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TABLE OF CONTENTS

EXECUTIVE SUMMARY, 3 Market Overview, 3 Competitive Overview, 3 Product Overview, 3 Marketing Mix, 4 Goals and Objectives, 4 Operations, 4

COMPANY DESCRIPTION, 5

ENVIRONMENTAL ASSESSMENT, 6 Overall Market, 6 Target Market, 6 Competition, 6 Competencies, 7 Competitive Advantage, 7 Mission Statement, 7 SWOT Analysis, 8

MARKETING, 8 Strategy and Positioning, 8 Competitive Advantage, 9 Products and Services, 9 Pricing, 11 Message and Promotion, 11 Marketing Mix, 11 Print, 12 Outline Marketing, 12 Social Media, 13 Website, 13 Information and Marketing, 13 Sales, 13 Financial Linkage, 13 Marketing Budget, 14

OPERATIONS PLAN, 15 Facilities, 15 Equipment, 19 Staffing, 19 Processes, 19 Outsourcing, 20 Customer Satisfaction, 20 Technology, 20 Supplies/Suppliers, 20 Licensing, 23

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Summary, 24

MANAGEMENT, 24 Management Team Bios, 24 Organizational Chart, 25

FINACE, 25 Start-up Funding, 25 Start-up Assumptions, 26 Sales Assumptions, 26 Sales Projection, 27 Staffing Assumptions, 30 Marketing, 30 Operations, 31 Industry Norms and Comparisons, 31 Contingency Plan, 31 Break Even Analysis, 32 Projected Profits, 32 Projected Cash Flow, 33 Exit Strategy, 34

APPENDIX A Bibliography, 35

APPENDIX B OPERATIONS, 35

APPENDIX C MARKETING AND ENVIRONMENTAL ANALYSIS, 44

APPENDIX D FINANCE, 44

RESUMES, 44

Fuzzy Hookah: Feeling Fuzzy?

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Executive Summ ary

Market Overview

The interest in hookah is steadily increasing and the hookah industry has yet to reach its peak in the United States. We plan to cater to people within the ages of 18-35 who live in the Orland Park, Illinois and Tinley Park, Illinois area. These people make up 28% of each villages population. Orland Park, Illinois’ total population is 56,767, and Tinley Park, Illinois’ population is 56,703. The median household income for Orland Park, Illinois is $80,383, and the median household income for Tinley Park, Illinois is $80,774. The residents of this area have higher household incomes the national average of $56,576 which means they will the disposable income needed to afford and enjoy hookah on a regular basis.We also plan to cater to the significant Arab community within the Southwest Suburban area of Chicago.

Fuzzy Hookah Lounge has two direct competitors that are within 15 miles of the location; Sahara Hookah Lounge and Hookah Time Café. They service a similar target market as Fuzzy Hookah Lounge. They are both restrained by strict hookah bar regulations regarding food and beverage service. Sahara Hookah Lounge is very outdated, but they have a loyal customer base. Hookah Time Café was opened in 2009. This hookah café is modern, and spacious. They have reasonable price points but they are still new to the area.

Competitive Overview

Sahara Hookah Lounge: Located at 7899 W 159th St in Tinley Park, Illinois. Sahara is a basic hookah lounge serving 100 + flavors of tobacco, and fountain and coffee drinks. This business also sells at home hookah supplies like tobacco, hookah hoses and hose covers. Sahara’s strength is that they have been at this location for about 20 years so they have had ample time to build loyal clientele, a reputation, and brand recognition.

Hookah Time Café: Located at 20653 Renwick Road in Crest Hill, Illinois. Hookah Time Café doesn’t sell food or beverages but they offer hookah at reasonable pricing and a comfortable atmosphere. Hookah Time Café’s strengths are that it offers a better selection of amenities like VIP rooms and free WIFI; they offer reasonable pricing for hookah and the location is up to date, clean and inviting.

Product Overview

A hookah lounge is a lounge that serves a tobacco-pipe in a traditional Middle-Eastern setting, with Persian rugs and curtains to decorate the bar. Hookah is composed of a pipe that is typically filled with water, sometimes liquor and wine, with flavored tobacco on the head with foil wrapped on top with holes poked into it, with a coal slowly burning the tobacco. The heat will react with the water, creating steam and smoke that will be blown out through a hose.Fuzzy Hookah Lounge will provide its customer with high quality tobacco at reasonable prices. Each flavor lasts about 45 minutes each. We expect people to buy at least one or two flavors each visit.

We will base our pricing strategy off the results of or consumer survey results. According to our survey customer find the cost $10-$13 per person for each flavor is most reasonable. In order to stay competitive we have taken into consideration the pricing strategy that our competitors use. Our nearest competitor, Sahara Lounge has no competition in the area and they have been able to set their prices at a premium rate of $10 per personOur intention is to create the perception that Fuzzy Hookah Lounge is a modern location for relaxation and entertainment in a social environment.

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Marketing Mix

Seeking mention in blogs for the Chicago south suburbs and Orland Park area. Writing press release of the grand opening to Future Newspaper and the Arab Horizon, both of which

are Middle Eastern and Arabic publication that circulate in Chicago. Pay for advertisements on the MetroMix website, Google Adwords Express, and Yahoo Local. Optimizing the use of the business webpage through Search Engine Optimization tasks Using social media profiles (Facebook, LinkedIn, Twitter, YouTube, Google Plus, Four Square and

PinInterest) to interact and communicate with past and potential customers.

Section IV: Goals and Objectives

Increase customer awareness Increase customer loyalty Increase social media interaction by 45% within the first 12 months of the grand opening. Increase Fuzzy Hookah Lounge’s sales by 30% within the first six months of the grand opening and 50%

within the first year of opening.

Operations:

Our operations plan summary is to ensure our facility has a relaxing Middle Eastern ambience, we want to ensure our staff is qualified and helpful to our customers. We want to ensure that our processes with inventory and rules are followed. Our processes are that supplies need to be ordered once a month so the bar manager must keep track of what is used and communicate this to the business manager as well as put in the system. The business manager is the only person who will order supplies & equipment. We need our employees to be prompt and to care about people.Finance:

Fuzzy Hookah is expected to grow sustainably by the end of its fifth year of operations. With a total investment of $400,000 from outside investors the rate of return on investment will be 41.57%. The Projected value of Fuzzy Hookah Lounge will be $3,562,067 at the end of five years, with a net cash flow of $587,914. Fuzzy Hookah will buy out the outside investors at the end of five years for $1,480,751.

