Obtaining a cannabis license can be a tricky process if you don’t have the proper team or experience on your side.
We have had many successful cannabis licenses awarded to our clients, so Dominique Shakramy & Jim Breese review all of the common cannabis licensing questions.
If you want specific help with your cannabis business license, you can contact us to get started.
You can watch the full webinar here:
You can download the slides here.
Full Webinar Transcript:
My name is Jim Breese and I’m here with Dominique Shakramy and so today we’re going to go into an AMA about all the different licensing questions that we get. Over the past maybe six to eight weeks we’ve been doing webinars on all the different cannabis license types, how to prepare for your licensing and all the different things that come along with getting your cannabis business up and ready and going. But now we want to get into answering some of the questions that get asked to us. Common questions, some very nuanced ones, but again, I just want to read a disclaimer before we get started today. The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal tax investment or any business advice in general. And also I want to talk about the generality of the answers here.
So you know, we get questions from all around the country, even out of the country as well. So you know, a lot of the things we’re going to talk about, they depend on many different factors such as varying from jurisdiction to jurisdiction. Even within the state of California. Different cities have different cannabis laws. So you know, if you really want to get down into the nuances of your specific area, you know, we’re just going to give general considerations today. Again, this is not legal or professional business tax advice, any of those kind of advises is just general kind of guidance on thoughts on what you should be considering when you’re going to actually go into this. No specific advice here, but when you engage our services, we can dive deep into your specific scenario and give you the actual guidance you need to succeed. So with that, let’s hop in and answer some of the most asked questions about cannabis licensing in the United States in most specifically in the state of California.
We have a great time. Enjoy your presentation today. Again, if you have any questions, reach out to us on our website www.greengrowthcpas.com, or you can give us a call at 800-674-9050.
So just to go over who GreenGrowthCPAs is, you know, we are a tax preparation firm. We started off as a tax preparation firm and we focus specifically on cannabis business operations. We’ve completed over 500 annual tax returns for cannabis operators spread across all the verticals, dispensary’s, distribution, cultivation, manufacturing, delivery, testing, everything top to bottom. So we have seen all the different, you know, how the businesses work financially. We’ve got over 300 clients in California, Colorado, Michigan, Oregon and we performed over a dozen audit related projects in the last 12 months. We are growing and growing. And one of the most important parts is that we focused on cannabis specifically because we have a thorough and deep understanding of the tax compliance, audit assurance related issues for this industry.
We can give you this very thoughtful advice that you know, if you go to a general CPA, they’re going to tell you very strict to the tax code, this and that, and we stay within those bounds as well, but we know what are the operations benefits to actually using this structure versus this structure and how does that impact your business materially with things like Tax code 280E all these different nuances to the cannabis space that make us and position us to give you the best, most thoughtful advice to have a growing and fast, fast paced business.
The first question is from Jerry says, I want to start a small cannabis cultivation, delivery, distribution, and even retail business. He says he has a cannabis cultivation license now, so what do you need to do to get a business license? He says he lives in northern California and do you have to get a business license for each state?
That’s a great question. So it sounds like he’s already has Jerry. You already have a cannabis cultivation license, which is good, and that’s one thing off the list. So to get a business license, they’re going to need to head to the specific city where your grow cannabis operation is at, and then you can go get you actual specific business license in that city if that’s a specific license that you’re talking about. Now, if you want to get a cannabis license, a business license for each of the different verticals, then there are a few considerations you’ve got to do. First, you really got to secure the funding for these different licenses here. If you want to go fully integrated, it’s not going to be cheap, especially in the state of California. So for all four operations, if you want to go to cultivation, delivery, distribution, retail, you’re looking at multiple millions, two to $4, million dollars of include startup capital, licensing fees, operating costs for the first year.
