Expert: M J Robbins - 2/3/2011

Question
Hello Mr. Robbins - I have had this idea rambling around in my head for a long time, and would like to run it by you for your comments or suggestions.
I have been a cigar smoker for the past 12 or so years and have always wanted to open my own shop. But because of the great expense I have never been able to. But the idea of a mobile cigar shop ( think food truck style )came to me. Now don't laugh yet. I was thinking of a cargo type van, customized inside with a sort of pull out type display case to hold the product. An awning would open up outside of the van to give customers an inviting walk up, maybe along with a couple of nice chairs to sit and smoke their purchase. The van would have a wrap around graphic to promote the business. The beauty of this is that the overhead would be minimal after the initial investment, no bricks no mortar. You would be able to relocate the mobile shop at different venues, ie busy CBD locations, festivals, special events, you get the picture. Anyway I know there are other ends to this that I am not aware of, hoping you can give me some insight. Thanks for your opinion.

Answer
Yes this is a funny idea.

I designed a mobile unit in 1993, a custom built trailer to display cigars. Cigars need to be kept at 65 degrees and 73% RH to be perfect. I set out first to learn about Refrigeration that I would used to power the unit. A Refrigeration Company owner helped design the unit. My friend packed the trailer with 6" of refrigeration packing and lined it with Spanish cedar. Then I need a van to tow it and pull the extra merchandise. Finally we needed power on site for the refrigeration. After careful research I had to go with a 5000 watt honda generator because refrigeration pulls 2.5 amps on surge and then that left extra power for other stuff.
Total cost in 1993 dollars $15,000 todays cost maybe $25,000.
I originally got paid to be at events like corporate parties and golf tournaments. Along with charging $400 to be there and selling cigars it worked out well. That all fell apart in 1998 with the collapse of the cigar market.
In 1995 I built the largest mobile tobacco shop on earth cost $250,000 instead of opening a store, only because we thought we would not see our kids grow up if we worked 7 days a week in a store. Imagine a custom built isuzu truck with a 17' box custom built by a movie studio company.
The whole side opens up and displays 400 different cigars and stores 25,000 cigars when full. Refrigeration keeps the temperature and humidity perfect. I go in to check humidity twice a day.
The truck has double refrigeration packing to keep everything fresh and 100% spanish cedar floors ceiling and walls.
Now the place I sell is at a swap meet in Orange County and my monthly rent is around $1,500 and the taxes road taxes and constant repairs on the truck refrigeration and other elements brings the cost to $2,000 a month.
Around the same price as a store at $1 a sq ft for 2,000 sq ft.

I still think I made a mistake if you want to make real money but I got to watch my kids grow up.
In a mobile facility you get no respect from the cigar companies even though you have been in business 30 years.

I will add more later...

Mike

#1 - outside you are at the whim of the weather and I have suffered greatly at the hands of Mother Nature.
I believe the cigar business in a recession as I have seen a decline in the last few years. Only with growth into other merchandising have I come close to sustaining my income. I am the West Coast Zippo distributor and that saved me in the Cigar decline in the late 1990s. Now I am off into other merchandise wholesale and retail unrelated to Cigars.
It costs so much to keep cigars fresh with a sealed humidor cedar lining and refrigeration that it needs a boom market to support this investment.
As a fun retirement store where you can sit and smoke and make a little money I see some succeed.
If you love cigars this could be a nice side income. Another boom when Castro dies could lead to money in this venture but if it is short lived the investment could still be a burden.
In other words if you invest $25,000 in a proper mobile facility and $25,000 in inventory for a total of $50,000 at 10% interest you might not pay off the initial cost before the boom fades.
In 1998 when the boom collapsed after just 4 years it knocked out thousands of Cigar shops retail, wholesale and manufacturers.
The only guys that seem to be making money right now are the stores that have clubs. Couches, big screen TVs, humidor and a charge for club dues. So if you have 1,000 members paying $300 then you have paid your overhead and employees + some profit and then you have the sales to pick that up. Still remember a good humidor creates stable clientele - if they trust you have fresh cigars they are more likely to come back. In my experience the #1 reason that cigar stores go out of business is the humidor - eventually a mediocre humidor destroys all the cigars and the customers recognize this.
The cigarette stores seem to be flourishing but there are tricks in purchasing cigarettes that seem to elude me and I hate cigarettes.

Any more info please ask
Mike