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CIGAR BAR.
Term Paper ID:23988
Essay Subject:
Analyzes establishment of fictitious cigar bar. Products, location, promotion, price, competition, financing, risks.... More...
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Paper Abstract:
Analyzes establishment of fictitious cigar bar. Products, location, promotion, price, competition, financing, risks.
Paper Introduction:
Introduction
Cigar bars have begun appearing in unusual venues in recent years; in addition to upscale restaurants and clubs, cigar bars have been found in department stores, hotels, and as standalone businesses. In some cases, the cigar bars are simply added to an existing establishment's operations; in other cases, the cigar bars serve as the focal point of the operation. This comes at a time when cigarette smoking is becoming increasingly unpopular and when efforts are being made to ban smoking in many bars and restaurants. Positioned as relaxation for the wealthy, cigars do not have the stigma attached to them that cigarettes do, and cigar bar owners are eager to capture a market, including plenty of women, which has seen strong growth in the 1990s. Given that the cigar bar is currently in the growth stage of the lifecycle, there would seem to be ple
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A five percent discount willbe offered on unopened cases of cigars, but this will be the onlyconcession that the establishment will make with regard to pricing. Membership will cost $1 per year andhumidors can be rented for $1 per month. Preparation can be made with one or two coffee/cappuccino machines,and coffee has gained acceptance as an after-meal drink that rivalsalcoholic drinks such as cognac. Promotion Because Fitzgerald's will be cultivating a high-class image, itspromotion will mirror that image. The third product category that will be featured at Fitzgerald's is,of course, the cigars themselves. Some offer food, aswell, although the food selection is often limited in standalone locations. These baby boomers have the income and theinclination to indulge in the luxuries that establishments such asFitzgerald's specialize in, and that trend is likely to continue as thebaby boomers age and new individuals enter this age and demographiccategory. Because of this,Fitzgerald's needs to establish an image and presence in the market whichclearly identifies it as an alternative of choice for those interested notonly cigars, but also in fine coffees and alcoholic beverages who areinterested in an atmosphere where conversation can be conducted. Conclusion Any new business which centers on food and beverage is subject toconsiderable risk; many restaurants fail during their first year. "I'll Take Manhattan." Nation's Business (June 1996): 68.Coeyman, Marjorie. These bars also typically serve liquor,sometimes focusing on martini cocktails, single malt scotches and finewines. Fitzgerald's will be organized as a partnership, withgeneral partners taking a day-to-day operating interest in the organizationand limited partners providing capital. Fitzgerald's will also promote itself as a private club and encourageclients to bring their customers there for business meetings. Sales Development Aggressive marketing techniques should help Fitzgerald's develop agood following. The proposed cigar bar,called Fitzgerald's, will emphasize the luxury of the cigar bar and pose analternative to singles bars and traditional cocktail lounges that areavailable. Positioned as relaxation for the wealthy, cigars do not havethe stigma attached to them that cigarettes do, and cigar bar owners areeager to capture a market, including plenty of women, which has seen stronggrowth in the 199 s. On other occasions, Fitzgerald'swill host coffee/cigar tastings, or scotch/cigar tastings, depending on theclientele and which evenings prove most popular (Krueger 4). Fitzgerald's will also face competition from traditional "clubs,"including some athletic clubs, which have also begun to introduce cigarbars to their facilities. Fitzgerald's will face competition not onlyfrom other standalone cigar bars, but also from bars and restaurants whichhave smoking rooms where cigars are tolerated and even encouraged. The other product that Fitzgerald's will offer is membership in thecigar bar, which will entitle consumers to the use of a private room aswell as access to humidors. For one price, consumers will sample various beverages incombination with various cigars, each of which is picked to complement theother. The company will actively work to promote the useof the club for members, and encourage companies to bring clients there forimportant meetings. Those members who want to maintaintheir private collections will be able to do so through the use of privatehumidors, which will be maintained for each individual. Alcoholic beverages also offer strong profit potential, with theability to generate the types of margins which can help a business such asFitzgerald's be successful in the long-term ("Columbia's Cafe" 48). Product There are several tangible products at a cigar bar, but the mostimportant product is the intangible atmosphere. In some cases,the cigar bars are simply added to an existing establishment's operations;in other cases, the cigar bars serve as the focal point of the operation.This comes at a time when cigarette smoking is becoming increasinglyunpopular and when efforts are being made to ban smoking in many bars andrestaurants. By emphasizing the membership aspect and by providing anatmosphere in which customers are comfortable, Fitzgerald's should be ableto overcome this obstacle and create a venue that is popular regardless ofwhere consumers choose to have dinner. Works CitedBarrier, Michael. Restaurants and coffee houses also posecompetition to Fitzgerald's since they will be appealing to many of thesame clientele that Fitzgerald's hopes to win. Most businesses require several yearsbefore they can become profitable; restaurants often are unable to remainpopular long enough to reach profitability. By providing an atmosphere which captures whatthe consumers want, and which provides it in a