.


#15 redjako

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Posted 07 April 2011 - 04:51 PM

Most small retail shops go $100-$300K in financing needs to supplement 3 years (not 1-2 years) of losses.

Unfortunately for my friend who has an ice cream shop ($150k in startup costs, and that was with 30-50% deals on equipment), its only enough for two years and he is FLOATING barely in break-even.

Everything you think you know about a business, double it. SBA's aren't loaning, banks are even worse...its rough out their.
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#16 nun

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Posted 07 April 2011 - 07:22 PM

location location location
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#17 bigasif

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Posted 07 April 2011 - 07:53 PM

2009 2009 2009 lol
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#18 Chreees

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Posted 07 April 2011 - 08:49 PM

Old thread that you've revived, redjako, but always a good topic. There's many many factors you should consider when opening a hookah lounge. I'm sure Mush covered it all in his thread:

http://www.hookahfor...ookah+%2Blounge

I'd type a whole essay, but kinda short on time right now...

#19 Majid

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Posted 10 April 2011 - 03:23 PM

I think alcohol can put a hookah bar over the top.
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#20 Regal

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Posted 12 April 2011 - 07:42 PM

I work at a hookah bar, do inventory, and am familiar with wholesale prices. What I've noticed is that the only reason they survive is because the markup on the tobacco is very large, and sometimes the moneymakers are really the amenities: drinks, alcohol, retail, and tips.

One thing you should focus on is building a group of regulars that come in when you open. The real issue with a hookah bar is the turnover rate of customers. If you build enough of a reputation and at one point are completely full and can't sit more people, then those people may actually be waiting for more than an hour. It's impossible to motivate people to smoke for 30-45 minutes, but ideally that's what would happen.

As Wade mentioned, the most important thing is a correct atmosphere. If you can build a place that can switch from a relaxed setting to an upbeat late night setting easily then you've set it up well. Unless you're using short pipes don't set them on tables, and be ready for pipes to get knocked over and break (regardless of where they're set).

Pricing is a big issue, and I would suggest charging people individually when they arrive, and definitely set a limit to how many pipes a group may have. We're having trouble because The Hookah House's owner thought it was a good idea letting customers get as many pipes as they've wanted which led to coal, foil, water, and pipe use increases while lowering the profit per bowl. Almost never does each person in a group need their own pipe.

The real money maker is alcohol and if you can get both a liquor and tobacco license in Ohio then that's what's going to make your business a real hit and profitable. Even on slow nights if you sell a few drinks you can make it a profitable night. In Colorado it's illegal to have a smoking establishment and liquor license. So many of our customers come and go between a neighboring bar.

If you run the business with just the owners as employees you you can save a lot of money and 10-20 thousand is feasible within a year, but as any social establishment your success depends on your reputation. This reputation is dependent on two things: the employees and how sociable they are, and the quality of the service/product that you're offering. If customers are always comfortable and the hookahs are quality then your reputation will be very solid. Basically run the place so nobody can complain about anything.

What would separate you from the other hookah bar is offering a product that they don't have. Tangiers tobacco for example is a great product, and is unusual. It's prices are similar to those of other tobaccos but it requires a different bowl which may be an issue. Ultimately the cost of bowls isn't very high, but it does cause hassle in the preparation.

I'm versed in the actual running of a Hookah Bar more thoroughly than setting one up; so if you have any questions about any specifics when it comes to how to run one I would be happy the share my experiences.

Good Luck,

Jonathan
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