Because if you’ve never started a business before, you have to have a lot of what they call runway capital to keep you going because you’re going to spend a lot of money that you didn’t plan on spending. And this kind of keeps the business afloat in that first year until you can turn and become profitable, break even, you know, make some money to pay the bills, and then everything else that goes on top of that. So number one, securing the funding is the most important thing. If you don’t have the money, this uphill battle’s going to be an uphill battle with 70 gorillas on your back.
Number two is you got to find the locations for the green zones in the specific cities that you want to be in. So now you have to consider that not all cities have licensing for all the types of business activities that you’d want to do.
So some cities, like in Pasadena, they’re not allowing manufacturing what they’re allowing other types of the verticals that you want to be in. So finding a city that has those verticals that you want to be in, hopefully all four of them are going to be in that specific city. So find the green zones and then start speaking with a realtor in that area to help start searching for properties. We’ll get into a question later in the AMA about how to find a property, but you know, start that process now because either the long pieces that actually gets you started with this application. And then from there, once you find your locations, you’re going to want to start submitting applications for each vertical in the chosen city. A lot of the stuff can be reused for each application, but each type of vertical you’re going to be in has a different, what they call SOP or standard operating procedures, which stands for simply how things get done in your cannabis business and you have to detail how all those different things go.
So that’s why every application is different and every application will have its own applicable fees. Now, some cities such as Long Beach, they allow you to do many different verticals under one address. In Northern California, there may be a few different cities, but we’d have to look. Again, this is where that generality comes in. We have to take the time. This is a lot of hours of research to go and see which cities are friendly to it and now that necessary. What cities are are friendly to it but which had the capacity in licenses because these people open up at these cities, open up windows for licensing so they may have more manufacturing license inventory and no retail license inventory. So that’s where our licensing action plans come in to help you actually search out specific cities. So again, you’re going to need to get a license for each type of vertical. It’s going to cost a fair amount of cash and locations for the actual business activities are what are going to be your main big hurdles to get over.
Hey Nathaniel, I see you have a question. You had a question about whether or not you can sell cannabis if you have a California 99 permit. I want to tie this in with Jerry’s question because it may seem. It seems like Jerry may not have a cultivation license to grow, but you may have a California 99 permit. Basically what this permit is, it’s a physician’s recommendation and that is given to a person who requires based on their medical condition and recommendation by the physician more than the allowed six plants for personal cannabis cultivation. So you cannot sell anything that you harvest from your 99 plants. Let me repeat myself. You’re not allowed to sell it, it’s just for you. So Jerry, if you have the same permit as Nathaniel, you will have to apply for a local cannabis cultivation permit if that answers your question, and Jim was right on the money when he says that you will have to apply for all the other permits unless you want to go in for a micro business permit.
A micro business permit allows you to choose up to four verticals. Obviously testing isn’t included, so it would be cultivation, manufacturing, retail, and distribution that allows you to vertically integrate your entire business and it will be expensive. Now, the costs will vary. They will always be on the higher end, but they can vary based on the city that you choose to locate. So if you choose to set up farther away from a bigger city like Los Angeles and you go out into desert hot springs, it could be a lot cheaper out there as opposed to trying to secure a micro business permit closer to Los Angeles.
We have a question here from Jacinto question was, what are the requirements to get a dispensary license in the city of Adelanto? Unfortunately Adelanto is no longer accepting applications for dispensary’s but they are accepting applications for cultivation, manufacturing, distribution, transportation, testing, nursery, and for all those verticals I want to produce adult use cannabis.
So the next question we have on the list today is from Tara. Her question is regarding manufacturing and distribution. Tara applied for a cannabis manufacturing and distribution permit under a nonprofit which was filed in 2013. So Tara’s question is, what type of business activities can the management company do to help the nonprofit and what activities should it stay away from so that there are no legal or tax issues. Right now, what we can tell you is that the industry is moving away from the cooperative collective model and starting January 9, 2019, your business entity will have to convert into a corporation or an LLC. Regarding what the Holding Company can do for your nonprofit. You know, we’re not legal firm so we can’t give you any legal advice, but based on when the state requirements for structuring cannabis businesses, once you make that conversion, you won’t have to worry about what that holding company can do.