Column1 Year 1 Year 2 Year 3 Year 4 Year 5

Net Sales $338,253 $428,986 $544,059 $689,998 $875,084

Sales Growth N/A 27% 27% 27% 27%

Goss Profit 233,639 296,310 $375,793 476,596 604,440

Gross Profit % of Net Sales

69% 69% 69% 69% 69%

Net Profit $67,798 $145,912 $204,712 $279,475 $374,490

Net Profit % of 20% 34% 38% 41% 43%

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Net Sales

Net Cash Flow $31,635 $132,291 $248,415 $396,609 $587,914

Ending Cash Balance

$31,635 $163,927 $412,342 $808,951 $1,396,865

Company DescriptionThe business that our team wishes to open is a Hookah Bar. A Hookah bar is a bar that serves a

tobacco-pipe in a traditional Middle-Eastern setting, with Persian rugs and curtains to decorate the bar. Hookah is composed of a pipe that is typically filled with water, sometimes liquor and wine, with flavored tobacco on the head with foil wrapped on top with holes poked into it, with a coal slowly burning the tobacco. The heat will react with the water, creating steam and smoke that will be blown out through a hose. This tradition of Hookah smoking began in the Middle East, and has become increasingly popular in the United States over the past decade.

This concept will solve a problem in the marketplace, more specifically, the marketplace around the Orland Park/Tinley Park area. This is because there is only one Hookah bar in this area within a 20-mile radius, and because the only existing Hookah bar in this area is very expensive, we will undercut their prices to make our Hookah bar more appealing than the competition. Our target market or audience will be the younger crowd, typically between the ages of 18-30. These are typically the people who smoke Hookah, but more than the younger generation, Arab Americans will be the most targeted market. Because Hookah originated in the Middle East, Middle Eastern people of all ages will be attracted to this Hookah bar more so than any other ethnic group, and since there is a large Middle Eastern population in Orland Park, this Hookah bar will attract them without a doubt.

Our mission statement will be to deliver the best Hookah-smoking experience at the fairest and most reasonable price as well. We want to give our customers the best possible experience for smoking Hookah, more so than the competition. We will accomplish this by having very friendly and knowledgeable staff that knows the product well, and knows how to treat their customers well. We will also have a very wide variety of Hookah tobacco, as well as our own house blends as well. We will offer a great atmosphere of dimly-lit lighting with authentic Middle Eastern rugs and pillows. We want to provide our customers with a place that will be very docile and welcoming, since a place like a Hookah bar is very hard to come by in this area.

Environmental Assessment

Overall Market

The business that our team wishes to open is a Hookah Bar. A Hookah bar is a bar that serves a tobacco-pipe in a traditional Middle-Eastern setting, with Persian rugs and curtains to decorate the bar. Hookah is composed of a pipe that is typically filled with water, sometimes liquor and wine, with flavored tobacco on the head with foil wrapped on top with holes poked into it, with a coal slowly burning the tobacco. The heat will react with the water, creating steam and smoke that will be blown out through a hose. This

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tradition of Hookah smoking began in the Middle East, and has become increasingly popular in the United States over the past decade.

This concept will solve a problem in the marketplace, more specifically, the marketplace around the Orland Park/Tinley Park area. This is because there is only one Hookah bar in this area within a 20-mile radius, and because the only existing Hookah bar in this area is very expensive, we will undercut their prices to make our Hookah bar more appealing than the competition. Our target market or audience will be the younger crowd, typically between the ages of 18-35. These are typically the people who smoke Hookah, but more than the younger generation, Arab Americans will be the most targeted market. Because Hookah originated in the Middle East, Middle Eastern people of all ages will be attracted to this Hookah bar more so than any other ethnic group, and since there is a large Middle Eastern population in Orland/Tinley Park, this Hookah bar will attract them without a doubt.

Target Market

Fuzzy Hookah Lounge will cater to college students and young professionals, typically between the ages of 18-35. These are typically the people who smoke Hookah, but more than the younger generation, Arab Americans will be the most targeted market. People within the ages of 18-35 make up about 28% of Orland Park, Illinois’ population and about 28% of the Tinley Park population. Because Hookah originated in the Middle East, Middle Eastern people of all ages will be attracted to this Hookah bar more so than any other ethnic group, and since there is a large Middle Eastern population in Orland/Tinley Park, this Hookah bar will attract them without a doubt. The median household income for Orland Park, Illinois is $80,383, and the median household income for Tinley Park, Illinois is $80,774. The residents of this area have higher household incomes the national average of $56,576 which means they will the disposable income needed to afford and enjoy hookah on a regular basis.

Competition

Currently, there are 51 hookah lounges in the Chicago Land Area. 26 are located in the city of Chicago and the other 25 are located in the outlying suburbs. The nears competition to the proposed location of Fuzzy Hookah Lounge are Sahara Hookah Lounge in Tinley Park, Illinois and Hookah Time Café in Crest Hill, Illinois. It is illegal for a hookah lounges operating in Tinley Park and Orland Park to serve food or drink so neither one of our competitors serves food or drink. It is legal for hookah lounges to allow its patrons to bring their own food and drink. Both of our competitors allow this and so will Fuzzy Hookah Lounge.

Competitor 1

Sahara Hookah Lounge: Located at 7899 W 159th St in Tinley Park, Illinois. Sahara is a basic hookah lounge serving 100 + flavors of tobacco, and fountain and coffee drinks. This business also sells at home hookah supplies like tobacco, hookah hoses and hose covers. Sahara’s strength is that they have been at this location for about 20 years so they have had ample time to build loyal clientele, a reputation, and brand recognition. Though they do lack in overall ambience, they do offer outdoor seating during the warm months. Their weaknesses are that they have higher than usual prices, poor marketing and promotion, small facility, no live music, outdating and drab décor, and they are located in an awkward location. They compete because they have very little competition in the area. The nearest hookah lounge, Hookah Time Cafe, is located about 20 miles away from Sahara.

Competitor 2

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Hookah Time Café: Located at 20653 Renwick Road in Crest Hill, Illinois. Hookah Time offers hookah 40 hookah flavors at reasonable pricing and a comfortable atmosphere. Hookah Time Café’s strengths are that it offers a better selection of amenities like VIP rooms and free WIFI; they offer reasonable pricing for hookah and the location is up to date, clean and inviting. This business positions itself as the best hookah bar in the area but like Sahara, there aren’t any other hookah bars in the area for several miles. Their weaknesses are that it doesn’t sell hookah supplies; and there is no live music.

Competencies

We want to give our customers the best possible experience for smoking Hookah, more so than the competition. We will accomplish this by having very friendly and knowledgeable staff that knows the product well, and knows how to treat their customers well. We will also have a very wide variety of Hookah tobacco, as well as our own house blends as well. We will offer a great atmosphere of dimly-lit lighting with authentic Middle Eastern rugs and pillows. We want to provide our customers with a place that will be very docile and welcoming, since a place like a Hookah bar is very hard to come by in this area.

Competitive Advantage

Fuzzy Hookah Lounge is competitive and superior to its competitors because of its location, updated décor, live entertainment, superior online marketing and social media presence, wide variety of tobacco flavors, and desirable price points.

Mission Statement

“To deliver the best Hookah-smoking experience at the fairest and most reasonable price as well”.

SWOT Analysis for Fuzzy Hookah Lounge

Strengths Very little competition. Large concentration of our target

audience reside in Orland Park and Tinley Park. 28% of Orland Park’s population; Tinley Park’s population

Reasonable pricing strategy. Updated and modern atmosphere.

