Do you want to start a cigar lounge or smoke shop? If YES, here is a 18-step guide on how to start a cigar lounge business with no money and no experience. A cigar lounge or cigar bar is a place where smokers go to buy their preferred cigar brand and smoke freely without the fear of being embarrassed, arrested or fined.
In the airports, cinemas, shopping malls and public places in general, you might have noticed the “Smoking Not Allowed” signs hung at various spots informing the general public that the area is a no smoking zone. However, if you take your time to make inquiries, you would find out that there might be a cigar lounge just around the corner.
One good thing about starting a cigar lounge business is that if you are diligent enough and if you have good business/marketing strategies, you can build the business from just one outlet to numerous outlets across different cities in the united states from the sale of franchise.
So, if you are considering opening a cigar lounge business, all you would need is some capital to purchase or lease/rent a suitable facility and purchase furniture. You would also need some additional capital to purchase the initial supply of assorted cigars, pay your employees at least for the first 3 months, and also to pay your utility bills. These expenses are called working capital. This article will give you the needed guide to launch your cigar lounge business.
18 Steps on How to Start a Cigar Lounge Business
Table of Content
- 1. Understand the Industry
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide What Niche to Concentrate On
- 4. Know the Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 6. Know the Possible Threats and Challenges You Will Face
- 7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
- 8. Choose a Catchy Business Name from the ideas Below
- 9. Discuss With an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- The Business Services Process Involved in a Cigar Lounge Business
- 16. Write a Marketing Plan Packed With ideas & Strategies
- 17. Work Out a Reasonable Pricing for your Services & Products
- 18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
The cigar lounges industry comprises businesses known as smoke shops, cigar bars or lounges, where patrons can purchase and smoke cigars freely without fear of breaking the law of a country or city. Businesses in this industry usually provide limited food and alcohol services as a means of increasing their revenue generation.
The cigar lounges industry has made a strong comeback in the United States over the last five years as a large increase in cigar consumption has boosted the demand for cigar lounges (smoke shops). In the face of regulatory hurdles in obtaining exemption from state indoor smoking bans, both industry participation and revenue have grown at rapid rates since 2010.
As the economy continues to grow and improve over the next five years, more consumers will likely indulge in premium cigars at high-end smoke shops, helping the industry sustain its growth and widen profit margins. Also, the United States recent step toward normalization of relations with Cuba will definitely expand access to the country’s high-end cigars, providing an opportunity for the industry to maximize profits.
The cigar lounges industry is indeed a thriving industry in the United States, Canada and in most countries in Europe. Statistics has it that the Cigar Lounges industry in the United States of America is worth $2 billion, with an estimated growth rate of 11.0 percent.
There are about 7,684 legally registered and licensed cigar lounges/smoke shops businesses scattered across the United States of America and they are responsible for employing about 17,980 people. The industry is an open industry hence a low level of market share concentration.
If you are opening a cigar lounge for the first time, it is important that you conduct a thorough research so that you can be well informed and guided when making the choices of what you want from the array of options that are available to you.
Researching will open you up to the various opportunities you can leverage on and how you can access them. It’s not compulsory that you must be the one to carry out the research; you can pay professionals to help you garner the needed information.
Any entrepreneur who wants to start a cigar lounge business in the US would definitely be confronted with tough competition. The truth is that you will not only compete with cigar lounges in your location or city, but you would be competing with every other entertainment option such as wine bars, night clubs, restaurants, casinos et al where cigars are retailed and can be freely smoked.
Lastly, it is important to state that in as much as starting a smoke shop business can be profitable and rewarding; the success of any smoke shop/cigar lounge business in the United States is not automatic. The chances of new smoke shops to struggle within the first 6 months of launching can’t be ruled out.
As a matter of fact, it can take between two to five years before most cigar lounges and similar businesses can recover their initial investment. In order words, just like loads of new businesses, the statistics for cigar lounges do not favor startups, you just have to have a long-term investment plan if you intend starting your business.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who patronize a cigar lounge cut across all genders and adults from different tribes and races hence the demographic composition of the cigar lounge business is all encompassing.
The truth is that when it comes to selling cigars and cigarettes et al, there is indeed a wide range of available customers. In essence, your target market can’t be restricted to just a group of people, but to all those that reside around the locations where you have your cigar lounge and who have the purchasing power.
So, if you are thinking of opening your own cigar lounge business, then you should make your target demographics all encompassing. It should include corporate executives, socialites, students, migrants, entrepreneurs, business people, celebrities, military men and women, sports men and women, tourists and every adult in the neighborhood where your cigar lounge will be located.