Well, I hope we were able to answer your question, but if I’ve left you unclear or more confused, you can reach out to us anytime and we can to get the conversion started for you since you will have to convert your nonprofit into a corporation or an LLC. And that’s specifically for the state of California.
So we have a really good question here from Elsita. She wants to sell marijuana, bath cannabis, bath products, lotions and body oil, and eventually even maybe gummy bears and cannabis tea. So my guess is you’re asking what type of license you’re going to need to actually do this and for these types of products and activities, you’re going to want to get a manufacturing license that involves infusions or you could also find a white label manufacturer who can infuse your products for you. So that just beats out that whole cannabis application process. So to answer your question, what you want to do is possible, you will need a cannabis manufacturing and infusion licensed to do this and there are two options. You either go and get your license yourself or you find a white label manufacturer to do it for you that is licensed because you cannot, if you’re unlicensed then you can’t do this. And I hope we are able to help you down the road to find the best solution to meet all your needs.
And one of the important parts about, or one of the best parts about going with a white label manufacturer is it allows you to focus on the most important part of the thing that probably the thing you like to do most, which is create more products and market your product. A lot of these things you don’t need your specific license. Companies can do these things for you and these are the things that they specialize in. They specialize in all the different manufacturing, buying the heavy equipment, doing all the capital expenditures, so your little business, not that it’s little, but then if it’s, you know, less than a million dollars, you’re not getting crushed by having these huge capital expenditures for a big press or for this big infusion machine. You can focus on the business activities that you like to do. So white label manufacturing is probably going to be a better option for many of these smaller manufacturers, more product people or other type of people that want to start their business. You don’t have to go out and get your own license.
There’s another pretty interesting question here from Eric. His question is regarding holding companies with multiple subsidiaries, and my interpretation of your question, Eric, is can one company hold multiple licenses for various brands and if that is the right question, if I hit the nail on the head then yes. This is possible. There are two solutions for your question. One is to go in and get a type seven or type six manufacturing license, which is volatiles and nonvolatile license and then register with the CDHP, the California Department of Health to register with the CDHP, the California Department of Health for a shared use facility. After that you would get your subsidiaries, all those other companies to apply for a shared type license. That way you’re holding company is a primary licensee and all the subsidiaries are the shared use licensees and you guys would essentially share that facility. The use anyway.
Part of a shared use facility means having a proposed occupancy schedule, so what that means is only one licensee can be using the facility at any one given time. So you would set up a schedule and everyone would have to follow that. You could always, you will always be able to share the common areas such as the restrooms, the kitchen, the break rooms, but for use of the extraction areas, you will have to follow that released schedule that you’re going to have to submit to the CDHP. Another solution would be for your holding company to go in and get that license, the manufacturing license, and then white label it. Produce white label cannabis extractions that could be infused into your subsidiaries products and then eventually rebranded as such. So those are two possible solutions for your dilemma. There is another thing off the top of my head right now that you could encounter some problems with is the maximum allowable number of licenses from per owner.
So I would have to look into that. But off the top of my head, you know, there is a number that the state has set on how many licenses a person can own or how many facilities they can operate. And if you give us a call, we can set up a time and walk you through the process, whichever process that is that works for you, whether you want to go in as a shared use facility or if you want to go and get your manufacturing license so that you can produce white label cannabis extractions.
Our next question here is from Ramiro, very high level question here. So what is the process after getting a license and how much time do we have to execute? So with cannabis licensing, there’s two things here. So you’re going to get a local permit and then once you start getting that local permit and get your occupancy permit, you can start going in and start to build out your facility. Whatever that is, they can’t turn the key on and start producing products or selling products or distributing products until you get your state license in the moment that you get that state license, whether you get the email or you get it in the mail, you can start selling immediately or start manufacturing immediately. So you know, you don’t want to have too much lag downtime between your local permit and your state authorization because you want to use all that time to build out the facility.
