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Hookah lounge business plan for your own bar business
Do you want to start a hookah bar business? A hookah bar business is undoubtedly one of the most profitable startups, yielding the greatest rate of return as compared to other businesses. A hookah bar is a place where people can come freely and enjoy different flavors of hookahs, drinks, e-liquids, appetizers, cigars and sometimes alcoholic drinks too. Opening a hookah bar will prove a rewarding and profitable business for you, as smoking is banned in public places in many countries.
Before starting it, you need to have a well-structured shisha bar business plan covering even the tiniest bit of details. To help you avoid all the trouble of thinking and making a plan yourself, we are providing a detailed sample hookah lounge business plan for the startup ‘Aladdin Hookah Bar’.
Executive Summary
2.1 The Hookah Lounge Business
Aladdin Hookah Bar will be a registered hookah bar in Miami at a 10 minutes’ walk from the Bayside Marketplace. Miami is a highly advanced and ordered city; a hookah bar strategically located in the main commercial zone of this populated city will business a lot, as most people and tourists search for a serene place for smoking and relaxing.
The business will be owned and operated by Stephen Gerrard who is well-known in Miami for his reputable catering services operating for the last 15 years.
2.2 Management of Hookah Lounge
Gerrard aims at achieving perfection in hookah bar business by providing an exotic environment and fresh hookah drinks. The business will be managed by Gerrard himself initially and he’ll hire a small team for different tasks.
2.3 Customers of Hookah Bar
Aladdin Hookah Bar will provide fresh fruit hookahs and different types of coffees in a well-designed seductive environment to both permanent and temporary residents of Miami aged 22 and above.
2.4 Target of the Company
If you have decided to open a hookah bar, you must include your targets in your hookah bar business plan to improvise your business at a large scale. Mr. Gerrard’s target is to make his hookah bar’s environment homey and unique by providing a large number of drinks, hookahs, coffees, and teas.
Company Summary
3.1 Company Owner
Gerrard is famous in Miami for his reputable and distinguished catering service operating for the last 15 years. Due to the individuality of his ideas, he is considered the esteemed choice for managing caterings in events. This year, he wants to start a side business of a hookah bar and is willing to invest both time and money in it.
3.2 Why the Hookah Lounge Business is being started
Due to the policy of WHO to protect non-smokers from passive smoking, smoking is forbidden in public places, and people search for a hookah lounge to smoke. Gerrard is going to launch a hookah bar as he best knows how to open a hookah bar and how to run a hookah lounge successfully. In addition to that, he also aims to generate profit from his comfortable and legal smoking place in Miami.
3.3 How the Hookah Bar Business will be started
After analyzing various aspects of this business, Gerard has decided to manage the bar himself, yet he will hire a team for his assistance and for preparing the menu. The startup costs are as follows:
The detailed start-up requirements, expenses, total assets, total funding required as forecasted by the company’s analysts are given below:
| Start-up Expenses | |
| Legal | $55,300 |
| Consultants | $0 |
| Insurance | $32,750 |
| Rent | $32,500 |
| Research and Development | $32,750 |
| Expensed Equipment | $32,750 |
| Signs | $1,250 |
| TOTAL START-UP EXPENSES | $187,300 |
| Start-up Assets | $0 |
| Cash Required | $332,500 |
| Start-up Inventory | $32,625 |
| Other Current Assets | $232,500 |
| Long-term Assets | $235,000 |
| TOTAL ASSETS | $121,875 |
| Total Requirements | $245,000 |
| START-UP FUNDING | $0 |
| START-UP FUNDING | $273,125 |
| Start-up Expenses to Fund | $11,875 |
| Start-up Assets to Fund | $15,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $23,125 |
| Non-cash Assets from Start-up | $18,750 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $18,750 |
| Cash Balance on Starting Date | $21,875 |
| TOTAL ASSETS | $0 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $0 |
| Planned Investment | $0 |
| Investor 1 | $332,500 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $695,000 |
| Loss at Start-up (Start-up Expenses) | $313,125 |
| TOTAL CAPITAL | $251,875 |
| TOTAL CAPITAL AND LIABILITIES | $251,875 |
| Total Funding | $255,000 |
Services for customers
Before starting a hookah bar, you must be clear about the services you are going to provide to your customers as it will help you to estimate opening a hookah bar cost.
Gerrard has exclusive hookah bar ideas, he aims to make a perfect place for spending a quiet afternoon alone or with friends by adorning the big lounge by dim lights and brick walls combined with comfortable sofas and pillows.
Aladdin Hookah Bar will provide all sort of hookah drinks and coffees to its esteemed customers above age 22. Each one of our offerings will be prepared by maintaining strict health and quality measures.
Besides providing simple drinks, wines, and cigars, our major products will include:
- Hookah Drinks: We’ll provide fresh hookah drinks of the following flavors, Grape, Lemon, Peach, Cola, Mint, Black Mint, Strawberry, Cherry, Apple Doppio, Mango, Orange, Banana, Pistachio, Vanilla, and Rose. Besides these usual flavors, we’ll introduce a new flavor, Code Blue, which will be a mixture of creamy blueberry with red grape soda and black mint.
