With cannabis legalization blazing its way through almost all of the fifty states, no matter the different approaches each state takes, they all face a common issue: diversity among their license holders. Due to this continuous problem within the cannabis industry as a whole, states have taken different avenues to further solidify license holders who were most affected by the War on Drugs.
To give a grander overview of the obstacles social equity applicants face, this Blog will briefly discuss the main hurdles social equity applicants must overcome, as well as identifying different states’ approaches to highlight those taking the necessary steps to eradicate these concerns.
Location, Location, Location
A huge concern of any entrepreneur wishing to enter the cannabis industry is finding real estate, especially when a state’s cannabis regulations require identification of the property prior to applying for a license. Not only do these facilities have to be in compliance with the rules and regulations set forth by the state, but also with local zoning ordinances—which in most states, can cause more difficulty for applicants as many localities choose to opt-out of even allowing cannabis businesses within their boundaries.
A common zoning restriction utilized by the majority of legalized states are those limiting an applicant’s chosen property’s relative nearness to churches, schools, and even other dispensaries, regardless of whether they are currently operational. This can cause quite hardships for applicants who live in condense, overly-populated cities like New York or Los Angeles. Further, most states’ local government agencies require zoning approval and proof of local support either through their Planning Department or City Council. Anyone who has had to seek government zoning approval for any business matter understands the delays this presumptively will cause to getting your business operational. Not only do local governments cause delays through tedious matters, but also seeking the landlord’s approval, if leasing, and coming to an agreement for leasing can cause even further setbacks to those wishing to enter the cannabis industry.
One state trying to overcome social equity applicant’s struggle to obtain real estate is the Big Apple. New York’s most recent application process for a Conditional Adult-Use Retail Dispensary (“CAURD”) license allowed those with New York cannabis convictions to apply for a small fee of two thousand ($2,000) dollars. Not only did the Office of Cannabis Management (“OCM”) provide a significantly reduced fee to apply, it also promised those chosen for licensure an identified property within the state. This never-before-seen regulation assigns a retail dispensary location in one of the fourteen geographic regions of New York. These state-leased locations funded by the New York Social Equity Cannabis Investment Fund will allow provisional licensees to be given a location based on one of the five preferences they listed on their application. Since New York is the first state to implement this type of benefit, other states will be keeping a close eye to see if these retail facilities will be successfully operational in the years to come.
Lack of Resources
Another major concern among social equity applicants is their lack of resources in various components of achieving licensure. From lack of funding to inability to overcome complex legal obstacles, social equity applicants face a multitude of setbacks before even starting the application process. Although several states have created social equity funds and provided resources to make the application process less complicated, operating any business regardless of form requires sufficient funding and understanding of legal challenges specific industries face not only when applying, but also after becoming fully operational.
On average, a cannabis business can cost $2 million dollars in start-up costs; however, this price can vary significantly depending on the state an applicant chooses to enter. To demonstrate, Oregon has the lowest application fee for a cannabis business license at two-hundred and fifty ($250) dollars, whereas, Florida, who only permits vertically-integrated licenses, has an application cost of one hundred and forty-six ($146,000) dollars as recently reported for their Pigford/BFL application process. These non-refundable application fees don’t even begin the financial resources an applicant needs to operate a cannabis business as there are capital requirements, local permit and licensing costs, leasing expenses, and more.
Massachusetts is one of the few states whose social equity program offers more than just policy, rather it includes infrastructure for education, financing, and mentorship. As the first state to offer a statewide social equity program, Massachusetts not only prioritize social equity participants for licensure review, but also gives applicants exclusive access to social consumption establishment licenses, delivery licenses, and courier licenses for at least two years.
Understanding the Law & Compliance
In addition to the multitude of hardships social equity applicants face in entering the industry, finding reliable and trustworthy legal guidance is a huge component as to whether they can successfully achieve licensure. With states creating a complicated maze of application requirements through their cannabis commissions, it is no wonder that several states send numerous deficiency letters on a daily basis to those trying to acquire a license. Moreover, social equity applicant programs tend to have different requirements than those entering the general application pool. For example, Nevada’s cannabis consumption lounge application has additional documentation that must be provided in comparison to their general pool. One misstep can cause those qualified to lose their priority status, and possibly the license altogether.
Not only are social equity applicants faced with providing further documentation and certification depending on the state, states require several operational plans to ensure an applicant is capable of operating their cannabis business. From standard operating procedures (“SOPs”) in IT, security, quality assurance, and more to developing comprehensive business and regulatory compliance plans, there are immense hurdles for applicants to overcome without the proper legal guidance.
With years of experience in working in multi-state cannabis business expansion, our Team understands the complex challenges social equity applicants face when entering the cannabis industry, regardless of the state. We have worked alongside local partners and social equity applicants to ensure they are provided licensure to further diversify the cannabis industry as a whole. If you wish to speak further on the available opportunities to enter a state’s social equity applicant program, contact one of our Team members at info@cannacoregrp.com to set-up a call.