You don’t want to be sitting on your hands and paying all that rent and burning up all that cash. Like I was talking about before that two to $4,000,000. If you want to go for all four licenses, you know, let’s break that down and take a half million, quarter million, $250,000. You know those, that money burns up everyday that you’re not doing something to move yourself closer to being turned key. Don’t just wait on the license to get started and moving forward in your business. You just can’t do any business activities, but you can get the business queued up and teed up to actually kick off in the day you receive your license. And just a side note as well. Licenses and approvals are good for one year and then you have to reapply in, re up your license and this may change jurisdiction to jurisdiction. They’re all gonna have their own different reporting and quarterly processes or half year or annual processes. So again, that’s why you got to reach out to us so we can help you walk through what every city is going to be asking for.
The next question kind of ties into the question that Jim just answered. It’s from Sarah. She’s asking whether or not we need to get a local permit or a state permit first. So the way it’s panned out is that you need a local permit or authorization in order to apply for a state license. So there is no way around that. You have to go into whatever city it is or unincorporated area that you want to go into and get that local cannabis permit before you can apply for a state cannabis license.
Our next question for the day is from Mike. He’s asking who are the critical team members that we need for a successful application? We get asked this a lot. People are always worried about, you know, what is the city going to look at, what is the state going to look at?
The way it’s set up is that if a city authorizes you, you’re pretty much set to good to go for a state license and all they’re really going to be looking at is how complete your application is at that point in time. But you’ve already been vetted by a local authority. So you’re almost for sure going to get that state license if you work closely with them and get them everything that they need, everything they want, everything they’re asking for. To answer this question specifically, you know, here in California they’re placing a lot of weight on experience. So we see a lot of players coming from outside of California that want to get into the market. And the first thing that they’re doing is they’re finding local cannabis operators. So right now I’m going to have to say that the most important person on this application is the person that’s going to be running your business and hopefully that person is a licensed operator already in the state of California, preferably a pre ICO, meaning they’ve been around since the nineties, late nineties, early two thousands and have been operating their businesses compliantly.
The next would be obviously where’s the money coming from? It is going to come from your investors. If you are unable to foot the bill yourself, then you’re gonna want to show that you have financial backers that can cover all your operating expenses, all your build out costs and that contingency fund that you’re going to need in the event that something happens and you need to be able to dip into some sort of well to cover those expenses. And the next is they’re looking for owners that have experience in highly regulated industries, meaning probably from a medical profession or an accounting profession or distribution. Distribution is a highly regulated industry, especially aviation distribution, cargo, all that stuff. Because of importing and exporting laws, they would be good candidates to own a business here in California. Another thing that California cities are looking closely at is community benefits.
Including a community leader or upstanding members of the community in the area that you are going to be applying for a local permit is a really good idea. If you can find someone that’s local that can speak to the community, that has a strong presence and is willing to be part of your project and your business, then that would definitely up the chances of you getting a local permit in that area. And of course there’s also, you know, outsourcing professional service providers such as, you know, an architect, a really established cannabis architect or a security service provider to do your security plans that has consistently developed security plans for other licensed cannabis operators. Or professionals like us here at green growth cpas that offer accounting and financial services to cannabis businesses specifically as well as licensing and compliance. So getting all of these outside players to be part of your team that have the street credibility, that have the industry experience, will also give you that extra push towards the finish line.
Alright, so the next two questions are kind of related. So I want to go into answering them both. Kind of in the same vein here. So, so John asked, are there any good tips to finding a good cannabis retail location? And Shawn asks, how do I convince a landlord to rent to me? Alright, two very loaded questions, but I think these are going to be good here. So number one, first and foremost, how do I find a good retail location? Number one, it has to be zoned for retail. The city has to be open for retail. Some cities are not looking for retail, they don’t want the kind of foot traffic in there. Maybe they’re an industrial city and all they want is just kind of the, you know, the manufacturing and warehousing and distribution side of it. But if you find a city that is open to retail. Number one, find a good real estate agent or someone that you know that is local, that knows kind of how that city operates.
