Hello everyone and Happy Holidays!
In this episode our awesome managing CA attorney, Mio Asami covers the most asked questions in California Cannabis licensing as well as shares her point of view that is the California Cannabis market. If you’re looking to start a licensed adult-use Cannabis business in California, do not miss this one!
Announcer: Information provided on this podcast does not, and is not intended to constitute legal advice. All information, content and materials available on this podcast are for entertainment purposes only. The views and opinions expressed are those of the speakers and do not necessarily reflect the official policy or position of Cultiva Law. Now, without further ado, here are your exquisite esquires, Mio Asami and Fabiola Jimenez.
Fabiola Jimenez: Oh, what’s up squad? Back with Mio and Fabi, per ush. Yeah. Well now we’re going to be the fucking usual, cause it’s 20 minutes and I know all you hoes can afford that. So-
Mio Asami: But honestly though, those hour long ones, ain’t nobody got time for that.
Fabiola Jimenez: No. So, thanks for tuning in with us. Today we’re going to be actually talking about one of the hottest topics that we have in front of us, literally every single day that I don’t know shit about, but Mio does, and she is our California guru licensing marijuana queen of everything. So per usual, we’re going to be talking about four different things when it comes to California licensing. And so, just kind of opening up a little bit and Mio, could you kind of give our squad a little bit of background, a little bit of information on, what does getting licensed in California to sell marijuana mean?
Mio Asami: Sure. To start, California is very attractive to many people because it’s such a huge market, so it’s a huge state. I mean, there’s a lot of economic potential over there. So people really want to get licensed and they want to jump in… Did you jump on this cannabis train, but California, when they pass Prop 64, which was the one that made it legal for recreational marijuana, they really didn’t make it easy at all. And they actually made it very fucking hard. So, the way that the regulations were set up is that you need both a state license and a local license or a local approval, whatever the fuck, the local city or the County wants to call it, they made it so that you have to have both.
Mio Asami: The state won’t give you a license unless you have the local approval and what’s even more fucked up about it is that each of these locales decides to… I’m going to be really fucking honest with this. What’s even more fucked up is that each of these locales decides how they want to go about licensing themselves. So, as somebody who wants to help clients get licensed, we want to help y’all get into the business, but keeping up with every single city, every single county and how much they charge for licensing and how they process the licensing, whether it’s going to merit base, whether it’s going to be a raffle, whether it’s going to be on a rolling basis, whatever the hell, you have it, they’re all different. They’re all different, really different.
Mio Asami: So yeah, it sucks. So when it comes to the general setup of it, that’s pretty much what it is. You have to have both the local approval and the state approval that goes in addition to the traditional licenses, like your business license, your CDTFA, tax ID at the state level, you need your seller’s permit depending on what stage of the supply chain you’re in, then you’re going to need a resellers permit and all that jazz. So, it’s a shit show. It’s a fucking fat process.
Fabiola Jimenez: So let’s say, we buy some fucking [inaudible 00:04:00] setup and we’re good by the time we come to you. We did this on our own. Can you talk about some of the areas that are open, some areas that are closed, maybe some hot areas that people are really looking into, that you get a lot of questions on that.
Mio Asami: Yeah. And you know, this is actually one of the most common questions that I get when I’m talking to clients and when I’m talking to potential clients and just people in general. Whenever I say, “Well, you need both the local and the state approval”. They’re like, “Okay, well then where can I get a license?” So like I said, because you need to have kind of an idea of where you would like to even operate your business. Like we start there. That’s really, the only way to go about finding out, is to look at each of these cities and to look at each of these counties to see if they’re open for licensing and how they go about doing it. So it’s-
Fabiola Jimenez: So it’s a case by case basis, location by location. So, in theory, someone can come in and go through every city in California, every County in California and find out what or who is issuing licenses. And they can just kind of scour one through.
Mio Asami: Yeah. It’s a complete trial and error thing. Like, “Hey, I thought of a city”, and then “Let me check that city”, right. Yeah. So, which is why, through our experience and through our various whatever it is, like our work and just in general, trying to help people with their licensing. We have some areas that we know are open or that are rather more inviting for cannabis businesses, but they tend to be more out in kind of the rural areas. So if we’re talking bigger cities, San Francisco is… Actually, I don’t know about San Francisco, but we’re talking like LA, those metropolitan areas like orange County, just kind of that general area, they’re mostly fucking closed, man.
