Consumption lounges are on the bleeding edge of the cannabis industry. The new industry segment has little history outside of Amsterdam, and with the varied state regulations limiting how the businesses operate and what they can offer, operators are left with practically nothing to model themselves after.
The knowledge gap on launching and operating a consumption lounge is massive for nearly everyone in the industry — except for Sara Stewart, who has already opened lounges in California and Illinois and is parlaying her experience into her role as president of Ritual, a business development firm focused on consumption lounges.
Stewart helped open the Lowell Café (now known as the Original Cannabis Café) in West Hollywood, California, which was the first licensed consumption lounge in the country, and the RISE Cannabis lounge in Mundelein, Illinois, and is currently helping develop numerous lounges in different states.
Marijuana Venture spoke with Stewart about the current state of the industry’s newest segment, where it is going and what is holding it back.
Marijuana Venture: You are in a unique position since you’ve already helped open a couple of consumption lounges. Is that correct?
Sara Stewart: Yes, I did. I’ve been in hospitality for 15 years, and I was basically poached from Tao Group, a very large hospitality group, to open the first cannabis restaurant of its kind in West Hollywood. That was quite an experience. I learned Metrc from a restaurant standpoint as opposed to retail. It was very different and kind of changed my perspective on what these places need to succeed. And being first to market is often first to mistake. So I’m actually very grateful that I got to be in that environment, to learn from it.
MV: Why are you so excited about Nevada?
Stewart: The regulations and the opportunity. I think the amount of people that are going to be building something in such a busy tourist destination will normalize this experience for the first time. Some of them are going to be able to be open 24 hours, which is insane. It’s something we haven’t seen yet.
But most importantly, every single one of them is, in some fashion or form, a multi-use space that is a restaurant, a dispensary, a non-cannabis-related retail store and then a venue. We’ve got so many revenue streams coming out of these experiences, but they’re just giant concepts at this point.
MV: You mentioned that a number of people are skeptical that lounges can be profitable. Where do you think that disbelief comes from?
Stewart: If you think about it, the top 10 multi-state operators, let’s say, are all very retail focused. Their bread and butter is retail. A lot of them think they’re going to build the most beautiful retail store and then throw a little smoking room behind it. That’s sort of like being a liquor store and thinking you’re gonna build a café behind it. You don’t do that. You buy a café, or you buy a restaurant. So they’re not thinking about this in the right way.
Even the products sold in these lounges are made for take-home use and for multiple servings, whereas with alcohol, pubs came before liquor stores, so we knew what a single serving looked like. We knew how to control the environment. We’re a little opposite in the cannabis space in that regard.
MV: The novelty of public consumption will definitely bring some people in to consumption lounges, but do you think it’s enough to keep them coming back?
Stewart: Retention is a big thing in this space and in restaurants in general. If people come once, how do businesses keep them coming back again and again. That’s definitely something we’re paying a lot of attention to and trying to compete with hospitality groups in general, not just cannabis industry.
MV: Do these businesses need additional amenities to draw in consumers? Who are they targeting?
Stewart: Absolutely. And a lot of these places, especially in San Francisco, where you find a lot of them, or even the Palm Springs area, are pretty targeted toward men. You don’t really see a lot of women going into them. They are a little bit more catered to the “stoner-bro culture.”
MV: Are musical acts and comedy shows getting a lot of traction in cannabis lounges?
Stewart: One of the demographics that we target heavily are the entertainment goers, because there’s definitely a demographic of people who probably won’t go to a lounge on a daily basis to eat a meal and smoke with friends, but they’ll go for an event or something unique and different. I wouldn’t say that, by itself, is a solid business model, but having these concepts is absolutely targeting those people and keeping the event programs busy.
MV: Was there anything that you were really surprised by when you transitioned from hospitality to marijuana?
Stewart: I don’t know if I’m surprised by really anything these days. I was already a consumer, but I was surprised at how much people are willing to put up with to consume in public. I was like, well, people are willing to stand outside for three hours and wait in line to come into this establishment and smoke weed with their friends.
This interview has been edited for length and clarity.