What You Need To Know Before Applying For Your New Jersey Consumption Lounge License

It’s official: As of January 2025, Class 5 cannabis retailers or medicinal cannabis dispensaries can apply for a “consumption area endorsement” depending on their priority level. In a similar fashion to other license types such as retail, cultivation, and delivery, obtaining a consumption area endorsement will take careful planning and the right guidance.

Rudick Law Group Associate Attorney Jessica F. Gonzalez moderated a webinar that covered legal, operational, business, and events perspectives for aspiring consumption lounge operators in the Garden State. Jessica was joined by RLG founder and managing principal Lauren Rudick, Maha Haq, business coach under the social equity development program for the LA Department of Cannabis Regulations, and Hazel Bagwell, founder of event production consultancy, The Haze Organization. This blog offers a recap of this webinar, which is available for download through this link.

Legal Perspectives for New Jersey Consumption Lounge Operators

Licensure Timeline and Challenges

On January 2, 2025, the application for consumption area endorsements opened for social equity businesses only. On April 2, 2025, consumption area endorsements applications will open to diversely held businesses, which includes disabled veterans, women and minority owners. Any other type of applicant can submit their application starting July 2, 2025. All consumption area endorsements will be add-ons to existing retail licenses meaning an applicant must hold a Class 5 Retail license or medical dispensary license to apply. 

Rudick recommended preparing as soon as possible.

“I think the biggest challenge will be the lift itself, particularly if you're new to the market and you don't already have a retail establishment,” she said. “You're going to have to first go through the process of having a licensed retail facility in order to get this consumption add-on or endorsement.”

Licensure Application Requirements

Cannabis operators must apply for licensure through the New Jersey Cannabis Regulatory Commission (CRC) portal. The consumption area endorsement application requires the following:

• A robust business and operating plan
• Detailed floor plans, including whether consumption will occur indoors or outdoors
• Information on the facility’s structural elements and ventilation systems
• Numerous standard operating procedures (SOPs), including: 
  
  • SOPs for the Transfer of Cannabis
  • SOPS re: good faith efforts to ensure cannabis brought into the lounge space was purchased on-site or is medical cannabis; 
  • SOPs for safe consumption; 
  • SOPs for age verification;
  • SOPs for the destruction of cannabis items  that are not finished in the lounge space; and 
  • SOPs for facility access and accommodations for emergency service providers

Municipal Considerations

After the CRC receives consumption lounge license applications, it shares the relevant information with the applicant’s host municipality. The municipality then determines whether the application adheres to its regulations.

“The municipality will make or break your experience and will decide whether it is even permissible for you to operate a cannabis consumption area,” Rudick said. “Municipalities have to opt in, and as of right now, not a lot of them have. … We want to convince these municipalities that opting into consumption activities will be in their best interest.”

Gonzalez added that the more prepared and educated lounge operators become, “the better you're going to create yourself as a subject matter expert, the more that they will trust you, and the higher likelihood that they will allow these type of operations within your municipality.”

Operational and Business Perspectives for New Jersey Consumption Lounge Operators

Five Points of Best Practices for Operating Consumption Lounges

While discussing the compliance-related design, ventilation, and traffic flow choices that lounge operators must make, Haq detailed five best practices.

1. Facility design and layout: Haq emphasized that a high-quality HVAC system is of the utmost importance for odor control and regulatory compliance. Odor control keeps neighbors happy while catering to customers who, Haq said, “may be just enjoying edibles [and] not want to be…in a hazy, smoky environment.” Lounges must also be partitioned off from dispensaries or disguised via frosted glass windows. Staff must be able to move around freely, so tables and seats must not be overcrowded.
2. Staff security: All staff, including security, should be trained in first responder matters if patrons feel unwell or require medical attention. Operators’ risk management practices also fall under staff security.
3. Cash handling protocols: Lounge operators should “make sure [customers] pay before the product gets to them,” advised Haq. SOPs should cover when a customer’s credit or debit card is misplaced, either by a staff member or a customer. “The person who gave you the card [may be] too high to remember that they put it in their pocket,” Haq said. “These things happen way more often than you may think.”
4. Customer experience and retention: Haq said that lounge operators should educate customers throughout their experience. “Tell a story…. So they enjoy the journey, instead of listing the rules… When you list all the rules to a patron, you might [not be able to] bring them back next time,” Haq said.
5. Financial and business strategy: Budget for additional purchases. Lounges may not make up the majority of a cannabis business’s revenue, so other revenue streams, such as device rentals, should be accounted for while budgeting. Haq also recommended developing relationships with regulatory authorities and analysts to inquire about the likely financial ramifications of potential business decisions.