Weaknesses Very little brand recognition. No existing customer base. No Awareness

Opportunities Fuzzy Hookah has the opportunity to

take advantage of the small amount of competition.

Location that is located near high commerce area of Orland Square Mall.

Weak Competition Growing interest in hookah smoking

Threats Illinois allows smoking in tobacco

shops, but allow cities to adopt more restrictive ordinances. These laws and city ordinances are subject to change at any time, and new legislation typically limits, rather than expands, smoking areas.

Hookah lounges must file an annual affidavit with the Illinois Department of Public Health to allow patrons to partake indoors.

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Marketing PlanMarketing Plan

Strategy & Positioning

The marketing strategy of Fuzzy Hookah Lounge will be to establish a base of Middle Eastern American customers and local people within the ages of 18-35. To that end, the following tactics will be employed:

Seeking mention in blogs for the Chicago south suburbs and Orland Park area. Writing press release of the grand opening to Future Newspaper and the Arab Horizon, both of which

are Middle Eastern and Arabic publication that circulate in Chicago. Pay for advertisements on the MetroMix website, Google Adwords Express, and Yahoo Local. Optimizing the use of the business webpage through Search Engine Optimization tasks Using social media profiles to interact and communicate with past and potential customers

Our intention is to create the perception that Fuzzy Hookah Lounge is a modern location for relaxation and entertainment in a social environment.

Competitive Edge

Fuzzy Hookah Lounge competitive edge will be established through its community organizing ability via its website. This website will present an interface for users to:

Connect with Fuzzy Hookah Lounge to learn more information about any upcoming promotions or events.

Connect with us on Facebook, LinkedIn, and Instagram Plan events to propose for the Fuzzy Hookah Lounge calendar

Fuzzy Hookah Lounge will in general have a relaxed, social environment but on our peak days on Thursday, Friday, and Saturday Fuzzy Hookah Lounge will have a more party-like atmosphere. On these peak nights we will provide live performances, and upbeat Middle Eastern music.

Fuzzy Hookah Lounge will be preferred over our closet competition Sahara because the décor is modern and spacious. We offer more amenities such as WIFI, entertainment, and welcome patrons to bring their own beverages and food. Sahara does not offer these amenities.

Products & Services

Detailed Description

A hookah lounge is a lounge that serves a tobacco-pipe in a traditional Middle-Eastern setting, with Persian rugs and curtains to decorate the bar. Hookah is composed of a pipe that is typically filled with water, sometimes liquor and wine, with flavored tobacco on the head with foil wrapped on top with holes poked into it, with a coal slowly burning the tobacco. The heat will react with the water, creating steam and smoke that will be blown out through a hose. This tradition of Hookah smoking began in the Middle East, and has become increasingly popular in the United States over the past decade.

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Fuzzy Hookah Lounge will provide its customer with high quality tobacco at reasonable prices. Each flavor lasts about 45 minutes each. We expect people to buy at least one or two flavors each visit.

Flavors include:

Cherry Strawberry Blueberry Tropical Fruit Apple Watermelon Coconut Jasmine Fuzzy Hookah House Blend Rose Grape

Lebanese Blend Raspberry Pumpkin Pistachio Lemon Cola Mint Orange Peach Vanilla Mango

The facility will include a stage area where performances, can be presented. Fuzzy Hookah Lounge will offer customers to reserve our larger sitting areas for groups of 8 or more.

Amenities

Party Rooms Bring your own bottle Bring your own food Flat screen TVs Free WIFI Free Parking VIP Rooms Live Music Live Entertainment

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Pricing

Rationale/Strategy

We will base our pricing strategy off the results of or consumer survey results. According to our survey customer find the cost $10-$13 per person for each flavor is most reasonable. In order to stay competitive we have taken into consideration the pricing strategy that our competitors use. Our nearest competitor, Sahara Lounge has no competition in the area and they have been able to set their prices at a premium rate of $10/ person. Our survey results have shown that consumers don’t mind paying this premium rate for hookah. In fact they believe it to be most reasonable. As a result we will compete with Sahara Hookah Lounge directly at price.

Flavored tobacco for hookah pipes will be sold as well for $10 per person for each flavor and for the first round and $8 per person for subsequent rounds.

Place

Décor

We decorate the location using an exotic Moroccan or Egyptian themed décor, including couches, curtains, and carpets. We plan to do a full renovation of the location after 3-5 years of operation.

Location

Fuzzy Hookah Lounge will be located at 17171 Wolf Road, Orland Park, Illinois. This neighborhood service as a stellar location for Fuzzy Hookah Bar because it is located in an affluent area where the median house hold income is $80,383. The location is visible from the street and there is a large lighted sign that can be used to bring attention the location. Orland Square Mall is located in Orland Park, Illinois which provides Fuzzy Hookah Lounge to capitalize the growing high commerce area near LaGrange Road and 159th Street. The location is also across the street from a large residential neighborhood.

Message & Promotion

Strategy

Slogan: Feeling Fuzzy

Fuzzy Hookah Lounge’s grand opening will be marked by an event featuring live music, belly dance performance, discounts on hookah services.

The grand opening will feature to option to purchase two for one tobacco, or select flavors will be priced at $5 per person. We showcase live belly dance performances and a live band who will play traditional Arab music.

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

Group discounts on non-peak days – Four or more people will receive 25% off the total bill, up to 6 people

Free prizes for winners of business card drawing (to encourage target market of young professionals)

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Incentives to organize the first events via the website (such as free rounds of tobacco for the organizers at a later date)

Flavor of the month – will be chosen by the manager and offered at a discounted price of about $8 per person.

Marketing Mix

Print:

The SouthTown Star

Distribution: Chicago Land; South, Southwest Suburbs Frequency: Daily We will include a 3x5.65 inch add in this newspaper on Wednesdays, Thursdays, and Fridays. The cost of this ad is $557 for 52 times. The 52 times will be spread across the months of January to May. We will purchase another 52 times in the month of June which will last until October. We will pick the advertising back up in the following January.

The Arab Horizon Newspaper

6000 W. 79th St., Suite 204 Burbank, IL 60459 Longest-running Arabic-English newspaper in the U.S. Since 1997. Outlet known in Arabic as “Al-Offok

Al-Arabi.” Circulation: 10,000 Deadlines: 13th of each month Frequency: Monthly Distribution: Chicago ¼ page ad cost $120 for one time with a minimum of six times or six months = $720 ½ page ad cost $275 for one time with a minimum of six times six months = $1650

Future Newspaper

P.O. Box 1207 Tinley Park, IL 60477 The longest-running and only Middle Eastern newspaper in the Midwest. Printed in Arabic and English.

Distributed throughout the midwest including the Chicagoland area, Detroit, Michigan, Indiana, and Wisconsin.

Circulation: 9,000-13,000 Deadlines: 13th and 27th of each month Frequency: Bimonthly Distribution: Chicago 10x5 ad cost 150 for 1 time Will purchase for the months of January, February, March, June, July, August, November and

December. $1,200 total.

