10 Tips for a Winning Cannabis Dispensary License

Features - Licenses

Five licensing consultants, attorneys and operators who have secured licenses in competitive cannabis markets share tips on how to create a winning dispensary license application.

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March 26, 2019

Winning a coveted dispensary license is your golden ticket into the competitive cannabis market. The license application process is more demanding than ever, and it can be tricky to navigate all the nuances—especially if you’ve never done it before. But there are a few secrets to creating an application that stands out.

Cannabis Dispensary spoke with five licensing consultants, attorneys and operators who have secured licenses in competitive cannabis markets:

Jonathan Havens, co-chair of the Cannabis Law Practice at Saul Ewing Arnstein & Lehr LLP, resident in the firm’s Baltimore and Washington, D.C., offices.

Erin Alexander, associate general counsel for Cresco Labs, a Chicago-based cannabis grower, processor and retailer operating in seven states.

Sara Gullickson, CEO of Item 9 Labs Corp., a publicly traded cannabis company specializing in the development of cannabis products and proprietary delivery platforms. Gullickson also owns the Strive Life of North Dakota dispensary, and Strive Wellness of Nevada LLC, a medical cannabis cultivation and processing facility with distribution rights. Gullickson previously served as the CEO and founder of Dispensary Permits, a nationally recognized cannabis consulting firm that won multiple cannabis licenses across more than a dozen competitive state markets.

John Darwin, founder and president of ONE Cannabis Group, a vertically integrated cannabis operator and franchisor based in Denver.

Armen Yemenidjian, co-founder and CEO of Integral Associates LLC, a retail and wholesale cannabis operator that has been awarded licenses in Nevada and California. Integral Associates operates Essence Cannabis Dispensary on the Las Vegas strip, as well as Desert Grown Farms and Cannabiotix NV, its cultivation and processing facilities.

Here are their tips on how to create a winning dispensary license application.

1. Understand your state’s application quirks.

Sara Gullickson: “This industry, specifically the licensing process, is still very new. Each state has its idiosyncrasies, and the application process in Pennsylvania was much different than in Hawaii or Arizona. In some states, specifically California and Michigan, you have to get local jurisdiction support in addition to the state’s blessing. In those situations, the municipality’s application process is more rigorous than the state’s.”

2. Secure real estate with the appropriate zoning.

Erin Alexander: “The first step is looking at the regulations to figure out the setback requirements—where can you be, where can’t you be: 1,000 feet from a church, 500 feet from a school? Finding real estate is the most difficult and challenging part of the process; finding places that meet the setback requirements, but also meet your requirements to be able to operate the business. Have Plan A, Plan B and Plan C, because everything ends up being more complicated than you anticipated.”

Jonathan Havens: “Make sure you can put your dispensary where you want to put it. In some states, the siting process is part of the application process, but sometimes you’ll get a pre-award from the state and then you need to go to the town, and that’s where people get tripped up. Having zoning approval from the local [municipality] is critical.”

3. Establish security protocols.

Havens: “Remember that the product you’re dealing with is federally illegal, so security is very important. Even though these states say you can sell it in a dispensary, they want to make sure you have a very tight control over what you’re selling. If you can’t control your product and it’s getting into people’s hands who are underage or don’t have a medical card, that’s the quickest way to lose your license. States are very focused on that, so you can’t overlook having a strong plan in your application to address security.”

4. Build a strong team with experience.

John Darwin: “Assemble a great team. Licenses are getting more and more competitive, so someone with a strong pharmaceutical background [for medical dispensaries] or a good government relations background is a great addition to your team. Make sure your team has operating experience. A lot of these licenses are merit-based, so being able to reference a track record of compliance and operational excellence in another state is huge. Also do background checks on all of your team members, because there are key items that can come up and derail the whole process.”

Havens: “Having an accountant who has worked with clients in the cannabis space is critical. You don’t want to be their guinea pig while they learn the accounting and tax rules. Also have strong legal support, whether that’s an in-house attorney and/or an outside law firm with experience, because questions are going to come up that need quick answers, and you want to have them in your contact list when those questions come up.”

5. Get involved with the local community.

Alexander: “I think the best piece of advice is: Be connected to the community where you want to locate. That can be the secret sauce to winning an application. A lot of people know how to run a dispensary, but you have to spend the time attending city council meetings and engaging with local elected officials so they trust you and so they understand what you can bring to the community. Part of that is also engaging with civic and charitable organizations, finding out what the local priorities are, so you can be a good neighbor and a good steward of the community values.”

Havens: “A lot of people overlook an aspect of the application that I'm always quick to tell clients to focus on, which is community engagement and education. You can understand the opposition if you take the time to get out and have educational events that show that you’re not just trying to make money, but you really do care about the community. If you have events that are open to the community, not just people who are purchasing your product, you might win people over and you might ward off potential opposition down the road.”