setting where the valueperceived justifies the price, Fitzgerald's should be able to build aclientele and a business which will be successful. Inaddition, Fitzgerald's is subject to regulations regarding the types ofcigars which can be imported (including the ban on Cuban cigars), and mayhave to find alternate sources for some of the more exotic cigars that itwould like to carry. Food at Fitzgerald's will be limited to cookies, biscotti and smallpastries which can be easily obtained from local vendors; no foodpreparation will be done on-site. These promotional activities will include direct mailpieces sent to offices and targeting highly paid professionals as well asprint ads in urban magazines. Perhaps more importantly, Fitzgerald's willbuild relationships with various cigar stores in the area in order topromote the establishment as a place where cigar smokers are welcome. The goal willbe to have an average price point of approximately $9, with some cigarspriced well above that point. Fitzgerald's owners would do well to contact not onlythe state liquor authority, but also the bureau of Alcohol, Tobacco andFirearms to ensure that they are in compliance with the myriad regulationswhich govern this type of operation. Byhaving special nights for cigar store owners and their employees,Fitzgerald's can introduce itself to this important group; the company mayalso want to consider making special memberships available to those in the"industry." Cigar tastings will also be a cornerstone of the establishment's salesdevelopment. However, aproperly positioned and appropriately promoted establishment should be ableto develop a clientele which can see it through the difficult beginningyears and help it maintain viability well past the time that its trendiercompetitors have left the scene. Since the goal is to create the atmosphere of a private club (formembers and nonmembers alike), there will be an emphasis on seating whichfacilitates conversation, with minimum seating at the bar. Cigars will be available for purchase individually, or they may bepurchased for consumption off-premises. To accomplish this, Fitzgerald's must also promote itself as being"different" from the competition. The availability of membershipwill enhance the exclusive image of Fitzgerald's as well as provideadditional sources of income. The three basic products offered at Fitzgerald's will be coffee,liquor and cigars. Hours of operation, particularly with regard to when liquor can beserved, may also be covered by either state or local statute, andFitzgerald's will also be subject to special fees because it is sellingalcohol. "El San Juan Hotel & Casino Adds $25 , Cigar Bar." Travel Weekly (12 September 1996): C22. "All Puffed Up." Restaurant Business (1 April 1996): 32-35."Columbia's Cafe Cigar Bar is Smokin'." Nation's Restaurant News (27 November 1995): 48.Kapner, Suzanne. Distribution In the case of a cigar bar, location is critical to its success. Financing It is estimated that the capital needs of Fitzgerald's will approach$35 , , including a special ventilation system, humidors and a humidifiedroom for the cigars, bar equipment, coffee equipment, and otherrequirements. Just as consumers do not purchase luxurycars merely for transportation, so visitors to cigar bars are interested inmore than just the cigars. Beyondthat, coffee drinks, alcohol and cigars will be priced commensurably withthese products in other establishments similar to what Fitzgerald's offers,with a target "average" price of $9 per cigar. There will alsobe a special ventilation system designed to help keep the air filtered;this is estimated to cost between $75, and $1 , for the facility.Patrons will also be able to select cigars directly from a speciallyhumidified room, which will also be glassed-in for display purchases(Krueger 3). At this point, cigar bars areoperated as standalone locations where clients can purchase their cigars orbring their own; many of these clubs feature humidors that clients can rentto store their private stock. Ads will be taken out in print media forthe city, but the emphasis will be on those magazines that have thedemographics (high income readers) that Fitzgerald's is trying to court.The advertisements themselves will be understated and in the form of aninvitation, possibly inviting the readers to "a different kind of bar" andemphasizing the differences between Fitzgerald's and other night spots.Direct mail, targeting executives in the area and sent to office addressesrather than home addresses, will also be used. The overall allure of the cigar bar is one of exclusivity andcachet; these are not establishments that cater to low income consumers(Barrier 68). "Woodroast Fires Up for the Future." Nation's Restaurant News (21 October 1996): 3-4.Krueger, Jill. Coffee drinks (in both alcoholic and non-alcoholicforms) will include selections that patrons are likely to be familiar withfrom establishments such as Starbucks and other coffee houses: fineflavored coffees, espresso, cappuccino, latte, mocha, and variations onthese. Approximately 4 varieties of cigarswill be available, with prices starting at approximately $2. The goal will be to feature products which are not readilyavailable in other locales and which reinforce the image of an exclusivesetting. Many in the industry considercigar bars to be a fad which will have a short lifespan; if Fitzgerald'sdoes not estimate the length of that fad accurately, it may not be able torecoup the investments of its owners (Krueger 3). In somecases, hotels have committed considerable resources in order to add cigarbars, which heightens the competition, as well (Myers C22). This also include interior appointments and furnishings.The facility will seat 75 in the main room, and an additional 3 in themembers-only facility. Learning what these are in the beginning and anticipatingincreases in this area will help the operation remain profitable in thelong-term. It is estimated that Fitzgerald's will be ableto sell 3 memberships during the first year and an additional 2 duringthe second year, with new memberships stabilizing at approximately 1 foreach consecutive year. Held as often as once each