Coronavirus pandemic deals setback to marijuana consumption lounges, but some owners stick with plans

(This story has been updated to clarify that not all California consumption lounges are closed.)

Many marijuana businesses were just starting to open lounges and tasting rooms where their customers could enjoy the products they purchased when the coronavirus pandemic struck a year ago, forcing those plans to be put on hold.

Legal and regulatory issues also have presented hurdles in some states.

The future of such venues, as a result, is up in the air, raising questions about a business model that entrepreneurs hope to deploy to generate additional sales.

Christopher Stefan, principal of Denver-based financial-services platform Cannabis Capital Advisors, wonders whether people will be willing to return to consumption lounges and tasting rooms after the pandemic has subsided and if marijuana businesses that had been planning to open such venues on their premises will still do so.

“Are you going to take a financial risk of building that out and staffing it if you’re not sure how people are going to behave?” he asked.

Still, some business owners plan to make a go of it and open on-site consumption venues.

Change in plans

Marijuana businesses in Alaska, Colorado and Nevada had been making preparations for the day their states would allow them to operate lounges and tasting rooms, while others had already started operating.

But with the airborne coronavirus spreading rapidly, people blowing smoke into an enclosed room seemed like it could accelerate the rate of infection.

In Alaska, regulators approved two cannabis lounges last year. But then COVID-19 arrived.

One of the venues, in Ketchikan, opened briefly in October. But a sharp increase in COVID-19 cases forced the owner to hit pause, the Associated Press reported.

A second lounge, in Fairbanks, hopes to open this year.

Colorado also permits consumption lounges, but few have opened.

The Smokin’ Gun Apothecary, in Denver suburb Glendale, had submitted its application to operate its 100-square-foot tasting room just before the pandemic hit.

But when Gov. Jared Polis issued a statewide stay-at-home order on March 26, 2020, the retailer pulled its application.

Smokin’ Gun owner and managing partner Lindsey Mintz said she’s unsure when the speakeasy-themed tasting room might open.

And rather than taking up the 100 square feet originally designated for the tasting room, she is considering building out a rooftop patio for the lounge.

The Smokin’ Gun had not determined whether it would charge a fee and allow people to bring their own marijuana  products to the lounge or whether it would sell cannabis in the lounge for people to consume on-site.

“We were still in the process of doing an internal analysis on the structure of the business when everything got shut down,” Mintz said.

Mintz also owns Shotgun Willie’s, an adult nightclub adjacent to Smokin’ Gun. She said many of the cannabis shop’s late-night customers come from the nightclub.

“For us, it’s getting all our ducks back in a row and seeing where the industry goes the first half of this year,” she said.

Regulatory obstacles

Even though Colorado has laws on the books permitting consumption lounges, restrictions have prohibited some businesses from opening them.

When Lisa Leder purchased a historic home in Denver in 2019, she had planned to apply for a social consumption license.

But it turned out that the building was within less than 10 feet shy of the 1,000-foot distance the law says it should be from a day-care facility.

“Tourists really have no place to consume legally,” Leder said. “Colorado has been progressive in saying we’re open to selling it, but we really don’t want you to consumer it here. Most hotels don’t allow you to consume.”

Instead, Leder turned the house into an events venue and museum dubbed the Marijuana Mansion.

While consumption is not permitted on tours of the Marijuana Mansion, anyone renting the entire space for an event is permitted to partake in cannabis use on-site. The cost of booking the venue for an evening starts at $800.

“The point of the space is to be open for industry events,” Leder said. “You can rent the space and bring in pizza, or we can have it catered.

“We’d like to have a social consumption license, and we’ve been trying to get the setback reduced by 500 feet, but the city is adamant about keeping it at 1,000 feet.”

California also permits consumption lounges, but many are closed because of the pandemic.

“You can’t have a place where people are smoking and blowing on each other right now,” Stefan of Cannabis Capital Advisors said.

Full steam ahead

But that has not stopped some entrepreneurs from pushing ahead with their plans.

In the small town of Sesser, roughly 300 miles of Chicago, the owner of the Luna Lounge hopes to open the on-site cannabis consumption venue within the next couple of months, according to The Southern Illinoisan.

It would be the state’s first recreational cannabis consumption lounge.

Customers would bring their own cannabis. Luna would sell or rent rolling papers, pipes and other paraphernalia for customers to enjoy their cannabis.

In Nevada, one tasting room – located on tribal land north of the Las Vegas Strip – opened before the pandemic but is now temporarily closed because of COVID-19.

The NuWu Cannabis Marketplace was permitted to open a tasting room because sovereignty exempts the Southern Paiute tribe from the state’s current prohibition on such venues.

Retailers such as Las Vegas-based Planet 13, meanwhile, are planning consumption lounges when the state approves them.

Planet 13 built its 112,000-square-foot superstore with the intent to open a consumption lounge when the state permits such facilities to operate.

When that will happen is unclear. A bill working its way through the Nevada Legislature would legalize cannabis social use lounges.

“When we first opened our superstore a few years ago, we did it with plans to really expand into an entertainment complex,” said David Farris, Planet 13’s vice president of sales and marketing.

“We added a restaurant, bar and customer-facing production. We also left significant real estate in our build-out for future retail and a future consumption lounge.”

Planet 13 plans to do something that’s “very Las Vegas” but won’t start designing the space until a law permitting social use venues passes and there are guidelines for how such lounges can be built, Farris said.

Under current Nevada laws, tourists can visit the state and legally purchase cannabis, but the only place they are permitted to consume it is inside a private residence.

Among the concerns over social use lounges is that people will drive after consuming marijuana.

“Before COVID, 90% of our business was tourism,” Farris said. “All the traffic is coming from walking or Uber, and there are a lot of visitors from out of state. The issue of them driving would not be a problem.”

States and on-site consumption

A number of states allow for licensed, on-site marijuana consumption venues. Regulations vary by state, and localities might need to opt in.

Source: Marijuana Policy Project
StateOn-Site Consumption Allowed?
AlaskaYes. Regulators approved rules for on-site consumption in late 2018.
ArizonaNo, not specified.
CaliforniaYes, if it is allowed by the locality. Tobacco and alcohol cannot be sold or consumed onsite, the area must be restricted to those 21 and older, and it must not be visible to the public or to those in areas that are not age-restricted.
ColoradoYes. The legislature and governor approved a law to allow on-site cannabis “hospitality” in 2019.
IllinoisYes. On-site consumption will be allowed at retailers for those localities that opt in.
MaineNo. Social use was allowed in the voter-initiative, but lawmakers rewrote the law.
MassachusettsNot as of fall 2018, although onsite consumption may be allowed in future regulations.
MichiganYes. The law gives the regulating department authority to issue additional types of licenses, including those for social consumption and consumption at special events. Regulations for on-site consumption have not been issued yet.
MontanaTBD — The department may allow on-site consumption.
NevadaNot yet. In 2019, the legislature and governor enacted a two-year moratorium on localities allowing on-site consumption.
New JerseyYes. A licensed cannabis retailer may operate a cannabis consumption area. Customers can buy the cannabis from the retailer or bring their own.
OregonNo.
South DakotaNot included in the constitutional amendment. Could be included in legislative implementation or permitted by regulators.
VermontNo.
Washington stateNo.