Harborside got around a regulatory ban to open SoCal’s first drive-thru cannabis shop in Desert Hot Springs

Melissa Daniels | Palm Springs Desert Sun

Show Caption Hide Caption Video: Here's how to use SoCal's first drive-thru cannabis dispensary Harborside cannabis dispensary is located in Desert Hot Springs, Calif. and features a drive-thru.

A new era in retail has dawned for Southern Californian cannabis consumers who want to shop for joints and edibles like they would a burger and fries.

Located two turns off Interstate 10, Harborside Desert Hot Springs on Paul Road is the second cannabis dispensary drive-thru in the state and the first in Southern California.

Cannabis drive-thrus are technically forbidden under state law. But there’s a narrow exception for applications submitted prior to June 2018. That means dispensaries that didn’t apply for a drive-thru before then can’t create one.

The Harborside location is a unique offering among the Coachella Valley’s 40-some licensed dispensaries, one that is expected to draw heavy traffic from tourists coming to the Coachella Valley.

It’s also a sign of the region’s growing prominence in the industry — Harborside was among the first dispensaries in the nation to legally sell medical cannabis, and was featured in a short-lived reality TV series called “Weed Wars.”

Harborside co-founder Steve DeAngelo told The Desert Sun that the Coachella Valley is becoming one of the “global epicenters” of the cannabis industry, thanks to cities like Desert Hot Springs that were able to open up to recreational cannabis in 2018 after the passage and implementation of Proposition 64.

“Harborside has always been about pushing the boundaries of cannabis freedom as far as we can,” DeAngelo said, “and this is another step in that direction.”

The location began operations with a soft opening in November, and already customers were spotted rolling through the drive-thru after Thanksgiving.

A grand opening celebration and ribbon cutting is planned for 10 a.m. on Saturday, Dec. 7, with appearances by DeAngelo along with comedian Jim Belushi, who owns a cannabis farm.

The consumer experience

Harborside Desert Hot Springs General Manager Tom Grigor said the store aims to provide a convenient experience that leaves customers feeling like they’re getting their money’s worth.

“We shouldn't be making people jump through hoops to buy legal cannabis,” Grigor said. “You should be able to buy it the same way you buy anything else: fruits, vegetables, soda pops, whatever.”

The operation mimics a fast food drive-thru with the addition of a transaction drawer, similar to those found at a bank or pharmacy.

Shoppers will pull up to one of two windows to browse through a limited menu that includes Harborside’s most popular items, like $8 Key pre-rolled joints and a $20 Loudpack disposable vape pen. Items are listed on a large television screen in the window as well as on a laminated sheet that shoppers can retrieve from the drawer and read in their vehicle.

A budtender at the window will scan the driver’s ID for age verification. Not all passengers will have to give their IDs; only the person who is making the purchase, Grigor said.

The budtender will answer any questions and take their order, then complete the transaction with items placed in paper bags along with a receipt and any change. Payments can be made with cash or debit card.

Shoppers can also place an order online and give their name at the window to pay and pick up their products.

Conrad Gregory, government relations and business development manager at Harborside, said the biggest concern surrounding the drive-thru during the approval process was that people would buy cannabis and consume it while driving.

The store forbids on-site consumption, which is not allowed under Desert Hot Springs’ cannabis ordinance. It’s also against the law to consume cannabis while driving. All cannabis products are required to come in childproof packaging, which sometimes includes shrink wrap or plastic containers that must be squeezed or pulled apart to open.

From that perspective, Gregory said the drive-thru isn’t any different than customers who leave with cannabis products in their car from a shop. Still, he acknowledged that operations will go through some trial and error, especially as the busy tourist season in the desert kicks up and visitors who are not experienced with buying cannabis come through.

“For a lot of folks, this will be new to them,” Gregory said. “How do you help them make a decision that doesn’t take away the No. 1 factor for a drive-thru, which is speed and convenience? You can’t have a 30-minute transaction.”

Inside the store, shoppers can browse empty packaging to take a look at available products. Then they’ll head to the counter to pick up the products and complete the transaction.

The store sells a range of brands, including Harborside’s own brands. They carry Canndescent, which is grown and packaged at a nearby Desert Hot Spring facilities, plus other popular brands like Kiva, Terra, Select, Care by Design and several brands from Monterey County's Loudpack Farms like Kingpen vapes and Smokiez edibles.

