Hookah Bar Business Plan

Arz al-Lubnan Hookah Bar

Executive Summary
Arz al-Lubnan Hookah Bar (Cedars of Lebanon) is a new hookah bar concept which will focus on a combination of
Middle Eastern customers and customers over 22 years in age to offer a more adult alternative to hookah bars
frequented by college-age customers. The first bar will be established in Trendytown, and managed by the business
founders, Sayed and Yasmine Batroun. The business will generate revenues through the sale of flavored tobaccos,
non-alcoholic drinks, and appetizers. The business seeks angel investor funding to launch its first bar.

The business projects to become profitable in its first year with good profit from strong sales in the first year. Sales
will triple by the third year of operation. Net profit of sales will be respectable due to the high margin on the products
sold. Exit for investors is possible from sale of the franchise to a chain of bars looking to expand their market.

Objectives
Arz al-Lubnan Hookah Bar seeks to achieve the following objectives with the launch of its first hookah lounge:

1. To establish a community of hookah smokers who contribute programming, events, and culture ideas to Arz
al-Lubnan Hookah Bar resulting in 50 events or programs held in its third year of operation.
2. To maintain a Facebook Fan page of 5,000 individuals by the end of its third year as a sign of its community.
3. To become profitable in its second year through the sale of tobacco, food and drinks.
4. To establish a franchisable model for hookah bars and initiate fundraising and planning for franchising by its
fifth year of operation.

Mission
The mission of Arz al-Lubnan Hookah Bar is to provide a comfortable environment, sometimes relaxing and
sometimes energetic and stimulating, around which those who love hookah smoking, as well as new converts, can
come together. The environment will draw on elements of Middle Eastern culture as well as the culture of the local
environment.

Keys to Success
The keys to success for Arz al-Lubnan Hookah Bar are:
1. Create a comfortable environment
2. Provide high quality tobacco, food, drinks, and hookah equipment
3. Establish a loyal core following
4. Expand the market of hookah smokers in the Trendytown area
5. Energize the customer base to generate their own culture and events at Arz al-Lubnan Hookah Bar

6. Company Summary
7. Arz al-Lubnan Hookah Bar is a new concept for a hookah lounge which centers around the community
aspect of smoking hookah pipes. The business will launch its first hookah lounge in Trendytown within six
months and endeavor to create a scalable model which can be franchised in additional urban locations. The
business will earn revenues through the sale of tobacco (multiple flavors), drinks (coffee, tea, and juices)
and food (Middle Eastern and American snacks and appetizers requiring light preparation). The customers
are expected to be those of Middle Eastern descent and their friends, those interested in Middle Eastern and
hookah culture, and young (22-35 year old) urbanites interested in a community-oriented experience that is
an alternative to bars serving alcohol and coffee shops.
8. Company Ownership
9. Arz al-Lubnan Hookah Bar is owned and established by the husband and wife team of Sayed and Yasmine
Batroun, Lebanese-American residents of Trendytown who have developed the concept for the store after
working in hookah lounges while overseas. The business is established as an S Corporation to allow for
additional investors to join. Sayed currently owns 51% of stock and Yasmine owns 49%. 40% of shares will
be provided to investors in the initial round of funding, diluting the founders' shares to 60% between the two
of them.
10. Start-up Summary
11. The start-up expenses for Arz al-Lubnan Hookah Bar include legal consultation and permit fees as a retail
and food service establishment, as well as a special permit for the lounge to allow smoking within. Stationery
includes business cards, letterhead, and business brochures.
12. Insurance includes initial general and product liability premiums as well as renter's and key-employee
insurance. Rent covers one month's security and two month's rent for the initial location to allow for build out
of the space before opening. Start-up marketing covers the marketing campaign before launch, as described
in the marketing plan. The website is a significant expense. It offers basic information on the business as
well as a scalable social networking component to allow for the organizing of hookah groups and the
planning of events.
13. The cash required will see the business through until cash flow break even is achieved. Current assets
includes lounge furniture (£10,000), tables (£10,000), kitchen supplies and tools (£10,000), silverware,
plates, glassware, and hookahs (£10,000). Long-term assets include basic improvements to the space
(£30,000 for additional plumbing, electrical work, taking down and putting up walls where needed, painting,
refinishing floors), lighting fixtures (£10,000), sound system (£10,000), POS sales system and wireless
devices (£20,000), kitchen equipment (£20,000 for stoves, refrigerator, and warming units), office equipment
(£5,000 for computer, printer, fax, telephones).
14.
 15.
16.
Start-up

