Ep #3 - Ep #3 - Breaking Down The Cannabis Regulatory Confusion

Breaking Down The Cannabis Regulatory Confusion with Courtney Caron & Hirsh Jain

In this week’s podcast we sit down with Courtney Caron & Hirsh Jain and discuss the regulatory challenges that people face entering and within the cannabis industry.

Courtney Caron is the founder and managing partner of Adamant Law Group focusing on cannabis law and music entertainment law. Courtney represents many of the State of CA’s top cannabis retailers and is also a co-owner of The Artist Tree Fresno a cannabis retail store and Elevate Lindsay, a retail, cultivation and consumption lounge in Lindsay, CA.

Hirsh Jain is the Founder of Ananda Strategy, a consultancy that advises leading cannabis brands, retailers, technology businesses and venture capital funds in the United States. Ananda has helped clients operationalize more than 50 cannabis businesses in communities across California. Hirsh is on the Board of Directors of the National Organization for the Reform of Marijuana Laws (NORML) in California and also serves as Vice Chair of the California Cannabis Chamber of Commerce, which aims to promote the common interests of cannabis businesses in California.

During the discussion Courtney and Hirsh talk about the challenges with licensing, merit based applications, application processes for people in california, nationwide and at local levels while also debunking some myths about opening stores, compliance issues and other cannabis regulatory issues they have dealt with during their careers.

Transcription:

Breaking Down The Cannabis Regulatory Confusion with Courtney Caron & Hirsh Jain

Eric:

This is the Roots to Risk Podcast hosted by Eric Schneider, alongside Isaac Bach. Roots To Risk brings you insights, the latest stories, and long form discussions about the cannabis industry. You’ll hear interviews with industry leaders and their perspective on current and future trends, how they’ve built success and what challenges they have faced. Our goal is to facilitate candid conversations and provide informative content for the cannabis community at large. Let’s go. What’s going on, Isaac? How we doing today?

Eric:

How are we feeling?

Isaac:

Yeah, it’s, uh, it’s a gloomy day here in New York, but I, I’m, I’m excited for the weekend. I’m really excited for, uh, the two guests we have coming on today. I think it’s gonna be very unique and, uh, insightful, just given the fact that, you know, they’re, they’re a wealth of knowledge and honestly, two people who are newer to, to our network.

Eric:

Yeah, I’m super excited. Um, you know, I think, I think you and I met Hersh and, and Courtney a few months ago, um, just crossing paths, talking about, you know, California market, um, providing a really, really interesting insight into the California market. I think it’s gonna be an awesome episode. Uh, just quickly to, to give their bios for everybody, you know, Courtney Keone, Courtney’s the founder and managing partner of Adamant Law Group, a boutique Los Angeles law firm focusing on cannabis law and music, entertainment law.

Eric:

Courtney represents many of the state of California’s top cannabis retailers and counsels her clients on licensing, merit based applications, compliance, and general matters. Courtney has won dozens of highly coveted merit based a licenses on behalf of her retail clients. Courtney is also a co-owner of Artist Tree Fresno and Cannabis Retail Store and Elevate Lindsay, a retail cultivation and consumption lounge in Lindsay, California.

Eric:

Courtney has three kids under six and enjoys B M X bicycle racing in her free time. Courtney’s got a lot going on, lot going on.

Isaac:

I wish my resume wreck like that.

Eric:

Yeah, oof. Unbelievable. And, and, uh, you know, not to be outdone Hirsch, Jane Hirsch is the founder of a non strategy, a consultancy that advises leading cannabis brands, retailers, technology businesses, and venture capital funds in the United States. Ananda has helped clients operationalize more than 50 cannabis businesses in communities across California. AO also serves clients in Arizona, Colorado, Louisiana, Maryland, Michigan, Nevada, New York, Ohio, and Oregon Markets.

Eric:

Hirsch is also on the board of directors of the National Organization for Reform of Marijuana Laws in California, which for 50 years has been working to reform. California’s cannabis laws led the opposition to the War on drugs in California, and co-sponsor the Nation’s first medical cannabis law, prop two 15 in 1996. Hurst also serves as vice chair of the California Cannabis Chamber of Commerce, which aims to promote the common interest of cannabis businesses in California. He also has BA from uc, Berkeley, and a JD from Harvard Law School.

