Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on May 31, 2022 Updated on November 23, 2023
$23,550 - $48,100
$200,000 - $502,000 p.a.
Time to build
1 – 3 months
$60,000 - $150,000 p.a.
A hookah lounge, or shisha lounge, is a relaxing place people visit to smoke tobacco through a water pipe. Hookah lounges have been popping up across the US and around the globe, with the global hookah industry set to double by 2030.
If you’re a hookah fan, or just enjoy providing a chill environment, it could be a great time to get in on the action and start your own hookah lounge. You can have fun, help others have a great time, and make good money.
But before you fire up the pipes, you’ll need to know the business launch process. Luckily, this step-by-step guide will expand your knowledge and put you on the path to hookah success.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Growth forecast – The global hookah tobacco industry is projected to more than double by 2030 to reach nearly $1.7 billion.
Trends and challenges
Trends in the hookah lounge industry include:
Mint-flavored hookah tobaccos are growing in popularity, and fruit flavors are another favorite.
Hookah is so trendy that companies have started making hookah merchandise, such as T-shirts with hookah-related phrases, which present a revenue opportunity for hookah lounges.
Challenges in the hookah lounge industry include:
Many areas of the country are passing laws to limit what hookah lounges can offer.
Hookah lounges are receiving a lot of negative press due to the health hazards of smoking hookah.
How much does it cost to start a hookah lounge business?
Startup costs for a hookah lounge range from $23,000 to $48,000. Costs include the space rental, space preparation, and hookah equipment and supplies. They also include a liquor license and liquor inventory.
You’ll need a handful of items to successfully launch your hookah lounge business, including:
Hookah pipes and gear
Tables and chairs
Tobacco and flavors
Setting up a business name and corporation
$150 - $200
Business licenses and permits
$100 - $300
Business cards and brochures
$200 - $300
$1,000 - $3,000
$2,000 - $4,000
$10,000 - $20,000
Hookah equipment and supplies
$5,000 - $10,000
Liquor license and liquor inventory
$5,000 - $10,000
$23,550 - $48,100
How much can you earn from a hookah lounge business?
Hookahs are usually priced at about $20 an hour. Your profit margin after all costs should be about 30%.
In your first year or two, you might serve 20 hookahs a day and serve $15 in alcoholic beverages to 10 people, bringing in $200,000 in annual revenue. This would mean $60,000 in profit, assuming that 30% margin. As your hookah lounge gains popularity, you might serve 50 hookahs a day and beverages to 25 people. With annual revenue of $502,000, you’d make a healthy profit of $150,000.
What barriers to entry are there?
There are a few barriers to entry for a hookah lounge. Your biggest challenges will be:
The startup costs of renting the lounge space and getting it ready for business
Meeting license and permit requirements
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what’s involved in starting a hookah lounge, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research hookah lounges in your area to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a hookah café that serves liquor or a shisha bar that offers food.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as herbal shisha or flavored tobacco.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
You’ll want to create a hookah menu with different flavor mixes. You could also serve liquor with the proper licensing. If you put in a kitchen, you could offer food as well.
How much should you charge for hookah?
Hookah prices range from $15 to $25 per hour. Check prices in your area to make sure you’re competitive. Your profit margin after supplies, rent, and overhead should be about 30%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market will be Hookah smokers, which are likely to be a younger crowd, so you should focus your marketing on TikTok and Instagram.
Where? Choose a hookah lounge location
Choosing the right location for your hookah lounge is crucial for attracting customers and ensuring its success. Look for a spot in a high-traffic area with good visibility, such as a busy nightlife district or a college town.
Consider accessibility and convenience, ensuring that the location is easily reachable by public transportation and has ample parking. Additionally, assess the competition in the area and aim to differentiate your hookah lounge by offering unique flavors or a relaxing and comfortable atmosphere.
By strategically choosing the right location, you can establish a profitable and popular hookah lounge that offers a unique and enjoyable experience for customers and stands out in the competitive hospitality industry. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
Step 3: Brainstorm a Hookah Lounge Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “hookah” or “shisha lounge”, boosts SEO
Name should allow for expansion, for ex: “The Puff Palace” over “The Outdoor Hookah Lounge”
Avoid location-based names that might hinder future expansion
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Hookah Lounge Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
Executive Summary: A concise overview of your hookah lounge business, highlighting key elements such as mission, goals, and financial projections.
Business Overview: Detailed information about your hookah lounge, including its location, concept, and any unique selling points that set it apart in the market.
Product and Services: Clearly outline the variety of hookah flavors, drinks, and any additional services offered in your lounge.
Market Analysis: A comprehensive examination of the hookah lounge industry, target market demographics, and trends to identify opportunities for growth.
Competitive Analysis: Evaluate other hookah lounges in your area, assessing their strengths and weaknesses to position your business effectively.
Sales and Marketing: Detail your strategies for promoting and selling your hookah lounge services, including online presence, promotions, and partnerships.
Management Team: Introduction of key individuals involved in running the hookah lounge, emphasizing their qualifications and roles.
Operations Plan: Outline the day-to-day activities and logistics of running the hookah lounge, covering staffing, hours of operation, and supplier relationships.
Financial Plan: Provide a detailed breakdown of the costs, revenue projections, and financial forecasts for the hookah lounge, demonstrating its financial viability.
