A cigar shop or smoke shop is a retail outlet where smokers go to buy their preferred cigar brand and smoke freely without the fear of being embarrassed, arrested, or fined. Note that not all cigar shops are open to the general public, some cigar shops will require you to sign up as a member before you can have access. The global cigar and cigarillos market was estimated at USD 17.45 billion in 2019 and is expected to reach USD 17.96 billion in 2020.
The revenue forecast in 2025 is put at USD 21.02 billion. Statistics have it that the Cigar Lounges industry in the United States of America is worth $2 billion, with an estimated growth rate of 11.0 percent. There are about 7,684 legally registered and licensed cigar lounges/smoke shops scattered across the United States of America and they are responsible for employing about 17,980 people.
Steps to Start a Cigar Shop Business in 2023
Table of Content
Conduct Market Research
The first step in the market research process for your cigar shop is to develop market-based research questions in line with your overall business goal and objective. In this regard, you should source information that will help you maximize your business, and also help you operate your cigar shop with less stress, and of course, build the business to profitability.
a. Who is the Target Market for Cigar Shop?
If you are thinking of opening a cigar shop business then you should make your target demographics all-encompassing. It should include corporate executives, socialites, entrepreneurs, business people, celebrities, military men and women, sportsmen and women, and every adult in the neighborhood where your cigar lounge will be located.
b. Is Cigar Shop a Profitable Business?
Yes, the cigar shop business is profitable and statistics show that the industry generates an average of $2,109 monthly sales with monthly gross profit at $728 on a gross profit margin of 34.5 percent.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to cigar shops because the cigar shop business is a subset of the cigar industry.
d. Who are the Major Competitors?
- Fox Cigar Bar Scottsdale
- Cigar Republic USA
- Karma Cigar Bar
- Sunset Cigar Lounge
- Smoking Jacket Cigar Lounge
- Ashton Cigar Bar
- Bo’s Cigar Lounge
- The Cigar Bar & Grill
- Occidental Cigar Club
- Casa de Montecristo by Cigar Inn
- Little Havana Cigar Factory
- Gran Havana Cigar & Hookah Lounge
- West Coast Cigars
- Key West Cigar City USA
- Posh Hookah And Cigar Lounge
- Royal Hookah & Cigar Lounge
- Good Ol’ Times Cigars & Lounge
- The Charles P Stanley Cigar Company and Lounge
- SMoKE Manayunk – Cigar & Hookah Lounge
- The Cigar Lounge at Chamberlain’s Steak and Chop House
e. Are There County or State Regulations or Zoning Laws for a Cigar shop?
Yes, the FDA regulates all tobacco products, including; hookah, e-cigarettes, dissolvables, smokeless tobacco, cigarettes, all cigars, roll-your-own tobacco, pipe tobacco, and future tobacco products that meet the statutory definition of a tobacco product.
Please note that there are county or state regulations and zoning laws for cigar shops, and players in this industry are expected to work with the existing regulations governing such business in the county or state where the business is domiciled.
f. Is There a Franchise for Cigar Shop?
Yes, there are franchise opportunities for the cigar shop business, and here are some of them;
- Gateway Cigar Store/Newstands Franchise
- Puff City Franchise
- Casa de Montecristo
g. What Do You Need to Start a Cigar Shop?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Shop facility
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Suppliers of cigars and related products
- Employees
- Startup Capital
Memorable Business Name ideas for Cigar Shop
- The Lords© Cigar Shop, Inc.
- Boston Connect® Cigar Shop, LLC
- Smoke© Cigar Shop, Inc.
- Smoke Solutions® Cigar Shop, Inc.
- Melting Pot™ Cigar Shop, Inc.
- Jerry Benson™ Smoke Shop, LLC.
- Drill Blaze© Cigar Store, LLC
- Jonny Moore® Cigar Shop, Inc.
- Green Leaf© Cigar Shop, Inc.
- Martins© Cigar Shop, Inc.
- Sleek® Cigar Shop, LLC
- Coast Line® Cigar Store & Bar, LLC
- Free World™ Cigar Shop & Hookah Bar, LLC
- Thomas Gusto© Cigar Shop, Inc.
- The Don’s Place® Cigar Store, Inc.
- Santos Marcos™ Cigar Lounge & Hookah Bar, Inc.
- Greenish Wrap™ Cigar Shop & Hookah Bar, Inc.
- Cuban Guys© Cigar Shop and Bar, Inc.
- One Stop® Cigar Shop & Hookah Bar, LLC
- Friendly Colony™ Smoke Shop, Inc.
Register Your Business
a. What Type of Business Structure is Best for Cigar Shop?
Even though there are several options when it comes to the cigar shop business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Cigar Shop?
