Are cannabis consumption lounges the next hookah bars? Inside the untapped business model

May 4, 2023 · Yahoo!News

Across the state, pubs, cigar bars and even hookah lounges are common. Could cannabis consumption lounges be next?

Michigan is among 10 states that have legalized public cannabis consumption on some level. Cannabis lounges allow customers to consume on-site, but they’re not allowed to sell any marijuana or related products like edibles.

They essentially operate as the equivalent of BYOB (bring your own bottle) restaurants.

“The public is welcome and they can bring any cannabis they want, whether it was purchased at a dispensary or even if it was home grown,” said Chris Atteberry, the general manger of Kalkushka, one of only two licensed marijuana consumption lounges operating in the state.

“(Marijuana) has to be brought in from the outside or given away by companies or growers. Patrons can come in and pass out cannabis to each other without a problem, as long as there’s no sale of the product in the lounge.”

Laying the groundwork

When Hot Box Social opened its doors in Hazel Park last spring, they made history as Michigan’s first recreational cannabis lounge.

General manager Samantha Baker said they tackled plenty of misconceptions at first, because they were setting a precedent.

“Being the first consumption lounge in the state, I think just the overall community just wasn’t sure what to expect,” she said. “Especially being cannabis and cannabis still being a new venture.”

Getting involved in the community has helped the business break through some of the stigma.

“Being in business for a little over a year now, the community has been a lot more receptive seeing us being in business and what our model looks like and the spaces we’ve created and just the overall respect that we’ve been trying to establish,” Baker said.

For most of their first year, Hot Box Social was open only for private events. This past March, they opened to the public on Mondays and Tuesdays.

“Hot Box Social has really built our name in creating a safe space for the cannabis community,” Baker said. “We really centered those days (Monday and Tuesday) around being able to come to our establishment, whether you’re coming to co-work or looking for a space after work.

“I also was able to connect with the community members to where they weren’t looking to be in alcohol-centered spaces but still wanted to be in that social environment, and cannabis paired very beautifully with that.”

Baker has seen a wide range of people stop in, from experts with refined tastes, to the “canna-curious” just trying an edible, down to someone who just wants to hang out and not consume anything at all.

“Whether they’re looking to stop by after work to roll up a joint or maybe they’re kind of a cannabis connoisseur and they come in with their full dab rig set up — beautiful glassware and all the bells and whistles — or everything in between,” Baker said.

Atteberry, the general manger of Kalkushka, described the northern lounge as “a place for like-minded people to come together and enjoy cannabis in a comfortable environment.”

Atteberry worked previously as a bar manager and has experience dealing with unruly customers. That’s not the case at Kalkushka, he said.

“Not one time have I had to raise my voice at a patron and ask them to leave,” he said. “We will have parties of 60 to 70 people and no one is on their phone except to post to social media. Everyone is communicating with each other.”

Atteberry added that lounges like Kalkushka have helped take cannabis use out of the shadows.

“It’s almost like a Disneyland effect,” he said. “Many of our patrons are older and they’ve always had to hide their use from their parents or the neighbors. Here they can come in and sit down and enjoy it openly and responsibly.”

How it works

At Hot Box Social, guests are welcome to bring their own cannabis products and smoking accessories, or they can order from the lounge’s retail partner, which offers free delivery.

Kalkushka is open to the public Wednesdays-Saturdays. There’s a dispensary located right next door. Patrons are free to bring in food or order by delivery, and Kalkushka offers coffee and pop.

Atteberry said guests must be at least 21 to enter the lounge and no alcohol is permitted.

“Tobacco, alcohol and firearms can’t come into our place,” he said.

Other safety concerns include being able to identify when someone has consumed too much.

“Anyone who works here is certified as a bartender and is looking for overconsumption and is able to recognize it,” Atteberry said. “We strive to make sure that, when someone leaves, they’re able to get into their car and drive away. We’ve never had major incidents.”

Atteberry said if someone appears to have had too much, they’ll offer them a coffee or suggest a walk outside to get some food.

“We encourage them to get out and walk in Kalkaska,” he said. “People have been good about managing their consumption.”

Why so few?

Will more cannabis lounges follow in Hot Box Social and Kalkushka’s footsteps? It’s complicated.

Forty miles from Kalkaska, Gaylord — which made cannabis legal almost two years ago and may soon have as many as 10 retail outlets and a growing operation in the city — doesn’t have a lounge. Mayor Todd Sharrard believes lounges face challenges in developing a viable business model.

“In the industry, they say the dollars and cents don’t work just to have a consumption lounge because with LARA (Michigan Department of Licensing and Regulatory Affairs) you can’t (sell) alcohol and you can’t (sell) marijuana. For any of those facilities to make it today, I’m not sure how they’re doing it,” he said.

Does he see the concept coming to Gaylord?

“Time can change and cure everything. Who even thought we’d be having this conversation?”

David Harns, a spokesman for LARA, said companies with marijuana enterprises, like retail outlets and growing operations, are free to open a consumption lounge as long as it’s in a separate location.

Why has the concept been so slow to catch on?

“Businesses are trying to figure out ways to make this license type profitable,” Harns said.

Atteberry said Kalkushka brings in revenue from monthly membership and daily entry fees, private parties and events.

“A lot of cannabis companies will use us to display their products and actually have marijuana users use the product,” he said. “The companies pay a fee to be able to do that.”

The monthly subscription fee is $35.

“The daily fee ranges from $5 to $10 (per person) depending on if there’s an event that night,” Atteberry said. “If we have a special event, then we may have a higher cover charge.”

Atteberry thinks the Kalkushka business model could be exported to other locations.

“Absolutely no question about it,” he said. “Here in Kalkaska, it’s a driving destination, so I get people who want to come here and specifically drive here.”

“The only reason it wouldn’t work is the mental block that people have against a business like this,” he added. “Cannabis is here to stay and it’s made Michigan a huge player in the cannabis trade in the nation. This is a place where cannabis users can go and build a community.”

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Baker said, while it’s possible we’ll see more lounges open across the state, their business model will be specific to whatever their vision is. Baker envisions a continued mix of public and private events, like puff and paint parties or yoga classes, with a focus on hospitality.

“There’s a little bit of something for everyone.” (Full Story)

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