month, these tastings can provide goodintroduction to the atmosphere of Fitzgerald's and help the cigar barposition itself as more than just another meeting place. Cigarbars, although increasing in popularity, run this same risk. The goal is to appeal to consumers in the middle and upperincome categories, professionals, who are interested in building arelationship with an establishment where they can have conversationswithout having to shout, and where they can enjoy quality drinks and cigars(Barrier 68). Theestablishment needs to be located such that it is easily accessible fromthe types of places that the target consumer frequents, such as highquality restaurants and theaters. These mailings will use acreative message similar to that in the print advertisements. Introduction Cigar bars have begun appearing in unusual venues in recent years; inaddition to upscale restaurants and clubs, cigar bars have been found indepartment stores, hotels, and as standalone businesses. Other analysts, however,consider that the "boom" in cigar smoking will continue as baby boomersage, and that the trend toward more "adult" bars will also continue as babyboomers who have raised their children seek venues which do not targetyoung single individuals. Liquor and coffee drinks will beprovided only for on-site consumption. In addition, "cigar tastings" where aselection of cigars will be paired with a selection of wines. Regulatory Requirements As a cigar bar, Fitzgerald's is subject to a number of regulatoryrequirements which do not impede other food service organizations.Fitzgerald's will need to secure a liquor license that includes the abilityto sell spirits; these can be difficult to obtain in some localities. Critical Risks Perhaps the most critical risk facing Fitzgerald's is just how longthe boom in cigar and cigar bars will run. This will enable the cigar bar to keepits operating costs to a minimum since it will not require the expensiveequipment and additional personnel that having food on-site would require.In addition, refraining from offering an extensive menu reduces the amountof inventory carrying costs and waste that many restaurants encounter. Since the membership dues and humidorrentals are received regardless of how often a member uses the "club," thiscan greatly enhance the profitability of the operation. Martini cocktails, forexample, will be staples at the cigar bar as will single malt scotches andcognac. Total fixed costs for the first year, including lease payments,advertising and associated obligations, are estimated at $55 , ; thiswill be supplied by a consortium of private investors who anticipate athree-year payback period. Price Because Fitzgerald's is promoting itself as an exclusive locationwhich does not want to cater to everyone, it will follow a premium pricingstrategy with regard to all of its products. Fitzgerald's will be able toavoid this situation in part because it will not be serving food (which isa notoriously low profit item), but it will be subject to the whims of thepublic. Given that the cigar bar is currently in the growthstage of the lifecycle, there would seem to be plenty of opportunity forentrepreneurs able to raise the requisite capital and enter this market. The goal will betwofold: one, to invite these cigar consumers to patronize Fitzgerald's,and two, to encourage these cigar "professionals" to encourage theircustomers to visit Fitzgerald's. Competition Because cigar bars are still in the growth phase of the productlifecycle, there is not yet significant competition in the field, althoughcompetition is increasing. While some cigarbars have adopted mail order techniques for increasing their business,Fitzgerald's will, for the foreseeable future, remain a walk-inestablishment only (Coeyman 32). Operating hours will be from 6pm to 2am, with staffrequired on-site approximately one hour before and one hour afteroperating. "Where's There's Smoke..." Orlando Business Journal (18 October 1996): 3-4.Myers, Gay Nagle. These can bepromoted through cigar shops as well as through word of mouth. In addition, Fitzgerald's will court local cigar shops and hostspecial events for owners and employees of these shops. Because of this, the cigar bar should belocated in a theater district or restaurant district with easy access andin a place that is already well-known to consumers. By having aspecial members-only room and individual humidors where customers canmaintain a private stock of their favorite cigars, Fitzgerald's candistinguish itself from other cigar bars which are less exclusive and whichdo not offer the same type of atmosphere. Fitzgerald's will offer a complete bar, with wines, spirits and beers,but will emphasize premium products throughout. Another critical risk facing Fitzgerald's is the problem which allrestaurant operations face, which is maintaining a loyal clientele whichcan provide long-term viability. When the cigar bar is added to an existing restaurant or club, the newoperation simply augments the previous one. These willbe fixed price evenings where the fee (averaging $75 per person) willinclude both the wine and the cigars. A staff of 12 (including full-time and part-time workers) willbe utilized. Opportunity Cigar bars combine an area where cigar smoking is welcomed andencouraged with the serving of alcoholic beverages. Because of this, offering premium coffeedrinks will reinforce the image that Fitzgerald's is trying to build andprovide an alternative for those consumers who do not want to indulge inalcoholic beverages. Such a wide price range will accommodate thetastes of different types of consumers, including those who are not yetwell acquainted with the types of cigars available (Kapner 3). The cigar bar sells atmosphere and ambiance as much as itsells cigars, and the product of the cigar bar is not only the food, drinkand tobacco which is offered, but also the allure of belonging to a "club"which has few members. In addition, sinceimage and comfort is a large part of what Fitzgerald's will be selling,considerable attention will need to be paid to the interior decoration ofFitzgerald's.
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