Appendix: Include any additional documents or information that supports your hookah lounge business plan, such as permits, licenses, or relevant research.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to hookah lounges.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your hookah lounge will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC)– Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding a hookah lounge business. You might also try crowdfunding if you have an innovative concept.
Step 8: Apply for Hookah Lounge Business Licenses and Permits
Starting a hookah lounge business requires obtaining a number of licenses and permits from local, state, and federal governments. For starters, you’ll need a tobacco license as well as a liquor license if you serve alcohol.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your hookah lounge business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Restaurant365, lightspeed, or toast to manage your menus, inventory, schedule, and invoices.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
For your hookah lounge, the marketing strategy should focus on showcasing the unique, relaxing experience you offer, the quality and variety of your hookah flavors, and any additional amenities or services, such as a comfortable seating area, live entertainment, or specialty beverages.
Professional Branding: Your branding should convey an exotic, luxurious, yet comfortable atmosphere. This includes a distinctive logo, interior design of the lounge, and engaging signage.
Direct Outreach: Network with local college campuses, clubs, and groups that might be interested in a hookah lounge experience. Offering group discounts or hosting special events can be effective.
Digital Presence and Online Marketing
Professional Website and SEO: Develop a visually appealing website that showcases the ambiance of your lounge, menu items, and any special events. Optimize your website for local SEO to rank for searches related to hookah lounges, nightlife, and local entertainment.
Social Media Engagement: Utilize platforms like Instagram and Facebook to showcase the atmosphere of your lounge, special events, and promotions. Regularly engage with your audience by sharing enticing images, upcoming events, and customer testimonials.
Content Marketing and Engagement
Lifestyle Blog: Share blog posts about hookah culture, tips for enjoying hookah, and related lifestyle content.
Email Newsletters: Keep your patrons informed about special nights, live music events, or new flavor introductions through regular newsletters.
Video Content: Create videos that capture the ambiance of your lounge, special events, or feature customer experiences and testimonials.
Experiential and In-Person Engagements
Theme Nights and Events: Host theme nights, cultural events, or special gatherings to attract different customer groups and keep the experience fresh and exciting.
Local Partnerships for Events: Collaborate with local artists, musicians, or DJs to host unique and engaging events in your lounge.
Collaborations and Community
Collaboration with Nearby Restaurants: If your lounge doesn’t serve food, consider partnering with nearby restaurants for food delivery services.
Community Engagement: Participate in local festivals or events to increase your visibility and engage with potential customers.
Customer Relationship and Loyalty Programs
Loyalty Programs: Implement a loyalty program that rewards regular customers with discounts or special offers.
VIP Memberships: Offer VIP memberships that provide special perks, such as reserved seating or discounts on certain nights.
Promotions and Advertising
Targeted Advertising: Use local advertising in nightlife guides, university newspapers, and online platforms popular with your target demographic.
Influencer Collaborations: Collaborate with local influencers or personalities who can showcase your lounge to their followers.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your hookah lounge meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your hookah lounge business could be:
Skip the tobacco – come enjoy our herbal shisha bar
Exotic hookah flavors and unique signature cocktails
Bring your friends and share a hookah over a bottle of wine
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a hookah lounge business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in hookah lounges for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in hookah lounges. You’ll probably generate new customers or find companies with which you could establish a partnership.
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a hookah lounge business include:
Hookah Makers – prepare hookahs
Bartender – make cocktails
Servers – serve hookah and drinks
General Manager – scheduling, ordering, accounting
Marketing Lead – SEO strategies, social media
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Run a Hookah Lounge – Start Making Money!
Hookah lounges have been common in the Middle East for centuries, and recently made their way to the United States. The hookah market is taking off, expected to double in the next decade. If you’re a hookah lover and want to share your passion with others, now is the right time to launch your own hookah lounge. You could help people enjoy their evenings out and make a good living at the same time.
Your business knowledge is fired up now, so it’s time to start buying water pipes and getting your successful hookah lounge off the ground.
Hookah Lounge Business FAQs
Is a hookah lounge profitable?
Yes, a hookah lounge can be profitable. You’ll need to design an interesting hookah menu and create a great atmosphere, and you can be successful.
How do I differentiate my hookah lounge business from competitors?
To differentiate your hookah lounge business from competitors, you can focus on providing a unique atmosphere or ambiance that sets your lounge apart. This can include offering a diverse selection of high-quality shisha flavors, creating a comfortable and inviting space with unique decor or lighting, or providing exceptional customer service.
Can I start a hookah lounge on the side?
It would be very difficult to start a hookah lounge on the side unless you have limited hours, which could seriously affect your ability to make a profit.
What kind of music and entertainment can I offer in my hookah lounge business?
The music and entertainment you offer in your hookah lounge business will depend on your target audience and the atmosphere you want to create. Some popular options include playing ambient or chill-out music, hosting live performances or DJs, or offering karaoke or open mic nights.
What kind of partnerships or collaborations can I establish for my hookah lounge business?
There are several partnerships or collaborations you can establish for your hookah lounge business, such as partnering with local businesses to offer discounts or promotions, collaborating with musicians or performers to host special events, or working with suppliers to offer exclusive shisha flavors or products.
How to Start a Hookah Lounge
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Hookah Lounge Name
Create a Hookah Lounge Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Hookah Lounge Business Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run a Hookah Lounge - Start Making Money!
Hookah Lounge Business FAQs
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