Ganja Goddess CEO Zachary Pitts joined the Southern California Coalition and the California Cannabis Couriers Association in filing a lawsuit against the city of Los Angeles over its latest cannabis delivery licensing plan. As the head of a delivery service that spans the state, Pitts has been working closely with officials in LA to get the city’s delivery licensing program up and running.
In July, however, the city altered its plan and focused its program on social equity applicants—barring non-social equity applicants from the LA delivery license until 2025.
It’s the latest in a number of twists and turns in Los Angeles, each one seemingly reversing course on a plan to include as many prospective businesses as possible in this booming marketplace.
We spoke with Pitts to learn more about the lawsuit and about the larger picture of cannabis delivery this year.
Eric Sandy: Why was it important for you to be attached to this lawsuit?
Zachary Pitts: We had the trade organizations, and I'm part of both of them actually. We felt like i[the lawsuit] needed a face of someone who was working with city, who was in the original system, who would be applying for the license and had material losses because of the city going back and changing the law after years and years of delays. There were particular circumstances that we felt like I represented very well. And there are plenty of delivery services in a similar situation as me, but we felt it needed someone who had invested in leases and employment and in setting up a license in the city of LA.
ES: And what is the main argument here?
ZP: The reason that we're suing the city is it's really the last option. We really didn't want to, but there's just no other path for us. The city originally created a system that was fair, a system that myself and many other delivery operators spent lots of time helping to [develop] with individual communities throughout the city that were interested in how cannabis was going to change the economy and the city and all and their neighborhoods. I worked closely with the council members, and I thought we had really come to a collaborative effort that was really successful. In some ways, we had gotten all different parts of the industry onboard. We had gotten so many neighborhoods and communities onboard. Unfortunately that was passed back in 2017, and the city just took way too long and bungled way too many things in its licensing process. It had problems rolling out, on every level, quickly and efficiently the licenses and doing the inspections and verifying everything that they need to verify.
The city also have problems properly establishing who is a social equity candidate and dispensing those licenses for the storefronts. And then right before we finally, after years of delays, thought we were coming up, inside of about nine days, they changed the law and prevented a very large portion of us from getting a license for another five years, which is just untenable. There's no way that we can survive. Every small operator or anyone who had any legacy in this business—they were out of options. We can move out of the city permanently, and many have already. At this point, the only people who can last until 2025 are those with millions of dollars in the bank in investments or a large corporation.
It’s really quite unfortunate, because the way that it was set up was that the applicants who are not social equity, like myself, would be contributing to the success of the social equity applicants. We would be paying fees. We would be incubating. We would be providing funds to really see success from the social equity applicants. It’s just frustrating and it's disappointing. And it really ends up hurting a lot of people without helping anyone. And the only result that I can see is that you're more likely to have failure from the social equity candidates, because they're not getting the incubation and the funding. It ensures that the illicit market remains robust in LA. We’re already competing against people who aren't paying the huge taxes that we are, who aren’t facing the regulatory climate that we are. And now, we don't even have an option of licensing.
ES: In terms of the timeline, that most recent rule change that you’re describing happened in July, correct?
ZP: That is correct. It was very sudden, the change. As recently as May or June, there were delivery operators in meetings with the [Department of Cannabis Regulation] about when they were going to start the pilot program for delivery and when there were going to start the general rollout. They assured us it was coming very soon and that we'd be really excited and happy about when it comes out, obviously. And then they reversed course and ended up changing it very suddenly. Between the public notification of the changes they were proposing and when it actually happened was so fast—it was just in a matter of two weeks or so. We sent letters, we went to the meetings to explain, like, “I don't know why this is happening! Please don't do it! It's hurting way too many people.” It just fell to deaf ears. Given our options, I guess, the legal route is the only option that we have left. We really hope we can come to some sort of resolution.
ES: Right now, in the fall of 2020, when delivery is top of mind for businesses and consumers, what is the state of delivery in the city Los Angeles?
ZP: If you're outside of the city of LA and hold a license in a city outside of LA, you can deliver into LA. If you’re a storefront, you can deliver in LA. There are delivery options, but these are options that in many ways are hurting the city. They're not getting the same sort of tax revenue that they could be if [delivery] was licensed within LA.
"They changed the law and prevented a very large portion of us from getting a license for another five years, which is just untenable."
- Zachary Pitts
This is actually one of the problems with the delays in LA: For a lot of delivery companies, their only option to survive was to make an agreement with a storefront where they would take over and become part of the storefront’s company. They would manage the delivery arm. A lot of the storefront owners, they have enough on their hands. They're not familiar with delivery. It's a different type of business in many ways. But with these contracts, it's a pretty predatory practice in some ways. They are not really making that much money. It’s not really offering them long-term viability. And then other people have just left the city and they're giving their money and licensing fees and a good portion of their tax dollars to [some other] city outside of LA.
ES: And that can include cities within Los Angeles County, right?
ZP: Yeah, and so people have found a way to do it legally. I think in the end, though, it just ends up hurting the local businesses in LA and it ends up hurting the city—the tax revenue it's making.
