A red-hot new segment of the industry is taking off, with little direction and massive obstacles
In theory, consumption lounges should be where the rubber meets the road in the cannabis industry. But while new lounges are opening across the country, operators don’t seem to have much runway to work with under the current regulations.
California in 2019 was the first state to allow licensed consumption lounges to open — and then the coronavirus pandemic hit and the segment was left idling. By the time the world was ready to stop working from home, Alaska was already running consumption lounges, Colorado, Illinois and Michigan were launching their programs, and Massachusetts, Nevada, New Mexico, New Jersey and New York were developing their own regulations.
Today, lounges are open in Alaska, California, Colorado, Illinois, Michigan and New Mexico.
But business owners in the fast-growing segment are hopeful the regulations, which were built around the regulatory framework of the existing state cannabis industries and don’t necessarily lend themselves well to hospitality businesses, will ease as the new segment finds its footing.
Marijuana Venture reached out to operators in open and upcoming states to see what these businesses can legally offer consumers, what is currently working for their business models and what they hope to incorporate in the future.
The Studio Lounge
West Hollywood, California
The Studio Lounge operates near the heart of Los Angeles in West Hollywood, California, where it sits above its sister business, The Artist Tree dispensary, and below a larger event space the company uses for private events as well as public ones like its cannabis yoga.
“People start in the lounge and then they go up to the third floor for yoga, or a painting class, or a writing workshop,” says The Artist Tree director of marketing Caroline Fontein.
Customers can take any items they purchase from the dispensary on the first floor and consume them upstairs in the lavish lounge. While single joints are the most convenient and commonly consumed items, The Studio Lounge also rents some of the more extravagant smoking equipment that consumers might be interested in trying.
“If you’re a regular cannabis user, you wouldn’t necessarily have a gravity bong,” Fontein says. “But when you’re in an environment like that, where you can rent that out, it’s fun to experience and you’re getting to try something new that you haven’t tried before, or maybe something you didn’t even know existed.”
The Studio Lounge has been open for a little more than a year, but Fontein says a lot of consumers are simply not aware that consumption lounges even exist.
“I know there’s been a lot of challenges, but a lot of licenses were issued,” she says. “It’ll be great once some of these other license owners open shop and it’ll become more of a destination.”
Although lounge operators in Los Angeles are not allowed to serve food, Fontein says the company has partnered with a nearby restaurant so if patrons get hungry, they can scan a QR code and order food directly from the restaurant.
“It comes out plated, like you’re in a restaurant,” Fontein says. “It’s a pretty seamless experience for customers, but that’s a whole revenue stream that we could be owning.”
New legislation will allow operators like The Studio Lounge to serve food beginning January 1, 2024. Fontein says The Studio Lounge isn’t going to retrofit an entire kitchen into its West Hollywood location, but the legislation will allow the company to incorporate a commercial kitchen into its upcoming second lounge in Hawthorne, California. Fontein says incorporating a restaurant into the lounge would at least help develop the hospitality side of the business by giving servers a bigger bill and the potential for larger tips.
“If we have a group of 20 people come in, at a restaurant, it’s typically 20% gratuity automatically added onto the bill, but that doesn’t work with cannabis, because every single person needs to make individual purchases,” Fontein says. “We really want to have this best-in-class customer experience for our employees and our customers, but for our employees, it’s like, ‘Okay, but we’re not making tips on this.’”