- General Business License
- Health and Safety Permit
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections
d. What Type of Certification is Needed to Open a Cigar Shop?
You don’t need any certification to open a cigar shop.
e. What Documents are Needed to Open a Cigar Shop?
These are some of the basic legal documents you are expected to have in place if you want to legally run a cigar shop business in the United States of America;
- DBA
- EIN
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Online Terms of Use
- Online Privacy Policy Document
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a cigar shop business, you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Cigar Shop Business?
To be truthful, the cost required to open a cigar lounge can vary significantly. Lionel Melendi who owns a cigar shop in Brooklyn, recommends that business owners have at least $500,000 in funding. Savvy business owners, however, may be able to open a shop for a little less than that.
b. What are the Costs Involved in Starting a Cigar Shop Business
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $1,200.
- Marketing promotion expenses (2,000 flyers at $0.04 per copy) for the total amount of $80.
- The cost for hiring a business consultant (writing of business plans inclusive) – $2,500.
- Insurance (general liability, workers’ compensation, and property-casualty) coverage at a total premium – $2,400.
- The cost of accounting software, CRM software, and Payroll Software – $1,500
- The cost for payment of rent for 12 months at $1.76 per square foot in the total amount of – $35,600.
- The cost for shop/facility remodeling – $25,000.
- Other start-up expenses including stationery – $500
- Phone and utility deposits will cost – ($2,500)
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $30,000
- The cost for start-up inventory (a wide range of cigars and other tobacco products, electronic cigarette products, E-liquid, vape pen, replacement coils and juice may cost you as little as $50 for the first month, while a full-featured box mod paired with an MTL tank, coils and juice may go up to $120. After that, you should expect an average of $30-60 per month for coils and juice, drinks and small chops et al) – $16,027
- Storage hardware (bins, utensil rack, shelves, glasses case) – $3,720
- The cost for store equipment (cash register, security, ventilation, signage) – $3,150
- The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al) – $8,000.
- The cost of launching an official website – $600
- The cost for our grand opening party – $3,000
- Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Cigar shop?
- The size of the cigar shop business
- The choice of location
- The required licenses and permits
- The type of facility
- The brands of cigar and accessories related in the shop and additional services offerings
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the cigar shop
- The cost for furnishing and equipping the cigar shop – facility
- The cost for insurance policy cover
- The cost for registering the business
- Supplies and ongoing expenses
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the cigar shop
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new facility for your cigar shop, but if you have the required finance, it will pay you to build your facility. The truth is that building or reconstructing a facility will allow you to come up with a facility that will fit into your overall business goals and vision.
e. What are the Ongoing Expenses of a Cigar Shop Business?
- Supplies (inventory expenses)
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
f. What is the Average Salary of your Staff?
- Shop Manager (Owner) – $45,000 Per Year
- Cigar Rollers – $29,630 Per Year
- Sales Boys and Sales Girls – $26,100 Per Year
- Security Guard -$24,000 Per Year
g. How Do You Get Funding to Start a Cigar Shop?
- Raise money from personal savings and sale of personal stocks and properties
- Raise money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Apply for business grants and seed funding from the government, donor organizations, and angel investors
- Source soft loans from your family members and your friends.
Write a Business Plan
a. Executive Summary
Our cigar shop will be located in a fast-growing community in San Antonio, Texas. We have been able to secure a one-year lease of a vacant shop within the city’s largest shopping mall. We are fortunate to secure a facility with an option of renewal for 5 years at a rate that is favorable to us.
Our customers are going to be treated to good music at all times. We have made provisions for a live band, karaoke, countryside music, jazz et al. which will be played in the background to create the ambiance our customers will cherish.
b. Products and Service
- Cigars
- Tobacco-related accessories
- Tobacco products
- Mass market cigars and cigarillos
- E-cigar
- Providing a cigar-friendly smoking environment
c. Mission Statement
Our mission is to establish a cigar shop business that will make available all brands of cigars, tobacco products, electronic cigarettes, and accessories in the United States at every given time to our customers, and a place where people can freely smoke, network, and socialize.
Vision Statement
Our vision is to establish a secured cigar shop in San Antonio, Texas that will be the melting pot of all lovers of cigars and other tobacco products.
d. Goals and Objectives
The goals and objectives of a cigar shop are to provide a retail outlet where smokers can go to buy their preferred cigar brand and smoke freely without the fear of being embarrassed, arrested, or fined.
e. Organizational Structure
- Shop Manager (Owner)
- Cigar Rollers
- Sales Boys and Sales Girls
- Security Guard
Marketing Plan
a. SWOT Analysis
Strength:
Our strengths as a company are excellent and detailed customer service, a wide range of cigarettes, tobacco, and cigar accessories, excellent facility, ambiance, and a perfect location for a vape shop in a metropolitan city like San Antonio.