Gullickson: “Research the specific town or jurisdiction and figure out: ‘Is it red or blue? What are the pain points in the community; are they environmental or are they opiate-related?’ Then pull in some community leaders who focus on those pain points, to make sure you’re hyper-focused on the community. We put together sophisticated community benefits programs that address how we’re going to give back. We build parks, we build sidewalks, we’ve funded little league teams and hosted clothing drives—whatever the area needs. When you contribute to your communities, they’re so much more welcoming.”

6. Budget more capital than you think you’ll need.

Alexander: “It can get expensive. You’re obviously going to need application fees and license fees, which can range from a $500 application fee to a $30,000 license fee that you might get refunded if you don’t win. But then you’ve got property hold fees. You’re going to be paying attorneys to review documents. You’re going to be paying planners and architects to design your site. You might be paying both a planner and a zoning attorney to help you through the zoning process. From soup to nuts, I think a fair budget for a good-quality application is probably half a million dollars—which is crazy, but that’s what it takes. There’s a lot of moving pieces to making this successful.”

Darwin: “We advise clients to have the available liquid funds to cover capital expenses over the course of a year. You want to be making money by the end of that year, but if there’s a rainy day, you want to be well-capitalized to survive.”

Armen Yemenidjian: “Understand it is a highly competitive market. Because there are so many competing applicants, it’s imperative to have a clear, concise plan with a budget and a path to victory. Applicants need to demonstrate they will be successful if awarded the license. You need to not only have the budget to pay for the application, but also show regulators you have the capital to [operate the business successfully].”

7. Get a head start before applications are released.

Gullickson: “When you’re proactive in putting a business plan together and engaging in the state’s programming before the rules and regulations are even finalized, you’re going to position yourself light-years ahead of somebody that just gets the idea to throw an application in when it’s published. My most recent successes are the clients that we’ve spent eight months or a year with, building their team and making sure they had a solid foundation on which to apply.”

Havens: “The No. 1 thing is to not wait until the last minute. The application timeline is going to be shorter than you want, so look for business partners prior to the application coming out. Attend meetings of medical cannabis commissions to understand what’s coming down the pike and when that next round of licenses is going to be dropped. Get your plans in order. The more elements you have to populate your application before they’re even dropped publicly is going to give you a leg up.”

8. Impose internal deadlines.

Havens: “Submission day always goes quicker than you think. It would be nice if everyone on the team could operate with the assumption that this is really due the day before it’s due, because there are always unforeseen circumstances.

“A lot of states require hand-delivery, so you can’t be finalizing things the day of. Have a single point person who’s the final arbiter of [deadlines, who determines,] ‘What time do we need to stop editing and head over to the state agency to make sure it gets in on time?’

“Some states have electronic submissions now, and to the extent they allow you to do a test submission, absolutely do that. If it’s due at 5:00, I wouldn’t start trying at 4:30 to upload a 700-page document. Start late morning at the latest, because there are always issues, and sometimes you can’t get the regulators on the phone to say, ‘What do I do now?’”

“From soup to nuts, I think a fair budget for a good-quality application is probably half a million dollars—which is crazy, but that’s what it takes.” –Erin Alexander, associate general counsel, Cresco Labs

9. Turn a boring application into a creative story.

Darwin: “Some companies have full teams of technical writers that have graded these types of applications before. That’s who you’re competing against, so it’s important to have a strong technical writing team.”

Alexander: “Write it in such a way that it’s easy to follow. These end up being massive legal writing projects, so taking the time to put together a very well-written piece will help you stand out. [That requires] ... good writers and good subject-matter experts. We have a couple attorneys that work on applications, and we have technical writers that have some operational expertise and can write about our operational practice [so it’s] readable to somebody who may or may not be familiar with how a dispensary operates.”

Gullickson: “You can hire a technical writer to put your application together, but if you don’t have style and grace and an overarching theme throughout your application, it’s not going to stick out. Who wants to read 100 security plans? Nobody. So how can you create a theme or a story and be really creative in your presentation?”

10. Partner with industry consultants who have done this before.

Yemenidjian: “If you’ve never operated a dispensary before, you probably could have gotten away with writing your own application five or six years ago. Now, the process has become so advanced, applicants must have an understanding of technical writing and standard operating procedures to be successful—especially because there are more criteria now, such as community engagement, corporate responsibility and social citizenship, that are being taken into consideration.”

Havens: “If you go at this alone and don’t involve consultants who know the cannabis business, it’s an uphill climb. I’m not saying it’s impossible, but one of the reasons you see a lot of national or multi-state operators is, obviously they want economies of scale and they want to broaden their footprint, but local interests need their help. It’s hard to populate an operational plan, a clinical plan and a security plan if you haven’t done it before.”

Gullickson: “I don’t urge working with an expert because I want clients; I urge working with an expert because ... you’re just not going to win if you don’t know all these idiosyncrasies, no matter how much you research on the internet. The devil’s in the details with the application, so you need that industry expertise; it’s mandatory. States don’t feel comfortable anymore giving licenses to somebody that doesn’t have the experience.”