Opening your own cigar lounge might be a tempting dream for any cigar enthusiast. But you’ll have your work cut out for you taking it from dream to reality. Before you dive in, you need to answer a critical question: How much will it cost?
By the time you cut the ribbon and unlock your front door, you’ll have invested hundreds of hours and thousands of dollars bringing your vision to life. Every cigar shop and lounge is unique, but costs can rapidly escalate beyond expectations if you’re unprepared.
This article highlights key start-up costs and investments to realistically factor into your new cigar lounge plans. We’ll look at avoiding mistakes and how you can be financially and logistically prepared to launch your cigar lounge.
Breaking Down Cigar Lounge Start-Up Costs
Creating an inviting space for enthusiasts to enjoy fine cigars, share drinks, and host engaging conversations is a great way to fuse business ownership with a beloved pastime.
And today’s landscape seems increasingly receptive to the concept. It’s getting more and more popular for cigar aficionados to enjoy the ritual of premium hand-rolled cigars in lounges across North America. Add a full bar, comfortable leather armchairs, and elegant decor — and you have an appealing business model.
Related Read: How To Open a Cigar Shop in 5 Easy Steps
With some creativity, you can create a humidor with the best brands, host pairing events and tastings, and create a community of loyal customers. And, of course, turn a profit. However, it’s not all positive. There are some risks to consider:
- Opening any brick-and-mortar small business is a financial gamble.
- Attitudes towards tobacco use can impact customer demand.
- Various states and municipalities ban or restrict smoking indoors.
- State and local regulations require licenses with long applications.
- You’ll need small business insurance to cover for potential losses.
If you balance the good and bad and still want to dive in, you can be successful with proper planning and budgeting. Let’s get started.
Location Sets the Foundation
The location of your cigar lounge will be a driving factor in start-up costs (and earning potential and profit margins).
Your rental costs will fluctuate depending on where you want to open your lounge. For example, in busy urban areas, you can expect sky-high rents. But deciding to move further out isn’t always the answer. Although you’ll have cheaper rent, you’ll miss out on local foot traffic.
Once you find a space, inspect it carefully. What will you need to do to turn it into a cigar lounge? Build-out costs can get high to turn your space into a compliant, functional cigar lounge. It’s best practice to get quotes from multiple contractors before committing to a build-out budget. A move-in ready location can save tens of thousands in initial costs.
Last but not least, check out the laws and ordinances that govern cigar lounges in your town. Some places have strict ventilation requirements, capacity limits, or additional fees. Some cities don’t allow smoking lounges, so double-check before committing. Consulting with an experienced business lawyer helps navigate the red tape.
Inventory and Climate Control
The initial outfitting of your humidor and stocking cigar inventory requires a significant upfront investment.
A high-quality humidor with precision temperature and humidity control is essential. Don’t cut corners or go cheap here. Typically, a quality humidor costs between $1,000 and $5,000. You might invest in an electronic monitoring system to automatically regulate conditions and alert you of any issues.
You’ll need to stock premium cigars to attract the right clientele for your cigar lounge. A well-curated and managed inventory lets your customers know you’re knowledgeable and passionate about fine cigars. Initial inventory can cost anywhere between $10,000 to $30,000. It’s best practice to keep inventory fresh by selling through and replacing existing stock.
Factor in ongoing inventory costs. You’ll likely invest 10–20 percent of revenue into replenishing your cigar selection as customers smoke through your stock. Account for this in financial projections and budgeting.
To reduce costs, you can partner with cigar brands to secure discounted pricing, minimize waste, and consider a membership program.
Furnishings and Decor
If you want to create a specific vibe in your lounge, consider hiring an interior designer. You could do it yourself, but interior designers often find ways to maximize space, make best use of lighting, and match colors to create an ambiance. Be prepared to spend on:
Seating: Comfortable seating is a must! You want your customers to feel at home and relaxed. Expect to invest at least $5,000–$10,000 in attractive leather chairs, couches, and bar stools. You’ll then need to arrange seating that encourages conversations between patrons.