Requirements

Start-up Expenses

Legal Help and Permits £5,000

Stationery etc. £2,000

Insurance £2,000

Rent £6,000

Start-up Marketing £15,000

Website £50,000

Total Start-up Expenses £80,000

Start-up Assets

Cash Required £40,000

Other Current Assets £40,000

Long-term Assets £95,000

Total Assets £175,000

Total Requirements £255,000

Products and Services

Arz al-Lubnan Hookah Bar will specialize in non-alcoholic, organic drinks, and healthy appetizers and snacks of both
Middle Eastern and American origin. The initial menu includes:

 Assortment of organic teas

 Assortment of organic coffees
 Fruit juices and juice blends
 "Mocktails" featuring fruit juices and fresh fruit
 Salads
 Crudite and dips
  Pita or pita chips and hummus/other dips
 Falafel
 Spinach fatayer
 Onion rings
 Fried fava beans

Prices for drinks will range from £3 for simple teas or small coffees to £12 for certain mocktails. Prices for appetizers
will range from £5 to £8 for single servings and £12 to £25 for group dishes (serving 4-6 people).

Flavored tobacco for hookah pipes will be sold as well for £15 for the first round and £12 for subsequent rounds.
flavors include:

 Cherry
 Strawberry
 Blackberry
 Mixed Fruit
 Apple
 Licorice
 Candy
 Jasmine
 Banana
 Rose
 Grape
 Lebanese Blend
 Pistachio
 Lemon
 Cola
 Mint
 Orange
 Peach
 Vanilla
 Mango

The facility will include a stage area where performances, talks, and films can be presented. These will be organized
by customer groups who will book the space free of charge for events that are acceptable to Arz al-Lubnan Hookah
Bar management.

Market Analysis Summary

The market for hookah bars in the United States has grown significantly in the past decade. Hookah-bars.com reports
that, as of October 2008, there were at least 470 hookah bars in the U.S. and an average of five new hookah bars
were opening every month. From these numbers, it can be estimated that between 2-5 million current hookah
smokers live in the United States. Of these hookah smokers, approximately 10% are of Middle Eastern origin and the
remaining groups are of American origin but have grown to embrace hookah culture.

In Trendytown, Arz al-Lubnan Hookah Bar will focus on locals in the greater Trendytown area of Middle Eastern origin
and young professionals.

Market Segmentation
Arz al-Lubnan Hookah Bar has determined the following market segmentation for potential customers:
Middle Eastern Americans: Area residents who have either immigrated from the Middle East or have family origins
in the Middle East. They value the connection that hookah bars provide with their culture and traditional elements. As
many Muslims do not drink alcohol, they do not feel alienated in hookah bars, which they sometimes do in bars which
focus on liquor. They appreciate being able to meet other Middle Eastern Americans at hookah bars, both for
friendship and for dating. While this is a small market segment in Trendytown, they use hookah bars more frequently
than other groups.

College Age Residents: College students who seek an alternative to bars and parties on their campuses seek out
different experiences. Hookah bars provide such an experience because of their exotic ambiance, colorful
atmosphere, focus on group dynamics, and the element of danger/risk provided by smoking. Furthermore, those
between the ages of 18 and 21 can frequent hookah bars while they cannot go to many bars that serve alcohol.

Young Professionals: 22-35 year-old professionals who are tired with bar culture sometimes react against it by
looking for other activities. They seek locations where they can congregate with friends, talk, and share a new
experience. However, they are turned off by hookah bars with a high percentage of college age customers.