What’s the good central business district of the area. How’s the parking situation? Do they have these local relationships with realtors? If you look at how the realty spaces built, real estate investors come into an area and they start buying up a lot of property. When you start looking at these industrial areas, it’s held by maybe 10, 20, very large companies. So you’ve got to have to have somebody that has a big relationship or a deep relationship with these companies to kind of get your foot in the door because the demand for these properties is high and it’s no secret that the demand is high. So these people are going to be asking for a lot of money. Now, a green zone is something that is like the zone for this. These projects here, these cannabis projects, it’s going to be something that’s away from school zones, from youth centers, no daycare, no churches, no parks way away from the residential areas, so you can look up your zoning map.
You’re looking for like the industrial general zoning, that’s really important, so looking at the zoning, but again, get a local realtor to help you with that. So if you’re looking for retail, you’re going to also want to be somewhere where there’s a lot of foot traffic where there’s good either public transit, there’s buses being dropped off of tourists and there’s a lot of parking in the area because people are in and out and also looking at utility costs. Not necessarily that important for retail, but if you’re going into say cultivation or cultivation is a very heavy intense for the utilities, right? It’s going to be very cost prohibitive to grow cannabis in downtown Los Angeles. Whereas you should be looking to go out to somewhere 50 miles outside the city where there’s cheaper everything, cheaper land, cheaper utilities, all those different expenses. Now, say you do find a spot and you do get an actual introduction to a landlord, how are you actually going to convince this landlord to rent to you?
Aside from getting the application all the way through? The hardest part is going to actually be getting in this person to talk to you and actually be open to the idea of cannabis. Cannabis is a generational issue and you’re going to notice a lot of the older landlords or people that have the money are there like you know that they’re gaining more acceptance of this, but they just got to be told 700 times and it’s going to be okay. But the first thing to when you’re speaking with a landlord in a negotiation is find out and seek to understand that you know their objections first. What are they holding back? Why are they holding back? Ask them so you can get context to address their issues. You may be thinking about, oh, they’re scared that the police are gonna bust in when it’s really, you know, they’re nervous that they don’t want to have a huge water spill from your hydroponic system breaking and that everything rotting and they get black mold. You don’t know what their issues are, their objections are until you ask them.
So once you get context, you can start talking about the potential upsides that either remedy their issues or different technologies that remedy their issues or other examples and case studies that remedy there issues. You just have to ask and know and we talk about potential upsides. You can look at, Hey, new legislation, maybe this hemp bill your rent, you know, 600 acres of farmland out in central California and they say there’s no way we’re going to grow hemp. We have all these good crops out here. Now it’s like, no, this new farm bill passed. So you people are not up to date. You’re a fanatic potentially about cannabis and you know, every little news article that’s coming out, these landlords don’t have that kind of context. So you have to share these types of things with them. Now, another potential upside in retail, especially, you’ll see this in the restaurant business, is that there are these things called percent gross receipts leases.
Where you can actually say, Hey, I’ll share potential some upsides of my retail operations, so I’ll give you three percent of my gross receipts as well as some base rent. Now this means that their incentives are aligned with yours. The more money you make, the more money they make, which means they’re going to be a better landlord. They’re going to help out with those issues. Hey, your hot water heater’s broken will be there tonight. They’re not going to be holding back on you. There’s a lot more alignment of incentives when you do these types of leases, so that’s another thing to consider. Also be ready to make concessions or compromises. Of course, like I said, increase rents and rates. They know their properties in demand. If property is going for normally $2 a square foot, be ready to pay nine, 10, 12, $17 a square foot.
