Location, Location, Location.
The time has finally arrived! The first adult use cannabis customer has made a purchase legally in California. Although CA is not the first state to legalize cannabis is it by far the largest. It is not breaking news that thousands of people have been and will continue working to enter the cannabis space in California in hopes of capitalizing on the huge opportunities. A lucky few have already begun or completed the process to enter the market legally starting January 1, 2018. Most of these businesses have been operating in the medical market and have a proven track record, others will be opening their doors or hitting the shelf with their product for the first time. Either scenario has one common denominator - they have a location.
The most well thought out business plans are just words on paper until a location is secured. It seems so simple, buy or rent a space and open your business. Thousands if not millions of people have started their own small business, it’s can’t be that difficult, right? Unfortunately, if you have chosen or are thinking about entering the cannabis industry you have now joined one of the most highly regulated industries in the US. Zoning requirements and local ordinances have been drafted to control where any type of cannabis business can be located. For many businesses, their existing or desired location will not qualify. Additionally, for those that have found the right property to rent, landlord approval is required to operate a cannabis business! If you cannot meet these two early criteria your cannabis business is just an idea in the eyes of the regulated market.
There is a common misconception that the California state agencies are the only governing body for the industry. The state will not even accept a temporary application until local compliance or licensing is proven. To obtain a local license, a location must be secured for your business. However, each city operates differently and has different regulations relative to obtaining a local license. Do you get the idea of the importance of having a location? One fatal flaw of most local jurisdictions throughout the regulation process has been publishing maps detailing where cannabis will be accepted. This has created market value inflation, landlords asking for 5x traditional rental price. Landlords are getting away with extortion. Rent increases of 400% and higher are the norm for “consenting landlords”. These increases have made it very difficult for the small business owner to effectively enter the industry without far exceeding their location budgets.
Do not be surprised when national news stories are highlighting consumer lines wrapped city blocks with eagerness to buy recreational cannabis. This coverage will likely bring in a whole new group of interested “cannapreneurs” and investors looking to cash in. What about those that have been waiting on the sidelines to “see what happens”? Are they too late? Is the market flooded? Not at all! Before you spend that seed money on your logo design and cool swag first recognize the importance of your desired location. Understanding the local regulations regarding site selection, permitting, licensing and starting operations is the first step is setting your business up for success.