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Paid Online Marketing:

Google AdWords Express

Google AdWords Express is cost per impression advertisement system that is perfect for small and local business because it only displays the advertisement when the consumer types in specific keywords that matches a company’s business type. We will budget $15 per day for our advertisement to appear on Google.com. We will run our ad on Wednesday, Thursday, and Friday of each week. That is about 14 days a month. The cost will be about $210 per month.

MetroMix is a network of local entertainment websites backed by a joint venture between media companies Gannett and Tribune Co. It’s a guide to local restaurants, bars and clubs, events, concerts and movies. They offer opportunities to advertise on the website. We will enlist an ad in the Cube (BS) position for $750/day for 7 days during the grand opening month and 7 days during our peak months from May-August.

Yahoo Local is an online business directory that ensures that your company’s website appears at the top of a consumer search for which ever type of business they may be looking for. It cost $9.95/month. We will maintain this subscription for at least five years.

Social Media:

Fuzzy Hookah Lounge’s marketing manager will use social media to connect with the community, and past and potential customers. Fuzzy Hookah Lounge will have Facebook, LinkedIn, Twitter, YouTube, Google Plus, Four Square and PinInterest profiles. We will update the content for these pages on a regular basis. Some need more updating than others, for instance Twitter. We will post video of live events and videos of customer interaction on YouTube. All of these social media profiles will be linked back to the Fuzzy Hookah Lounge website.

Website:

Search engine optimization will begin during the development of the website through its initial design and will continue by using the WordPress Content Management System. We will purchase the web development service from the digital marketing firm Ideas Marketing Group of Chicago, Illinois. A member of our board of directors has digital media, social media, and web development experience and is able to manage and maintain Fuzzy Hookah Lounge’s online presence.

We will use the website to connect with past and potential customers to inform them of Fuzzy Hookah Lounge;s pricing, amenities, store hours, location, events and promotions.

Informal Marketing – Memberships:

Fuzzy Hookah Lounge will join the local chamber commences to increase its credibility and involvement with the community. The cost of each member is listed below.

Chicago Southland Chamber of Commerce – Cost $275/ Year Orland Park Chamber of Commerce – Cost $210/ Year Includes listing in the Chamber of Commerce Business directory.

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Sales

Fuzzy Hookah Lounge will sell its products through attentive wait staff. They will be compensated through base hourly wages and tips and will work to provide the best customer service possible. It is the wait staffs job to inform customers of all promotions and to upsell hookah services by asking if they would like to have another flavor and suggesting that customers try the flavor of the day.

Financial Linkage

Sales Projections

Below are Fuzzy Hookah Lounge’s projected sales. It shows the dollar amount that expected to be made from providing a hookah experience including beverages like coffee or soda. The hookah industry has peak days and peak months. The sales have been calculated based on these highs and lows. The months May, June, July and August are expected to be the business busiest months. Based on our interviews with other hookah lounges within the Chicago Land area, most people enjoy visiting hookah lounges when the weather is warm and there is opportunity to do hookah outdoors. Ramadan, a holiday observed by people of Islamic faith, is celebrated during the months of July and August. During this time it is popular for consumer observing Ramadan to enjoy hookah at night during the time that is allow to break their fast. Wednesdays, Thursdays, and Fridays are expected to be the business’s busiest days of the week.

Marketing Budget

This marketing budget is an aggressive attempt to ensure public awareness of Fuzzy Hookah Lounge and its presence in the neighborhood that it serves. The budget includes the cost of printed collateral, paid online advertising, conferences, website development, window poster, storefront signs, entertainment, and informal marketing or memberships to the local chamber of commences.

Yearly Marketing Expenditures Jan Feb Mar Apr May

Jun July

Aug

Sept

Oct

Nov

Dec

Total

Online Marketing (Google AdWords, MetroMix and Yahoo Local)

$1,96

0.00

$1,960.0

0

$1,960.0

0

$1,960.0

0

$1,960.0

0

$1,96

0.00

$219.9

5

$219.95

$219.9

5

$219.95

$219.95

$219.95

$13,079.7

0

Conferences $295$29

5Print (The Arab Horizon, and Future Newspaper)

$982 $425 $425

$827

$270

$270

$270

$270

$3,739

Collateral$357 $320

$357

$320

$1,353

Website Development (WordPress

$6,00

0

$6,000

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Content Management SystemInformal Marketing

$485

$485

Posters/Signs

$2,02

0.00

$20.00

$2,040.00

Entertainment

$500.00

$500.00

$500.00

$500.00

$1,000.0

0

$1,00

0.00

$1,000.00

$500.00

$500.0

0

$500.00

$500.00

$500.00

$7,500.00

Total Marketing Expenditures

$34,492.1

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Marketing Budget Rationale

The Arab Horizon - 10x5 $150 for one time; purchase for January, February, March, June, July, August, November and December. $1,200 total.

Future Newspaper - 1/4 of a page $120; 1/2 of a page $275 for one time; minimum of 6 times. Grand opening quarter of January, February, and March use the 1/2 page; June, July, and August use ¼.

Metromix Online marketing - Cube (BS) $750/day for 7 days first quarter; 7 days second quarter. Promotional Pluggers-1000 $50, brochures 1000 $270, 1000 Business Cards $37. Large 24.26x36.26 inch posters cost $9.99 each; we will purchase two for each quarter. Collateral and poster printing at VistaPrint Conference the Southland Chamber of Commerce Business to Business Expo Booth cost $295. Google Adwords $15/day; $210 per month. Yahoo Local $9.95/month. Ideas Marketing Company Quote for WordPress Content Management System For website $6000. Informal Marketing Membership to Orland Park Chamber of Commerce $210, Southland Chamber of

Commerce $275. Neon Sign for front of the store $2000, Entertainment - Belly Dancer $250 for 30 minutes; twice a month and four times a month during May,

June July because these are our most busy months. SouthTown Star 3x5.65 inch ad cost $577 for 52 times. Purchase in January, and June.

Operational PlanFacilities

Fuzzy Hookah Lounge will be located at 17171 Wolf Rd. in Orland Park Illinois. The building is 6,000 square feet and the building will be purchased. The current price is $595,000 which is negotiable and can probably get for $495,000 as this building has been on the market for 3 years. We plan to

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purchase the building since it has multiple uses. Our full taxes per year would be $31,000. There are a total of 70 parking spaces for our guests. We will be open 7 days a week from 6pm to 2am.

Since there is a bar area inside the building, that is area where we will keep our tobacco on display. Our tobacco is stored in tin cans so this allows for freshness for up to a year. We will leave

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tobaccos on display so people can see what we have for purchase, that way we don’t have to change our menus every week. Our menus will contain our basic flavors but as we get in new flavors or trial flavors, they will be on display and they will be available at a discount price to encourage our patrons to try it. We will have a storage place upstairs for all our supplies. The bathrooms are located in the rear of the location and we have one semi private room that has a fireplace.