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Middle-Eastern Americans 3% 500 515 530 546 562 2.97%

College Age Residents 3% 15,000 15,450 15,914 16,391 16,883 3.00%

Young Professionals 3% 30,000 30,900 31,827 32,782 33,765 3.00%

Total 3.00% 45,500 46,865 48,271 49,719 51,210 3.00%

Target Market Segment Strategy

Arz al-Lubnan Hookah Bar will target Middle Eastern Americans and young professionals, and not college age
residents. By seeking the target market segments described here, Arz al-Lubnan Hookah Bar intends to establish a
base of Middle Eastern devotees who will serve to give the bar credibility and authenticity. These devotees will feel
comfortable bringing their non-Middle Eastern friends to Arz al-Lubnan Hookah Bar. These additional customers must
be sought to prove Arz al-Lubnan Hookah Bar as a franchisable model for American consumers. Therefore, Arz al-
Lubnan Hookah Bar will be positioned for young professionals as an alternative to bars where community can be
developed, as well as a non-threatening fusion of American and Middle Eastern cultural aspects, rather than a total
immersion in Middle Eastern culture.
These markets exist throughout the United States and the Trendytown location will serve as a proving ground for the
Arz al-Lubnan Hookah Bar model.

Service Business Analysis

Over 470 hookah bars are in existence in the United States, spread throughout the country with some concentration
in cities. From 2000 to 2004, at least 200-300 new hookah bars opened for business, according to the journal
Smokeshop. Generally, as long as 80% of sales are derived from tobacco, smoking within hookah establishments
can be permitted by law.

The hookah bar industry is highly fragmented, with most bars being independent establishments. A small percentage
open a second or third location. There are currently no national hookah bar franchises.

Indirect competitors to hookah bars are coffee shops, bars that serve liquor, and cigar stores/tobacconists.

Typically, hookah tobacco is sold and pipes are provided to customers in hookah bars. Tobacco is sold in rounds
which serves a group of four to six for about an hour. Food and drinks are sold via waiter or bar service while
customers sit in groups and smoke. While some attend hookah bars alone, customers typically attend with groups
and sit at round tables with their group.

Competition and Buying Patterns

Hookah bar customers in the United States judge between establishments based on location (they will not be willing
to travel too far out of their way for a hookah bar) the variety of flavors served, the atmosphere, and the additional
food and drink options served.

Specific competitors for Arz al-Lubnan Hookah Bar include Ali Baba Hookah Bar, Babylon Hookah Lounge, Desert
Cafe, and Zee's Smoking Corner.

Ali Baba Hookah Bar: With DJs and dance parties on weekends, Ali Baba's serves a younger crowd who enjoy
meeting others.

Babylon Hookah Lounge: Also has DJs and tends toward a young consumer base. Older customers complain that
the lounge is loud, much like a rave concert.

Desert Cafe: Loved by regulars for its owner and its atmosphere, Desert Cafe has plasma TVs, outdoor seating in
summer and atmospheric lighting. The location is faulted for its low quality tobacco and lack of upkeep on their
hookahs.

Zee's Smoking Corner: With an extensive list of flavors, Zee's also focuses on college age residents and drives
away others with its loud music and party atmosphere.

Web Plan Summary

The website for Arz al-Lubnan Hookah Bar will offer a standard "brochure-style" presentation with details on the
products, services, location, and concept of the bar, as well as an extended social community component, tied in to
Facebook. The website will serve casual customers interested in the bar as well as fans who become involved in
creating cultural events and groups at Arz al-Lubnan Hookah Bar through the social portal, which will include a basic
calendar visible to all users and extended features reserved for members who log-in.

Website Marketing Strategy

The website for Arz al-Lubnan Hookah Bar will be promoted through PR, direct advertising, search engine
optimization, and the growing community of customers.

