LAS VEGAS (KLAS) — A non-refundable $10,000 application fee to run an independent pot lounge is just like everything else in Las Vegas — a gamble.
With the window about to open for applications in Nevada — Oct. 14-27 — 20 players will get in on the ground floor of a business that promises to see high traffic from tourists and many locals. Applications for independent pot lounges will go through a lottery to be considered, and only 20 will be approved. And half of those will go to applicants who meet “social equity” goals that were established after the state was criticized for the low numbers of minority-owned cannabis businesses that were licensed. Qualifying social equity applicants get a 75% discount on the fee for applying for an independent lounge, reducing it to $2,500.
It’s a big-money gamble for existing dispensaries that want to have a pot lounge on-site: Will it be worth the cost to apply?
“The most difficult part for people is the stress of feeling like you’re gambling $10,000 on an application fee,” according to Juliana Whitney, the Las Vegas-based co-founder of Leafsheets. “Or for dispensaries, their application fee is $100,000.”
Big money
On Sept. 1, the state estimated there would be as many as 40 to 45 retailers forking over $100,000 each for on-site pot lounges. A spokesperson said this week that the estimate hasn’t changed.
While the retail pot lounges won’t face the angst of a lottery just to get in the game, there are questions about return on investment. Is that exorbitant? One source in the industry said the cost of doing business is “astronomical” — high taxes and a slew of obstacles that make every step more difficult.
Whitney believes the rest of the country will be watching as Las Vegas pot lounges become a reality. Leafsheets is a do-it-yourself web solution to navigating the application process, providing prospective businesses with plans and guidance. Whitney, 33, has been working in the industry since 2015, with clients that have included Deep Roots Harvest, Euphoria Wellness, Nature’s Chemistry, Planet 13 and Rove.
It’s high stakes — and high reward — as the next step in legalized marijuana gets ready to roll out in a state where consuming cannabis products is actually illegal anywhere other than at home. Pot lounges will provide legal relief to this problem, and they are expected to start opening as early as spring of 2023 — maybe earlier for retail lounges.
What will a pot lounge look like?
David Farris, vice president of sales and marketing for Planet 13, sees the application process from a different perspective.
Planet 13 is a leader in the Las Vegas market, and many other dispensaries tend to lean on their leadership. “We are asked a lot of questions and asked about updates … but we are just like all the other retailers going through this process for the first time,” he said.
The dispensary, one of the most visible in the Las Vegas valley with a location just off Interstate 15 at Desert Inn, is already a tourist attraction. Farris says traffic through the store brings a big advantage as pot lounges near reality.
Planet 13 is still working on concepts and considering what the lounges will ultimately look like. Coffee shops, hookah bars and other ideas that are “more wild” are out there, Farris said. “I do think that a lot of people in the industry are incredibly creative,” Farris said, adding that lounges aimed at the tourist market could be completely over the top.
For Planet 13, nothing is finalized as the application window nears. “It takes a lot of work,” Farris said.
Whatever the existing template might be, Las Vegas is likely to break it. With 41 million tourists providing a big pool for demand, the Vegas solution might be unlike any other. And then there’s the locals question. Will locals even go to pot lounges?
Whitney said that’s one of the big questions. That uncertainty — and the state’s ban on serving alcohol at a pot lounge — has fueled a lot of speculation about what pot lounges will be like in Las Vegas.
“I think the industry looks better here than it does in other places. The stores are nicer, that kind of thing,” Whitney said.
Business decisions
The business end of marijuana is a learning experience for those who might see it as an opportunity to turn a quick buck. It’s taken a long time to get to the point of moving forward with pot lounges as Nevada put the regulatory structure into place. Clark County and the City of Las Vegas have adopted the state’s procedures — Henderson and North Las Vegas are not planning to have pot lounges immediately. The local governments won’t work with anyone until the state approves an application. At that point, the county and the city will regulate the locations and business licenses of the ones that hold the “golden ticket” — an approved application from the state.
And then, they’ve got to move quick.
“The operators that are approved will have 12 months to get open,” Whitney said. “It will really depend on their ability to meet that timeline, which can be affected by construction and all kinds of things.”
A new problem on the roads?
Another aspect of pot lounges: When customers come out of pot lounges, will impaired drivers be a bigger problem?
The nature of cannabis impairment is different from alcohol, because the effects aren’t always immediate. When we enter the world of “budtenders” serving customers, will they know when to cut them off?
Farris said Planet 13 has dedicated resources to training staff to recognize signs of impairment. “We are unique in that we have a full training team.” Another big factor for lounges that will cater to tourists is that they tend to rely on ride-shares or cabs to get to businesses. Or they walk.
Farris said Planet 13 also provides a shuttle service.
But will all pot lounges be proactive in stopping customers from getting behind the wheel?
Whitney noted that training is part of a larger concern — the turnover in staff in the marijuana industry. She said employees require a high level of training, but they don’t stick around.
Social equity
The steep discount to give an advantage to “social equity” applicants is meant to level the playing field for minorities to get into the business. But realities of the marijuana industry are heavily stacked against minorities.
Judah Zakalik is Nevada’s co-director of M4MM — Minorities for Medical Marijuana. He’s also a 50-50 partner in Zion Gardens, a cannabis cultivation business in North Las Vegas, along with several other ventures.
MJBizDaily.com quoted Zakalik’s partner, Aaron McCrary, in a 2020 article about minority involvement in Nevada’s cannabis community. McCrary has been lauded as the first Black cannabis “master grower” in Nevada, according to the article.
“The ability to access large sums of legitimate capital is the No. 1 impediment to success of all small businesses,” McCrary said.
It takes money to make money, and Zakalik said while social equity is a good starting point, more needs to be done if minorities will ever be more than employees or vendors serving the big companies that are already established. He said meaningful participation and ownership will only come when minorities control companies that cultivate and sell at the wholesale level — and then a pot lounge won’t be fighting an uphill battle for profit.
A license for an independent lounge without the “vertical integration” of cultivation and a dispensary means an owner will have to pay the markup from wholesalers — a big obstacle to profitability.
Still, Zakalik applauds Nevada for taking a step.
Application nuts and bolts
The Cannabis Compliance Board has all the information posted online, and businesses have been preparing as the application period nears.
For some businesses, a consultant’s guidance will be key to hitting that timeline. Leafsheets emerged as an alternative to hiring a consultant, and they are working with people in a variety of situations.
“We have cultivators who don’t have dispensaries that have reached out and are applying for independent lounges. We have dispensaries who are applying for the dispensary side of the lounges. And we have brand-newcomers to the whole industry who are applying and so they’ll only own a lounge if they get chosen. There’s all kinds of people that are trying to get in,” Whitney said.
