Following West Hollywood's Lead, Cannabis Foodies Could Turn Retail Into A High Art

The pungent smell of marijuana is noticeable the moment visitors walk in to Lowell Farms: Cannabis Cafe.

The smell gets a bit stronger once one enters the West Hollywood restaurant and cannabis consumption lounge.

Puffs of smoke could be seen in the air. Patrons casually smoke joints and eat edibles while dining on farm-to-table style fried chicken sandwiches, baby kale salads, gourmet burgers, hummus and coleslaw.

West Hollywood is the only place in Los Angeles that allows for on-site consumption. In the Bay Area, there are more than 10 consumption lounges where one can eat cannabis edibles, smoke or vape. 

It is unclear how many social consumption lounges make up the 873 or so licensed cannabis sellers in California. An official from the Bureau of Cannabis Control, which oversees the cannabis licenses in the state, said consumption lounges are approved at the local level. The Bureau keeps no official total.

The smell isn't new to California, but the type of venue is.

For more than half a century, cannabis for the general adult public had been prohibited, and smoking and consumption had been relegated to inside homes, medical cooperatives or via illegal dealers. Now, a line of people stand patiently waiting outside for up to an hour to partake in and check out the scene inside this hybrid high-end restaurant and consumption lounge, where people are smoking and eating cannabis freely.

As legal cannabis operations continue to pick up steam in California and across the nation, these smoke and consumption lounges could be the new normal in retail areas in certain cities in the next five to 10 years, experts say. Lowell Farms has the first restaurant/café component.

Nationwide, there are 11 states and the District of Columbia that have legalized marijuana for adult recreational use. Though there are several states where cannabis is legal that have banned marijuana social lounges like Alaska and Washington, several places in California, Massachusetts and Colorado allow this type of business.

In Colorado, there are more than a dozen cannabis social clubs, according to Westword, a local Denver news website. In Massachusetts, there is at least one private social club in Worcester, according to PotGuide.com, a cannabis news and guide website. Oregon has several private clubs as well. 

Many city officials and property owners are looking at West Hollywood as it paves the way for the success of this retail model

In West Hollywood, Lowell Farms is one of 40 cannabis operators, including one of 16 in the city's consumption category, that have received a license to operate in the city, according to West Hollywood Community and Legislative Affairs Manager John Leonard. Leonard oversees the city’s cannabis business program.

In 2017, the city approved 40 cannabis licenses for five categories: retail, medical, delivery and two types of consumption lounges. One of the consumption lounges licenses allows smoking, vaping and eating edible cannabis, the other edibles-only. Businesses could apply for more than one license. 

Cookies Retail Partner Daniel Firtel said much like a bar that serves alcohol, consumption lounges where visitors can smoke and eat edibles freely are the next frontier for the cannabis industry. 

"It is a growing trend,” Firtel said, comparing the next generation of cannabis cafés to those in Europe and Barcelona.

Cookies is a San Francisco-based cannabis and lifestyle brand with three dispensaries in California and three branded clothing stores in Los Angeles, San Francisco and Seattle. More are in the works in several states, he said.

Upon the opening of Lowell Farms earlier this month, the city approved competitor Budberry's application, according to Eater, Budberry will be the city's first licensed, edibles-only consumption lounge and café. Budberry is slated to open next year. Another consumption lounge business is up for approval in the coming weeks, Leonard said.

By the end of next year, the city expects to see at least six or more of these consumption lounges to open and eight dispensaries to open in the city, Leonard said.

Because the city went through a rigorous merit-based system that carefully hand-selected the businesses that received a license, these consumption lounges aren't going to be dingy storefronts, Leonard said.

"We wanted high-end retail restaurants or bars or interesting neighborhood businesses that fit the physical aesthetics of West Hollywood," Leonard said. "That was really important for us."

Leonard said since West Hollywood had passed its local ordinance a couple of years ago, he's received a lot of phone calls from other cities and landlords. Surprisingly, not so much from neighbors. 

"We only received one complaint with Lowell Farms," Leonard said.

Leonard said a representative from a nearby synagogue expressed concern about the pungent smell of cannabis drifting to the synagogue property. He said Lowell Farms installed a high-end ventilation system to absorb the smell. 

"For the most part, we're received a lot of support from neighbors," Leonard said. "We've required Lowell to have a high level of security so there's always two security guards on-site and another roaming the block. I think the neighbors like the added security."

Many cities have spoken with Leonard regarding West Hollywood's ordinance and some have come by to check it out.

"A lot of them are taking a wait-and-see approach," he said. "I would expect to see more throughout the state. There is a great demand for these types of businesses."

However, there is a catch: Commercial property owners and landlords in areas where cannabis is legal are still hesitant about renting out their property.

There is still the fear of property being seized by the federal government, which still classifies marijuana as an illegal drug. For owners that have large debt on their buildings, the lender or bank may prohibit cannabis businesses from operating in that location, Firtel said. 

Along with finding a building, a cannabis operation needs to be very well-funded and be ready to secure a business license, as well as possibly facing neighbor opposition.

“There is this huge opportunity here,” Allen said. “These are going to be long-term durable businesses, but it’s not for the faint of heart.”

For property owners, Leonard said, he has found that their biggest concern is whether the bank or lender would allow a cannabis operation to become a tenant. 

Firtel, of Cookies, said that is probably the biggest hurdle to overcome. 

"Most of the objections are coming from banks," Firtel said. "They are carving out items on the loan documents that prohibit landlords from leasing to cannabis businesses."

He said property owners are also wary of the type of crowds they might think may come to a cannabis operation, the amount of smoke in the air and how that could affect other nearby tenants. 

Still, money is a big upside for these property owners, Firtel said. 

"That is one of the deciding factors," Firtel said. "That’s one way to motivate landlords, to be able to pay a little bit more."

West Hollywood and Lowell Farms are paving the way for others cities and companies to follow, said Hezekiah Allen, former executive director of the California Growers Association and now CEO of Emerald Grown, a cannabis marketing services company. 

"They are the trailblazers," Allen said, adding that consumption lounges do not usually offer food or serve alcohol. Because Lowell Farms is separated into two separate business entities, it is a full-service restaurant and a consumption lounge. It is still awaiting its liquor license. 

Cookies, Firtel said, is in the process of opening a cannabis consumption lounge in Coachella Valley in Riverside County. 

“I hate to use this word but there’s no other way to describe it, it’s experiential retail,” Firtel said. “You have that aspect of a dispensary and a separate lounge where you can smoke or consume cannabis. You can hang out and there’s a communal vibe. There’s a community aspect of cannabis. Cannabis is supposed to be shared with family, friends and loved ones.”

CannaVentures founding partner Josh Munk said he expects to see a rise of consumption lounges and cannabis cafés through the state and nation. It is still a fairly new concept here in the United States.

Munk said many of these new businesses will have high-end designs much like one would see in cannabis cafés across Europe. 

"Lowell is one of the early pioneers," Munk said. "The days of consumption lounges that feels like you and a bunch of your friends just smoked out in a basement is over. These new lounges are going to be high end, have a nice vibe and bring in a great crowd of people."