The medical marijuana business is no place for novices.
Not only will entrepreneurs applying for licenses next month need a minimum of $400,000 in liquid assets, they also must provide diagrams and photos of a purchased facility, mapped out and reimagined. Where will the security cameras be? Where are the entrances and exits? How will they be secured?
A solid business plan — how they’ll run the facility, track inventory, report to the state and keep afloat financially — also must be laid out.
“People who are applying, they’re not stoners, they’re not the ‘whoa, dude’ guy. These are savvy businesspeople,” said Charles Houghton, a corporate lawyer and medical marijuana consultant based in Colorado. “By the time you’re done (with the application), it’s going to be looking like a phone book.”
During a four-year pilot program that went into effect at the beginning of the year, Illinois will award 60 dispensary (retail) licenses and 21 cultivation center licenses.
Bob Morgan, statewide project coordinator for the Illinois Medical Cannabis Pilot Program, said the state anticipates that it will receive as many as three applications for every available license.
“We expect a very competitive process,” Morgan said.
Draft applications, which entrepreneurs can use to start their applications, went live online this month. Official applications will be released “as quickly as possible,” a state spokeswoman said, and will be due Sept. 22. The state hasn’t said when it expects to notify winners.
Illinois stands to gain $6 million in licensing fees alone. Officials said the upfront costs and taxes will help narrow the applicant pool and incentivize winners to follow the rules.
Chicago attorney Alex Thiersch plans to apply for six licenses. He said he has secured land and has spent more than a year preparing his business plan.
“This is not just something anybody can do,” Thiersch said. “People don’t quite realize just how big of a task this is to take this on. We definitely have a very good idea (of what the business would look like). We’re analyzing numbers; we’ve got spreadsheets of potential revenues and costs.”
The Chicago-based company he and his business partner, wholesale business owner John Dohm, of Rockford, created to apply for the licenses is called Salveo Health and Wellness. He said they’re applying for dispensaries in Rockford, Elgin and Quincy, and grow houses just outside Roseville and Clinton and one in Quincy.
“First and foremost, it is a business opportunity,” Thiersch said. “This is a chance to get in on the basement floor of an emerging industry, which all signs are pointing to being around for a long time and growing exponentially over the years. There aren’t many opportunities like this that come around.”
Secondly, he said, he thinks anyone applying should have a passion for medical marijuana on a more personal level. For him, it was his mother.
“She passed away from lung cancer not too long ago,” Thiersch said. “I’ve just seen what someone going through end-stage cancer goes through as far as taking massive amounts of narcotics … just to control your pain. To think that there was likely something out there that could have helped her. She could have had a little more freedom in the last couple months of her life.”
So far, 23 states and Washington, D.C., have legalized medical marijuana. Gov. Pat Quinn signed the Compassionate Use of Medical Cannabis Pilot Program Act on Aug. 1, 2013, and it went into effect Jan. 1.
Applications will be rated on a weighted points system, modeled after systems in other states, including Massachusetts.
Those pitching sites for grow houses must show that “the size and layout promote safe dispensing of medical cannabis, product handling, and storage,” according to the draft application, which does not cite a specific size. The centers must also have an open interior layout, good airflow and a loading dock out of public sight.
The state said it will consider security and a grower’s plan to ensure a consistent level of THC, the psychoactive chemical in marijuana.
Most important for dispensaries are security, a business plan and plans to educate the public, Morgan said.
“A lot of these individuals most likely have not used cannabis before,” Morgan said. “They have to educate them about the different stands, the types of products.”
Background checks are also required.
“If you’re smart, you will have everything (from the draft application) already done” by the time the official applications are released, Houghton said. “They want to know everything.”
To help individuals navigate the process, Houghton and his partner, KC Stark, are holding a Marijuana Business Academy for $299 at the Courtyard Chicago Downtown/Magnificent Mile hotel this weekend. The all-day “how to” seminar Saturday will touch on topics such as zoning, funding, branding, operations and employment issues, among others specific to Illinois. On Sunday, participants are encouraged to pitch their ideas to industry leaders, investors and brokers for feedback.
The latest memo from U.S. Deputy Attorney General James Cole outlines eight criteria that, if met, allow individuals in states where medical marijuana has been legalized to operate their businesses without fear of prosecution from federal authorities.
In all reality, many applicants won’t receive a license to be one of the first legal medical marijuana businesses in the state. For those who still want to be involved in the industry, a multitude of ancillary businesses typically pop up in states that legalize medical marijuana, Houghton said.
He said he thinks it will take six to eight months before a business has a license in hand and a few months more to get everything set up. It takes about four months to grow a crop of marijuana, and state officials said they expect the drug will become available for patients by spring.
The state Department of Agriculture is charged with evaluating applications for cultivation centers, and the state Department of Financial and Professional Regulation will look at submissions for dispensaries.
“It’s finding money, finding places, overcoming obstacles,” Houghton said. “And that’s why I love doing it, because everybody who’s doing it is an entrepreneur, and they’re bringing their own money. They’re not borrowing it from a bank, because a bank won’t lend you the money.”
Application and license fees
Nonrefundable application fees are $25,000 for grow houses and $5,000 for dispensaries. The license fee for those approved will be $200,000 for grow houses and $30,000 for dispensaries.
Cultivation center (grow house) application: 1,000 possible points*
• Cultivation plan: 300 points
• Security plan: 200 points
• Suitability of proposed facility: 150 points
• Product safety and labeling plan: 150 points
• Staffing and operations plan: 100 points
• Business plan: 100 points
Dispensary application, 900 possible points*
• Business and operations plan: 200 points
• Security plan: 200 points
• Record keeping and inventory plan: 200 points
• Suitability of proposed dispensary: 150 points
• Financial disclosures: 150 points
*Subject to change. Applications have optional bonus sections for additional points.
Application dates for proposed businesses
Aug. 8: Draft applications became available at www2.illinois.gov/gov/mcpp; official applications are forthcoming.
Sept. 8: Applications can be submitted to the state
Sept. 22: Applications are due
SOURCE: State of Illinois
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