3. Decide What Niche to Concentrate On
It is important to state that there is no known niche area when it comes to the cigar lounge business. Every player in this line of business is basically involved in making available a place where patrons can purchase and smoke cigars freely without fear of breaking the law of the country or city.
But it is common to find a standard cigar lounge engage in all or some of the underlisted;
- Sale of cigars
- Sale of tobacco-related accessories
- Sale of other tobacco products
- Sale of food and drinks
- Mass marketing of cigars and cigarillos
- Premium cigars
- Providing a cigar-friendly smoking environment
- Assorted red and white wines
- Beer and liquor
- Distilled spirits
- Sale of E – Cigars
The Level of Competition in the Cigar Lounge Industry
The competition that exists in the cigar lounge line of business goes beyond competition amongst cigar lounges in your location; you are expected to compete with outlets such as night clubs, bars, hookah bars, beer pubs/parlors et al that also sell cigars and cigarettes et al. Thus, it will be right to say the competition in the cigar lounge business is tough.
The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your products or business properly, you will always make headway in the industry. Just ensure you have varieties of cigars, cigarettes, tobaccos and other products from top manufacturing brands within and outside the United States, you can deliver excellent customer services and you know how to attract and reach out to your target market.
But over and above, there are several cigar lounges and outlets such as night clubs and bars, hookah bars and beer pubs/parlors et al that also sell cigars and cigarettes et al scattered all around the United States.
So, if you choose to start your own cigar lounge business in the United States, you will definitely meet stiff competitions amongst these rivals. Besides, there are larger cigar lounges that determine the trends in the industry and you should be ready to compete with them for customers.
4. Know the Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers and the general public than the others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading cigar lounges in the United States of America and in the globe;
- Fox Cigar Bar Scottsdale
- Cigar Republic USA
- Karma Cigar Bar
- Sunset Cigar Lounge
- Smoking Jacket Cigar Lounge
- Ashton Cigar Bar
- Bo’s Cigar Lounge
- The Cigar Bar & Grill
- Occidental Cigar Club
- Casa de Montecristo by Cigar Inn
- Little Havana Cigar Factory
- Gran Havana Cigar & Hookah Lounge
- West Coast Cigars
- Key West Cigar City USA
- Posh Hookah And Cigar Lounge
- Royal Hookah & Cigar Lounge
- Good Ol’ Times Cigars & Lounge
- The Charles P Stanley Cigar Company and Lounge
- SMoKE Manayunk – Cigar & Hookah Lounge
- The Cigar Lounge at Chamberlain’s Steak and Chop House
If you are looking towards successfully launching a business and maximizing profits, then you need to ensure that you get your economic analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.
Cigar lounge business is not a Green business, as a matter of fact, you will come across several cigar lounges and other outlets such as night clubs and bars, hookah bars and beer pubs/parlors et al that also sell cigars and cigarettes et al when you drive through town.
So, if you are mapping out your economic analysis, you should carry out thorough market survey and costing of what is required to rent a space where you are expected to open your cigar lounge business and the amount required in furnishing and equipping the facility and of course purchasing your first supply of tobacco-related accessories, and also the cost to successfully run the business.
Over and above, if you are considering starting a cigar lounge business, then your concern should not be limited to the cost of renting a shop facility and furnishing and equipping the facility and of course purchasing your first supply of tobacco-related accessories, but also on branding and on how to build a robust clientele base. The truth is that if you are able to build a robust clientele base, you are sure going to maximize profits in the business.
5. Decide Whether to Buy a Franchise or Start from Scratch
When it comes to starting a business of this nature, it will do you a world of good to buy the franchise of a successful and well – established cigar lounge/brand as against starting from the scratch. Even though it is relatively expensive buying the franchise of an established cigar lounge brand, but it will definitely pay you in the long run. You can look at this list of profitable cigar lounge franchise opportunities.
But if you truly want to build your own brand after you must have proved your worth in the cigar lounges industry, then you might just want to start your own cigar lounge business from the scratch. The truth is that it will pay you in the long run to start your cigar lounge business from the scratch.
Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business. Please note that most of the big and successful cigar lounges around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
If you decide to start your own cigar lounge business today, one of the major challenges you are likely going to face is the presence of well – established cigar lounges and other outlets such as night clubs and bars, hookah bars and beer pubs / parlors et al that also sell cigars and cigarettes et al. The only way to avoid this challenge is to create your own market.
