California Legislature introduces the Cannabis Cafe Act

A California lawmaker has introduced a bill that would allow the state’s licensed cannabis consumption lounges to sell freshly made food and beverages and host live events. The measure, Assembly Bill 374 (AB 374), was introduced last week by Democratic Assembly Member Matt Haney.

California law does not allow cannabis consumption lounges to sell freshly prepared food to their guests. A rule change passed in November 2022 will allow lounges to offer pre-packaged food and drink and allow customers to bring their own freshly made produce to a limited extent, but businesses themselves will be denied the ability to serve most non-infused products to their customers.

Haney’s bill would allow consumption lounges in California to sell freshly made food and beverages and host live entertainment events. In the Netherlands, more than 700 cannabis cafes, often referred to as coffee shops, attract 1.5 million visitors a year, according to Haney’s office. Allowing the state’s consumption lounges to operate under a similar business model would open up new economic opportunities for the companies and could attract tourists and locals to visit struggling downtown business districts.

“Many people want to enjoy legal cannabis in the company of others. And a lot of people want to do that while sipping coffee, eating a scone, or listening to music,” Haney said in a statement. “From an economic, health or safety standpoint, there is absolutely no good reason why the state should make this illegal. If an authorized cannabis retail store also wants to sell a cup of coffee and a sandwich, we should allow cities to make that happen and let those small businesses hold back no more.”

The bill would not allow cannabis consumption lounges to sell alcoholic beverages. Additionally, Haney noted that the proposal is limited to licensed consumption lounges and does not allow other types of businesses to enter the legal cannabis market.

“To be clear, we’re not saying that coffee shops should be allowed to sell cannabis,” Haney said. “We say cannabis stores should be allowed to sell coffee. It shouldn’t be illegal for an existing cannabis company to move away from just selling marijuana and instead have the opportunity to grow, prosper and create jobs by offering coffee or live jazz.”

Bill offers new possibilities for consumption lounges

Supporters of the legislation say Haney’s bill would give cannabis consumption lounges the ability to grow and serve their customers. Although he has not commented on the legislation, Nikesh Patel, director of the San Francisco Cannabis Bureau, said new revenue streams could help companies survive in a highly competitive and highly regulated industry.

“We are hearing from our operators that it is a very challenging time to be in the cannabis space,” Patel said. “And some of the reasons are less foot traffic on the streets and higher tax burdens for cannabis companies. There is still competition with the illegal market and the cost of flowers has fallen overall, which has impacted the entire supply chain.”

Haney’s bill does not automatically allow cannabis consumption lounges to serve food and drink or host live events. Instead, local governments would also have to approve the change for the companies in their jurisdictions. According to Haney’s office, city leaders in West Hollywood, Palm Springs and Cathedral City have already issued such ordinances. In San Francisco, Supervisor Rafael Mandelman plans to introduce legislation Tuesday that would allow the city’s consumption lounges to benefit from Haney’s proposal.

“I think these (current) restrictions don’t make sense and aren’t helpful for the lounges,” Mandelman said. “And I think that in terms of creating more comfortable spaces and building our local cannabis industry, tourism and economic development for all of these reasons, it makes sense to take advantage of Representative Haney’s proposals.”

Before it can become law, AB 374 must first be passed by the California Convention and State Senate before going to Democratic Gov. Gavin Newsom’s office for consideration. Though he’s not sure the governor will sign the law into law if he gets the chance, Haney hopes Newsom will give California’s consumption lounges a new way to thrive in a challenging business environment.

“California’s small cannabis companies are struggling,” Haney said. “Issues like oversaturation, high taxes, and the thriving black market are hurting cannabis companies that play by the rules and pay taxes.”

“I hope that the governor, who has been a small business owner himself in the past and has worked in the hospitality industry, can now see this as an opportunity,” he added.