Mio Asami: The most prominent place that comes to mind right now is Cathedral City. Yeah. It’s out by Palm Springs, California, which is like [crosstalk 00:06:21], it’s out there. So if you want to open retail, go ahead and go looking for Cathedral City, but they’ll also charge you up the butt for taxes. So that’s probably why they’re not-
Fabiola Jimenez: Yeah. And that actually brings up our next topic, which is, there’s a lot of allure and the glam behind owning a cannabis licensed retailer or farming or processing, but what are the real costs? Talk to me about what is it that… Again, we go through this hurdle, right? We get all of our state and city licensing, and now we have this area that we have, and we’re ready to go. What are the costs that people should be considering? What are those returns for those investments? Let’s talk about really what are those hurdles that people need to come in with and deal with.
Mio Asami: Yeah. I guess, kind of to break it down by stage, when it comes to costs, you want to think about licensing costs. So, these local licenses, they can charge anything that they want, as I said before. So I’ve seen as high as $20,000 just to apply. And then after that, they charge a licensing fee if you get approved. And I’ve seen as low as maybe $3,000 for the application fee. So it really varies, but you want to consider the locale that you’re trying to get licensed in, in calculating your budget. So that’s just for licensing and then some attorneys, not including us, but there are some attorneys who do charge up towards $60,000 to help you out with getting your license. And they claim to do everything for you, everything from finding the real estate up until turning in the application for you, which really technically they’re not supposed to do, cause there is a regulation against anybody else preparing your application. But anyway, that’s beside the point, but that’s also a cost that you want to consider.
Fabiola Jimenez: I mean, not for anything, I think that a lot of people can kind of get situated with setting up their business and finding a general area. But as much as I hate to say, okay, you need to over lawyer everything, cause that’s not how we work as a firm. But I do think that a certain point, especially when it comes to the complexities of dealing with applications, I do think that it’s worth your investment-
Mio Asami: Oh, a hundred percent.
Fabiola Jimenez: To hire a lawyer, maybe not one that does everything, and then will charge you up the ass for it. One that you can talk to and they can walk you through this process and will get you what you need, obviously is going to come at a cost. But when you’re looking at it from the long-term perspective, if you pay upfront to get a lawyer to do this the right way, one time it’ll save you money in the long run, compared to you having to do this four or five, six, seven times with the state agency, because you didn’t submit the right document. So-
Mio Asami: A hundred percent, yeah. My in general version is for those lawyers that like to oversell themselves, just a little bit. I mean, you want to consider, again like Fabio said, “Definitely having a lawyer or just some kind of help in completing the application, because it is so complicated. It is definitely going to help you in the long run”.
Mio Asami: That’s a cost that you want to consider as well. These range anywhere from… it’s hard for me to give any range for legal costs because it’s wild. It’s a wild fucking industry. Yeah.
Fabiola Jimenez: One thing that I have to bring up that I actually discussed with my clients too, is really taking the time to understand the timeline. People think that, you go through the steps, I have my business, I’m all set up, I have a location, I know what I’m doing, and I have this license.
Fabiola Jimenez: The timeline actually is for getting your retail store up or your crop in the ground and planted and dried and everything. You go through this process. I mean, people, can be talking in a year minimum to be up and running. And so, that’s another cost that I think just kind of parleys through anybody in the cannabis industry, because you just don’t know. I mean, utilities are different, zoning restrictions are different. And so you can really take a long time to get your business up and running word as a profitable. And so, I have to kind of chime in there and say that “That’s another issue-“.
Mio Asami: Yeah, this kind of goes beyond just licensing, but part of the process is some places, some cities like to require applicants to have a location secured already. And that means that this applicant is paying rent on a location that they might not even get a license in. You can see where it’s kind of backwards, but at the same time, these things are going to… these costs are going to pile up. People don’t really consider things like that when they’re in the grand scheme of the out-licensing application fee is this, and then the lawyer costs this much, and then that’s all I’m going to spend. But really, you’re going to be paying red.