Some other challenges and threats that you are likely going to face is economic downturn; if the economy is in bad shape, business such as cigar lounges usually struggle to maintain their old customers or even welcome new customers. Also, unfavorable government policies can hamper the growth of your cigar lounge business. There is nothing you can do as regards these threats and challenges other than to stay positive that things will work well for you.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
You can either choose a general partnership, Limited Liability Company or even a sole proprietorship for your cigar lounge business. Ordinarily, sole proprietorship should have been the ideal business structure for a small – scale cigar lounge business especially if you are just starting out with a moderate start – up capital in a small neighborhood and with just one outlet.
But if your intention is to grow the business and have chains of cigar lounges across the United States of America and other countries of the world via franchising, then choosing sole proprietorship is not an option for you. Limited Liability Company, LLC or even general partnership will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your cigar lounge business; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your cigar lounge business with the ability to sell franchise and open chains of cigar lounges all across the United States of America, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
8. Choose a Catchy Business Name from the ideas Below
When it comes to Choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own cigar lounge business, here are some catchy names that you can choose from;
- Sleek Cigar Lounge®, LLC
- Coast Line® Cigar Lounge & Bar, LLC
- Free World™ Cigar Lounge & Hookah Bar, LLC
- Thomas Gusto© Cigar Lounge, Inc.
- The Don’s Place® Cigar Lounge, Inc.
- Santos Marcos™ Cigar Lounge & Hookah Bar, Inc.
- Greenish Wrap™ Cigar Lounge & Hookah Bar, Inc.
- Cuban Guys© Cigar Lounge and Bar, Inc.
- One Stop® Cigar Lounge & Hookah Bar, LLC
- Friendly Colony™ Smoke Shop, Inc.
9. Discuss With an Agent to Know the Best Insurance Policies for You
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your cigar lounge business.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own cigar lounge business in the United States of America;
- General insurance
- Health/Medical insurance
- Liability insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are considering starting your own cigar lounge business, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
11. Get the Necessary Professional Certification
When it comes to operating a cigar lounge business, you do not need to have any formal training or special certification before you can be allowed to open and operate a cigar lounge business in the United States of America and in all countries of the world.
All you need is informal training that will expose you to the ins and outs of buying varieties of cigars, cigarettes, tobaccos and other related products and effectively running the business. On the other hand, if you come across any form of certification that can aid you to effectively conduct your cigar lounge business and maximize profits, then by all mean try and pursue such certification.
12. Get the Necessary Legal Documents You Need to Operate
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own cigar lounge business in the United States of America;
- Certificate of Incorporation
- Business License
- Tax Payer’s ID/Tax Identification Number
- Foods and drinks handler certificate
- Health inspection Certificate
- Proof of district-issued food and drinks manager identification card
- Copy of license for the service support facility and/or a recent inspection report
- Cigar Lounge Business Plan
- Non – disclosure Agreement
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
13. Raise the Needed Startup Capital
Starting a cigar lounge business can be cost effective especially if you choose to start on a small scale by running a small cigar lounge business in a street corner or inside a public facility. Securing a standard and well – positioned lounge facility, furnishing and equipping the facility and of course purchasing your first supply of tobacco-related accessories and other tobacco products are part of what will consume a large chunk of your start – up capital.
If you choose to start the business on a large scale, you would need to source for fund to finance the business because it is expensive to start a standard large – scale cigar lounge business.
No doubt when it comes to financing a business, one of the first things and perhaps the major factor that you should consider is to write a business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business. Here are some of the options you can explore when sourcing for start – up capital for your cigar lounge business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for Loan from your Bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
14. Choose a Suitable Location for your Business
When it comes to choosing a location for your cigar lounge business, the rule of thumb is that you should be guided by the demand for smoking cigars and tobaccos et al and easy access to wholesale purchasing of tobacco-related accessories and other tobacco products. Of course, if you are able to secure a central location for your cigar lounge business, it will give people easy access to your bar.
It cannot be overemphasized that the location you choose to open your cigar lounge business is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people with the required purchasing power and lifestyle.
Most importantly, before choosing a location for your cigar lounge business, ensure that you first conduct a thorough feasibility studies and market survey. The possibility of you coming across similar business that just closed shop in the location you want to open yours can’t be ruled out.
