Despite the promise of social equity leveling the playing field in the marijuana industry, most diversity applicants and license holders believe the cards are stacked against them.
From Los Angeles to Boston, common obstacles include limited access to capital, complicated application processes, real estate priced well above market rates and bureaucratic logjams.
“If you’ve never operated a licensed facility before, you probably don’t really know where to start,” said Juan Aguirre, who was a nurse manager and medical marijuana caregiver in Michigan before he started making the right industry connections.
The entrepreneur was one of four social equity retail operators who shared with MJBizDaily their frustrations, disappointments and setbacks while trying to navigate government-run programs specifically created to help them succeed.
Location, location, location
Aguirre submitted 10 applications at $2,500 apiece in December 2019 to enter Illinois’ lottery system
The state finally issued its first 185 licenses this summer to social equity applicants after years of legal battles, administrative clogs and coronavirus pandemic-led delays.
Aguirre qualified for social equity status after his venture, Illinois Kindness, hired 10 employees, half of whom had to meet one of the following criteria:
- Lived in areas with high marijuana arrest rates.
- Was arrested for or convicted of a cannabis-related offense.
- Had an immediate family member with an arrest or conviction for a marijuana offense.
His company in late July was issued a conditional license for a dispensary in the Chicagoland region, one of 17 state jurisdictions earmarked for cannabis businesses.
Securing real estate – a top concern for most marijuana business operators – is Aguirre’s next challenge.
“We’re still searching for a location that will be suitable for our buyer,” he said. “We do plan to sell the license to a buyer right after finishing building out.”
Investor fallout prompted the sales decision, he added.
The retailer is scouting potential locations in Chicago’s Pilsen neighborhood, a strong Latino and arts enclave on the Lower West Side that’s undergone massive changes the past few years to become one of the city’s trendiest communities.
The problem is there’s not many real estate options there, considering all the zoning restrictions near churches, schools and other dispensaries – operational or planned. Multistate operators, according to Aguirre, have also claimed many top-tier areas, shrinking the map even further in the densely packed city.
“You have these MSOs that have kind of put their stake in the locations that they think are prime real estate,” said Aguirre, who lost a Democratic Congressional primary in June running on marijuana business opportunities, universal income and health care.
No protection
Ryan Brown, a social equity applicant, struck a deal with a landlord to hold a property in central Los Angeles as he worked through the approval process of obtaining a delivery license.
He said processing delays with the city’s Department of Cannabis Regulation (DCR) and bureaucratic runarounds for months derailed the deal.
When Brown was finally ready to pay the first month’s rent of $1,500, the landlord doubled the price. Then the landlord leased it to another proprietor.
“I ended up losing the property,” said Brown, who’s been trying to earn a cannabis license under L.A.’s social equity program for more than two years.
In that time, he’s spent more than $15,000 in various application and city fees.
And has nothing to show for it.
“My money that I invested in with DCR and everything else pretty much went down the drain,” he said.
“DCR didn’t protect me at all. I didn’t operate one day of business.”
Law and disorder
High application fees, which dog operators in marijuana markets nationwide, aren’t as problematic for New Jersey social equity applicants, who pay under $1,000 all in.
Among their top concerns beyond real estate and capital is finding affordable and reliable legal help to guide them through the state’s complicated maze of forms and other requirements.
“The problem that you may run into is the legal side of it,” said Justin Crosgile, who received conditional approval this past summer for a recreational retail license from New Jersey’s Cannabis Regulatory Commission.
Crosgile, whose Jamaican citizenship helped qualify him for social equity, provided MJBizDaily with an engagement letter from one law firm, outlying legal services for the conditional application only.
The firm’s flat fee: $100,000.
Instead, a friend introduced him to Chirali Patel, founder of the Blaze Law Firm, which steered Crosgile away from a bad equity deal proposed by an MSO, and ultimately, toward that conditional license.
“Prior to entering the cannabis industry I’d seen quotes for $5,000 for a business plan, but now some of my social equity clients get quoted $20,000 just for a 20-page streamlined business plan,” Patel told MJBizDaily via email.
“Many professional service providers do not offer discounts to social equity applicants, and it’s disheartening.”
Crosgile expects to sign a lease for his Newark dispensary as early as next week, a crucial step in converting that conditional license into an annual one.
“We’re trying to get over that hump, you know, and get some capital to get open,” he said.
Blazing a new trail
It took Bostonian Nike John more than a year to secure a neighborhood approval alone, a process that required community outreach meetings, documented support from residents and a letter from the local city counselor.
The social equity applicant said her first application was rejected by the Boston Cannabis Board, which contended she didn’t have enough local support and wasn’t local enough.
The board also suggested a $15,000 traffic study in Charlestown’s historic waterfront neighborhood, where she planned to open her dispensary.
John told MJBizDaily she collected more than 200 support letters, significantly more than other approved applicants.
“They didn’t want me to open,” said John, who is Black, grew up in the city and lives in the Dorchester neighborhood, which encompasses wide swaths of Boston and several different communities, about seven miles south of Charlestown.
“I’m the first nonwhite applicant to open in a majority white residential neighborhood in Boston,” said the founder of The Heritage Club, which launched retail sales Sept. 6.
The traffic study, which she pushed the city to commission, showed that the storefront wouldn’t affect traffic, paving the way for the neighborhood approval in May, six months after filing her initial application.
Despite the setbacks, John is happy she took her mom’s advice to enter the cannabis industry.
But she wants to see more substantive changes in Boston, particularly improving diversity among entrepreneurs and executives.
“They don’t have a lot of minority owners still, which is part of why I got into this,” she said.
“That’s the one thing I’d like to see more of.”
Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.