Weakness:
A major weakness that is obvious to us is the lack of economies of scale which may slightly affect the prices of our products.
Opportunities:
There are unlimited business opportunities available to cigar shop businesses in busy cities like San Antonio. San Antonio is one of the cities in the world where social life is at its peak. Besides, the shopping mall where our cigar shop is located is one of the busiest in the United States and it is open to loads of opportunities due to the influx of shoppers.
Threat:
Major threats we have in the business include; unfavorable government policies, bad press and publicity for cigars and tobacco-related products, and of course, vape shops.
b. How Do Cigar Shops Make Money?
Cigar shops make money by selling the following products;
- Cigars
- Tobacco-related accessories
- Tobacco products
- Mass market cigars and cigarillos
- E-cigar
- Providing a cigar-friendly smoking environment
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your cigar shop by sending introductory letters alongside your brochure to corporate organizations, transport companies, households, sports organizations, gyms, schools, socialites, and other key stakeholders throughout the city where your cigar shop is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business to give your business an online presence
- Directly market your products.
- Join local cigar shop business associations for industry trends and tips
- Provide discount days for your customers
- Advertise our business in community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
Financial Projection
a. How Much Should You Charge for your Product/Service?
Fine cigars cost anywhere from $2 to over $50 apiece and Cuban cigars can range anywhere from $7 or $8 to hundreds of dollars apiece. Please note that most premium handmade cigars range in price from $4 or $5 to $25 and up. We will follow the industry’s price range when retailing or products.
b. How Much Profit Do Cigar Shop Business Owners Make a Year?
It depends, but the available report shows that cigar shop owner makes over $45,000 annually.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the cigar shop business
- The types of products retailed in the shop
- The location the cigar business is covering
- The management style of the business
- The business approach of the cigar shop
- The advertising and marketing strategies adopted by the cigar shop
- The number of years the cigar shop is in business
d. What is the Profit Margin of a Cigar Shop Business?
The profit margin of a cigar shop business is not fixed; it usually depends on factors that are unique to your location. It could range from 75 percent to 100 percent depending on the type and brand of cigar and other tobacco products retailed in the shop.
e. What is the Sales Forecast?
Below is the sales forecast for a cigar shop business. It is based on the location of the business and other factors as it relates to such startups in the United States;
First Fiscal Year: $120,000
Second Fiscal Year: $200,000
Third Fiscal Year: $240,000
Set Up your Shop/Office
a. How Do You Choose a Perfect Location for Cigar Shop business?
- The demography of the location especially as it relates to people that smoke cigars
- The demand for cigars and related tobacco products
- The purchasing power of businesses and the residents of the location
- Accessibility of the location
- The number of cigar shops, vape shops, and cigar lounges in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City is Best to Open a Cigar Shop?
- Las Vegas, Nevada
- Los Angeles, California
- Brattleboro, Vermont
- Tucson, Arizona
- Silver Spring, Maryland
- Rowland Heights, California
- Portland, Oregon
- Richmond, Virginia
- Green Bay, Wisconsin
- Plano, Texas
c. What Equipment is Needed to Operate a Cigar Shop?
You should purchase cigarette holders, cases, shelves and racks, cigar accessories, receipt issuing machines, Sound System (For playing music), Point of Sale Machines (POS Machines), CCTV Cameras, and Flat Screen TVs. You will also need computers or laptops, internet facility, telephone, fax machine, and office furniture (chairs, tables, and shelves) amongst others, and all these can be gotten as fairly used.
Hire Employees
When it comes to hiring employees for a standard cigar shop, you should make plans to hire a competent shop manager (owner), cigar rollers, salespeople, and security guard.
Launch the Business Proper
In recent times, no cigar shop opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.
The bottom line is that with a proper launching of the cigar business, you will be able to officially inform people that your cigar shop is open for business.
a. What Makes a Cigar Shop Business Successful?
- Choose a good location and shop facility to launch the business
- Make sure your shop is stocked with different brands of cigar, tobacco, and cigar accessories
- Throw a grand party before officially opening the cigar shop
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your cigar shop
- Leverage on all available online and offline platforms to promote your cigar shop
b. What Happens During a Typical Day at a Cigar Shop Business?
- The shop is open for the day’s work
- Goods are properly arranged
- Walk-in customers are attended to
- Deliveries of orders are made
- Stocks are taken and reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Cigar Shop Business?
- Customer services skills
- Interpersonal skill
- Accounting and bookkeeping skills
- Business management skills
- Bargaining skill
- Work experience in a retail shop environment
- Experience in managing people
- Experience in business administration
- Experience in handling cigar and tobacco-related products.