11 Considerations When Vying for a Cannabis License

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Cannabis experience, plans for community involvement and building a strong application team are a few of the ways license applicants can stand out and succeed.

August 29, 2022

Be realistic about estimating operation size and don’t “shoot for the moon.” Start with a facility size that is manageable and note plans for expansion, if applicable.
©Richard T | Unsplash

Unless you have millions of dollars to spend to acquire a cannabis license, you are going to need to submit a successful application to launch a cannabis business almost anywhere in the U.S. To that end, there are a number of tips and strategies that will help secure the necessary first steps in launching your cannabis empire.

1. It all starts with the rules.

No matter what market you are applying in or how many times you have applied (and presumably won) a license, it all starts with the rules.

This may sound juvenile and rudimentary, but it is vitally important to read the rules. This includes, but is not limited to, all applicable statutes and rules, the application instructions, the application itself and any questions and answers or FAQs published by the regulator. Understanding the most basic parameters for the application will help you identify the easy points to secure and where your potential weak points will be.

While many states have very similar rules and requirements, every state establishes its own guidelines and processes. Just because you have applied in another state, even a similar state, does not mean you can duplicate an old application. You need to know the nuance of each state’s requirements and adapt your plans to meet these requirements. Without reading and understanding the most basic rules and requirements to apply, you can very easily submit an application that is destined for disqualification. For example, if the rules require all applications to be submitted via hand delivery and you mail or email your application in, you potentially will not have an application submitted properly. Additionally, if you do not pay the application fee in the manner permitted by the regulator, your application may not be considered. From an operational perspective, many applicants submit plans for operations they believe are the most effective; however, they may miss key requirements or small details of the applications. For example, if the rules require you to provide information on the seed-to-sale system you intend to use, and the applicant does not discuss their preferred system and how it will integrate within their proposed operation, then that application is lacking a key requirement.

2. You can never start too early.

Even before an application or its accompanying instructions are released, you can gauge basic requirements of an application from the parameters set out in statute. This applies to both adult-use and medical states but is extremely applicable to any limited-license market. It will take time to put a team in place, secure the necessary real estate, line up the cultivation or manufacturing equipment, identify and secure genetics, raise sufficient capital and commitments and anything else necessary just to apply and win. The earlier you start, the better. Start early enough in the pre-application process so if, and when, you win your license, you can hit the ground running with buildout and operations. This could be six months to a year (or more) ahead of time, but only you can determine how much time you really need to plan.

By starting your planning early, you can not only secure the necessary resources needed to submit a successful application, but you also ensure that those resources are not used by a competitor. If you can lock up a number of ideal locations with letters of intent for lease commitments, even if you don’t use those locations, you are able to apply with them and prevent other applicants from securing them. In many states, there is a limit to the amount of retail a cannabis operator can have (for example, in Pennsylvania, each dispensary permit is allowed up to three locations, so you could only secure three sites; however, in Florida there is no limit to retail locations, so you can lock up however many you are able to). This also applies to human capital and talent, as well as financial support. This is especially important for any aspect of your application that will require additional government support, like a conditional use permit or local approval letter. By starting the process earlier, you have more control over your application process.

3. Applications are both formulaic and an artform.

Successful applicants find the delicate balance between following the basic formula of an application and making their application stand out in the crowd. Regulators lay out a basic outline for all applications, and those items that must be addressed for applicants to obtain maximum points, so follow the formula. If the applicable regulations and application speak to 10 separate and distinct sections of an application (e.g., description of your cultivation plan of operations, description of your processing plan of operations, description of your retail plan of operations, schematics for all facilities, all applicable standard operating procedures, security plans and waste disposal plans), each with individual subparts, then your application should follow form and not omit any section. This is giving away points.

At the same time, an application must tell your story. Regulators and those scoring applications must walk away understanding not only your business and operational plans, but what makes you and your team the best option. Whether it is through your state-of-the-art extraction or cultivation methods, your unique celebrity partnership, your diversity-rich community involvement plans or even the scholarship you plan to establish, your application must have a heart and soul and tell your story.

A perfect application with no story is far from perfect.

Some applications require that the team drop off the documents in person and will not accept them by mail. Attention to detail is essential when reviewing license application rules.
©Antonioguillem | Adobe Stock

4. There’s no ‘I’ in team.

Having the right team in place is vital. Without any emphasis on one expert over the next, a successful application, especially in a limited-license state, likely will require a spectrum of knowledgeable people in the room.

  • Consider a strong application writer to prepare your application and help craft your story. Do your research with any application writer or consultants who specialize in cannabis license applications. Just as you would with a lawyer or accountant, ask for references. Also, understand where the application writer’s strengths and weaknesses lie and where they have found success. If a writer says they have won applications in a specific market, find out when and for whom.
  • Laws are complicated and confusing. Having a good regulatory lawyer to ensure your plans comply is imperative. Find someone who understands regulatory and administrative law and how to navigate the bureaucracy of a state or local government. It is less important to have someone in the actual state than it is to have a lawyer who has worked with the state or has knowledge of the state regulatory regime.
  • In many markets, engaging a lobbyist or a government relations expert is fundamental. It may not be necessary to have a lobbyist to submit an application; but, once you submit your application it is smart to have someone because, depending on the market, everyone else might.
  • Lastly, you need a quarterback. Applications are not just a group of narratives, and you will likely have many people contributing to it. There’s the writing, the legal and the real estate, just to name a few key areas. Your quarterback can be your application writer, consultant, lawyer or someone internal. It doesn’t matter who, as long as you have someone who understands the application process and can keep everyone on track with their respective roles to ensure the application is successfully completed and submitted on time.

