Licensing & Business Considerations for a Successful Cannabis Lounge

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As you plan to open a new cannabusiness or expand your existing operation, you’ll find there are a number of new licenses that may prove lucrative. One such new license is the on-site consumption license, which can be used to open a cannabis lounge. 

Higher Yields Consulting Licensing & Business Considerations for a Successful Cannabis Lounge

With the introduction of these on-site consumption licenses, there is great opportunity to influence the next stage of cannabusiness growth. But there are also limitations on these licenses that vary from state to state — and even by municipality. 

Read on to learn more about on-site consumption licenses and what you should consider if you are planning to open a cannabis lounge. 

States With Provisions for On-Site Consumption Licenses

Several states have provisions for on-site consumption licenses, but their requirements vary. While some states allow for a standalone on-site consumption license, others require that it be attached to another license, such as retail. 

The states with provisions for on-site consumption licenses include: 

  • Alaska: No cannabis lounges are open yet due to COVID-19 shutdowns
  • California: Cannabis lounges already operate.
  • Colorado: Allows cannabis lounges at a local level, in certain municipalities.
  • Illinois: Allows cannabis lounges, but without edibles.
  • Massachusetts: Allows cannabis “cafes.”
  • Nevada: Allows cannabis lounges, both with a standalone license and in conjunction with an existing retail facility
  • New Jersey: Has provisions for cannabis lounges, listed as cannabis consumption areas.
  • New York: Has provisions for cannabis lounges, and they can be standalone licenses.
  • Oregon: Cannabis lounges already operate.
  • Pennsylvania: There is only one cannabis lounge in the state, and it’s only open to medical cardholders.

Emily Seelman, Senior Technical Writer for Licensing and Legalese at HYC, notes that in some states, it’s up to the municipality to allow cannabis lounges or not. So you might be better off checking whether your municipality will allow it before you even look at the state at level. 

Obtaining a License for Your Cannabis Lounge 

The state in which you plan to operate will affect how easy it is to obtain your on-site consumption license. In some states, existing retailers can get an endorsement to also allow for on-site consumption. But, as noted above, other states allow you to apply for a standalone license.

According to Seelman, if your goal is to open a cannabis lounge, the standalone license is probably the better option. Without it, you’ll have to go through the competitive application process for a retail facility. 

If you plan to operate in Nevada or Massachusetts, especially, look into whether you qualify for social equity, as they’re planning to open up specific social equity licenses. A social equity license may help reduce your fees, but keep in mind that you’ll still be competing for the license. 

Nevada is also a great choice if you’re only interested in opening a cannabis lounge. The state is offering both the standalone license and one attached to a retail facility, which could open up opportunities for more people to get into the industry at once. 

Higher Yields Consulting Licensing & Business Considerations for a Successful Cannabis Lounge

Another state to consider for your cannabis lounge is New York. The state is taking a pretty open stance on public consumption that allows for cannabis consumption even on sidewalks, so it’s likely they’ll take an open approach to lounges, too. 

Seelman predicts that cannabis lounges will become like high-end bars, with controlled environments and — as New York is currently exploring — sound mitigation. However, one consistency across states is that no alcohol is allowed on cannabis lounge premises. 

Designing Your Cannabis Lounge Facility

If you are considering opening a cannabis lounge, HYC’s Design Build Director, Jesse Larson, says the facility itself is the all-important base of the business. “I’ve seen businesses with great teams, great work ethic, and great product fail because of poor facility design,” he notes. 

Unfortunately, some municipalities have made it extremely difficult for new facilities to enter the area, limiting or even eliminating opportunities for cannabusinesses that are not multi-state operators or corporations. Denver, for example, has made it more difficult to construct new businesses or modify existing structures. 

As a result, it’s tough to plan, design, build, and operate an ideal facility. But the facility is crucial to the success of a cannabis lounge, because you have to draw people in and make them want to stay. Larson observed that e-cigarette lounges learned this the hard way, as customers went in looking to make their purchases and get out — not linger.

As you plan your facility, Larson recommends considering how people want to experience cannabis, and how you can facilitate that experience:

  • Education. Give people a place to learn how to safely enjoy consuming cannabis.
  • Welcoming atmosphere. Think of a cannabis lounge as similar to a coffee shop, where people feel comfortable passing the time. 
  • Entertainment. Sometimes people want to sit and space out; other times they want to be entertained through media, food, beverages, etc.
  • Conversation. People crave social interaction. More than just a place to smoke, they’ll come to a cannabis lounge looking to socialize.

Finally, do whatever you can to create less of a burden on the customer to come in. Partnerships with Uber and Lyft, for example, can remove concern over potentially driving under the influence, encouraging more people to come inside and stay a while.

A New Standard for Cannabis Consumption

Remember that on-site consumption licenses and cannabis lounges are new. We’re setting a standard for the cannabis industry, so we have a responsibility to do it right and pave the way for future generations of cannabusiness owners.

Before you dive into the application process, it’s vital that you determine the most lucrative path for you and the actions that will best set you up for success. 

With New York’s licensing round just around the corner, give yourself the best chances of success with a strategic plan from our industry experts. Get in touch with HYC for a Feasibility Study today!

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