--- Side view

Rear view of Parking lot

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Private Room

Kitchen

This building is about 14 years old and it has been empty for about 3 years. All of the equipment in the building works, televisions, water, air and heating system, gas and electric systems. The improvement plans will consist of remodeling the bathrooms, covering of furniture, purchasing new

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furniture, new flooring, painting of walls, replacing of light fixtures, clean air machines, adding some Middle Eastern motif which would consist of draping scarfs and some tall and short columns located in the seating area, adding of pictures on the walls and 2-3 televisions. The seating area holds about 200 people. We are estimating remodeling over the next 5 years to be about $300,000.

Equipment

There is not a lot of equipment needed for a Hookah Lounge since we can’t sell food or beverages. We do have kitchen equipment that we will keep at this time since our customers can bring in food and beverages, but they may not need to use it too much. So there would be not cost associated with equipment. We need about 7 certified air filter machines which cost $1,195 each for a total of $9,000. These machines are mounted from the ceiling, each machine can clean air up to 800 sq. ft. and they come with a 7 year warranty, this machine is called a LA 1400-S and is used for Hookah lounges specifically.

Two-hundred chairs are $2,700 from target.com 32 fire retardant table tops are $40 each at Hookah Wholesale.com, which comes to $1,300. 8 columns at dollar general $5 each. A total 27 Middle Eastern scarfs as decorations came to $289 from BerbersEvents.com.

Staffing:

Fuzzy Hookah Lounge Employee Schedule

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

manager 6pm-2am 6pm-2am 6pm-2am 6pm-2am 6pm-2am 6pm-2am 6pm-2am 40 hours

Server 16pm-11pm 6pm-11pm 6pm-11pm 6pm-11pm

6pm-11pm

6pm-11pm

6pm-11pm 28 hours

Server 26pm-11pm 6pm-11pm 6pm-11pm 6pm-11pm

6pm-11pm

6pm-11pm

6pm-11pm 28 hours

Server 36pm-11pm 6pm-11pm 6pm-11pm 6pm-11pm

6pm-11pm

6pm-11pm

6pm-11pm 28 hours

We do not have an advisory committee yet but we are considering the following:

Sahara Hookah Lounge Manager, it’s a family business and they have been in business 20 years. Lawyer, hopefully Pro Bono Community Rep., to ensure we are serving the community Orland Park Rep, keep up with the laws and regulations Alva J. Hall , who has been in business for 20 years, Owner & CEO of Colossal Chops & Chicken, LLC. Gwen Owens, CPA for 25 years

Processes

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Our processes consist of our Lounge manager checking our inventory every day and every night. All sales will be entered into the company computer by a server each time an order is taken. At the end of the day the Lounge manager will take a look at sales and product and determine how much money was made and how much product was sold. Inventory and sales should equal to the profit we plan to make. Each can of tobacco cost about $15 and we can make $250 off that can. We charge customers $10 per person for one filling of a Hookah pipe.

Outsourcing

We will use 2 vendors, Texas Tobacco and Shisha Tobacco, who will provide our tobacco, hookahs and hookah accessories. The Lounge manager will ensure our inventory sufficient for each day’s daily sale, as this will become evident as we do end of the day inventory. Our end of the day inventory will tell us approximately how many customers we have served, the flavor of tobaccos that were sold, how much money we made and which tobacco we are selling the most of. We will have an excel chart on the computer that will calculate and tabulate this information.

Customer Satisfaction

We will leave optional post card surveys on each table to help us to determine what our customer’s needs are. We will also have our servers and Lounge managers to engage in oral conversation to ensure that the quality of our service and products are top of the line. Our staff will be empowered to do what it takes to please a customer, for example, if they try a flavor and don’t like it, we will not charge them for it and give them another tobacco of their choice.

Technology

Our technology will consist of 2 iPads and one desktop computer and cash register. Our desk top computer will keep track of all of our inventory, sales, profits, customer service evaluations, any repairs that are needed, our goals for the year and how we are progressing towards those goals, staff information such as salaries and resumes. The iPads will be for the servers to enter all transactions and these transactions will have to match what the Lounge manager has rung up on the cash register. Hopefully this practice will reduce theft and give some accountability for all money that is taken in by the Lounge. Sales tax in Orland Park is 8.750% according to the Village of Orland Park, Illinois.

We will use Aldelo software, which is popular for restaurants. This software will help to keep track of point of sale and inventory. This software has training tools included which help to reduce time and money in needing someone to train our staff. This software can be purchased at nurol.com. We will also us o*Net software for all of our Human Resource needs.

Suppliers/Supplies

Fuzzy Hookah suppliers are Texas Tobacco and Shisha Tobacco. Our supplier will be responsible for shipping orders we place in a timely manner and these orders will be placed on line with a company credit card. Should Fuzzy get into a situation where there is same day or next day shipping required, the order will be taken over the phone and a line of credit used to purchase the items needed.

20

Hookah Pipe for 2 people

Hookah Pipe for 1 person

Hookah pipes and accessories will be purchased wholesale for 500 people comes to $5,000 with a profit of about $20,000. To start we will only have the owner work and not take a salary for the first year. All the pictures above are supplies that are needed for the maintenance of our hookah pipes. Hookah hoses are the devices hooked to the base and it is what smoke travels through to get to patrons mouth. Hookah bowl is where the tobacco goes and it is placed at the top of the hookah pipe. Glass bases are the base of the hookah pipe. Hookah grommets are devices used to connect hoses, so they can be made longer or shorter. Mouth filters and tips are what each individual customer uses to smoke, each customer has their own personal one for sanitary use. Hose adapters and valves are used added to the hose to help guide smoke through to each

21

individual person. Hookah ash trays are placed at the top of the hookah at the bottom of the hookah bowl to catch the ashes that are produced while smoking.

The hookahs pictured above are the ones will start off with. The red hookah pipe for 2 people cost $29.00 will purchase 100 of those. The green hookah for one person cost $14.99, we will purchase 50 of those. The pink hookah for 2 people, which is our signature hookah, we will purchase 100 of those at $18.99 each. The silver and green hookah for 3 people cost $32.99 and we will need 100 of those. The red hookah for 4 people cost $49.00 and we need 100 of those. Our approximate cost for hookah pipes is about $14,000. Hookahs have to be taken apart and cleaned as show on the diagram above showing all the elements of the hookah and then they must be dipped in hot soapy water and rinsed and left to dry. Servers, who are also considered hookah makers, prepare the hookahs, so they put the hookah together, if necessary, and they put in the tobacco the customer has chosen, light the pipe, put the coals on top and then deliver the pipe and mouth pieces to the customers table.

Licensing, Zoning, and Legal Concerns

Our facility is zoned for a business and is in compliance with zoning laws. We have to obtain a business license from State of Illinois and we can apply on line. Insurance to cover the business is approximately $800 a month but our Insurance Agent at Allstate is still working out the details. We have to have a permit as a smoking establishment which is given by Orland Park Illinois. Both of these processes could take 6-8 weeks.

