Michigan Town’s Cap on MMJ Businesses Reflects Larger Trend, Offers Takeaways

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By most accounts, the small Michigan town of Ypsilanti has been a relatively welcoming place for medical marijuana entrepreneurs.

Local voters backed MMJ legalization by a ratio of nearly 5-to-1 in 2008, officials began permitting dispensaries and grow sites in 2011 and have taken a hands-off approach to the industry despite a damaging ruling by the state Supreme Court, and several cannabis operations are now thriving. One entrepreneur, Jim Nemeth, even said the city told him “come on down, we’ll welcome you here” earlier this year when he inquired about opening a dispensary.

But the climate has changed drastically as of late.

This week, the Ypsilanti City Council approved on second reading an ordinance that will cap the number of medical marijuana dispensaries and grow site licenses to a total of nine.

That could sink the plans of Nemeth or anyone else hoping to open an MMJ business there, as the town is already approaching the limit.

This same scenario is playing out in hundreds of towns and cities in medical cannabis states across the country, with local officials introducing new ordinances and moratoriums, abruptly revising rules, instituting bans and shaking up the playing field for MMJ businesses literally overnight. As a result, entrepreneurs often have to shift gears, pump much more money into the business than they thought or – in a worst-case scenario – abandon their plans completely. In Nemeth’s case, the tens of thousands of dollars he has reportedly invested in the process so far, including money spent to remodel a building, could go up in smoke.

While there’s no sure-fire plan to avoid such problems, the Ypsilanti situation offers some useful takeaways that might help lessen the risks:

Fully gauge the local climate for MMJ businesses before moving forward. Even if you’re following all local laws and requirements for starting an MMJ business, that might not be enough to ensure smooth sailing. Community backlash can trump all your efforts and force city leaders to implement new regulations. Make sure you get a handle on local sentiment – among residents and officials – surrounding cannabis businesses. Don’t assume the climate is favorable just because it looks that way on paper, as it did in Ypsilanti. If you discover a host of red flags, consider locating elsewhere.

Get to know the community. How do you gauge the climate? Have conversations with key stakeholders, local bigwigs and especially city council members if possible. This will give you an idea of which way the winds are blowing, and knowing the people who could ultimately decide your very fate might pay dividends in the long run.

Go above and beyond the basics. Nemeth thought he had done enough by meeting with the city planner, but apparently some city council members feel he should have talked to them. “Respect begins when you are a stranger and you enter a new neighborhood with intentions of making significant changes to it, and out of courtesy you assess and consider how the neighbors feel about the proposed changes before you attempt to make any changes,” one council member told AnnArbor.com when talking about the situation.

While talking to a city council member before opening a business would be unheard of in other industries, when it comes to medical marijuana every extra step you take might ultimately help – even if it seems an undue burden or a ridiculous unofficial “requirement.” The point: Do more than what’s required, whether that means talking to as many people as possible or exceeding the minimum standards.

– Brace for the unknown. The best laid plans don’t amount to much in the MMJ industry. Businesses operating on a shoestring budget with little in the way of reserves should think twice about moving forward. Unexpected developments like the Ypsilanti license cap require flexibility, from both a strategic and financial perspective. Nemeth, for instance, is now trying to rush the opening of his dispensary before the new limits take effect, which could drive up his expenses. If that fails, Nemeth said he will challenge the city in court, which will also cost money. Having the financial wherewithal to respond to these types of issues could ultimately mean the difference between success and failure.