Mio Asami: You’re going to be paying build out construction fees. You’re going to be paying permits for those build-outs or whatever it is. You’re going to be paying for inspections. You’re going to be paying for security. A lot of the security plans have to be written and drafted by a person that’s licensed for security within California. You’ve got to pay for an architect to draft your site plan. There’s so many different things that just go into the licensing itself and the application itself. And then that’s on top of insurance that you’re required to have for your business. If you’re doing retail, then you got to buy inventory because you got a license. Great. You got a location. Great. But then what are you going to sell? [crosstalk 00:12:42]. You got to sell your shit. You got to buy your shit to sell. I’m going to buy inventory.
Fabiola Jimenez: Yeah, and to me it sounds like at a minimum, you’re looking at least a hundred grand in your pocket that you can kind of have-
Mio Asami: I would say that’s just for licensing. California, especially, whenever people ask me how much it would probably cost, especially for retail, I’d say to be conservative, I would say have at least $600K. It’s not cheap. It’s not easy. It’s not cheap, especially with construction. Some places even require that you use local construction companies. For example, Oakland, Oakland requires that you use local construction companies. Most local construction company is going to charge you a hundred thousand dollars, just for your build-out. Then, I’m sorry, you sure are out of luck, but that’s what you got to do. It’s a lot.
Fabiola Jimenez: And, how do you see it… Our last topic is really kind of trying to understanding Ben, just chat about the California economy and how that is affecting the cannabis industry. And then, I really kind of want to touch upon a little bit of the black market and how that has an influence on California economy in general. So, let’s talk a little bit about that.
Mio Asami: For sure. I think as of November-ish last year, the projections were, that the regulated market, which is the market, the revenue created by people with licenses basically, within California alone, was something around $3 billion. But the flip side of that, the black market, the unregulated market, the untaxed unregulated non-compliant market created $8 billion. So it’s more than double we’re talking than the regulated market. So again, if you look at it on a positive light, that’s the potential that’s there, right? There’s more than double the potential of the current regulated market to make that revenue, in taxes or whatever it is that can be used for whatever it is. But when it comes to how big the unregulated market is, I mean, California, I get so many calls from so many people.
Mio Asami: They’re like, “Hey, like I want to open a dispensary in my city? How do I do that?” And I asked them, “What’s the city?”, and then I look up the city and I say, “You know, I’m sorry to tell you, but they’ve prohibited all cannabis activity”. And they’re like, “Well, there’s a dispensary down my street”. And I’m like, “Yeah, they’re probably illegal”.
Mio Asami: It’s so freaking common to have dispensaries and just businesses engaging in cannabis that look legit. They’re-
Fabiola Jimenez: Which is terrifying.
Mio Asami: So fucking legit looking, but they ain’t licensed yo. It’s so crazy, and when it comes to unregulated market and things like that, there’s only so much that the state can do at the same time to try and regulate them because they’ve also…
Mio Asami: Okay, this is personal, this is professional personal opinion, but the way that the state set up their licensing scheme really fucked them over in how big they were allowing the black market to get, because they made so many fucking barriers to entry for the regulated market that the black market is like, “Yo, I don’t got to pay taxes, I don’t got to get a license. I can do whatever the fuck I want and still make all this money. I make more money doing black market than I do with regulated market. So why the fuck would I get a license? So-
Fabiola Jimenez: No. And that’s super fair, and I also think that the acquisition costs are so much lower. I mean, a store can pop up, and I… correct me if I’m wrong, a store can pop up and then be gone the next day. When someone says something, all of a sudden they show up, 10 miles down the road and it’s the same people, the same thing. They don’t-
Mio Asami: Hell, even the same goddamn location. I’ve heard stories of places that get shut down for like two weeks and then they just come back and reopen two weeks later. How the fuck does that happen? It’s beyond me yo. Enforcement, it’s just a whole fucking different issue.
Fabiola Jimenez: Like you said earlier, I mean, it’s a matter of personnel, right? Like you can’t have someone being there all the time. Otherwise, the black market wouldn’t be where it’s at. They are famous for obviously operating under the radar. And so, if we had a police officer for every one person that was in the country, we could take control of those. But the reality is that even in California, that’s just definitely impossible to be able to have someone go out there and look at and say, “Oh yeah, that’s an illegal, we’re going to just shut this down”.
