Colorado Retail Cannabis Opportunities Limited for Newcomers as Existing MMJ Businesses Get Edge

Getting involved in the recreational marijuana business in Colorado could take a lot longer for newcomers than initially expected.

The state is moving forward with rules that will prevent new players from applying for licenses to operate adult-use cannabis stores until next summer, giving existing medical marijuana dispensaries a nine-month head start. Now, Denver – the hub of the state’s cannabis industry – is on the verge of passing a proposal that essentially will prevent individuals who don’t already operate a medical marijuana business from opening retail cannabis shops until 2016.

Couple that with the growing number of cities and towns across Colorado that have enacted bans and moratoriums on retail marijuana shops, and the near-term opportunities for newcomers are limited.

It’s certainly not what entrepreneurs expected when the state legalized cannabis for adult use back in November. But Colorado officials at both the state and local levels stress that they want to take a cautious, measured approach to the recreational industry, hoping to avoid the types of problems plaguing states that rushed into medical marijuana.

Entrepreneurs who aren’t already involved in the medical marijuana industry will need patience going forward, as the business opportunities might not materialize for quite a while depending on where they want to set up shop. The best option in some cities might be to buy existing dispensaries from owners looking to sell or consider providing ancillary services and products to the industry.

The emerging regulatory framework is good news in some respects for existing dispensaries. That’s particularly true for centers in Denver, which could have control of the city’s entire recreational cannabis market – estimated to hit about $128 million – all to themselves for more than two years should the measure pass.

Under the proposal in Denver, dispensaries that either already have licenses or are in the process of getting one would be allowed to completely convert to the adult-use market or cater to both registered patients and general customers, so long as they separate the two businesses in their existing locations. The proposal is part of a larger set of regulations on the adult-use industry that Denver City Council members are considering. While nothing is set in stone yet, the measure passed a City Council committee yesterday and is expected to receive the final green light next month.

Several local industry trade groups support the plan to limit recreational sales to existing MMJ businesses in Colorado and Denver, saying this structure will help prevent a host of problems – including the possibility of public backlash and even federal interference – by ensuring that the state is not flooded with  new cannabis shops all at once.

“We think it’s smart politics,” said Meg Collins, head of the Cannabis Business Alliance. “Sure, it gives (medical marijuana businesses) a leg-up at first, but we think this is the best way to approach it from the standpoint of building a viable industry in Colorado for both medical and adult use. It’s going to have long-term benefits for those interested in getting into marijuana in Colorado.”

Still, this isn’t an easy decision for many dispensaries, given that they will have to spend a lot of money and resources to transition into the recreational market. In Denver, for instance, the proposed rules would required them to have separate entrances and exits for the medical and recreational sides of their business, which could be difficult depending on layout and zoning issues. Given these types of challenges, many existing dispensaries are actually deciding to take a wait-and-see approach before moving forward with adult-use sales.