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Cigar Club Goes Corporate to Survive

Bruce Goldman
Posted: August 1, 2006

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.

Society members (left to right) Bob Lesnick, John Cito, George Koodray, Dan McCarthy, John de Silva and Ben Amoruso take a break in the game room.
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.

Members share a laugh in the club's semiprivate cove. The print and the cigar Indian are among the many accessories donated to the Society by members and companies in the cigar industry.
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.

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