Summary

Our operations plan summary is to ensure our facility has a relaxing Middle Eastern ambience, we want to ensure our staff is qualified and helpful to our customers. We want to ensure that our processes with inventory and rules are followed. Our processes are that supplies need to be ordered once a month so the bar manager must keep track of what is used and communicate this to the business manager as well as put in the system. The business manager is the only person who will order supplies & equipment. We need our employees to be prompt and to care about people.

Our start up operational budget will be in our financial statements.

Management/StaffingManagement Team-Bios

For our Hookah bar, we currently have four managers that will manage the lounge. Andrew Matouk, CEO. Strengths are 8 years of management experience and operations. Andrew has been a Hookah smoker for many years, and since Hookah is a big part of his Middle Eastern culture, he has extensive knowledge of the product itself, the price of using this product, and the target market that will primarily use this product. Andrew has a Bachelor of Art Degree from the University of Illinois at Urbana-Champaign, and he is currently a student at Keller Graduate School of Management. Andrew currently works as Assistant Manager at Arabian Nights Hookah bar in Palos Heights Illinois. He has worked there for 8 years but started out as a server. Andrew brings many years of management and Hookah smoking to the table, and with extensive knowledge of the product, he will bring valuable knowledge for our team and that will greatly benefit our team in our endeavor to open up our Hookah bar.

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Ashley Webb, Marketing Director. Her strengths include Marketing and Social Media, which are both very valuable assets in our endeavor to advertise our Hookah bar and make our business known among the community. Ashley currently works for DeVry Univesity in the Marketing Department, and she has worked there 2 years, which is very helpful for our business in planning our course of action on gaining customers and gaining insight into the area that we will be opening this business in. Ashley will help us to brand our name.

Cheryl Reed, Human Resource Director., who has a Bachelor Degree from DeVry in Human Resource Management and she is a very skillful researcher. She is very skillful in the Human Resources which will allow us to handle staff conflict with professionalism and fairness. She currently works for the MeBain Media Group as an assistant to the President and she has held this position for the past 3 years and she worked as Human Resource Manager for 6 years.

With her many years of work experience, this will be very beneficial for our group in determining how to run the business efficiently Research is very important in our attempt to open up a business, because without researching the competition, the equipment needed, the area that the Hookah bar will be in, and other aspects of this business, we will not be successful with our business.

Deborah Clayton the Business Manager. Her strengths include Accounting and business, which is the most important part of our project. Without her expertise, our business might be at a disadvantage. Deborah has also been working in the education field for 13 years , working the business office for 10 years as office manager and teaching 8th graders for the past 3 years. This knowledge of young adults will be valuable in gaining insight as to behavior of our customers since our Hookah bar will be primarily attracting customers that are typically between the ages of 18 and 30. Deborah has been working on gaining knowledge as to the process of which we must go through in order to open a business, contacting the Village of Orland Park to gain information on how to open up the Hookah bar, and what restrictions apply to our type of business. Numbers and figures are her strengths, and that is very valuable in opening up a business.

Organizational Chart

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Financial PlanStart-Up Funding

The owners of Fuzzy Hookah Lounge will each invest $140,550 toward the start-up cost. Fuzzy Hookah is also asking for an investment of $100,000 from outside investors (venture capitalist).

The investors will obtain 41.57% ownership for their investment while the owners of Fuzzy Hookah retain 58.43% ownership for their investment and expertise in Marketing, Finance, Operations, and Human Resources.There will be no other financial funding sources.

Equity Capital Investments Amount

Ashley Webb

$140,550

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Cheryl Reed$140,55

0Andrew

Matouk$140,55

0Deborah

Clayton$140,55

0Venture

Capitalist$100,00

0Venture

Capitalist$100,00

0Venture

Capitalist$100,00

0Venture

Capitalist$100,00

0$962,20

0

Use of FundsThe purpose for the Start-Up Funding:Capital PurchasesItem CostBuilding (and land) includes taxes

$626,000

Remodeling (construction)$290,98

1Cash Register $950Desktop Computer $1,700Microsoft office Software $500Phone package (4-hard lines) $650Start-Up Inventory $16,000Salaries/Wages (one month) $3,176Marketing Campaign $13,243Air Filters $9,000

$962,200

Start-Up Assumptions

The total start-up cost of $962,200 will allow Fuzzy Hookah to purchase the free standing building in Orland Park, IL for $595,000 and do minor renovations. According to the marketing plan Fuzzy Hookah will also require $13,243 to launch a very aggressive marketing campaign and establish a website.

As the chart states, the start-up funds will also allow Fuzzy Hookah to purchase the initial equipment and inventory needed to open the business to customers. Within the first few weeks of operation Fuzzy hookah

25

will not have enough revenue to cover salaries and wages; therefore a portion of the start-up capital will cover salaries/wages and other expenses for the first month of operations.

Sales Assumptions

Hookah bars and lounges have a great profit margin. Most hookah lounges in the Chicago area use 12grams of tobacco per customer (per smoke). The cost of the tobacco is approximately $0.08 cents per grams. Therefore the tobacco alone cost Chicago area hookah bars $0.96 per person (per smoke) and they sale their product for the price of $13-$16 dollars per person (per smoke).

Fuzzy Hookah’s sales forecast is based on surveys of the target market in Orland Park, Il and the surrounding suburbs (within a 10 mile radius). According to our surveys our customer base will be willing to smoke hookah at least once per week. The weekends will be our busiest time of the week. The Hookah surveys prompted potential customers to select the flavors they preferred to smoke at Fuzzy Hookah Lounge. The chart below ranks how many units of each flavor Fuzzy Hookah will need to stock (by unit) to meet customer demand per month.

Blueberr

y/Blue M

ist

Straw

berry

Tropica

l Fruit

AppleMint

Waterm

elon

Raspberr

yLem

on

House Blen

d0

50

100

150

200

250

300

350

Projected Unit Sales per Flavorper Month

According to the surveys potential customers were willing to pay between $10-$13 dollars per person to enjoy hookah. Therefore, the projected sales are based on the number of surveys for a particular flavor (by unit) multiplied by the sales price of $10 per person. Fuzzy Hookah lowered the sales price of their flavors to attract a customer base.