It depends on where you’re at, especially also how many licenses are going to be out there. Also think about additional insurances, insurances for the property for damage, you’re going to have to have a beefed up security plan or security improvements. You know, obviously there’s laws around what needs to happen, but you can go above and beyond the law, you know, more cameras, maybe landlords access to cameras and different things like that. And also lease term length. Some landlords may say, hey, I want a shorter term lease. Some may say I want you to be on for five years instead of the basic three years that I do. Just be willing to make different compromises and have an open conversation. You have to see your landlord as a business partner and not as a hurdle to getting your business open. The more you have a good rapport with your landlord, the more smooth that everything’s going to go because at some point, if things go sideways, the person that can hurt your business the most is the landlord.
If you guys get into a big blowout argument, they may just say, Hey, I’m going to go cancel the lease and I’ll deal with all the legal ramifications later or whatever that means and who gives a damn if it’s going to cost them a million bucks and maybe it will be more good for them to stick with the least financially, but they you just piss them off so much. They just don’t want to work with you anymore. So it’s just gaining context. Creating that rapport and building that friendship with your landlord. That’s how you get someone to land into work with you and convince them to rent to you. Now on the flip side, you may find someone that’s willing to actually sell you the property, maybe a rent to own type of agreement where you juice the returns for them in the first year. There’s so many different ways and you know, once you find a potential property and you want to get that kind of coaching, reach out to us and we can kind of give you some ideas we see that worked in that area or for this type of vertical for cannabis.
We have another question that a lot of people ask us about, are cannabis licenses transferrable? I’m sure you guys have heard companies buying licenses from existing operators and yes, it is possible. The only thing is that any change in ownership has to be reported to the BCC and when they receive this change in ownership notification, you have to cease all operations. Which means if you are currently in the middle of a grow then you would have to stop dead in its tracks. So you have to plan accordingly. And then once, if and when the BCC actually approves these changes, then that, that new ownership goes through and they can start managing, operating and using the license and the facility. Typically what we’ve seen is that, you know, changes in ownership occur right before anything is even built out or right before operations begin. So licenses awarded the company that owns the license is about to start and they decide, oh, let’s just sell it for a good price.
And they do. And so nothing is lost at that point in time. But if, if you are looking to take over a licensed operator operating in the red, then he or she would have to cease operations until BCC approves the change in ownership.
So our next question is from Jason. He’s asking if I have a criminal record, will be automatically denied a cannabis license. The answer to that question is not necessarily so the BCC, the CDHP and CalCannabis, all have stipulations and regulations regarding people that do have convictions and wanting to become owners. So there’s actually a really, really, really long list of the types of convictions that a person has that they have to report that will be reviewed by the BCC committee. It falls under three major categories, which is a violent felony conviction, a serious felony conviction, and felonies involving fraud, deceit or embezzlement.
There are also a few other felonies on the list, such as, you know, if you were transporting or selling controlled substances to a minor or drug trafficking. Also any prior convictions where the sentence includes terms of probation, incarceration, or supervised release. What the BCC is going to do is they’re going to evaluate the nature and severity of the act or, the offense, and whether the conviction is cannabis related at present. If you do have a cannabis related conviction, there is some, some spite and knowing that you could have that record expunged, so if it is cannabis related, there’s a good chance that you could still be an owner. They’re also going to evaluate the criminal record as a whole, so if you, let’s say, committed a crime in 1970. It’s been 40 years since your convictions, since your probation, you haven’t had even a single parking ticket.
Then this all works well in your favor in terms of evaluation and they also want to see the time that’s elapsed since the conviction. So if you committed a serious felony four years ago, probably not going to be as strong a case as somebody who committed a serious felony 10 years ago and since then has not had any sort of violation infraction or any other convictions. Since then. There is also something that the BCC is going to review and if you can provide it, it’s called a certificate of rehabilitation. What this is really is that you go to court to ask the court to issue the certificate that proves that you know you’ve done your probation, you are an upstanding member of the community. You were able to reintegrate and eventually get a pardon from the governor of California. Now not everybody can get this and it does take some time, but if you do have it, this will work very well in your favor when the BCC does evaluate your conviction records.
