How to Start a Hookah Lounge

Also called a hookah café, a shisha bar, or a hookah den, a hookah lounge is a place where customers go to smoke shisha. This flavored tobacco is smoked through a pipe, and it can be shared by multiple people. Hookah lounges can charge by time, by pipe, or by tobacco amount.

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Start a hookah lounge by following these 10 steps:

  1. Plan your Hookah Lounge
  2. Form your Hookah Lounge into a Legal Entity
  3. Register your Hookah Lounge for Taxes
  4. Open a Business Bank Account & Credit Card
  5. Set up Accounting for your Hookah Lounge
  6. Get the Necessary Permits & Licenses for your Hookah Lounge
  7. Get Hookah Lounge Insurance
  8. Define your Hookah Lounge Brand
  9. Create your Hookah Lounge Website
  10. Set up your Business Phone System

We have put together this simple guide to starting your hookah lounge. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Hookah Lounge Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

  • Your state’s business records
  • Federal and state trademark records
  • Social media platforms
  • Web domain availability

It’s very important to secure your domain name before someone else does.

What are the costs involved in opening a hookah lounge?

A hookah lounge costs about $40,0000 to start. This price includes having a nice retail space to fund. It also includes licensing and insurance. The other costs include sourcing useable hookahs and shisha. Typically, a lounge will carry between 10 and 30 hookahs. Each can cost as much as $150.

What are the ongoing expenses for a hookah lounge?

Ongoing expenses include rent, utilities, cleaning, hookah replacement, and shisha replacement. Normally, a hookah lounge will cost about $2,000 to $3,000 per month to run. A 50-gram container of shisha can cost as little as $10 to buy. The same container can be split across multiple hookahs, resulting in a profit of about $100.

Who is the target market?

The best customers are those who aren’t rowdy. Because hookah smokers need to be at least 18 years old, the hookah-smoking culture can be chaotic. Hookahs are fragile, and a hookah lounge owner will lose money if their hookahs are broken. Every lost hookah reduces the overall number of people who will buy services. Ideal customers are quiet. They’re also return visitors. Hookah lounges make a lot of money from familiars, often creating deals and discounts for them.

How does a hookah lounge make money?

A hookah lounge makes most of its money by giving patrons a hookah to smoke. A hookah “session” is paid for either before it begins or after it is over. Normally, one hookah is shared between two and four people. Hookah lounges can either charge by the hour, or they can charge by the bowl’s size. Normally, a hookah lounge will determine a bowl’s price by how much shisha it can hold. A large bowl, for example, may burn longer. For this reason, it costs more to smoke.

Hookah lounges can also make money by selling shisha separately. Or, they can sell hookahs and hookah accessories. These accessories include coals, hoses, and vases. Other hookah lounges may sell food or even alcoholic beverages.

How much can you charge customers?

Customers can be charged about $10 for a single-person smoking experience, $15 for a three-person smoking experience, and $20 for a four-person smoking experience. Each smoking “experience” includes one hookah to be smoked. You can also offer to replace the bowl’s shisha, if you’d like. This isn’t necessary, but it can definitely retain customers if it’s balanced against the expense.

How much profit can a hookah lounge make?

A hookah lounge can make quite a lot of money, if it’s successful. Average profits are about $150,000.

How can you make your business more profitable?

To become more profitable, you should create incentives. Because shisha is a niche form of entertainment, a lot of customers will return to hookah bars with unique atmospheres. Consider adopting a discount plan, rewarding returning customers, or offering food and drinks.

Want a more guided approach? Access TRUiC’s free Small Business Startup Guide – a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

One crucial aspect that cannot be overlooked when starting your hookah lounge is the importance of establishing a solid business foundation. While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs.

This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.

In practice, this means that if your hookah lounge were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.

Ready to Turn Your Business Idea Into a Reality?

Tailor Brands is our top recommendation because it guides you through every step of the formation process with hands-on support — from paperwork and compliance to devising a detailed plan to help you achieve your business goals.

FORM YOUR LLC

Note: If you’re interested in more information before getting started, we recommend having a look at our state-specific How to Start an LLC guide (DIY) or our in-depth Best LLC Services review (for those opting for a professional service).