Sales ProjectionsSales

Projections 2012 2013 2014 2015 2016

Assumptions TOTAL TOTAL TOTAL TOTAL

Blueberry/Blue Mist

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Unit Volume 2.0% 5365 6804 8629 10944 13879Unit Price $10

Gross Sales $53,648 $68,039 $86,290 $109,437

$138,792

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $1,609 $2,041 $2,589 $3,283 $4,164

Net Sales $52,039 $65,998 $83,701 $106,154

$134,628

(Cost of Goods Sold) 30% $16,095 $20,412 $25,887 $32,831 $41,638

GROSS PROFIT $35,944 $45,586 $57,814 $73,323 $92,991

StrawberryUnit Volume 2.0% 5365 6804 8629 10944 13879Unit Price $10

Gross Sales $53,648 $68,039 $86,290 $109,437

$138,792

(Commissions) $0 $0 $0 $0 $0

(Returns and Allowances) 3% $1,609 $2,041 $2,589 $3,283 $4,164

Net Sales $52,039 $65,998 $83,701 $106,154

$134,628

(Cost of Goods Sold) 30% $16,095 $20,412 $25,887 $32,831 $41,638

GROSS PROFIT $35,944 $45,586 $57,814 $73,323 $92,991

Tropical FruitUnit Volume 2.0% 5365 6804 8629 10944 13879Unit Price $10

Gross Sales $53,648 $68,039 $86,290 $109,437

$138,792

(Commissions) $0 $0 $0 $0 $0

(Returns and Allowances) 3% $1,609 $2,041 $2,589 $3,283 $4,164

Net Sales $52,039 $65,998 $83,701 $106,154

$134,628

(Cost of Goods Sold) 30% $16,095 $20,412 $25,887 $32,831 $41,638

GROSS PROFIT $35,944 $45,586 $57,814 $73,323 $92,991

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AppleUnit Volume 2.0% 2682 3402 4315 5472 6940Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

MintUnit Volume 2.0% 2682 3402 4315 5472 6940Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

WatermelonUnit Volume 2.0% 2682 3402 4315 5472 6940Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

RaspberryUnit Volume 2.0% 2682 3402 4315 5472 6940

28

Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

LemonUnit Volume 2.0% 2682 3402 4315 5472 6940Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

House BlendUnit Volume 2.0% 2682 3402 4315 5472 6940Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commissions) 0% 0% $0 $0 $0 $0 $0

(Returns and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

CoconutUnit Volume 2.0% 2682 3402 4315 5472 6940Unit Price $10Gross Sales $26,824 $34,020 $43,145 $54,718 $69,396

(Commiss 0% 0% $0 $0 $0 $0 $0

29

ions)(Returns

and Allowances) 3% $805 $1,021 $1,294 $1,642 $2,082

Net Sales $26,019 $32,999 $41,851 $53,077 $67,314(Cost of

Goods Sold) 30% $8,047 $10,206 $12,944 $16,415 $20,819

GROSS PROFIT $17,972 $22,793 $28,907 $36,661 $46,495

Totals for All Product Lines

Total Unit Volume 34871 44225 56089 71134 90215

Total Gross Sales

$348,714

$442,254

$560,885

$711,338

$902,149

(Total Commissions) $0 $0 $0 $0 $0

(Total Returns and Allowances)

$10,461 $13,268 $16,827 $21,340 $27,064

Total Net Sales

$338,253

$428,986

$544,059

$689,998

$875,084

(Total Cost of Goods Sold)

$104,614

$132,676

$168,266

$213,401

$270,645

TOTAL GROSS PROFIT

$233,639

$296,310

$375,793

$476,596

$604,440

Staffing Assumptions

Most hookah bars and lounges have one manager (full-time employee) and a small wait staff (part-time servers). For example, CNN Money interviewed the owner of Social Smoke (one of the largest hookah suppliers in the industry) who reported an increase in sales of 28% over the same period last year with only 11 employees to serve 15 countries (2009). Interviews with other Hookah managers in the Chicago area confirmed that only a small part-time staff was needed. Fuzzy Hookah will follow this method by hiring six servers, one bouncer, and two hostesses on a part-time bases with one full-time general manager.

The Board of Directors of Fuzzy Hookahs will work on a part-time bases and will not collect a salary for the first five years of the business.

One General Manager will be employed on a full-time bases. The manager will be responsible for the day to day operations of the business and will report directly to the board of directors twice per month on the status of the business. The manager will also be responsible for the staff, schedule, inventory count, and overall customer satisfaction of the business.

Marketing Assumptions

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According to other hookah bar managers most marketing is done on a word of mouth bases. Therefore customer satisfaction is our priority. Within the first year of operation Fuzz Hookah will establish a website, flood the Orland Park area and the surrounding suburbs with advertisements, and have a grand opening inviting the local businesses, residents, family and friends to a free gathering. The customer surveys and the private party room (for sports events, parties, etc...) will keep Fuzzy Hookah in the minds of our customers.

The Marketing director will maintain the website and stay in communication with the general manager concerning customer surveys, private party bookings, and other issues that might be related to sales and marketing.

Operations Assumptions

Fuzzy Hookah Lounge will operate seven days a week (with employee’s having two days off per week). The inventory will be stocked with the most popular tobacco flavors selected from the Fuzzy Hookah marketing surveys. The start-up funding will fund enough supplies on hand to satisfy approximately 2000 people within the first month of operation and also support the giveaway promotions, samplings, and the grand opening celebration.

Industry Norms and Comparisons

The is no organization or trade association tracking hookah industry sales and norms, but based on interviews with hookah managers and news articles hookah businesses are growing rapidly all over the United States.

“Three years after the state banned indoor smoking in public places, Chicago-area hookah lounges are hotter than ever, packing in a new crop of aficionados to puff on ancient communal water pipes.

Employing a loophole that allows patrons to light up inside tobacco shops, dozens of the exotic smoking dens have sprung up in the city and suburbs since the Smoke Free Illinois Act became law in 2008, much to the frustration of some health officials.” According to the Chicago Tribune article April 13, 2011.There are more than 400 Hookah Lounges in the United States which is an increase of over 400% since 1999.(CNN Money, 2009)

Through conversations with owners and managers of various hookah bars within the Chicago area the industry has grown. The hookah industry is fairly new and has limited information available but the following information was revealed:

Name of company

Location Years of service

quote Reference

Social Smoke Arlington, Tx

Social Smoke is growing gangbusters, and its success says a lot about the new international, cross-cultural landscape of American small business.The first quarter of 2009 was Social Smoke's best ever, with sales rising 28% from the same period a year earlier.

CNN Money 2009

31

Shouk Lounge Philadelphia Just ask Yis Tigay, 28, owner of the Shouk Lounge in Philadelphia… Patrons stay twice as long in the hookah bar as they do in the three conventional diners his family owns, he says…

CNN Money 2009

Contingency PlanCurrently there are concerns that hookah smoke can be dangers to one’s health. Though it has

been proven not to be as potent as cigarette smoke these concerns have led to talk of an additional tax on hookah tobacco purchases. This additional tax of up to 775% will increase the amount paid for tobacco from $2.83 per pound to $24.78 per pound according to the Hookah Trade Association Industry (2010). In the case of Fuzzy Hookah the price per gram will increase from $0.08 to $0.62.

If this were to occur Fuzzy Hookah will increase the sales price of the product. This can be down easily since the sales price is currently $3.00 per person less than our competition.

Another concern for the Fuzzy Hookah Lounge is the current age requirement to smoke in the state of Illinois is 18 and it is being challenged and could change to 21 years of age. Hookah is a social event that tailors to young adults and if this new law passes it will cut into our niche market. A plan for this possibility is to have some activities or scheduled events that will tailor to an older market (about three years over our niche market) to keep our older customers longer.

Break Even Analysis

Fuzzy Hookah will break even within the second month of operation with projected Gross Profits of $17,768 and total expenses of $10,293.

