Cigar Club Goes Corporate to Survive

August 01, 2006
By Bruce Goldman

New Jersey's smoking ban could have snuffed out the Metropolitan Cigar Society this spring, but an innovative restructuring has saved the smoking club from extinction.

Founded in 1994, the nonprofit organization had never missed its monthly dinners at The Brownstone, a catering facility in Paterson, New Jersey. Dan McCarthy, the club's founder, was determined to find a way to keep that streak intact after Acting Gov. Richard Codey signed the ban in January prohibiting smoking in most indoor public places in the state.

With the loss of its regular venue, McCarthy and his fellow board members decided to transform the club into a for-profit entity and search for a new location. Organizing itself into a limited liability corporation, the group, now known simply as the Metropolitan Society, sold 45 shares of preferred stock at $1,000 apiece and 10 shares of common at $500 each and drew up an operating agreement, which was formally ratified by the preferred members on July 19. The new entity was set up to function without any employees, in order to avoid violating the smoking ban.

"Since New Jersey passed the smoking ban…we were actually forced into this," said McCarthy. "There was no alternative, and we would have had to disband the club."

Instead, the group seized upon the corporate structure idea.

"We said, 'This is a golden opportunity for a business,'" said Ben Amoruso, one of the club's original members, who serves on the board of directors of the new corporation. "A lot of us were entrepreneurs, and we [already] had a nucleus [of members]. We did a business plan, a profit-and-loss statement…[and the venture] was an instant success."

The Society used the proceeds from the equity sales to help finance the renovation of a warehouse in an industrial park in Fairfield, New Jersey, which was owned by the father of one of the club's members. Beginning in mid-April, club members donated their time and resources to turn the 4,200-square-foot location into a private, upscale cigar lounge, complete with a game room, kitchen, dining hall, and walk-in humidor and lockers.

While the preferred shareholders don't ever have to pay membership dues, the common holders pay $75 a year. In addition to the equity members, the club has approximately 45 associate members, who pay annual dues of $200 (an additional $100 allows 24/7 access to the facility, a privilege the shareholders enjoy). The organization is projected to break even when total membership reaches 125, McCarthy said.

Additional income will be derived from usage fees, cigar locker rentals and facility rentals to outside groups. To access the club, members pay from $20 to $50 a month, depending on frequency of use. Those who want to rent lockers can do so once the walk-in humidor is completed later this summer; 12-by-18-inch lockers will run $60 a year, smaller ones, $40. Plans call for nearly 200 lockers to eventually be built.

Construction of the walk-in humidor, like almost everything else at the club, was undertaken by the members themselves to keep the renovation costs to a minimum. Starting with nothing more than the shell of an old warehouse space, members used their respective skills to turn the facility into a first-rate cigar and recreation facility in a mere 75 days.

"We basically outfitted this place on 10 to 15 cents on the dollar," said McCarthy. The total cost came to about $38,000, compared to an estimated $250,000 the club would have spent if it had hired outside contractors exclusively, according to George Koodray, a longtime member and club secretary.

"Nothing in here was reclaimable," said Koodray, who was sporting the Society's new maroon short-sleeve shirt at the group's July dinner. "We had to remove the studs, right down to the cinder block. We reframed, rewired and built everything out."

Longtime member Bob Lesnick, a private investigator by trade, did all the electrical work. Jeff Mortman, an ex-Marine, oversaw the plumbing and heating installation. Other members spackled, painted and cleaned. The only task requiring an outside contractor was the painting of the ceiling, which the club had raised from eight to 12 feet to accommodate the cigar smoke.

Once the space was renovated, the Society acquired tables, plush cloth chairs and other furniture in near mint condition at a discount from hotels and a casino that were liquidating their merchandise. Two 42-inch plasma TVs were set up in the main lounge, while the game room was equipped with a pool table, a pair of poker tables and a dartboard. A refrigerator was installed in the kitchenette, and planned vending machines may dish out playing cards along with the usual assortment of soda and snacks. The dining room, which can seat 100, will eventually have a small bandstand where a DJ will be able to spin tunes for people renting the club for private parties.

Just as McCarthy had hoped, the Society's monthly dinners continued uninterrupted. The first repast in the new facility was held on May 3, even though the renovation was still ongoing. Six-foot sandwiches, several hot trays and salads were provided by one of the members, Jack Shahoor, who owns a Foodtown supermarket. Starting in June, the club was able to hire an outside caterer for the dinners.

The group -- whose members range from doctors and judges to contractors and other small-business owners -- invites representatives from cigar and beverage companies to the dinners, where members can sample cigars, spirits and other products. (General Cigar Co. and JR Tobacco have made appearances, as has Cricket Hill Brewery, a New Jersey lager and ale producer.) Another highlight of the dinners is the raffling off of a cigar box (or two).

In the future, the Society, which also holds an annual golf tournament, hopes to establish reciprocity agreements with other cigar-smoking organizations to provide "a refuge for travelers from other areas," said Koodray. Clubs from Montreal, Canada, and Florida have expressed preliminary interest in such a relationship, he said.
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