Fabiola Jimenez: It’s just, they look so real. They look so real. They have all the logos and the branding and the window fixings. And I mean, it would take a snitch, one to call her shit out well, but also, two would actually take a lot of manpower to investigate and really figure out if that is an illegal location operating or not.
Fabiola Jimenez: And then by that time, I’m sorry, but if you’ve ever… not that I’ve ever dealt with the illegal black… But if you’ve ever done that, you know that they’re quick on their feet. They’re good. They’re good at their job. And they’re selling product as professionals, that’s it. But instead of doing it in the alley, they’re doing it at a storefront and then they just balance in two weeks when they’re starting to feel the heat, which is just real. This is just real talk. You’re not going to have your dealer be there on the corner every single day. They’ll switch out, they’ll change corners, they’ll change people. And this is the same thing, it’s just on a much more louder, more blatant scale, which is really interesting. So it’s going to be crazy, but yeah-
Mio Asami: I mean, I think it’s even more heartbreaking to me sometimes when I get calls from people who are like, “Hey yo, I’m going to be real with you. I don’t have a license, but I’m growing right now anyway. But I want to get a license. How do I do that?” And these people are trying to… they want to start doing it the right way. But again, so many barriers to entry that they’re like, “Fuck dude, I can’t do that. It’s just not possible”. So yeah, I really think they’ve fucked themselves over.
Fabiola Jimenez: Yeah. It’s definitely like a system failure overall. I mean, even when you start looking at even different States, no state is perfect. I mean, obviously you can look at Oregon and Colorado and say like, “Okay. Yeah, a little bit more progressive than the rest of us”. Cool, I get it. But there’s also a lot of trial and error and it just really depends on the state and how far they’re willing to push that envelope. Yeah, I just don’t think-
Mio Asami: And especially California is also a little unique in that, California was the first state to legalize medicinal cannabis. We had that shit back in ’96 and then it took literally 20 years until recreational. So, all of the people that were already operating under medicinal days, they’re like, “Why the fuck do we got to suddenly change up our shit? We’ve been doing this for 20 years. What are you talking about?” So then it just adds fuel to the fucking dumpster fire that’s down there.
Fabiola Jimenez: It’s fuel to the fuckery. And this is another systematic issue where our States, our government, aren’t listening to the people. I mean, the first people that they should have listened to, like “Okay, who’s been growing weed for 20 years?” Okay. What do you think are the issues here? But it really comes down to, I think, greed, corporate greed of where can we get the most bang for our buck with absolutely minimal effort, minimal amenable expertise, is just like, “Hey, fuck it, whatever. Let’s just try to whatever we can”.
Fabiola Jimenez: And unfortunately, there are people that are willing to pay that, but those are the people that we don’t want in this industry. You don’t want those corporate actors, we really want to pave the way for, you and me to be able to just open up a shop, like any other fucking candle store, you know what I mean? And so [crosstalk 00:21:11], yeah. It’s kind of wild. And that is our show for today, y’all. So, make sure to follow us and subscribe Cultivating Combos, on IG you can follow me at @fabiatcultivalaw.
Mio Asami: You got me at Mio, @cultivalaw.
Fabiola Jimenez: Check out our Facebook, @cultivalaw. And Mio, what was the strain of choice, for today’s episode?
Mio Asami: So, today’s episode sold the strain of choices, blue dream. For those of you who understand the bad blue dream came from California. And that’s why I chose that today. Blue dream is a cross between blueberry and haze. When we’re talking about properties, it’s a sativa-dominant hybrid. So you got like rural energizing effects, but like not completely up there [crosstalk 00:22:06]-
Mio Asami: Check out on our IG, cause we’re going to post why this is hilarious to us. So whenever I say, sativa-dominant hybrid, check out our IG [crosstalk 00:22:24]-
Mio Asami: Anyway… because it’s real talk anyway. So back to blue dream. So we got sweet berry aroma, cause it’s got remnants of the blueberry. People use it, people smoke it, whatever the fuck, ingest it, consume, whatever it is you do. [crosstalk 00:22:46]-
Mio Asami: We’re talking symptom relief without many of the sedative effects, so that’s probably part of the more than a sativa-dominant part hybrid. But anyway, that’s our strain of choice today. Thanks so much for tuning in.
Fabiola Jimenez: And happy holidays, y’all.
Mio Asami: Seriously happy holidays.