Finish line in sight for recreational licensing of pot shops, but hurdles remain


By Fred Dreier, Marijuana Business Daily


Washington state’s march toward retail marijuana sales is accelerating, with officials holding a long-awaited lottery this week to decide which entrepreneurs can open recreational shops.


While the finish line for the application process is now in sight, there’s still a ways to go. Once the results of the lottery are announced May 2, winners will have to clear several other significant hurdles before receiving a license, and they might have to wait several months before opening their doors and selling cannabis to the general public.


Officials with the Washington State Liquor Control Board are hopeful that a few retail stores will open for business by mid-July, although they admit that the lion’s share of businesses will not open until weeks or months later.


Here’s a rundown of the licensing process for retail stores as well as some insight into the challenges applicants have faced and a look at how existing dispensaries are preparing for the possibility that they won’t win a permit:


Applying for the Lottery


Prospective retail business owners have been working for months to prepare for recreational marijuana.


Entrepreneurs had to complete a preliminary application just to enter the state’s lottery for the 334 retail licenses. Applicants who already operate medical dispensaries also had to decide whether to bring their businesses up to code for the new retail regulations before or after the lottery, and they had to determine whether to create a secondary plan should they miss out on a retail license.


Brian Smith, a spokesperson for the Liquor Control Board, said the lottery application required business owners to have at least a letter of intent from a landlord for their proposed location and pass a basic criminal history check.


More than 2,100 businesses initially submitted applications, according to the board. Hundreds of those were turned away due to incomplete applications, while another 100 did not pass the criminal background check or the meet the required zoning rules for their businesses.


In the end, roughly 1,500 businesses qualified for the lottery.


Dispensary owner Angel Swanson said the 30-page application to enter the lottery was time-consuming. Swanson had to show proof that her 2,500-square-foot retail spot complies with zoning rules and is indeed hers to use. She then had to provide a detailed work history for every job she’s ever held.


Swanson also faced the question of whether to invest ahead of time in her existing dispensary to bring it up to the standards required for retail sales — a big risk considering she might not win a license — or wait until after the results of the lottery. Swanson chose the former, shelling out more than $20,000 in infrastructure improvements, including a new $6,000 security system.


“We want to be ready,” Swanson said. “The application fee was only $250, which is a drop in the bucket.”


Not all business owners have followed Swanson’s path. Ryan Agnew, a Seattle-based attorney, said many dispensaries he has worked with are putting off spending until after the lottery.


“It’s hard to spend money before you know you have a shot to get a license,” Agnew said. “I think some are holding off because the majority of the scrutiny will be done after the lottery spots are awarded.”


When Will Shops Open?


Officials are hopeful that a handful of businesses may be able to open by the end of July, but the lion’s share might not launch until later in the year, possibly in the winter.


The decision by retail owners to hold off on infrastructure improvements will likely slow the licensing process after the lottery is conducted. In fact, sources said this part of the process could take much longer to complete than the initial application phase.


“They have only been partially vetted at this point,” Smith said. “If you are chosen, we do the full license investigation.”


That investigation includes looking into the company’s business model as well as its financiers. Full background checks will be completed on individuals backing the company, which will likely be time-consuming and labor-intensive. Then regulators will look at the business itself to make sure it meets the standards for safety, security and compliance.


Smith said that egregious violations — if, for example, one of the business owners has a criminal record — could result in the loss of a lottery spot. But in the case of minor problems, the liquor board will work with lottery winners to get them on track.


This will likely slow the process further.


Industry experts are already hypothesizing how the trickle of retail shop openings will impact the budding cannabis economy.


“You’re going to see long lines at these retail shops through the summer,” Agnew said. “It will be tricky for recreational to compete with medical.”


Preparing a Plan B

With 1,500 applicants vying for 334 licenses, many prospective shop owners will go home empty-handed.


Those that own existing dispensaries will likely continue operating as is if they don’t secure a recreational license — as long as they are tolerated. Washington has not cracked down on medical marijuana dispensaries in general, even though they operate in a legal gray area. The state has failed to address how it will handle these businesses going forward but has not indicated it will attempt to close them in the near future.


“People believe that medical isn’t going anywhere soon,” Agnew said.


Swanson is hoping to get one of 17 licenses up for grabs in unincorporated Pierce County. But the odds aren’t exactly favorable: based on her back-of-the-napkin math, there are more than 100 businesses still in the running for licenses in the county.


Rather than rely entirely on the luck of the draw in the lottery, Swanson is investing time and resources into her secondary cannabis business, called Green Staffing Solutions. The company provides temporary or permanent employees for retail, processing and cultivation businesses.


Still, the fact that the whole process is tied to chance rubs her and others the wrong way.


“We are not dumb, we have a Plan B,” she said. “It’s just difficult to accept that it’s going to come down to luck.”

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