 PR efforts will include promotion to blog writers for the Trendytown area and hookah bars/Middle Eastern
culture and guest posts by the owners to these blogs. PR will also focus on the notable social media
component of the website as it ties in to developing programming for Arz al-Lubnan Hookah Bar
  Direct advertising will include Google ads, Facebook ads, and targeted ads on a few area websites. £1,000
a month will be devoted to this type of advertising in the first year
 Search engine optimization will begin during the development of the website through its initial design and will
continue with an outsourced firm retained to continue SEO work for £1,000 a month
 The community of customers will generate word-of-mouth and online referrals by inviting friends to the Arz
al-Lubnan Hookah Bar website through Facebook or Arz al-Lubnan Hookah Bar's social network
component

Development Requirements
Development of the website requires an experienced Web development firm with past success in developing social
networking components for businesses. The website will include the following in its basic, front end:

 About Us - background on the business and its concept and mission

 FAQs about hookah smoking and Arz al-Lubnan Hookah Bar
 Menu of food, drinks, and tobacco
 Photo gallery
 Contact page
 Location and Directions page with connection to maps from Google Maps or MapQuest

The social portal of the site will include:

 Membership sign-up and log-in pages

 Social calendar for Arz al-Lubnan Hookah Bar
 Step-by-step instructions for creating an event, discussion group, or throwing a party at Arz al-Lubnan
Hookah Bar
 Individual pages for user-created events
 Account page for each user showing events they are signed up for or have created
 Sharing buttons to make it easy for users to send event information via Facebook, MySpace, Twitter
 Automated tie-ins between the site and the Facebook Fan Page to minimize changes that must be made in
two places

Furthermore, the developer will create a Facebook Fan Page, and a back end for the site including:

 Form to allow management to make changes to menu offerings and prices without the need to use HTML
 Approval area for management to approve, reject, or request additional information on events
 Ability for management to add or remove photos from photo gallery and to organize them into albums

Development of the website will occur over a three month period. The first two months will produce a beta version
which will be tested by management, with revisions given to developers, for one month after that. It is expected that
additional changes will extend over the first few months of operation and £500/month of the marketing budget is
devoted to ongoing maintenance and development in the first year.

Strategy and Implementation Summary

The focus for implementation will be on establishing the quality of the offering, its suitability for the 22+ target market,
and the infrastructure to allow for community-driven culture. The fostering of the Arz al-Lubnan Hookah Bar
community will be important to the growth of the business and its proof as a franchisable model.

Competitive Edge
Arz al-Lubnan Hookah Bar's competitive edge will be established through its community organizing ability via its
website. This website will present an interface for users to:

 Connect with each other and Arz al-Lubnan Hookah Bar after they have left the establishment
 Organize groups to attend Arz al-Lubnan Hookah Bar together
 Plan events to propose for the Arz al-Lubnan Hookah Bar calendar
 Send out invites for these events

The party-like atmosphere at other hookah bars does not allow for easy conversation and for performances and
events of the type expected at Arz al-Lubnan Hookah Bar.

Marketing Strategy
The marketing strategy of Arz al-Lubnan Hookah Bar will be to establish a base of Middle Eastern American
customers first, and using these customers to bring in other young professional as friends. To that end, the following
tactics will be employed:

 Seeking mention in blogs for the local area

 Pitching the story of its concept and opening to Middle Eastern cultural and language publications
specifically, and area newspapers and magazines in general
 Advertising with posters and flyers in the downtown Trendytown area

The bar's grand opening will be marked by an event featuring live music, free food and drink offers, and door prizes.

After the launch, promotional incentives for customers will be advertised in newspaper advertisements, on the
website, and in the store for:

 Group discounts
 Free prizes for winners of business card drawing (to encourage target market of young professionals)
 Incentives to organize the first events via the website (such as free rounds of tobacco for the organizers at a
later date)

These expenses are included in the Profit and Loss statement for Arz al-Lubnan Hookah Bar as marketing expense.