- Teas & Coffees: We’ll provide a wide range of coffees and teas including flat white, espresso, long black, macchiato, Vienna and Irish coffee.
- Soft Drinks: We will also provide various kinds of soft drinks.
- Salads: We’ll also provide fresh vegetable cheese salads, bean salads, and fruit salads.
Aladdin Hookah Bar will be open twenty-four hours a day.
Note
Before starting a hookah bar, you must be clear about the services you are going to provide to your customers as it will help you to estimate opening a hookah bar cost.
Market Analysis Summary
Operational and Strategic Planning
he first thing to do before starting a hookah bar is to research about how to start a hookah bar business in your state since there are a lot of concerning health regulations in practice. After that, carry out an accurate marketing analysis which will help you to decide the company’s strategies over the next years. It must be incorporated in the initial business plan and all subsequent things must be planned according to it.
Considering its importance, Mr. Gerrard obtained the services of marketing experts to help him develop a hookah bar business plan taking into account the current marketing demands.
5.1 Marketing Trends
If you want to know how much is hookah bar business profitable, you will be glad to know that there are more than 7000 legally registered hookah bars in the US and the number of hookah bars is increasing significantly. According to an IBISWorld report, hookah bars have generated a revenue of more than 900 million dollars in the past few years.
But remember, the success and failure of any business depend upon how keenly you focus on your target customers. A successful marketing strategy can only be developed after knowing the target audience and potential customers.
This sample business plan will help you in defining your target audience, you can take help from this sample business plan even if you don’t know how to start a hookah lounge, In this business plan we have explained how to open up a hookah bar and run it successfully.
5.2 Marketing Segmentation
The following type of target audience will become the future customers of Aladdin Hookah Bar.
5.2.1 General Traffic: The top category of our target customers will be the general traffic i.e. the people who happen to be near our hookah bar and decides to relax and smoke for some time in the hookah bar. We will be benefited a lot as Aladdin Hookah Bar is situated near the main market of Miami, which is visited by thousands of people daily. The exclusive entrance and dim-light theme of Aladdin Hookah Bar will attract the people who search for a place to sit calmly to smoke or to drink hookah.
5.2.2 Companies and Businesses: This category includes all employees working in the various office, companies, and businesses situated near us. As smoking is not allowed in offices, so the workers who want to drink hookah or cigars in their break time will rush towards. The employees of these companies and businesses will buy hookah drinks, coffees and salads from us on a daily basis.
5.2.3 Local Residents: We also aim to target the local residents residing in nearby areas. We are sure that they will be surely addicted to the solace environment we’ll provide, and whenever they want to have a hookah drink, they’ll approach us.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | ||||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | |||
| Local Residents | 48% | 22,334 | 32,344 | 43,665 | 52,544 | 66,432 | 10.00% | |||
| General Traffic | 18% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% | |||
| Companies & Businesses | 34% | 18,322 | 19,455 | 20,655 | 22,867 | 24,433 | 15.32% | |||
| Total | 100% | 52,089 | 65,143 | 80,873 | 94,156 | 111,410 | 9.54% | |||
5.3 Business Target
Our target is to become the best hookah bar in Miami within the first year of launch. We also aim to recover our initial capital within 3 years of our launch and grow our sales by 30% each year. We’ll achieve our target by providing the best quality drinks and environment and by valuing our customers.
5.4 Product Pricing
Product pricing is the most important factor affecting the sales of a new business. We have priced our items and drinks in the same range as our competitors in the market. But the products which are only provided by us such as Code Blue Hookah will be a little costlier as more effort will be required for its preparation.
Strategy
After you have understood how to open up a hookah bar you must plan your business strategy, you can take help from this sample business plan on how to open up a hookah lounge.
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6.1 Competitive Analysis
Aladdin Hookah Bar will have a tough competition because there are thousands of already established hookah lounges in Miami. Moreover, people are always hesitant to try a restaurant business plan that’s why Gerrard has decided that Aladdin Hookah Bar will be decorated in a unique manner, to attract the customers for the first time.
Our biggest competitive edge is our location and the wide parking space for our customers. Lastly, we will provide our customers with the best standard and quality products in a healthy environment where we’ll do proper aeration system to purify the air from the smoke.
6.2 Sales Strategy
For attracting the majority of people in the startup of a business, Gerrard has planned some types of advertisements.
- We’ll give free hookah drinks and salads till the third day of launch.
- We’ll ensure that we have a wide range of hookah drinks, cigars, tobaccos, wines, non-alcoholic drinks and salads at all times.
- We’ll provide an online table reservation facility for those who want to come in the form of a group with friends.