You’re also going to want to submit other evidence of rehabilitation. This just means like letters from previous employers since your conviction, since your release, you know, you’re an honest employee, you did really well. You’re a hardworking provider. If you were seeing a counselor or a therapist, you know, a letter from them would, would definitely bolster your application forward in the evaluation process. So yes, Jason, if you do have a criminal record, you know, and you have taken that turn around the corner in stride, you know, there, there is a chance that you could still be the owner of your own cannabis business. However, there are some cities that will not allow individuals that have had convictions regardless of any other certificate of Rehabilitation or whatnot to become owners. So if you’re serious about overcoming your conviction and becoming a cannabis business owner, you may want to look into local ordinances of the places that you want to apply for a permit, a local permit to make sure that you know they don’t have any strict guidelines regarding owners with convictions.
So the next question here is from Laura and her question is, what is the main reason most cannabis applications get denied? So you kind of have to understand the application process in how is an application reviewed to know how it gets denied. So most cities are doing what they call a merit based application review process. So every little section, they’re going to have a different weight in a different score on that section as well. They’re going to. Every state is going to score it differently because every city has a different end game for how they want the cannabis businesses to fit into their local or their community because some, again, some retail, some don’t want anything to do with it, so only want manufacturing. So it’s hard to say why every specific one gets denied, but let’s just go into kind of into the merit based things in what are the heavyweight in this application here.
Number One, first and foremost is they lack experience. Business owners that are listed as owners or people have financial interest on there. Just lack experience in the cannabis space or in regulated industries to begin with. And why is that important? First and foremost, they don’t want to give a bunch of licenses to people that don’t know what the hell they’re doing and they’re going to come out here and they’re going to either waste the local people’s money. They’re going to waste the time of the approval committee and they’re going to go out there and they’re gonna flop. They’re going to bring a bad name of cannabis to that city if you don’t perform and do well for that city is just going to show bad on the city. They don’t want people with lack of experience. They want, you know, they want the Lebron James of cannabis to come to their city and actually make this thing work and put them on the map and give them good tax revenue. Give them a good name and cannabis fits well into our society. So they want that kind of experience.
So now what’s something that dovetails into this lack of experience is lack of community involvement and lack of community understanding. So every community has their own different needs, right? Some communities need a lot more tax revenue to improve their schools. Some want to have cannabis just fit in. And it’s like, you know, just like the rite aid kind of fits into their neighborhood. They want the cannabis to kind of just fit right in in, you know, pair well with what’s already going on in the community, so you’ve got to understand what the community needs and then provide and fill that void of that gap of what the community needs and this is where having someone with boots on the ground actually knows what’s going on and what the community needs, what the Chamber of Commerce is looking for, what the actual a licensing body in that city is looking for.
You just gotta know what they’re asking for and actually provide that and not just what you think they need, provide what they tell you they need. That’s by just going to most cities before they open up their licensing window, they’re going to hold a little workshop for five, six hours, two hours on a Thursday night, on a Saturday afternoon, and they’re gonna say, Hey, here’s the process, but also this is what we’re looking in. How cannabis fits into our community. So if you go to that six hour meeting, that two hour meeting, you’re going to get a lot more context onto what actually is going to be necessary for that application and then other things as well. The last, the third thing that why most applications fail is that you just don’t have enough money. This is in California specifically. This is not a broke man’s game.
This takes a lot of money. I said this like six times throughout this podcast Webinar here. It takes a lot of money and they see, all right, well they only have $247,000. That’s going to get you probably through like 60 percent of the process. They want to see someone that has a lot of financial backing and you may have what they call committed capital versus sideline capital. You may have already gotten someone that committed $1,000,000 to you, but they also have this sideline capital of $7,000,000 to dip into, as Dom said earlier, like if things go sideways or if things come more expensive or if you run into some speed bumps, your business is not going to go off the rails and then you know, you’re, you’re dead in the water. They want someone that has the money to figure this out because at some point things are going to become very, very expensive for the operator needs to know. You have the financial liquidity to face those financial problems.