Sales Strategy
Arz al-Lubnan Hookah Bar will sell its products through attentive wait staff and bar counter staff. They will be
compensated through base hourly wages and tips and will work to provide the best customer service possible. Wait
staff will use wireless tablets to place orders which are sent over the bar's wireless network to kitchen staff and bar
staff to prepare dishes and drinks.

Sales Forecast
Sales will be predominantly through tobacco revenues, which also has a relatively low cost of sales. Secondary
revenue streams are food and drinks which will be sold to some, but not all, customers who order tobacco. Sharp
growth is expected over the first three years of operation as the community aspect of Arz al-Lubnan Hookah Bar is
developed and customer-directed programming begins to take place.

It is expected that a customer will return to Arz al-Lubnan Hookah Bar on average 15 times a year, taking part in 20
rounds of tobacco in that time. Therefore, this projection represents 1,000 customer groups in the first year, 2,500
customer groups in the second year and 3,500 customer groups in the third year.

Strategy and Implementation Summary

The focus for implementation will be on establishing the quality of the offering, its suitability for the 22+ target market,
and the infrastructure to allow for community-driven culture. The fostering of the Arz al-Lubnan Hookah Bar
community will be important to the growth of the business and its proof as a franchisable model.

Competitive Edge
Arz al-Lubnan Hookah Bar's competitive edge will be established through its community organizing ability via its
website. This website will present an interface for users to:

 Connect with each other and Arz al-Lubnan Hookah Bar after they have left the establishment
 Organize groups to attend Arz al-Lubnan Hookah Bar together
 Plan events to propose for the Arz al-Lubnan Hookah Bar calendar
 Send out invites for these events

The party-like atmosphere at other hookah bars does not allow for easy conversation and for performances and
events of the type expected at Arz al-Lubnan Hookah Bar.

Marketing Strategy
The marketing strategy of Arz al-Lubnan Hookah Bar will be to establish a base of Middle Eastern American
customers first, and using these customers to bring in other young professional as friends. To that end, the following
tactics will be employed:

 Seeking mention in blogs for the local area

 Pitching the story of its concept and opening to Middle Eastern cultural and language publications
specifically, and area newspapers and magazines in general
 Advertising with posters and flyers in the downtown Trendytown area

The bar's grand opening will be marked by an event featuring live music, free food and drink offers, and door prizes.

After the launch, promotional incentives for customers will be advertised in newspaper advertisements, on the
website, and in the store for:

 Group discounts
 Free prizes for winners of business card drawing (to encourage target market of young professionals)
 Incentives to organize the first events via the website (such as free rounds of tobacco for the organizers at a
later date)

These expenses are included in the Profit and Loss statement for Arz al-Lubnan Hookah Bar as marketing expense.

Sales Strategy
Arz al-Lubnan Hookah Bar will sell its products through attentive wait staff and bar counter staff. They will be
compensated through base hourly wages and tips and will work to provide the best customer service possible. Wait
staff will use wireless tablets to place orders which are sent over the bar's wireless network to kitchen staff and bar
staff to prepare dishes and drinks.

Sales Forecast
Sales will be predominantly through tobacco revenues, which also has a relatively low cost of sales. Secondary
revenue streams are food and drinks which will be sold to some, but not all, customers who order tobacco. Sharp
growth is expected over the first three years of operation as the community aspect of Arz al-Lubnan Hookah Bar is
developed and customer-directed programming begins to take place.
It is expected that a customer will return to Arz al-Lubnan Hookah Bar on average 15 times a year, taking part in 20
rounds of tobacco in that time. Therefore, this projection represents 1,000 customer groups in the first year, 2,500
customer groups in the second year and 3,500 customer groups in the third year.

