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New Business Model - Can this work?

WissamNourWissamNour subscriber Posts: 1
edited July 2009 in Business Planning
Ever since I was little, I`ve been an entrepreneur. I`ve sold lemonade in front of my house and eventually, gotten littler kids to run it while I sat in the house and watched TV. It`s in my nature.
Now I`m 22 and have been looking to start a company and a franchise that I build myself from the ground up. I`ve read almost everything I can get my hands on (WWGD is my favorite out of all of  them) and I finally think I know what I want to do -- but can it work?
In my city, the University houses the most jobs. With 40+ thousand students (and increasing), a thriving community has settled around it. There are bars, cafes,
shops and restaurants that line the street, but no hookah lounges.
Inversely, a city two hours from me with another university and pretty
much the same economical landscape have two hookah lounges, along with
bars, cafes, shops and restaurants. I find it fascinating because people love hookah here, and the shops that sell to their needs have grown steadily. Now my idea isn`t just to balance
the equation. Instead, I`d like to try something disruptive, something
that has never been done before: A business run by consumers or a
business club.
First, I`d play it safe and find my niche. By providing the highest quality tobacco, hookahs, tea, juices and atmosphere, with almost NO competition other than DIY and targeted advertising, I am almost guaranteed to find a small following. And unlike lounges in the other city, I would go back to the Arab roots and charge one price for your smoke session. That means a flat rate whether you smoke for 30 minutes or several hours on end. Even if you leave and come back, you paid for the day; no extra money needed. That`s how Arab`s do it, and that`s how I`ll do it. And of course, I`ll bring the occasion incentive like belly dancers, DJ`s, and performers.
Second, I`ll start a membership price. Becoming a member will significantly reduce the cost to you if you were a regular. Instead of a price per day, how about a price per month, per 6 months, per year? I want to turn my regulars into members.
Third, I`ll start a community. With my members in place, I`ll start asking them to communicate to one another. I`ll ask them to smoke as much hookah and drink as much tea as you would like, but also to be apart of a community and weigh in on a variety of
issues regarding the lounge and how the lounge could benefit the community. What would you like to see the lounge do? Who can we help? And what can we change for the better?
I would allow my customers to actively shape my lounge with
their input and ideas. I would then value those ideas in hope that giving
them a platform and a setting to pursue connections would fuel their ambitions. Our community could then do a variety of things. We could have fundraisers, debates, live music, and art shows. We could watch soccer, play videogames, and even throw birthday parties. And
for those that don`t want to join the community, I would still offer daily passes
at a fair price. But if you end up coming to the lounge enough to have paid for one, I will make
you a member. It would only benefit me if you were more active.
As an incentive to bring further members into the
community, I would setup incentive programs; programs that the community
itself makes more enticing through gifts and the like. For instance,
imagine an artist donating his art to our lounge as the incentive. The
person who brings in the most people gets to own that art.
Online sites like Facebook and Myspace could keep us together when we are away.
Basically, I`d like to start a community driven business that one day
becomes bigger than itself, all around
the central theme that we all love hookah and people, while of course, still being profitable.
What do you think? Can it work?


  • robertjrobertj subscriber Posts: 0 Member
    It is an interesting approach.
    I`d start to find the answer to your question by "running some numbers".
    1. What are the startup costs? (how much $ will be required before you open for business for things like deposits, equipment, inventory, improvements, prelaunch promotion,etc)
    2. What will the monthly expenses be? (rent, utilities, payroll, etc)
    3. Projected revenue:
          a. How much will you charge for a day, membership, etc?
           b  How many paying customers will be required to break even.
    Then ask yourself - is this number feasible/ possible / probable?
  • WissamNourWissamNour subscriber Posts: 1
    Thank you both for your replies.
    Let me first reply to Rober J:Startup cost: ~ $60,000Fixed cost/month: ~$14,600My projected revenue is were I`m unsure. I don`t know what to charge. My variable cost is only $0.25 for one hookah and one pot of tea, so my pricing is mostly based on how to bring in more customers. The lounges in the other city charges $12-$18 for a hookah, but allow you to split the cost. I will charge a flat-rate. So anywhere between $5 and $10 dollars.As for the membership, that is even harder to figure out. So let`s just focus on daily customers for now.I`ll low ball the number and say I charge $5 per person. That means if they only smoke one hookah and drink one tea, that`s a 95% gross margin. I don`t expect that number to dip below 80% even if they hangout all day.So let`s say I charge $5 and make $4 dollars gross profit margin. That means I`d have to bring in 3650 a month, which is a little daunting. Let`s further extrapolate.Price/Gross Margin Profit vs. People need to break even$6/$5 - 2920$7/$6 - 2434$8/$7 - 2086$9/$8 - 1825$10/$9 - 1623It doesn`t seem feasible at all....even at the highest sale price I would need to bring 54 people every day. It would need to be bussling.  ====================================================Phaino:There are actually more arabs here in my city. It has never really made sense to me. I`m not sure why my city has none. But like I said, the community stores that sell hookah supplies are steadily growing and I see it everywhere. The market is there. I`m a student at this university and I know its there. It`s really strange but it`s probably due to my numbers above.Being arab myself, I`ve already done quite a bit of research. Furthermore, our university has the highest jewish population in the state and jewish people love hookah as well. Everyone praises the idea. We all love it. But will we pay for it is the question.WissamNour7/31/2009 4:30 PM
  • WissamNourWissamNour subscriber Posts: 1
    Rent - 5000
    Utilities - 400 (water, electirc, trash, gas, tv, internet, phone)Supplies - 50Insurance - 50Staff - 9100 (4 waiters, 2 cooks, 1 manager)Total - 14600I guess I could do with only 2 waiters, 1 cook, and then myself as manager for a while. That would cut the staff cost by half bringing it down to about 10,000 / month
  • elenora123elenora123 subscriber Posts: 0

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  • WissamNourWissamNour subscriber Posts: 1
    Hmmm a WOW factor...
    Well besides being the first hookah lounge in town, I plan on sparing no expense to make it incredibly nice and incredibly comfortable; speakers, couches, lights, paintings, tapestries, etc. etc.. I was also thinking about renting out an adjacent lot and turning it into a library of sorts; where students can come in and study with peace and quiet while smoking hookahWhat else do you recommend?
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