Recreational cannabis sales have been legal in Michigan for nearly three years, but establishing public spaces to legally consume weed is still in its infancy.
The first two state-qualified “consumption lounges” opened this year: Hot Box Social in Hazel Park and Kalkushka Lounge in Kalkaska. Michigan is among seven states to allow legal cannabis consumption lounges. Nineteen municipalities across Michigan have opted into allowing these businesses to varying degrees, and two municipalities have not specified whether they will allow the use, according to the latest state data.
However, consumption lounges face more hurdles than the average hospitality business, particularly by restricting cannabis sales on the premises. Customers need to bring their own product to the establishment, or they can have it delivered from a dispensary. They’re effectively BYOB bars.
Opening — and generating revenue from — a consumption lounge is generally difficult unless it’s attached to a dispensary, said Trent McCurren, co-founder of The WellFlower Group, a vertically integrated cannabis company with dispensaries in Manistee and Ypsilanti.
“For it to really make sense, you need it to be right next to your dispensary because it’s hard to make money in your consumption lounge because you can’t sell alcohol, and people probably aren’t coming there for a dining experience,” McCurren said during a recent cannabis roundtable hosted by MiBiz. “I know there’s probably exceptions there, but unless everybody’s buying stuff from your dispensary, walking over … and consuming it there, it’s hard to make the argument for them as a standalone business.”
The owners of Lucky’s Community Cannabis Co., which plans in the coming months to open dispensaries in Muskegon and Big Rapids, hope to open a venue where people can consume cannabis at their Big Rapids location.
“We recognize there is an opportunity as retailers, but we are looking at lounges as part of our growth strategy,” said Raahul Reddy, principal of Lucky’s Community Cannabis Co. “As we started researching it, we found more and more hurdles, but we recognize things might change a little bit.”
Reddy and Lucky’s President Marc Robert have received local approval to open a dispensary on the second floor at 120 S. Michigan Ave., above Star Shooter’s Bar & Restaurant. They hope city officials will consider allowing them to open a lounge on the third floor of the building after renovations, even though Big Rapids has not formally opted into licensing consumption lounges.
“A lot of places aren’t (opting in) because they don’t want to be the guinea pigs,” Robert said. “I don’t think you’re going to find a bad response from the communities that have allowed lounges, and I don’t think people who are elected officials have their fingers on the pulse — they don’t realize how accepted (cannabis) is. Now that it’s become legal, you’re seeing more people open up and say they smoke it who would have never have said that before.”
Robert and Reddy plan to charge a cover fee and host events on the third floor of the building. They plan to split up the third floor into three sections for people who want to study or work in the space, socialize, or use a gaming area with flat screen TVs and playstations.
“It’s hard to monetize because you can sell food but you pretty much can’t sell alcohol,” Reddy said.
The owners plan to waive a cover fee for patrons who bring a receipt from purchasing product downstairs at their dispensary.
After opening June 1, Kalkushka Lounge books private events and charges a cover fee during regular business hours with options for daily, monthly and yearly membership fees. The lounge contains a cafe that sells prepackaged food and coffee, and is located next to The Botanical Co. dispensary, which is a part owner of Kalkushka.
The goal behind Kalkushka Lounge was to add another successful business to the town of Kalkaska and create a space where people can gather without the fast-paced environment of a bar, said Chris Atteberry, Kalkushka Lounge general manager.
‘There is a need’
Landon Bartley, interim president of the West Michigan Cannabis Guild and CEO of Proxima Collective, said people who are knowledgeable about cannabis need a public place to legally consume products.
“People consume (cannabis) publicly all the time, and some will say everyone is doing this anyway, what’s the problem? The problem is that it’s still illegal and there is a potential business type that could bring in business, people, traffic and tourism,” Bartley said. “This will provide an outlet for people to consume, explore and decide if this is something they are interested in using, selling, growing or getting more information about. You can do that with a budtender at a dispensary, but you can’t consume it there. And you can’t legally consume at your apartment if your landlord doesn’t allow it.”
The Cannabis Guild advocates for expanded licensing for consumption lounges, Bartley said. Grand Rapids — where Bartley previously served as the city’s cannabis administrator — initially planned to hold off on allowing consumption lounges and take a “wait and see” approach, Bartley said.
“I think there is some interest among the commissioners in seeing lounges happen, and I think there is a need,” Bartley said.
The 3,000-square-foot lounge in Kalkaska is furnished with live oak tables, leather chairs and a comfortable atmosphere that greets patrons with an open sign that reads “open your mind.”
“We want to change the community’s mind about what they might think a business like this is and be a community based space that leaves a positive mark on the town of Kalkaska,” Atteberry said. “Through community investment and being involved, we’ve been successful and we’re looking forward to changing more minds.”
Atteberry also sees an opportunity to expand more into the tourism industry with a cannabis tour through the region.
“People have shied away from a cannabis tour, but they could hit a bunch of dispensaries and end up here, have a place to consume and then take everybody home,” Atteberry said. “That’s another thing we can offer.”