We have another question from Michelle. She’s asking how long does it take to get approved? This is a really good question because it varies from city to city on a local level. Some cities will process applications faster, but typically they’ll say between 60 to 90 days. So that’s a two to three month turnaround time before they release which applicant’s they’ve chosen to move on in the permitting process. Terms of the state license it shouldn’t take too long. Once you get all the required documentation in and you’ve addressed whatever concerns they have. Again, it may take between two to three months or 60 to 90 days to get a turnaround time for that. That being said, the total turnaround time is anywhere between four to six months or maybe even a little longer.
There’s another good question here from Mark. He’s asking if we grow in one city or county, can we distribute in another? The way it works out here in California is that if you don’t have a distribution license, you can’t move your products. So you can grow anywhere as long as you have a distributor coming to get your products and they would be the ones to handle distribution. And now testing laboratories are going to have to be able to go to your facility and test your products themselves. So the answer to that question is you can grow anywhere you want, but as long as you don’t have a distribution license, which you can apply for, even if you have a cultivation license, you won’t be able to move anything. So if you wanted to streamline the process, which may or may not be beneficial to you in terms of reporting your own taxes and paying them yourself, you could just find a distributor that moves your products for you.
So Paul’s asking what is considered a microbusiness. So like I said earlier, if you guys were logged in at the time, a micro business allows for four verticals under one license and in one facility, I mean one location. As you know, to safe guard, the integrity of testing. If you do plan to be a cannabis testing facility, you cannot go for any other license types and vice versa. So when a micro business essentially is, is it allows you to be a cultivator or a retailer or a manufacturer and a distributor all under one umbrella and one easy shot that is on the state level. Some cities will not offer micro business permits. They will make you apply for separate permits for each vertical type. So to clarify, the micro business license is one license with the state and in some cities they will offer this permit as well. That allows for four different verticals to occur under one license and in one location, so it could be manufacturing, distribution, cultivation, and retail.
To follow up to that micro business question sandy here is asking or has asked, can I concurrently hold licenses for all parts of my operation to vertically integrate all parts of our business into one address or do we need separate spaces? So Sandy, if you wanted to do it, I guess an easy way and if the local city permits, you could just get a micro business license and do all of that under one license type. However, there are some cities, like I mentioned, that will not permit micro businesses. That means you’re going to have to go in and apply for each activity separately. State regulation specifically state that a licensed premises must have its own unique address. So if you’re looking at a single parcel of land state regulations does not disallow that each vertical has to be on separate parcels of land.
You just need to have walls and doors that remained closed at all times to separate each activity type and you can actually go to city council, I believe it’s the planning department, and you can ask them to assign unique addresses to each specific activity location on the parcel of the same parcel of land. Some cities will give you a hard time. They might not even do it, so if I were you, if you hear about a certain city coming online anytime soon, you might want to ask them if they will be able to assign unique addresses for you on one parcel of land if this is what you intend to do.
The next question for today is from Angella. Her question is if we change team members from the license application, how do we handle that with the city or state? So the way I’m reading this question is if ownership changes what I have to report these changes to the city and the state.
My answer to that question is yes. Anything that drastically changes any sort of structure, whether physical or immaterial like ownership or management, you will have to report that to the city and to the BCC and generally if it involves ownership, changes in ownership. And this could include ownership means individuals who manage and make decisions for the company. So if it is a supervisor that you’re switching out, you would have to report that which means you would have to cease operations until BCC approves this. In the event that an employee quits though or is let go and a new one is hired. Since these employees are not making decisions for the company, you won’t need to report it to the city or the state, but I would advise that you keep all the relevant records and provide this to the city and the state upon their request.