5. Management is key.

Build a diverse, multi-disciplinary team. Applicants should have their management team in place before any application is submitted. If you are applying for a cultivation license, then you should have your top growers lined up and use their experience as a benefit in your application. This goes for any other license you apply for—retail, manufacturing, vertical, or anything else. Moreover, it is important to show regulators and application scorers that you have your operational management team lined up.

Regulators want to see applicants who are as close to turn-key as possible. This means also having your HR, finance and accounting, compliance, marketing, and any other necessary functions to the operation of not just a cannabis business, but any business. Determining your senior level team members in these positions is imperative. Also, if required in certain medical markets, you may need to identify your medical director, who will almost certainly be required to be a physician (M.D. or D.O.) licensed in the state you are applying in. Having people with strong backgrounds in their respective areas will only increase the number of points you obtain for experience and ability to operate quickly.

6. There is value in having cannabis experience.

Regulators scoring applications have as much to gain with the applicants they ultimately award a license to as do the actual applicants themselves. Regulators have to stand by their process and want their program to ultimately succeed. Success relies on those being awarded licenses becoming operational quickly and in compliance with the applicable regulations. This directly correlates to an increased value to institutional or industry knowledge, and, it is important to present a plan and a team who knows how to run a cannabis company. Past cannabis experience tells regulators you have lived through start-up cannabis growing pains and have presumably learned from them and will use this experience to successfully operate in this new market.

7. There is equally a value to in-market experience.

There is no question that—especially in limited-license or new cannabis markets—there is a heavy emphasis on supporting “home-state” operations. In some states it is built into your application. For example, in Florida, a vertical market, the regulators want cultivation companies to have experience in growing agricultural products in Florida. In other states that have a residency requirement, like Oklahoma, the “home-state” aspect is a necessity. It will be important to demonstrate the strong ties your company has to not just the state, but the local community you intend to operate in. For those coming into a state for the first time, this is where local industry organizations can play a key role in developing relationships.

Consider the entire cannabis operation when submitting your application, from cultivation to security to waste disposal.
©Andrey Popov | Adobe

8. Community involvement and social equity matter.

Community involvement and social equity are also a huge focus. Applicants should develop relationships with their local community and leaders (not just government officials, but community leaders). Cannabis is still very misunderstood or taboo in many communities, and it will be important to educate your community before applying. Having letters of support (if allowed) from local officials and community leaders will benefit an application ten-fold.

Equally as important is your emphasis on and plans to enhance social equity. How much diversity or social equity influence does your operation have? Be forward-thinking with your diversity and social equity efforts. As an applicant you should truly think about how you can influence underserved and underprivileged communities in the state you are applying in and propose plans to address these issues. Whether it is establishing a scholarship, working on expungement projects or guaranteeing a certain percentage of vendor contracts to minority-, women- and veteran-owned businesses, thinking broadly and providing real plans are key to a successful application.

9. Be realistic with your plan of operations.

Many people think it is key to “shoot for the moon” with your proposed plan of operations and say you will have the biggest and greatest operation ever imagined for the cannabis industry. While this sounds good in theory, it can backfire. Regulators are smart and understand it takes time and capital to get up and running. In many markets, especially where you have a limited amount of time to become operational, regulators recognize that the “grandiose” plans aren’t realistic, and they will see right through it. Remember, in most jurisdictions, your application is the benchmark you are held to.

Don’t say you are going to build out 250,000 square feet of canopy if you have 90 days to begin cultivating—unless you can realistically do it. Be honest and tell them you will build out in phases and if necessary, use temporary grow pods to get going while you build out your permanent facility. In addition, you should understand and integrate the timelines you must comply with. It is OK to have the extravagant and sexy plans that will catch the eyes of the regulators, but be realistic in how you propose to implement such plans.

10. Be proactive about organized labor.

Involvement by organized labor is increasing, especially in the Northeast, Midwest and West Coast. States like New Jersey and even cities like Palm Springs, Calif., are requiring relationships with organized labor as part of their application or renewal process. You can gain key points in an application by embracing this and getting in front of it. Applicants shouldn’t feel they need to work with the same one or two unions constantly in the news for cannabis. You can be creative and be proactive when there is an organized labor requirement. In states where organized labor is influential, even if there is no requirement, having a relationship identified will increase community support and application points.

11. It’s all about the money.

Set a budget for the application process, and be prepared to exceed it. Lawyers cost money. Consultants cost money. Land use and zoning cost money. Real estate costs money. Don’t walk into an application round with an “idea” of how much you will spend. Have a budget that reasonably estimates your various expenses and costs, and work to stay as close to it as you can. This will help you determine whom you can realistically utilize on your team. With that said, expect to exceed your budget quickly.

The cannabis industry is not an easy one to break into. However, with the right planning and focus, you will find yourself sitting on top of an opportunity of a lifetime.

Zachary R. Kobrin is a partner at Akerman LLP.