Tables: A large range of table sizes and shapes will help accommodate individuals and groups. For tabletops, consider the vibe you’re going for. Upscale materials, like polished wood, marble, and granite, help set the tone for your lounge. Round tables promote interaction, and bar-height tables cater to patrons just popping in.
Related Read: 6 Resources for Small Business Owners
Lighting: Lighting can’t be overlooked. Lighting choices set the mood. Warm pendant lights, classic table lamps, and subtle wall lights create a relaxed, classy atmosphere. Overall lighting levels should be dim for a cozy, relaxing tone. Use spotlights sparingly to highlight cigar displays.
Decor: Decorative flourishes add a finishing touch. For example, framed artwork, live plants, and area rugs can elevate your space and maintain an upscale yet approachable vibe. Vintage maps, leather club chairs, and rich wood accents work especially well. Again, an interior designer can help here.
Legal Fees, Permits, and Licenses
Navigating substantial red tape comes with the territory when opening a cigar lounge. You’ll have your hands full, from permits and licenses to regulations and fees. Legal expertise on your side could prove to be invaluable but can set you back.
Work closely with a business lawyer familiar with local laws and regulations. They can guide you through the process of permitting and licensing. You’ll likely need a tobacco license, liquor license if serving alcohol, special ventilation system approval, occupational licenses, fire department permits, health department certification, zoning variances, and more.
Many jurisdictions also limit the number of tobacco or liquor licenses available. Don’t sign your lease until you know there’s a license available, and make sure you budget for license application fees. It might take longer than you think to secure licenses and permits. Allow at least six months.
Legal hurdles are tedious, but embracing these steps is an opportunity to demonstrate professionalism. You can improve local relationships, avoid penalties, and build a good reputation in your community.
Other Costs To Look Out For
There are also some less obvious costs to consider. General liability and property insurance are the most common — location and other factors affect coverage costs. Any incidents resulting from cigar consumption should be covered by product liability insurance. Business interruption insurance can replace income if your business is forced to close temporarily.
Marketing will also be an investment. When you first open, you want to create a buzz. A grand opening might include a tasting or pairing event; you’ll want to promote that through social media and paid channels. Factor in ongoing marketing expenses, too.
Related Read: 3 Tobacco Promotion Ideas for Small Businesses
How many employees will you need? Consider staffing costs like wages, salaries, training, benefits, and payroll taxes.
Finally, make sure you have a working capital buffer. There will be unexpected expenses and overages as operating costs ramp up. A buffer of six months is ideal. Consider lines of credit to avoid cash flow issues. Start-up costs can exceed projections, so having contingency funds is key.
Using Your Point of Sale (POS) System To Manage Costs
Opening a cigar lounge requires significant time, money, and effort. But for enthusiasts seeking to turn their passion into a business, the rewards can outweigh the risks. We’ve covered various cigar lounge start-up costs, from securing the right location to stocking your humidor — but how can you manage costs?
After opening, your point of sale (POS) system will be indispensable for tracking expenses and optimizing operations. To maximize functionality, choose a system designed specifically for tobacco retail. Key features that help control costs include:
- Streamlined inventory management and automated ordering to reduce waste
- Robust reporting and analytics on sales, revenue, margins, and other data to inform business decisions
- Employee scheduling, hour tracking, and projected staffing needs help control labor costs
- Flexible payment processing to accommodate diverse customer preferences
- Management of customer loyalty programs to encourage repeat business
- And more!
At Cigars POS, we work with thousands of tobacco store and cigar lounge owners to streamline their businesses.
Our loyalty features include tracking favorites, personalized promos, and rewards systems. We also have a feature allowing customers to keep a tab open while trying cigars with friends. These little flourishes help your cigar lounge thrive while keeping customers in mind.
Want to see it in action? Reach out today to schedule a demo of Cigars POS.
