How to Start a Hookah Business

Most hookah businesses fall into a combination of three categories: wholesale suppliers, rentals, and lounges. The most popular form of start-up is the hookah lounge. Wholesale suppliers are vital because they distribute of hookahs and other supplies. The rental business can be a stand-alone or used as an added revenue stream by combining it into other business ventures such as lounges, franchises, or distributorships.

Business Plan

Once the type of hookah business model is decided upon, it is important to put together a financially concise business plan. Without a well thought out business plan financing any business is impossible and government agencies, such as the Small Business Administration, will not consider providing small business support services without a minimum of a business outline.

Basic Costs

Startup costs should include the following: the cost of equipment, entertainment, location, decorating costs, business insurance, and legal fees. For rental and wholesale hookah businesses, startup costs are lower because it can be run as a home business.

Expect to purchase hookahs in bulk with prices ranging from $20 to $80 dollars. A common hookah marketing practice is to include the price of tobacco in the $50 to $180 retail price. Rental hookah businesses pairs nicely as an add-on to party catering.

Legal Considerations

Legal fees, permits, and licenses are a major financial consideration when planning this start-up model. The hookah lounge business must conform to State and local smoking laws. When planning a hookah lounge it is important to review smoking laws to see how tobacco can be distributed and smoked. In some cities, such as Chicago, zoning regulations require that a business must earn 80% of its revenue and devote 90% of its retail space to tobacco sales.

Safety Considerations

Zoning laws vary, but most States will require special ventilation to circulate air or possibly insulation foam to protect other building tenants from second hand smoke. All lounges must follow health and safety regulations. Training is essential in the proper handling and care of hookahs. The communities will give these start-up businesses increased scrutiny because of second hand smoking issues. Expect to pay higher business insurance premiums because of the possible liability issues attached to smoking hookahs.

References:

Hookah Culture
Hookah Cafes Association
Business.gov - The Official Government Link for Business
The Small Business Administration (SBA)
GovBenefits.gov
The SBA Small Business Readiness Assessment Tool
SBA: Small Business Start Up Planner
Grants.Gov: A Grant Application Package
SBA: Loan Application Checklist