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.
Coachella Canna Club
Armen Paronyan describes opening his consumption lounge, the Coachella Canna Club, as a “long, hard battle.”
“Hospitality and cannabis are gonna definitely meet somewhere, but right now it’s been a tug of war,” Paronyan says. “One of the neighboring cities has banned indoor consumption and it’s turning into a thing. There’s also some bills in Sacramento right now trying to stop the food service side (of consumption lounges).”
The Coachella Canna Club opened in April in a former nightclub that was built to house a dispensary and onsite restaurant that each operate separately. Paronyan says commercial kitchens are strictly prohibited for consumption lounges in Riverside County, but having the former nightclub divided like a small cannabis mall circumvents the restriction.
Because Paronyan is the owner of the LA Cannabis Club, a chain of three dispensaries around the greater Los Angeles area, and three cultivation sites, he is able to create his own menu of ready-to-consume products for the lounge that are sold solely by its neighboring dispensary, such as 1-gram flower packages for each of his strains as well as offer competitive pricing for the lounge’s customers.
“We also have a brand appreciation day where brands can set up and give vouchers for $1 or a penny so people can just go across to the store and get a sample of that brand,” he says.
With a capacity for 172 people in the lounge, Paronyan is also looking to set up a ticketed events schedule for the business and plans to capitalize on the numerous musicians that travel through Coachella annually. He is also planning to host a movie night, which, according to the data analytics firm New Frontier Data, is the most popular post-consumption pastime (56% of consumers regularly engage in movie-watching after consuming cannabis).
“People will be able to get popcorn, drinks and watch a movie together and smoke,” Paronyan says.