The store is also the site of the Pure Healing Cannabis Clinic, which will offer herbalist and recommendation services.

How they did it

To get around the state ban, Harborside and its partners navigated through a loophole.

Chad Conner, an herbalist who spends his time between the desert and San Diego, purchased four adjacent lots of land with his father with the hopes of creating a dispensary that focuses on using cannabis as a healing plant along with other herbs. They first applied for the permit back in November 2014, according to the city of Desert Hot Springs.

They were charged with laying infrastructure, as the stretch of land off of Paul Road lacked utility service, Conner said. Getting financing was “a nightmare,” he said, as cannabis companies don’t have access to traditional banking since the drug is illegal under federal law.

Conner soon realized the task of day-to-day dispensary operation would be more than his team wanted to take on, so they began meeting with existing companies about the possibility of a split healing clinic and dispensary. Harborside emerged as the strongest contender.

Around that time, the idea of a drive-thru began percolating, as Conner learned of the first one in Shasta Lake that began operating under medical laws in 2016.

The Harborside location — which is behind a gas station right off Interstate 10 — seemed ideal. And it was a way for the legacy company to differentiate itself from the rest of the market. But the state of California was in the midst of updating its emergency regulations, and the May 2018 version banned drive-thru sales.

But by early 2018, Conner had submitted an amended conditional-use permit with the city of Desert Hot Springs that outlined their plans for a drive-thru. With the grandfathered drive-thru clause included in the regulations update, the plan went before the Desert Hot Springs Planning Commission in August 2018.

At least one other California dispensary is taking advantage of the grandfather clause: A third drive-thru dispensary, Highway 395 Dispensary Drive Thru, is planned in Adelanto, Calif.

Once they obtain local approval, dispensaries have to obtain state approval from the Bureau of Cannabis Control. Gregory said Harborside has a provisional license for the Desert Hot Springs facility, which allows them to operate before getting an annual license.

Jocelyn Kane, vice president of the board of the Coachella Valley Cannabis Alliance Network, said it’s a sign of the regional market’s viability that out-of-town players like Harborside would choose to create a foothold here. And that kind of competition can be good for the industry overall, she said.

“I believe more is better,” she said. “Harborside definitely has a lot of experience in how to do retail, so I think they’re going to model for other folks a really deep understanding of how to do this.”

A changing company

Harborside, founded in 2006, was among the first businesses to receive a medical dispensary license in the United States. The Desert Hot Springs store is the company’s fifth location, joining two in the Bay Area and two in Oregon. Another new store is planned in San Leandro.

In May of this year, the company completed its reverse takeover of Lineage Grow Company Ltd., and then went public on the Canadian Stock Exchange. Shares peaked at $5.10 in Canadian dollars shortly after launch in June. Then shares declined to just under $1 at the end of November, joining multiple cannabis companies that saw stock prices slide in recent months.

Halfway through 2019, the company acknowledged the drop in value and partly attributed it to an industry-wide trend. To help course-correct, they authorized a 5% of their shares in a normal-course issue bid but have not yet done so. Just two months later, CEO Andrew Berman, who had spearheaded going public exited the company, and Chairman of the Board of Directors Peter Bilodeau then took over as interim CEO.

Since then, the third quarter brought $14.1 million in revenue, a 22.4% increase over the same time last year, and Bilodeau told investors that California-centric growth is a crucial part of the company’s growth strategy. Still, they revised their 2019 revenue target to $50 to $52 million in revenue, down from a previous target of $55 to $57 million.

DeAngelo, who is chairman emeritus of the board, said that the drop in stock value among cannabis companies trading in Canada is a “little bump the road.” He expects it to stabilize because of the continued legalization of the plant and the demand that consumers will have for a plant with healing properties.

“I have always believed that one day cannabis would be very widely available for society, because it's such a valuable plant,” he said.

“I have to confess, though, I didn't quite have the drive-thru in mind when we first opened Harborside.”

Melissa Daniels covers business and real estate in the Coachella Valley. She can be reached at (760)-567-8458 or melissa.daniels@desertsun.com. Follow Melissa on Twitter @melissamdaniels