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CANNABIS DESIGNATED CONSUMPTION LOUNGES: A GREAT ADD ON TO A RETAIL LOCATION—PROBABLY NOT A VIABLE STANDALONE BUSINESS

John W. Fraser

Imagine going to a bar with co-workers for drinks after you finish work on Friday. You show the bouncer your ID to prove that you are 21 and pay a cover charge at the door—not completely unheard of but not the norm for a Friday afternoon. You get into the bar, go up to the bartender and order a beer. In response, the bartender advises that they don’t serve any alcohol here, customers have to bring their own alcoholic drinks. “You see,” the bartender explains, “this is not a ‘bar’ this is just a designated alcohol consumption establishment. We can’t legally sell or serve alcohol here. We also can’t allow alcohol to be sold on our premises. This is just a place where people can gather to consume.” Right about this time, you’re probably demanding a refund for the cover charge and leaving.

The above-scenario might sound ridiculous, but it’s an accurate depiction of marijuana designated consumption lounges in Michigan. These facilities are licensed by the Marijuana Regulatory Agency, and, while they do provide a space for patrons to consume cannabis on the premises, no cannabis can be sold at the designated consumption lounge. That means that these lounges are literally just a place where folks can consume cannabis. As a result, these businesses are likely to have a difficult time generating enough revenue to cover operating expenses as a standalone operation. These businesses require security personnel to check IDs of all incoming patrons as well as personnel to ensure that patrons are not becoming overly intoxicated and are not selling cannabis on the premises. As a result, it is unlikely that these businesses can be financially profitable on their own.

However, adding a designated consumption lounge to an existing or prospective marijuana retail establishment or marijuana microbusiness provides a great value add for prospective customers—particularly if the designated consumption lounge is adjoining or connected to the retail operation. This configuration permits customers of the retail business to purchase their product and bring it with them over to the lounge for consumption. This configuration would be similar to Amsterdam’s “coffeeshops” where you purchase cannabis in one part of the store and consume in a separate area. Also, because the Marijuana Regulatory Agency permits delivery of recreational cannabis to designated consumption lounges, patrons seated in the consumption lounge can order cannabis from the adjoining retail facility to be delivered to them at their table.

Designated consumption lounges are a welcome and necessary addition to Michigan’s cannabis business licensing system. However, at this point, they are probably only viable as a supporting piece of an existing marijuana retail establishment or marijuana microbusiness. If you are interested in starting your own cannabis business in Michigan, contact attorney John Fraser at Grewal Law PLLC for a free consultation to discuss how our team can help you start your business.

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