That finish is a penetrant, not a surface coating. So the surface prep is pretty much whatever you want. For siding, it might be a pretty raw finish. Or, at most, a scuff-sanding of 50-60 grit. That is, there is no real requirement that new wood surfaces be prepared in specific manner for these sorts of finishes on cedar. For cedar, I've found that the real reason to prepare surafces for finish is to make it easier to apply the finish!
But for wood furniture there is an implicit contract that it doesn't fill the user with slivers, and is somewhat comfortable for their dainty bits.
To that end, you'll want to sand to something reasonable like 200-300 grit, and break the edges a bit. Clean the dust off and that's about it.
As for how fine to sand: that is a matter of taste and effort. For furniture intended to be left outside to go grey, going much further than 240 grit is probably overkill. I'd personally find 150 a little too rough for my leaning-back-in-the-shade-with-a-beer comfort, but I suppose after 1 or 2 Canadian summers the surface will be rougher than that anyway. I suppose you could use 150 most places and then finish a little finer on the seat and back. (Though, again, that sounds like extra effort for dubious results.)