Business Overview


Also called a hookah café, a shisha bar, or a hookah den, a hookah lounge is a place where customers go to smoke shisha. This flavored tobacco is smoked through a pipe, and it can be shared by multiple people. Hookah lounges can charge by time, by pipe, or by tobacco amount.

Who is this business right for?

Anyone who’s interested in shisha, hookah, or the hookah culture should open a lounge. A hookah lounge is a good business for entrepreneur types, diner lovers, and tobacco connoisseurs.

What happens during a typical day at a hookah lounge?

A hookah lounge owner is in charge of setting up hookahs for people to smoke. A lounge owner needs to make sure all the hookah pipe pieces are clean. Similarly, they need to make sure the lounge’s shisha supply is clean and unspoiled. A lounge owner charges customers, keeps track of payments, and cleans the establishment. Hookah lounges are typically small, and they can be operated by a single person. Some hookah lounge owners stock hookahs for sale. They can also sell shisha, hookah hoses, hookah bowls, and other accessories.

What is the target market?

The best customers are those who aren’t rowdy. Because hookah smokers need to be at least 18 years old, the hookah-smoking culture can be chaotic. Hookahs are fragile, and a hookah lounge owner will lose money if their hookahs are broken. Every lost hookah reduces the overall number of people who will buy services. Ideal customers are quiet. They’re also return visitors. Hookah lounges make a lot of money from familiars, often creating deals and discounts for them.

How does a hookah lounge make money?

A hookah lounge makes most of its money by giving patrons a hookah to smoke. A hookah “session” is paid for either before it begins or after it is over. Normally, one hookah is shared between two and four people. Hookah lounges can either charge by the hour, or they can charge by the bowl’s size. Normally, a hookah lounge will determine a bowl’s price by how much shisha it can hold. A large bowl, for example, may burn longer. For this reason, it costs more to smoke.

Hookah lounges can also make money by selling shisha separately. Or, they can sell hookahs and hookah accessories. These accessories include coals, hoses, and vases. Other hookah lounges may sell food or even alcoholic beverages.

What is the growth potential for a hookah lounge?

A lot of hookah lounges are local. Because of this, there isn’t much growth potential on a state, or even national, level. A hookah lounge can, however, become a local favorite. If your hookah lounge offers the best shisha, the lowest prices, the best discounts or other great amenities, expect it to be a main location for visitors.

Hookah lounges gain a lot from tobacco’s inelastic demand. People who smoke hookah will often pay a lot for it, and they’ll keep returning to purchase it. For this reason, a hookah lounge which provides the best products, services or cost opportunities will have a very big advantage.

Getting Started


What are some skills and experiences that will help you build a successful hookah lounge?

A hookah lounge owner needs to have a firm grasp on hookahs. They need to understand how they’re smoked, how shisha is measured, how to take care of a hookah, and how to make a pleasant smoking session. High-quality hookah lounge owners also understand the culture of smoking hookah. Because hookah is a middle-eastern novelty, some visitors go to lounges to try something exotic. While hookah has become pretty popular, a high-quality lounge will still cover the “bells and whistles” to make a nice experience.

A hookah lounge owner also needs to understand liquor and tobacco laws. Guests need to be safe at all times. Guests can smoke too much hookah, causing them to get sick. A good hookah lounge owner will make sure guests are knowledgeable about hookah.

What are the costs involved in opening a hookah lounge?

A hookah lounge costs about $40,0000 to start. This price includes having a nice retail space to fund. It also includes licensing and insurance. The other costs include sourcing useable hookahs and shisha. Typically, a lounge will carry between 10 and 30 hookahs. Each can cost as much as $150.

What are the steps to start a hookah lounge?

Once you're ready to start your hookah lounge, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:

  1. Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
  2. Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your hookah lounge is sued.
  3. Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
  4. Open a business bank account. A dedicated checking account for your hookah lounge keeps your finances organized and makes your business appear more professional to your customers.
  5. Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
  6. Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
  7. Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
  8. Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
  9. Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

Select your state below for an in-depth guide on completing each of these steps in your home state.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Recommended: Fizzle.co offers video courses and a supportive online community of like-minded entrepreneurs. Try one month membership for for free.

What are some insider tips for jump starting a hookah lounge?

When jump-starting a hookah lounge, make sure your prices are affordable. Additionally, make sure you’re offering shisha the customers like. Again, hookah bars benefit from the average customer’s love of tobacco. That said, a hookah lounge which doesn’t prepare shisha properly can lose business quickly.

Raw materials will also need to be sourced. Make sure you’re using popular shisha, and make sure your employees are skilled in the art of shisha preparation. While shisha preparation isn’t too difficult, there is a firm culture behind it.

Growing Your Business


How to promote & market a hookah lounge

Fortunately, hookah lounge promotion takes care of itself. Word of mouth, normally, will suffice. That said, you can boost your hookah lounge’s visibility by marketing through liquor stores, outside grocery stores, near college campuses, and party areas. Once a hookah lounge is “found,” it usually catches on quickly.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

Customers will come for the hookah, but they’ll stay for the experience. Because smoking shisha is a social event, customers will flock to whichever lounge offers the best amenities and prices. Normally, this includes: a low shisha price, loose smoking restrictions, informative staff, an interesting environment, and good deals.

How and when to build a team

At the start, you can run a hookah lounge yourself. You should quickly gain between one and three workers, however. A lot of hookah lounges are small, and they thrive on having a café-like atmosphere. That said, a hookah lounge with slow service is often passed up.

Legal Considerations


State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a hookah lounge. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.

For more information about local licenses and permits:

Certificate of Occupancy

A hookah lounge is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a hookah lounge.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your hookah lounge will be in compliance and able to obtain a CO.

 

Food Regulations

When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections

There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business.

Reduce Personal Liability

Structuring your business as a limited liability company (LLC) ensures your personal assets are protected in the event your business is sued.

What is an LLC?

Form an LLC in 5 easy steps

Earning Potential


How much can you charge customers?

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. You can also offer to replace the bowl’s shisha, if you’d like. This isn’t necessary, but it can definitely retain customers if it’s balanced against the expense.

What are the ongoing expenses for a hookah lounge?

Ongoing expenses include rent, utilities, cleaning, hookah replacement, and shisha replacement. Normally, a hookah lounge will cost about $2,000 to $3,000 per month to run. A 50-gram container of shisha can cost as little as $10 to buy. The same container can be split across multiple hookahs, resulting in a profit of about $100.

How much profit can a hookah lounge make?

A hookah lounge can make quite a lot of money, if it’s successful. Average profits are about $150,000.

How can you make your business more profitable?

To become more profitable, you should create incentives. Because shisha is a niche form of entertainment, a lot of customers will return to hookah bars with unique atmospheres. Consider adopting a discount plan, rewarding returning customers, or offering food and drinks.

Next Steps

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