How to Create a Cigar Shop & Lounge
Have you been kicking around the idea of opening your own cigar shop and lounge? If you have, you’re in good company. I’ve gotten to talk about this topic with a lot of hopeful cigar shop entrepreneurs out there. So I thought I’d make a video with some of the details that you’ll want to know before you dive in headfirst.
The first thing you need to know about being in the business of cigars is that there is a nearly endless list of people and organizations who are already working to kill your business. There are non-profit organizations who work ceaselessly to hurt cigar companies simply because we work in the tobacco arena (nevermind the fact that there’s a world of difference between the risks associated with cigarettes and cigars). In addition to that – crafting new laws, taxes, and regulations on tobacco products is an easy way for local politicians to show their constituents that they can ‘get things done’. So you’ll face regular proposals from policymakers on the city, county, state, and federal levels. So if you’re looking to open a cigar shop, be ready for some adversaries. You’ll have plenty of them working in this industry. And if all the opposition doesn’t scare you, then perhaps the process will.
Once you begin working to get in with cigar makers, you’ll need to know how they tick. Keep in mind, they have all been working under the same hostile conditions that I mentioned above for decades. So they’re very relational, and not always quick to trust new people. For that reason, you’ll want to make sure you have your ducks in a row before you start trying to build those critical relationships. Here are three initial things you’ll need before you even consider calling a cigar maker.
Money is an essential ingredient in any business start-up. However, I still find myself talking with a people who have this attitude like, ‘I’ll cross that bridge when I come to it.” But funding is the bridge to cross for most new businesses. There are a million people with great ideas for new businesses, and of all the new businesses out there, more than 90% will fail before they reach profitability. So banks and investors aren’t eager to shell out a bunch of cash. Before you get going, you’ll need to know where your startup capital is going to come from.
As for the amount of money you’ll need, this varies A LOT depending on your business plan. The total capital needed will depend on things like the size of your humidor, what kind of lounge you’ll have, where you’ll be located (cost of rent), whether you’ll sell online or serve liquor. Every part of your business strategy will determine the amount of money you’ll need. So when you’re determining your startup costs, make sure you’ve got a good business plan.
II. A signed lease on a commercial space
If you want to open a cigar shop, you’ll need… well, a shop. That means an actual storefront (brick and mortar location) where your shop will be located. This will be your HQ, so you’ll want to make sure it’s located in the right area. You’ll want to know about how many people live in that area, and how many cigar smokers there are per capita in your area. That’ll help you get an idea of the kind of potential clientele you’ll even have.
A storefront will also be critical for your relationship with cigar makers. Manufacturers will only ship cigars to an actual retail shop. So you won’t likely find many who will send shipments to your house. You’ll want to have a storefront (with a humidor) where they can send the product.
This is where I’ll also mention that you’ll want your shop to be a stand-alone building. When you’re selling and smoking cigars, you won’t really want any retail neighbors. Most of the retail location horror stories I’ve heard from other cigar shop owners have to do with complaining neigbors. I’ve seen plenty of shops get shut down because of complaining neighbors (I’ve even had it happen to me before). For that reason, I’d recommend steering away from strip malls.
If you do decide to go with a strip mall or retail park, it may seem like you’ve got good neighbors at first, but those relationships can go sour fast when your neighbor’s customers start complaining about the smell, or they move out and you get brand new neighbors.
You’ll also want to make sure that your shop has an allowance for smoking written into the lease! This is a BIG one. If you’re leasing a space, and you don’t have a guarantee that you can smoke inside that space, there’s nothing stopping your landlord from cutting your legs right out from under you. Like I mentioned above, I’ve seen a lot of shops shut down after smoking was banned on the premises.
III. A Tobacco License
This one can be really simple or really tough. Every state has its own process for obtaining a tobacco license. Some are fast, simple, and affordable while others are a nightmare of red tape. In AZ, getting a license is pretty simple. It takes about a week and costs like $25.00. In California, there’s more than one type of license, they can cost more than $1000 per year, and they can take 6 months to obtain.
This is where I’ll mention that you should make sure you understand your state’s tobacco laws as you’ll almost certainly need to know them to get a license, and you’ll definitely need to know them to operate a shop.
Once you accomplish these first three steps, you’ll have the basic ingredients to begin creating relationships with cigar makers and eventually, host your grand opening (after you deal with a million small details like insurance, Point of Sale system, inventory selection, marketing, etc). I’ve spoken with dozens of people who want to do this (who wouldn’t), but only a brave few actually accomplish the tasks, and realize their dreams. If this is your dream, I wish you the absolute best. If you make it through this list, please feel free to give me a call at Cigars Daily. It has been my absolute privilege to help a hand full of shops get their doors open, and it’s something I always get excited about doing. – Tim