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It’s really easy and free!

You can acquire your EIN through the IRS website. If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

  • Separates your personal assets from your company’s assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a hookah lounge. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

Certificate of Occupancy

A hookah lounge is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a hookah lounge.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your hookah lounge will be in compliance and able to obtain a CO.

Food Regulations

When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections

There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers’ Compensation Coverage.

Find out what types of insurance your Hookah Lounge needs and how much it will cost you by reading our guide Business Insurance for Hookah Lounge.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market a hookah lounge

Fortunately, hookah lounge promotion takes care of itself. Word of mouth, normally, will suffice. That said, you can boost your hookah lounge’s visibility by marketing through liquor stores, outside grocery stores, near college campuses, and party areas. Once a hookah lounge is “found,” it usually catches on quickly.

How to keep customers coming back

Customers will come for the hookah, but they’ll stay for the experience. Because smoking shisha is a social event, customers will flock to whichever lounge offers the best amenities and prices. Normally, this includes: a low shisha price, loose smoking restrictions, informative staff, an interesting environment, and good deals.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites – full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

Other popular website builders are: WordPressWIXWeeblySquarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2024 to find the best phone service for your small business.

Recommended Business Phone Service: Phone.com

Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it’s fair pricing.

Is this Business Right For You?

Anyone who’s interested in shisha, hookah, or the hookah culture should open a lounge. A hookah lounge is a good business for entrepreneur types, diner lovers, and tobacco connoisseurs.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at a hookah lounge?

A hookah lounge owner is in charge of setting up hookahs for people to smoke. A lounge owner needs to make sure all the hookah pipe pieces are clean. Similarly, they need to make sure the lounge’s shisha supply is clean and unspoiled. A lounge owner charges customers, keeps track of payments, and cleans the establishment. Hookah lounges are typically small, and they can be operated by a single person. Some hookah lounge owners stock hookahs for sale. They can also sell shisha, hookah hoses, hookah bowls, and other accessories.

What are some skills and experiences that will help you build a successful hookah lounge?

A hookah lounge owner needs to have a firm grasp on hookahs. They need to understand how they’re smoked, how shisha is measured, how to take care of a hookah, and how to make a pleasant smoking session. High-quality hookah lounge owners also understand the culture of smoking hookah. Because hookah is a middle-eastern novelty, some visitors go to lounges to try something exotic. While hookah has become pretty popular, a high-quality lounge will still cover the “bells and whistles” to make a nice experience.

A hookah lounge owner also needs to understand liquor and tobacco laws. Guests need to be safe at all times. Guests can smoke too much hookah, causing them to get sick. A good hookah lounge owner will make sure guests are knowledgeable about hookah.

What is the growth potential for a hookah lounge?

A lot of hookah lounges are local. Because of this, there isn’t much growth potential on a state, or even national, level. A hookah lounge can, however, become a local favorite. If your hookah lounge offers the best shisha, the lowest prices, the best discounts or other great amenities, expect it to be a main location for visitors.

Hookah lounges gain a lot from tobacco’s inelastic demand. People who smoke hookah will often pay a lot for it, and they’ll keep returning to purchase it. For this reason, a hookah lounge which provides the best products, services or cost opportunities will have a very big advantage.

Take the Next Step

Find a business mentor

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

  • Funding
  • Events
  • Guides
  • Support

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a hookah lounge?

When jump-starting a hookah lounge, make sure your prices are affordable. Additionally, make sure you’re offering shisha the customers like. Again, hookah bars benefit from the average customer’s love of tobacco. That said, a hookah lounge which doesn’t prepare shisha properly can lose business quickly.

Raw materials will also need to be sourced. Make sure you’re using popular shisha, and make sure your employees are skilled in the art of shisha preparation. While shisha preparation isn’t too difficult, there is a firm culture behind it.

How and when to build a team

At the start, you can run a hookah lounge yourself. You should quickly gain between one and three workers, however. A lot of hookah lounges are small, and they thrive on having a café-like atmosphere. That said, a hookah lounge with slow service is often passed up.

Useful Links

Industry Opportunities

Real World Examples

Further Reading