Sales Forecast

Year 1 Year 2 Year 3

Unit Sales

Tobacco 19,791 50,000 70,000

Drinks 23,749 60,000 80,000

Food 15,831 30,000 50,000

Total Unit Sales 59,371 140,000 200,000

Unit Prices Year 1 Year 2 Year 3

Tobacco £14.00 £14.00 £14.00

Drinks £6.00 £6.00 £6.00

Food £5.00 £5.00 £5.00

Sales

Tobacco £277,074 £700,000 £980,000

Drinks £142,494 £360,000 £480,000

Food £79,155 £150,000 £250,000

Total Sales £498,723 £1,210,000 £1,710,000

Direct Unit Costs Year 1 Year 2 Year 3

Tobacco £4.20 £4.20 £4.20

Drinks £1.20 £1.20 £1.20

Food £1.50 £1.50 £1.50

Direct Cost of Sales

Tobacco £83,122 £210,000 £294,000

Drinks £28,499 £72,000 £96,000

Food £23,747 £45,000 £75,000

Subtotal Direct Cost of Sales £135,368 £327,000 £465,000

Milestones
The £15,000 in start-up marketing will be spent on the downtown ad campaign (design and production of posters and
flyers, as well as purchasing ad space), PR campaign (creation and mailing of press kit), and the grand opening
event (live music, door prizes, decorations, free food and drink offers).

After the launch, the business will hold a series of promotions - first the business card drawing and then event
incentives - to initiate programming at Arz al-Lubnan Hookah Bar.

Milestones

Milestone Start Date End Date Budget Manager Department

PR Campaign 1/1/2010 2/28/2010 £1,000 YB Marketing

Downtown Ad
2/1/2010 2/28/2010 £5,000 YB Marketing
Campaign

Bar Grand Opening 3/1/2010 3/1/2010 £9,000 SB Operations

Business Card Drawing 5/1/2010 5/30/2010 £5,000 YB Marketing

Event Incentives 6/1/2010 8/1/2010 £5,000 WG Marketing

Totals £25,000

Management Summary
Arz al-Lubnan Hookah Bar is managed by the husband and wife team of Sayed and Yasmine Batroun, Lebanese-
American residents of Trendytown who have developed the concept for the store after working in hookah lounges
while overseas.

Sayed Batroun will manage store operations and train wait and kitchen staff. He has culinary experience with ten
years as a cook. He will handle procurement and inventory management. He will also work as head cook during initial
operations.

Yasmine Batroun will manage marketing, business development, and finance. She has an MBA and corporate
experience as a marketing associate for a Fortune 500 business. She will oversee accounting and bookkeeping. She
will provide general management in the restaurant as needed, including management of events.

In the second year of operation a general manager will be hired to take over staff supervision, staff training,
procurement and inventory management. Sayed Batroun will continue to serve as head cook but will work on a more
strategic level in other areas.

Additional staff will include kitchen staff and wait staff.

Personnel Plan
Staff will include two bartenders, two wait staff, and one kitchen staff initially. This will grow to four bartenders, six
wait staff and three kitchen staff. Wages for bartenders and wait staff are lower as they are significantly augmented
by tips. These personnel assumptions are based on the bar being open 80 hours per week.

Personnel Plan

Year 1 Year 2 Year 3

Sayed Batroun £36,000 £36,000 £36,000

Yamine Batroun £36,000 £36,000 £36,000

Bar Staff £48,000 £75,000 £110,000

Wait Staff £33,600 £70,000 £120,000

Kitchen Staff £30,000 £70,000 £120,000

General Manager £0 £50,000 £60,000

Total People 7 11 15

Total Payroll £183,600 £337,000 £482,000

Appendix
Sales Forecast
 Month Month
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 12
10 11

Unit Sales

Tobacco 500 600 720 864 1,037 1,244 1,493 1,792 2,150 2,580 3,096 3,715

Drinks 600 720 864 1,037 1,244 1,493 1,792 2,150 2,580 3,096 3,715 4,458

Food 400 480 576 691 829 995 1,194 1,433 1,720 2,064 2,477 2,972

Total Unit Sales 1,500 1,800 2,160 2,592 3,110 3,732 4,479 5,375 6,450 7,740 9,288 11,145

Month Month
Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 12
10 11

Tobacco £14.00 £14.00 £14.00 £14.00 £14.00 £14.00 £14.00 £14.00 £14.00 £14.00 £14