For me, personally, this is a community that I feel part of. I was born in LA. I grew up in LA. I'm connected to it. I have a lot of employees in LA. And. in my particular instance, we have distribution and manufacturing [licenses] in LA, and in a pretty inefficient manner we kept on a lot of employees in LA while we tried to wait out the licensing delays. We sunk a lot of costs into that, and we have a lot of allegiance to this community. We just want a way. We want a fair chance that was given to us and then taken away.
ES: Could you provide a sketch of Ganja Goddess as things stand today: where you hold delivery licenses and what the company looks like in 2020?
ZP: The central delivery hub that we have is in Northern California, in Oakland. And the way that we operate is we’re an overnight delivery. We're not really trying to compete on speed. People place orders, and then we try to get it to them sometime in the next day. By slowing things down, we can reach most of California. The inefficiency of not having an LA hub really does hurt us.
ES: Could you describe why and how delivery has become so central to the growing cannabis market? In 2020, part of this answer may be kind of obvious, but what trends have you seen over the past six months?
ZP: Back in March, we had a huge increase and then it came down and leveled out—though it's still at a much higher rate than it was before the pandemic. At the very beginning, people were almost—I don't want to say the words “hoarding,” but they were making sure they had a very large amount of supplies and expecting that they weren't going to be going out or getting deliveries at all. Now, people are just more used to getting deliveries on a regular level instead of planning out three months in advance. What's happening in delivery was something that was going to happen anyway. The pandemic just jumped us ahead a couple of years. This happened in every aspect of our economy. I never used to get groceries delivered, because I was always kind of picky about how I chose my produce and things like that. But now it's something that I've used a number of times. I'm sure there are even people who hadn't used Amazon before and now are using it somewhat regularly. It's the same thing with cannabis.
It's something that can be delivered that a lot of people have already enjoyed. It has a history tied to delivery during the illicit days. But it's just become very obvious how easy and convenient and safe it is for people. I think there's also another aspect to it—branding and lifestyle. The retail shops that were surviving against places like Amazon and Walmart, they're the ones who are able to create a brand curation and a lifestyle that people are attracted to. You can't get that from something that just does everything, like Amazon or Walmart. That’s where there's been a lot of success in delivery and in cannabis in general—creating that brand. That's another aspect of ecommerce, where websites have started to replicate that online and curate an experience—curating a menu that people are attracted to and that they feel that they can trust.
ES: Along those lines, what are some of the ways that a delivery company like yours can, engender customer loyalty to really boost that connection that might occur over the counter at a storefront?
ZP: There's still a lot of customer service to delivery—keeping the customer informed about how it's being delivered, helping the customer when they contact us when they have questions. We have to have really robust education resources built in to the buying experience. We need to have really detailed information about the listings for each product that we carry. We need to be able to explain to people who are new to cannabis and who are still learning. Even if they have one or two years of experience, it's different than alcohol. Often, there isn't that legacy of knowledge about cannabis. We try to hit it on every level: We have newsletters, we have blog posts, we try to write up information or really detailed FAQs. We try to create as many resources as possible, so that people feel comfortable and feel like they understand what they're doing and how to learn more themselves and how to get a positive experience. And if they have a positive experience with us, that creates a lot of loyalty. It creates a legacy of loyalty that is really important for this industry, because customers are so new to cannabis in general.
ES: A lot of other states and cities, of course, are inevitably going to roll out delivery regulations and licensing processes. We see this in Massachusetts right now. What have you learned in dealing with cities and regulators that you suggest other jurisdictions think about when they go to write their delivery regulations? This might be an intimidating thing for a city council member in Chicago or wherever. What would you sort of recommend that these folks think about?
ZP: I think the key is that a lot of people are very new. A lot of the regulators are very new to cannabis, obviously, but the operators and consumers aren't necessarily as new.
I think there's a lot of value and explaining what your goals are to the people that you're trying to regulate. So, for instance, the primary goal of the Bureau of Cannabis Control [in California] is consumer safety, employee safety and raising revenue for the state. With consumer safety, I think probably the most important thing is science-based testing. There is not as many peer-reviewed studies as there should be on how to safely consume cannabis, what cannabis does to different people, et cetera.
I think that's one of the most important things, but then leaders tend to go very heavy on the fears of theft and armed robbery. With delivery, we have a very low rate of theft or robbery just because of the fact that instead of them coming to us, we're going to them. We tend to do so much pre-verification of the customer anyway. It’s a very difficult thing to rob from us. I understand their inclination, but at the same time this isn't nuclear waste. It's not going to get into the wrong hands and hurt tons of people. It's a product like any other. And once you bring it into the normal marketplace, you end up with the very fact that if you're a legal, licensed business you can call the police. Previously, especially in California, if you were robbed, even though it was legal to call the police, it was probably going to end up worse for you than if you don't. That very fat alone has revolutionized the industry and our ability to deal with theft and crime in a safe manner.