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Haq cautioned that she often sees operators investing in their brand and aesthetics before the more crucial elements, which can be a mistake.

“Leave that for the end, because you're going to build this spot, and hopefully, your brand and the aesthetics will follow afterward,” Haq said.

Three Common Operational Mistakes in the First Year

1. Budget: “I think people really underestimate how much is needed for a lounge,” Haq said. “Dispensary operators…are assuming that they can use a similar budget for a lounge. Not at all. You cannot treat a lounge as a retail space… it is an experiential space.”
2. Compliance-related delays: Even a small compliance error can delay opening for months. Using HVAC as an example, Haq said that its dysfunction “can delay your lounge from opening for months sometimes, even if it's just one thing you have to fix.”
3. Not offering the right products: Cater product offerings to single-use, like a two-pack of edibles or a pre-roll, to promote responsible consumption and accommodate varying tolerance levels. Offering smaller servings also encourages a more social, low-commitment experience for consumers who may be new to cannabis or prefer moderation.

Minimizing Overconsumption

Overconsumption is often more difficult to identify than overconsumption of alcohol. Additionally, many patrons will not be nearly as familiar with how they could accidentally consume too much cannabis as compared with alcohol. However, lounge operators are fully obligated to minimize the likelihood of overconsumption. 

“You have to create some [consumption] scales, and you can create your own scale for what works for your staff,” Haq said, such as a “baby dab, a small dab, a medium dab, and a large dab.” She also emphasized building enough trust with patrons that they will not hesitate to ask for help if they feel unwell or have consumed too much cannabis.

Minimizing overconsumption may also benefit the ongoing work of advocating for lounge-friendly regulations. Haq noted that municipalities may hesitate to license cannabis lounges because “they're very worried about the consumption while driving, the inability to understand when someone has had too much … If we fail in our business practices and then we lose the trust of the municipality…[fewer] municipalities will be ready to adopt consumption endorsements.”

“What I've seen work successfully,” Haq added, is to stop serving patrons “30 minutes before they leave” and cap consumption at the hour mark. Some people may need more time, she noted, “but to keep it cohesive for the actual function of the lounge…cap them after one hour.”

Events Perspectives for New Jersey Consumption Lounge Operators

Drawing Patrons to Your Lounge

Bagwell emphasized that, when hosting events, consumption lounges should prioritize “offering something unique. You've got to stand out to get people in that door. You've got to know your clientele.”

Bagwell suggested that lounge operators market their events through their mailing list, website, and, in particular, an event app. These strategies may also help lounge operators navigate the challenge that cannabis businesses cannot advertise in the same manner as traditional businesses. Bagwell named “creating a community within your lounge” via SMS marketing, customer membership programs, direct connection-making, and ticketing platforms’ built-in features as additional strategies.

Event Strategy

Bagwell said that proper event strategy and planning prioritize the target audience. If you expect your event to draw “the canna-curious,” then “smaller units” are necessary. By comparison, for hash-tasting events, top-quality product is the priority: “It always goes back to building community and building a good reputation.”

In addition to the cannabis itself, Bagwell said that lounge operators planning events must consider entertainment and side offerings that distinguish a consumption space from its competitors. She also suggested “playing off of events that are happening around you as well,” citing the World Cup as an example.

Event and Vendor Contracts

Lounge operators must be familiar with New Jersey’s strong regulatory environment as they plan and host events.

“If you're seeking outside support… we need to make sure that those contracts are in writing and compliant with the numerous limitations and restrictions on contractual relationships in that state,” Rudick said. “You have to be committed to compliance. Your organization… is only going to be as strong as your weakest link, and a lot of those links can be cleaned up via contractual language. We want to clearly define deliverables and expectations in written agreements.”

“It's not, can you afford to enter into one,” Rudick emphasized regarding written agreements. “It's, can you afford not to?”

Apply For a Cannabis Lounge License in New Jersey with Rudick Law Group

As Gonzalez said during the webinar, “The future of safe, social, and sophisticated cannabis consumption is here.” Seeking experienced legal guidance while launching a consumption lounge can maximize your chances of success. Rudick Law Group has a trusted history of guiding cannabis businesses through licensure and more in several states, including New Jersey. Contact RLG for strategic counsel and legal review at every step of the way.