For those that are unfamiliar, hookah is a water pipe with a long hose and a large chamber that is used to smoke a special form of tobacco, or other material, known as shisha. The practice likely originated in India hundreds of years ago and has since become popular nearly everywhere. Compared to other forms of tobacco use that become part of a lifestyle, smoking hookah is usually an occasional social activity to be enjoyed with a group of friends.
In the U.S., hookah dens have taken off in recent years, especially in college towns and urban areas. All over the country, young people have taken up the South Asian pastime of sitting around the hookah, smoking shisha, and enjoying themselves with a group of friends. For prospective small business owners, there’s no better time to open a trendy hookah lounge.
However, that’s not to say that opening a hookah lounge business is without its risks: the practice of smoking hookah has come under fire due to associated health concerns, and a number of localities have passed regulations or levied high taxes against businesses in the industry. If you remain unfazed, check out this guide for information on how to open up your own hookah lounge.
Hookah lounge business statistics at-a-glance
- Around 2.6 million adults smoked hookah in 2017, which is twice the number compared to several years prior.
- Hookah use is most popular among college-aged young adults, with past-year use between 22% to 40%.
- Hookah use is most prevent in the Northeastern United States, where around 15% of people aged 19-30 years old have smoked hookah in the past year.
- Hookah Wholesalers estimates the average gross profit of a 1-kilogram tub of shisha tobacco to be $1045.95.
Sources: CDC, The University of Michigan: Institute for Social Reach, Hookah Wholesalers
Is a hookah lounge business right for you?
Running a hookah lounge takes a certain skill set and mentality that not everyone is in possession of. If the following characteristics apply to you, then opening a hookah bar may be a good fit.
You have a passion for hookah culture and history.
Hookah use has a rich tradition of use in India, Iran (formerly Persia), and other countries in the Middle East. Entrepreneurs with a special interest in this history and a decent understanding of how the custom is practiced in its societies of origin will likely find the business more fulfilling.
You can handle the day-to-day running of the business.
Operating a well-trafficked hookah cafe requires a regular assessment of inventory, ordering new products, hands-on management, and other responsibilities. It’s not the type of business suitable for a lax approach.
You are aware of the health risks of hookah use.
Although hookah users don’t smoke as frequently as cigarette smokers and its more of a social activity rather than a lifestyle, there are nevertheless negative health consequences that result from hookah smoking. If you acknowledge these risks and still feel optimistic about opening a hookah lounge, then, by all means, go for it.
You have researched local regulations regarding hookah businesses.
In recent years, some municipalities have imposed heavy taxes on tobacco-related businesses while other cities have banned shisha bars altogether. Research the rules and regulations in your area to make sure that you’ll be able to open a hookah lounge without running into prohibitive red tape.
Opening a hookah lounge
1. Plan out your business
The first step is to write a comprehensive hookah lounge business plan to work out the details and formulate a strategy for the first year after opening. Plenty of adequate business plan templates can be found using a Google search.
Your plan should address the following questions:
- Which age group is the target market?
- Which products will you stock?
- How much funding will the business need to get up and running?
- What will be the interior and exterior design schemes of the hookah lounge?
- What type of music will you play?
- What will your prices be?
2. Calculate your expenses and purchase the necessities
Opening a hookah lounge isn’t cheap: start-up costs could total $30,000 when all is said and done. Here are some of the principal expenses you must consider.
- A retail space – This is the biggest expense you’ll face in opening a hookah lounge. The cost of renting a centrally located commercial space could run between $3,000 to $5,000 a month.
- Tables, chairs, and decorations – Opt for comfortable furniture: you want your hookah hub to be a place where people can relax and enjoy themselves for hours at a time. Typically, hookah lounges go with a Middle Eastern them or hip, bohemian theme.
- Hookahs and equipment – Hookahs have a wide price range, from $20 bucks for a little pipe to up to $3000 dollars for a large, top-of-the-line pipe. However, decent pipes that you can use in your lounge will come in the $200-$300 range. Plan to buy about 12 hookahs.
- Shisha – Of course, you’ll need to buy shisha in bulk, and selling shisha is where you’ll make your biggest profit. Be sure to offer an extensive menu with plenty of flavors.
- Acquiring licenses and permits – Check with your local municipal government for the exact list of certifications that you’ll need to run your business. Chances are you’ll need to get a handful.
- Sound system – Music is a must to create an atmosphere at your hookah lounge. Purchasing a decent sound system can cost at least $1000.
- Snacks and beverages – While your business may not be serving full meals, customers will need some small snacks and drinks to tide them over while they enjoy the hookah. If you don’t plan to serve alcohol, making a number of exotic teas available is a good alternative.
3. Acquire funding, choose a business entity, register your business, and obtain federal and state tax ID numbers
Refer to our How to Start a Business Guide for instructions on how to complete these essential steps.
4. Obtain the necessary licenses and permits
As previously stated, the exact types of permits and licenses you’ll need to open up shop depends on local laws and ordinances. Here a few that you can expect to require:
- Certificate of occupancy – This document certifies that your business complies with building codes, fire safety requirements, and other regulations.
- Retail tobacco license – Required in 38 states for businesses that engage in the sale of tobacco. If you choose to offer tobacco-free herbal shisha at your business, you can avoid obtaining this license.
- Liquor license – Serving alcohol at your hookah lounge is a terrific way to increase your profit, but you’ll definitely need a liquor license, or risk facing serious legal consequences.
5. Select a location
As smoking hookah is popular with young people (over the age of 18), it’s wise to open your business where young, college-age people congregate. Furthermore, your hookah lounge may not be the only stop on a group’s itinerary for the night, so basing the business in close proximity to bars, clubs, and other nightlife hotspots is a shrewd choice.
6. Buy insurance coverage
Insurance coverage is an essential means of protection for any business. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level.
Here are the forms of insurance you should consider:
Required forms of insurance for all business with employees:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance for a hookah lounge:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business-owned properties and possessions as a result of fire, theft, or storm.
7. Market your hookah lounge
While word of mouth is a great way to draw in customers, no new business can truly thrive without local advertisements and a well-established online presence. Here are the key steps for promoting your fledgling hookah lounge business:
- Create a website. Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, or Namecheap.com). Hire a web designer to develop the website (or do it yourself). Be sure to include detailed contact information on the site.
- Open social media accounts. Register accounts on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile. This will allow you to add pictures of your business, respond to positive customer reviews, and address customer concerns.
- Respond to online customer feedback. Register accounts on business review platforms such as Yelp and TripAdvisor. This will allow you to write thank-you notes in response to glowing reviews and address negative reviews.
- Take out ads on billboards and in local publications. It still pays to increase visibility by buying ads in local newspapers and on highway billboards.
Hookah lounge business resources
- Hookah Wholesalers – One of the premier direct hookah and shisha distributors in existence. Offers good prices and a wide selection of hookahs, coals, and accessories.
- SouthSmoke.com – Another fine hookah distributor that sells a wide variety of hookah pipes and related accessories, including charcoals, herbal shisha, cleaning supplies, and even electronic hookahs.
- Fumari’s Hookah Blog: The Culture and History of Hookah – A nice little primer on the origins of hookah use and how the practice became a widespread phenomenon.