Break-even Estimates

Year 1 (2012-2013) Monthly

Average

$12,816

Year 2 (2013-2014) Monthly Average

$7,657

Year 3 (2014-2015) Quarterly Average

$23,374

Year 4 (2015-2016) Quarterly Average

$23,792

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Year 5 (2016-2017) Annual Average

$96,895

Projected Profit and Loss

Income Statements 2012 2013 2014 2015

2016

TOTAL TOTAL TOTAL TOTAL

INCOME

Gross Sales $348,714 $442,254 $560,885

$711,338

$902,149

(Commissions) $0 $0 $0 $0 $0(Returns and allowances) $10,461 $13,268 $16,827 $21,340 $27,064

Net Sales $338,253 $428,986 $544,059

$689,998

$875,084

(Cost of Goods) $104,614 $132,676 $168,266

$213,401

$270,645

GROSS PROFIT $233,639 $296,310 $375,793

$476,596

$604,440

EXPENSES - General and Administrative

Salaries and wages $24,882 $25,380 $25,888 $26,405 $26,934Employee benefits $9,500 $9,975 $10,474 $10,997 $11,547Payroll taxes $3,732 $3,807 $3,883 $3,961 $4,040Professional services $0 $0 $0 $0 $0Marketing and advertising $37,467 $14,940 $14,940 $14,940 $14,940Rent $0 $0 $0 $0 $0Equipment rental $0 $0 $0 $0 $0Maintenance $0 $0 $0 $0 $0Depreciation -$3,881 -$3,881 -$3,881 -$3,881 -$3,881Insurance $4,200 $4,200 $4,200 $4,200 $4,200Telephone service $4,740 $4,740 $4,740 $4,740 $4,740Utilities $36,000 $36,000 $36,000 $36,000 $36,000Office supplies $3,000 $3,000 $3,000 $3,000 $3,000Postage and shipping $3,600 $3,600 $3,600 $3,600 $3,600Travel $0 $0 $0 $0 $0Entertainment $0 $0 $0 $0 $0Interest on loans $0 $0 $0 $0 $0Hookah's, Piping, and $20,000 $0 $0 $0 $0

33

attachmentsOther (change title here) $0 $0 $0 $0 $0

TOTAL EXPENSES $143,241 $101,761 $102,843

$103,963

$105,120

Net income before taxes $90,397 $194,549 $272,950

$372,634

$499,320

Provision for taxes on income $22,599 $48,637 $68,237 $93,158 $124,83

0

NET PROFIT $67,798 $145,912 $204,712

$279,475

$374,490

Projected Cash Flow

Cash Flow 2012 2013 2014 20152

016

TOTAL TOTAL TOTAL TOTAL

CASH RECEIPTSIncome from Sales

Cash Sales $348,714 $442,254 $560,885 $711,338 $902,149Collections $0 $0 $0 $0 $0

Total Cash from Sales $348,714 $442,254 $560,885 $711,338 $902,149

Income from FinancingInterest Income $86 $947 $3,081 $6,455 $13,830Loan Proceeds $0 $0 $0 $0 $0Equity Capital

Investments $962,200 $0 $0 $0 $0

Total Cash from Financing $962,286 $947 $3,081 $6,455 $13,830

Other Cash Receipts $0 $0 $0 $0 $0TOTAL CASH

RECEIPTS$1,311,00

0 $443,201 $563,966 $717,793 $915,979

CASH DISBURSEMENTSInventory $192,000 $192,000 $192,000 $192,000 $192,000Operating Expenses $147,122 $105,642 $106,724 $107,843 $109,001Commissions/

Returns & Allowances $10,461 $13,268 $16,827 $21,340 $27,064

Capital Purchases $929,781 $0 $0 $0 $0Loan Payments $0 $0 $0 $0 $0Income Tax

Payments $0 $0 $0 $0 $0

Investor Dividend Payments $0 $0 $0 $0 $0

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Owner's Draw $0 $0 $0 $0 $0TOTAL CASH

DISBURSEMENTS$1,279,36

5 $310,910 $315,551 $321,184 $328,065

NET CASH FLOW $31,635 $132,291 $248,415 $396,609 $587,914

Opening Cash Balance $808,951Cash Receipts $915,979Cash Disbursements $328,065

ENDING CASH BALANCE $31,635 $163,927 $412,342 $808,951 $1,396,86

5

Exit Strategy

The owners of the Fuzzy Hookah Lounge are asking for an investment from venture capitalist of $400,000. This investment will enable capital purchases of $962,200.

Capital PurchasesItem CostBuilding (and land) includes taxes

$626,000

Remodeling (construction)$290,98

1Cash Register $950Desktop Computer $1,700Microsoft office Software $500Phone package (4-hard lines) $650Start-Up Inventory $16,000Salaries/Wages (one month) $3,176Marketing Campaign $13,243Air Filters $9,000

$962,200

Venture capitalist will receive a 41.57% return on investment. The projected value of the Fuzzy Hookah Lounge will be $3,562,067 at the end of five years,

with a net cash flow of $587,914. Fuzzy Hookah will buy out the venture capitalist $1,480,751. This will leave Fuzzy Hookah with a value of $2,081,316.

Appendix A: References:Areavibes. (2010). Retrieved from Orland Park, Demographics: http://www.areavibes.com/orland+park-il/demographics/

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Areavibes. (2012). Retrieved from Tinley Park, Il Demographics: http://www.areavibes.com/tinley+park-il/demographics/

Betzabe, C. (2010, March 15). Hookah Lounges: A Popular Trend Sweeping the Nation. Retrieved from http://voices.yahoo.com/hookah-lounges-popular-trend-sweeping-nation-5633260.html?cat=7

Hospitality Industry . (2009, December 17). Retrieved from http://www.orble.com/how-to-run-a-successful-hookah-bar/

Martin, J. (2009, August 26). Booming hookah biz links China, Iran, Egypt - and Texas. Retrieved from CNN Money: http://money.cnn.com/2009/08/26/smallbusiness/hookah_entrepreneur.fsb/

Robert Channick, S. t. (2011, April 13). Hookah lounges thriving, three years after smoking ban. Retrieved from Chicago Tribun News: http://articles.chicagotribune.com/2011-04-13/news/ct-x-n-hookah-lounges-20110413_1_hookah-lounges-friends-cafe-and-lounge-public-places

Orland Park, IL Demographics. AreaVibes. Retrieved on April 17, 2013 from http://www.areavibes.com/orland+park-il/demographics/

Tinley Park, IL Demographics. AreaVibes. Retrieved on April 17, 2013 from http://www.areavibes.com/tinley+park-il/demographics/

Appendix B-Operations:Operations:

Hookah Hose Hookah Bowl Hookah bases Hookah Grommets

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Hookah Mouth Tips & Pieces Hoses Adapters & Valves Hookah Ash Trays

All the elements of a hookah piper

37

38

39

40

41

42

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Appendix C-Marketing/Environmental Analysis:

Please see attached spreadsheet

Appendix D-Finance:Please see attached spreadsheet