It is very important to gather as much facts and figures before choosing a location to set – up your own cigar lounge business. These are some of the key factors that you should consider before choosing a location for your cigar lounge business;
- The demography of the location
- The demand for cigars, cigarettes and tobaccos et al in the location
- The purchasing power of residents of the location
- Accessibility of the location
- The number of cigar lounges and other outlets such as night clubs and bars, hookah bars and beer pubs/parlors et al that also sell cigars and cigarettes et al in the location
- The local laws and regulations in the community
- Traffic, parking and security
15. Hire Employees for your Technical and Manpower Needs
On the average, there is no special technology or equipment needed to run this type of business. But you will sure need cigarette 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, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst others and all these can be gotten as fairly used.
As regards leasing or outright purchase of a bar facility, the choice is dependent on your financial standing, but the truth is that to be on the safe side, it is advisable to start off with a short – term rent / lease while test running the business in the location. If things work out as planned, then you go on a long – term lease or outright purchase of the property but if not, then move on and source for other ideal location/facility for such business.
When it comes to hiring employees for a standard cigar lounge business with more than one outlet, you should make plans to hire a competent Chief Executive Officer (you can occupy this role), Admin and Human Resources Manager, Merchandize Manager, Lounge/Bar Manager, Sales and Marketing Office Sales Girls and Sales Boys, Accounting Clerk and Cleaners. On the average, you will need a minimum of 5 to 10 key staff members to run a medium – scale but standard cigar lounge business.
The Business Services Process Involved in a Cigar Lounge Business
When it comes to business services process of cigar lounge business, there are no hard and fast rule about it. Basically, it is the duty of the merchandize manager to help the organization purchase tobacco-related accessories and other tobacco products from top manufacturing brands. They go out there to source for good purchasing deals and they also ensure that they only purchase at the right prices that will guarantee them good profits.
Once the cigar lounge business is in full operation, the tobacco-related accessories, other tobacco products, mass market cigars and cigarillos, premium cigars, cigarettes, tobaccos and other products from top manufacturing brands are properly arranged in a shelve and they are listed on the menu. Cigars and other products purchased from a cigar lounge can either be smoked in the lounge or taken away.
It is important to state that a cigar lounge business may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated cigar lounge business process is not cast on stone.
16. Write a Marketing Plan Packed With ideas & Strategies
Running a business requires that you should be proactive when it comes to marketing your goods or services. People and organizations will patronize your cigar lounge if they know that they are going to get the best ambience, products and of course value for their money.
Your marketing strategy should center on quality, security and pricing, and above all excellent customer service. You should ensure that whenever your customers visit your cigar lounge, they will get quality products and excellent service. The truth is that if you are able to put the above stated in place, you won’t struggle to retain your old customers and at the same time win over new customers.
Businesses these days are aware of the power of the internet and which is why they will do all they can to maximize the internet to market their services or products. In other words, a larger percentage of your marketing effort should be directed to internet users.
These are some of the marketing ideas and strategies that you can adopt for your cigar lounge business;
- Introduce your cigar lounge by sending introductory letters alongside your brochure to corporate organizations, car owners, taxi companies, transport companies, sports organizations, gyms, schools, socialites, celebrities and other key stakeholders throughout the city where your cigar lounge is located
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, 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 cigar 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)
17. Work Out a Reasonable Pricing for your Services & Products
One key factor that will help you sell your cigars, cigarettes and tobaccos et al at rock bottom prices is to purchase your supplies directly from manufacturers or wholesalers in pretty large quantities. The truth is the higher the quantity of items that you purchase directly from manufacturers and wholesalers, the cheaper you tend to get them.
Another strategy that will help you retail your cigars, cigarettes and tobaccos et al at the right price is to ensure that you cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products.
You can also try as much as possible to work with independent contractors and marketers; it will help you save cost of paying sales and marketing executives.
18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If your intention of starting a cigar lounge business is to grow the business beyond the city where you are going to be operating from to become a national and international brand by opening chains of cigar lounges and franchising, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your cigar lounge business;
- Place adverts on both print (newspapers and related magazines) and electronic media platforms
- Leverage on the internet and social media platforms like Instagram, Facebook, Twitter, YouTube, Google + et al to promote your cigar lounge business
- Install your billboards in strategic locations all around your city or state
- Distribute your fliers and handbills in target areas
- Contact corporate organizations, car owners, taxi companies, transport companies, households, sports organizations, gyms, schools, socialites, celebrities and other key stake holders throughout the city where your cigar lounge is located informing them about your cigar lounge bar business and the products you sell
- List your cigar lounge business in local directories
- Advertise your cigar lounge business in your official website and employ strategies that will help you pull traffic to the site
- Position our Flexi Banners at strategic positions in the location where cigar lounge business is located
- Ensure that all your staff members wear your branded shirts and all your vehicles are well branded with your company logo et al.