February 4, 2020
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Colorado recently enacted a law that grants the state’s Marijuana Enforcement Division (“MED”) the authority to oversee a new licensing scheme to permit the consumption of marijuana within certain establishments open to the public.
Licensed marijuana retailers and hospitality establishments, such as hotels or restaurants, in Colorado may now apply for either of two new licenses. Marijuana retailers may apply for a Retail Marijuana Hospitality and Sales Business License, while hospitality businesses may apply for a Marijuana Hospitality Business License.
Though different, these licenses are often lumped together because at their core, they essentially permit the same type of activity. However, “social-use,” or “on-site” licenses will not signal the beginning of marijuana lounges, and not every hotel lobby or restaurant will be shrouded in a purple haze just yet.
As this new social-use licensing scheme fits within the state’s existing regulations, businesses must largely comply with what is already in place before running off to apply for a license. This means local approval is required before a business can apply for a license.
Residents may not see or experience business conducted locally under these new licenses unless their government approves implementation. In addition, the law prohibits hospitality entities from having both a social-use license and a liquor license for the same premises.
For currently regulated marijuana retailers, the immediate expectation is for them to begin providing “tasting rooms.” In a concept similar to a wine tasting experience, customers will be able to try a marijuana product at the point of sale, as opposed to making a purchase and then going home to privately consume.
The ability to try a product on-site has the potential to boost sales of products that a customer may have otherwise overlooked and provides a new customer experience in a state that is bracing for a market plateau.
But location matters a lot with this new law, as retailers must be in an on-site consumption-friendly city and have the space to create a designated consumption area.
When you first hear that on-site consumption licenses are available to all hospitality establishments, the possibilities seem endless. From hotels that sell a variety of marijuana products and allow marijuana consumption in every room to bars that offer a choice between alcohol and marijuana, you might think that most within the hospitality industry will be clamoring for this new license.
However, people shouldn’t get carried away thinking that this will be the next big thing in marijuana. In order to qualify for a Marijuana Hospitality Business license, currently operating businesses cannot also hold a liquor license. In addition, a hospitality establishment cannot sell marijuana on-site, thus having to run on a BYOC (bring-your-own-cannabis) model, which makes the profitability of a pot lounge-only setting fairly low.
For many restaurants and hotels that already operate with a liquor license, adoption of this type of license over a liquor license will come at a cost – especially since the business will lack the ability to make the sale of the very marijuana being consumed on their premises in the first place.
But while large, already established businesses may take a hard pass on this type of license, there is still some great appeal for small, up-and-coming, or even unhatched businesses. For example, cafes and restaurants with no intention of ever selling alcohol are a bit more free to explore the potentials of offering on-site marijuana consumption in addition to their usual fare.
In fact, some Denver-area businesses were operating under a local law that allows non-smoking consumption of marijuana. With the change in state law, these types of business will have a bit more flexibility as well, since smoking marijuana within an appropriately designated area will now be exempt from the Colorado Clean Indoor Air Act.
It certainly is easy for people to get carried away with ideas upon hearing the term “social-use license,” but as we can see, there are a few barriers to entry in this new facet of the marijuana industry.
That being said, consumers will be looking forward to a new experience at their retailer of choice, and the emergence of a twist on the typical hospitality establishment is an exciting evolution for Colorado’s marijuana market.
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