California cannabis lounges and retailers outline plans to embrace cafe law

California cannabis microbusinesses and retailers hope a new state law that widely expands their ability to offer food, drinks and live music will drive growth and provide a template for other regulated markets.

Marijuana retailer The Artist Tree designed its newest store near Los Angeles International Airport with kitchen space in anticipation of the long-awaited policy change in the world’s largest cannabis market.

Other California marijuana stores, such as Sacramento-based chain Perfect Union, which has yet to feature on-site consumption, are weighing the new options to expand beyond traditional marijuana retail channels.

“This legislation opens the door to a future where cannabis isn’t something to be hidden or restricted but something to be celebrated alongside art, music and food,” said Angelica Sanchez, senior director of government affairs and compliance at Perfect Union, which operates nine stores, primarily in Northern California.

“Expanding these opportunities to cannabis retailers with on-site consumption is a win for both businesses and consumers across the state, fostering community engagement and growth.”

The day after California Gov. Gavin Newsom vetoed a bill that would have allowed small farmers to sell their cannabis products directly to consumers, he signed a separate measure on Sept. 30 to legalize marijuana cafes akin to those in the Netherlands.

Newsom vetoed a similar bill in 2023 that would have allowed California marijuana retailers to operate traditional kitchens and host on-site events, saying more workplace protections were needed.

Assembly Bill 1775 addressed those concerns by requiring employers to supply masks for workers and provide additional guidance about the risks of secondary smoke.

Operationally, the legislation allows:

The cannabis cafe law goes into effect Jan. 1, pending approvals from local governments – a challenging aspect of California’s regulated marijuana program.

Lauren Fontein, founder and chief compliance officer of The Artist Tree, said the new policy reflects changing perceptions about marijuana use while recognizing the commercial legitimacy of consumption spaces.

Under the current model, California’s licensed marijuana lounges – most of which are clustered in West Hollywood and the Bay Area – either don’t serve food or beverages, partner with outside suppliers such as restaurants or operate as separate businesses entirely.

Fontein said The Artist Tree opened a consumption lounge in 2022 in West Hollywood, where it partners with third-party concessions vendors.

“Having the ability to directly sell food and beverage should, in theory, really help the viability of cannabis lounge businesses,” she said.

Fontein is speaking on the panel, “How to Perfect the Consumption Lounge Experience and Promote Sales,” on Dec. 5 during MJBizCon at the Las Vegas Convention Center.

The Artist Tree secured permits for the initial build-out of a kitchen, including gas lines and related plumbing, at its new store and lounge on Imperial Highway.

Management, staffers and consultants are weighing food offerings, restaurant equipment and concepts from artisan pizzas and gastropub fare to more traditional cafe options at the new location.

“Hopefully we can launch that sometime in early 2025, which will be soon after the law goes into effect,” Fontein told MJBizDaily.

For Orange County-based marijuana brand Sauce Essentials, which sells gummies, pre-rolls and vapes at more than 300 stores across California, marijuana cafes represent a big opportunity to expand its customer base.

“We’re especially excited to start planning events and creating cool experiences that let people try out products firsthand, something that hasn’t always been easy to do legally,” marketing director Emma Shalaway told MJBizDaily via email.

“This is a great alternative for people who prefer cannabis and want to enjoy it in a more accepted, social setting,” she added.

Similar to its retail and consumption lounge model in West Hollywood, customers at The Artist Tree’s new location can purchase marijuana products at the on-site store or with a server.

Lounge patrons can rent an array of consumption devices, from Puffco Pro dab rigs to Stündenglass gravity bongs.

The company also introduced a mixologist-developed marijuana cocktail program at its location in Hawthorne.

Patrons can add a prepackaged 3-milligram or 10-milligram sidecar of THC oil to non-infused cocktails.

“There’s a lot of options around how you can consume your cocktail,” Fontein said.

The new location near the Interstate 105 and 405 interchange – a major transportation artery in Los Angeles – has catered to locals as well as travelers flying in and out of the L.A. airport, according to Fontein.

“We’re getting both locals and tourists,” she said, adding that the business is buoyed by a lack of licensed competitors in the area.

Fontein said the lounge model is unique to the area because Los Angeles prohibits marijuana consumption spaces.

In October 2022, voters in the coastal community of Redondo Beach rejected a special-election referendum to add a third marijuana retailer permit.

A month later, voters in neighboring El Segundo, Hermosa Beach and Manhattan Beach overwhelmingly backed existing bans on commercial cannabis activity.

Exclusive industry data and analysis to help you make informed business decisions and avoid costly missteps. All the facts, none of the hype. 

Featured inside: 

Despite the laundry list of challenges in California’s regulated marijuana market, the state still is considered a pioneer that often sets the bar for cannabis policy nationally and globally.

If a concept is viable in California, many industry experts believe it can be exported to other markets.

“The approval of consumption cafés is a further reflection of cannabis becoming more mainstream, similar to the advent of cigar bars that serve other items in addition to having a smoking lounge,” Joshua Horn, co-chair of the Cannabis Law Practice at the Philadelphia-based Fox Rothschild law firm, told MJBizDaily via email.

“Assuming California succeeds, we should expect more states to have this kind of offering.”

If you’d like to attend the MJBizCon panel discussion, “How to Perfect the Consumption Lounge Experience and Promote Sales,” tickets are available here.

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.