Support for the legalization of cannabis is at an all-time high in the United States. A total of eight states have now legalized recreational cannabis consumption and 29 states, the District of Columbia, Guam and Puerto Rico now allow for comprehensive public medical cannabis programs. As each state passes their laws and regulatory agencies begin drafting rules for implementing the programs, men and women from a variety of business backgrounds consider trying their hand in this novel industry. The fact is, that while many individuals vying to enter the industry have extensive business experience, it may not be as helpful as they think in their pursuit of owning and operating a cannabis business.
As in any other highly regulated industry, operating a cannabis business requires the acquisition of a business license. The nature of this new industry has resulted in states being conservative in the number of licensed cannabis businesses permitted to operate and highly cautious in selecting who will receive one of those licenses. You can expect the application process for one of these coveted licenses to be extremely competitive and to require an excruciating amount of information and time. While every state’s application process is different, there are several steps an applicant can take to ease the pain of the process and increase their chances of success.
Know the law and the regulations
The department or agency responsible for implementing the program will draft and publish rules for operational requirements, forms and methods allowed, and often the information that will be required for the application, even before it is released. Knowing the relevant laws and regulations substantially increases an applicant’s odds of obtaining a license. If information in an application doesn’t at least comply with the law or regulations, it will likely be promptly tossed in the reject pile. Agencies frequently release FAQs after publishing the regulations and/or application that can be invaluable in successfully putting together the correct information.
An applicant that hasn’t started preparing long before the application is released places themselves at a crippling disadvantage. Many teams that will be competing for a license have been preparing for years and applicants often only have 30-90 days to submit the application once it is released. Financial and criminal background checks, drafting standard operating procedures, creating a business plan and putting together a team, etc., can take months to complete. Not to mention the time it takes to perform redactions and put together the application last-minute.
Build a winning team
Hundreds of applications for as few as five licenses could be submitted, making this process exceptionally competitive. Often enough, individuals who initially decide to apply don’t know how to cultivate, extract or dispense cannabis. Regardless of how much general business experience a team may have, having individuals with experience in operating a cannabis business in some capacity can be considered a prerequisite to an applicant being selected for a license. Adding notable medical professionals and consultants with experience in pharmaceutical operations, cultivation, extractions, etc. can push a team to the top of the list. States may also allocate extra points to teams made up of residents of the state or diverse individuals.
Engage with the Community
The community in which an applicant plans to operate can make or break an application. Applications will frequently require an applicant to demonstrate that they have local approval to operate a cannabis business in the municipality and on the prospective property. This may require zoning meetings, law enforcement introductions and engaging in forums with the public. Local officials may even have to sign off on the application. Even if not required, making connections within and garnering the support of the community where you intend to operate can result in persuasive information to include in your application. And keep in mind that if you do receive a license, you’ll be working with these community members for the foreseeable future.
At this point in the regulated cannabis industry’s evolution, states have a responsibility to select only the most responsible and competent operators and their competitive application processes are intended to ensure that happens. The steps above can help an applicant demonstrate they can compliantly and successfully operate in specific areas.