- We’ll advertise our lounge and menu through our website and social media.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Hookah Drinks | 187,330 | 260,320 | 258,240 |
| Tea | 802,370 | 815,430 | 823,540 |
| Soft Drinks | 539,320 | 770230 | 1,002,310 |
| Salads | 265,450 | 322,390 | 393,320 |
| Coffee | 1,435,320 | 1,250,430 | 1,762,450 |
| TOTAL UNIT SALES | 3,229,790 | 3,418,800 | 4,239,860 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Hookah Drinks | $140.00 | $150.00 | $160.00 |
| Tea | $600.00 | $800.00 | $1,000.00 |
| Soft Drinks | $700.00 | $800.00 | $900.00 |
| Salads | $650.00 | $750.00 | $850.00 |
| Coffee | $140.00 | $120.00 | $100.00 |
| Sales | |||
| Hookah Drinks | $214,800 | $274,000 | $333,200 |
| Tea | $120,050 | $194,500 | $268,500 |
| Soft Drinks | $50,110 | $71,600 | $93,000 |
| Salads | $139,350 | $194,600 | $249,850 |
| Coffee | $62,350 | $72,300 | $82,250 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Hookah Drinks | $0.70 | $0.80 | $0.90 |
| Tea | $0.40 | $0.45 | $0.50 |
| Soft Drinks | $0.30 | $0.35 | $0.40 |
| Salads | $3.00 | $3.50 | $4.00 |
| Coffee | $0.70 | $0.75 | $0.80 |
| Direct Cost of Sales | |||
| Hookah Drinks | $98,300 | $183,000 | $267,700 |
| Tea | $66,600 | $119,900 | $173,200 |
| Soft Drinks | $17,900 | $35,000 | $52,100 |
| Salads | $19,400 | $67,600 | $115,800 |
| Coffee | $27,700 | $69,200 | $110,700 |
| Subtotal Direct Cost of Sales | $294,100 | $699,400 | $1,104,700 |
Personnel plan
After a great research on how to start a hookah bar business, Gerrard has devised his personnel plan, which is given here for your help.
7.1 Company Staff
Stephen Gerrard will himself act as the Aladdin Hookah Bar Manager and will be responsible for the daily activities. The company will initially hire the following people:
- 12 Bartenders for arranging glasses and bottles for attractive display and for mixing and serving drinks
- 2 Cashiers to receive cash from the people
- 1 Marketing Executive responsible for the marketing and advertising of the restaurant
- 2 Chefs for making salads
- 8 Cleaners to clean the dishes and other facilities at the restaurant
- 2 Security Officers
To ensure the best quality service, all employees will be selected through vigorous testing and will be kept in check for their dealing with clients.
7.2 Average Salary of Employees
The following table shows the forecasted data about employees and their salaries for the next three years.
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Bartenders | $485,000 | $495,000 | $505,000 |
| Cashiers | $85,000 | $92,000 | $109,000 |
| Marketing Executive | $166,000 | $173,000 | $180,000 |
| Chefs | $95,000 | $105,000 | $115,000 |
| Cleaners | $263,300 | $270,000 | $276,700 |
| Security Officers | $85,000 | $92,000 | $109,000 |
| Total Salaries | $694,300 | $732,000 | $789,700 |
Financial Plan
You can never estimate how much is a hookah bar business profitable unless you devise its financial plan. As the last step of your business plan, you must prepare a financial plan, to manage your investments and profits.
Aladdin Hookah Bar will be solely financed by Mr. Gerrard and no equity funding or outside loan will be required unless the business expands faster than forecasted.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $309,069 | $385,934 | $462,799 |
| Direct Cost of Sales | $15,100 | $19,153 | $23,206 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $15,100 | $19,153 | $23,206 |
| Gross Margin | $293,969 | $366,781 | $439,593 |
| Gross Margin % | 94.98% | 94.72% | 94.46% |
| Expenses | |||
| Payroll | $138,036 | $162,898 | $187,760 |
| Sales and Marketing and Other Expenses | $1,850 | $2,000 | $2,150 |
| Depreciation | $2,070 | $2,070 | $2,070 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $4,000 | $4,250 | $4,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $34,510 | $40,726 | $46,942 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $188,766 | $220,744 | $252,722 |
| Profit Before Interest and Taxes | $105,205 | $146,040 | $186,875 |
| EBITDA | $107,275 | $148,110 | $188,945 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $26,838 | $37,315 | $47,792 |
| Net Profit | $78,367 | $108,725 | $139,083 |
| Net Profit/Sales | 30.00% | 39.32% | 48.64% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $40,124 | $45,046 | $50,068 |
| Cash from Receivables | $7,023 | $8,610 | $9,297 |
| SUBTOTAL CASH FROM OPERATIONS | $47,143 | $53,651 | $59,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $47,143 | $53,651 | $55,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $21,647 | $24,204 | $26,951 |
| Bill Payments | $13,539 | $15,385 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $35,296 | $39,549 | $43,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $35,296 | $35,489 | $43,882 |
| Net Cash Flow | $11,551 | $13,167 | $15,683 |
| Cash Balance | $21,823 | $22,381 | $28,239 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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