The answer on the question ‘How Much Does it Cost to Open a Cannabis Consumption Lounge?’ depends on many factors, including the business model of consumption lounge permitted, location, premises size, your goals and objectives. The type of business model a lounge can use is based on regulations in the location: a lounge attached to a cannabis sales facility; a standalone facility; the ability to sell single use cannabis in the facility; a BYOC (bring your own cannabis) consumption lounge; mobile hospitality unit; the ability to sell non-cannabis-infused food and nonalcoholic beverages and sell tickets for on-site entertainment events.
When planning a cannabis consumption lounge, recommendations from experts in the hospitality industry can be applied:
- Back-of-the-house usually takes up 30 – 40% of the total building area.
- 60 – 70% is designated as front-of-the-house, which is the area intended for customers.
So, in round numbers, a consumption lounge with an area of 3,000 sq. ft will be divided into 900 sq. ft for back-of-the-house and 2,100 sq. ft for front-of-the-house of which 1/3 will be a dining seating area and 2/3 a bar area.
The cost of opening a cannabis consumption lounge can range from $250,000 to $1 million. This includes basic costs for licensing, personnel, rent and up-front renovation, security and other professional services, and initial inventory. Initial investments should be enough to cover all start-up and operational costs to maintain positive cash flow. In the following example, operating costs were calculated only up to the break-even point.
$600,000 scenario for 3,000 sq. ft facilities
- $50,000 licensing & legal fees & insurances
- $100,000 rent & deposit
- $150,000 space improvements ($50/sq. ft)
- $65,000 security & surveillance system
- $50,000 furniture and business equipment
- $25,000 marketing/advertising (3-5% of sales revenue)
- $7,000 computer software
- plus personnel
- plus deals with distributors / producers
Average sales per square foot for a cannabis retail with on-site consumption lounge is about $1,000-$1,750. More established operations boast 20-40% profit margins, while newer businesses may only see 10-15% due to their lack of strategic partnerships and vendor relations.
Revenue = $4,250,000 (100%)
-Direct Costs = $2,030,403 (48%)
Gross Profit = $2,219,597 (52%)
– Operating Expenses = $831,308 (19%)
Operating Income = $1,388,289 (33%)
Net Income = $905,414 (21%)
Net income after depreciation, interest, and taxes depend largely on local conditions, especially the availability of the IRC 280E exemption at the state level.
‘70% ready to go’ business plan templates
Our cannabis lounge financial models and business plan templates include a variety of business models and can be easily modified to adapt to any business goals, will help you estimate how much does it cost to start your own cannabis lounge, standalone, mobile or on-site, to build all revenue and cost line-items monthly over a flexible seven year period, and then sums the monthly results into quarters and years for an easy view into the various time periods.
Should you have any questions, please do not hesitate to contact us.
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