Eric:

Wow. Um, super excited for, for this segment, Isaac. It’s gonna be unbelievable, and, uh, I think they’re going to do most of the talking and provide a wealth of knowledge for, for those tuning in. So let’s go to ’em. Hey, everybody, how you doing? Um, this is the Roots to Risk Podcast brought to you by your host, Eric Schneider and Isaac Bach. Uh, two co-founders from Alfa Root. Really excited for this episode. I think it’s gonna be a unique view into the industry.

Eric:

Um, you know, going from, I would say a little bit more on the compliance and legal side, and, you know, want to introduce Courtney Corone from Adamant Law Group, as well as Herrs Jean from Ananda Strategies. Thanks for joining us today.

Hirsh:

Thanks for having us guys.

Courtney:

Glad

Eric:

To be here. Absolutely. And, and so we, we’d love to just kick off and, um, Hirsch, if you can lead us off and provide just a little bit more context into what you’re doing at Aand Strategies and, um, and we’ll go from there.

Hirsh:

Yeah, I’ll, I’ll give a, a sort of quick overview. Uh, so my firm is Aand strategy, and what we do is we serve, uh, cannabis brands and retailers, um, but also ancillary technology businesses and investment funds, um, across North America and in western, uh, Europe as well. Uh, prior to starting this firm, I worked in-house at a couple of large cannabis companies. I was the West Coast Director of Government Affairs at Med Men, and then I was the head of government affairs at cva. Um, so we serve operators across the, uh, supply chain. And in particular, um, I’m lucky to work with some of the leading retailers in California, which are, are Courtney’s clients.

Hirsh:

And that’s how Courtney and I, uh, do a lot of our work together, which is, uh, supporting, uh, some of the leading retailers in California, which are, which are her clients. So, um, I can toss it over to her to maybe say more.

Courtney:

Um, I’m Courtney with Adamant Law Group. We’re a southern California based, um, law firm that focuses primarily on cannabis, um, and the cannabis industry. But I also have a music, entertainment, um, practice as well. Um, prior to starting my firm, I was, um, associate general counsel for Live Nation US concerts, and worked for several large litigation firms prior to that. Um, I love the cannabis industry. I came about, um, my law practice, uh, just primarily through helping a friend, um, who prior to 2018 was looking to sell his delivery business in Los Angeles.

Courtney:

And, um, sort of through helping him with that, um, enjoyed quite a bit, um, of the industry and decided that maybe I would make it a full-time, um, practice. And so between 2016 and 2018, um, I worked primarily with him and then started my own firm in 2018. And that’s how I met Hirsch.

Eric:

Yeah, I was just about to ask, how did, uh, how did, how did you two get to meet one another and, and collaborate, you know, moving forward?

Hirsh:

Well, I mean, to be honest, I knew Courtney’s name. I mean, just to be totally candid, like many people in the industry knew her name because she was so successful at winning, um, retail licenses for some of the best retailers in the state. So I was aware of her name. And then I think we formally met, um, through the Cannabis Chamber of Commerce, which we’re both on the board of in la, which basically just tries to promote the common interests of, of cannabis businesses. So we met through that and just incrementally started doing some work together. And I mean, I’m, I’m, I’m grateful, you know, cause Courtney supports a lot of the, the best retailers in LA and I’ve been able to help plug into some of that work over the past couple years and, you know, help, uh, some of her clients open, um, some, some leading stores in California.

Courtney:

Yep, that’s absolutely right. Um, Hirsch and I have, have similar strengths, um, but also have some different experiences in the industry. And so Hershey’s time working for two of the larger, um, cannabis companies. And then my experience with merit-based applications has worked really well hand in hand. And so together, um, we come together and, and work through the merit-based application process and then the interview phase of the process. And then even, um, the entitlement, um, process once the application, uh, has been, um, submitted and the licenses have been won.

Courtney:

And so together we’re able to really, um, utilize each other’s strengths and knowledge in the industry to, um, further retail cannabis in California and across the United States.

Hirsh:

And, and, you know, just to put a pin on it, I think, I think the heart of it is like California’s a really complicated state. There’s 500 cities in the state. It’s not an easy state to navigate. <laugh>, both of us spend a tremendous amount of our time understanding the policy dynamics in the state where different retail opportunities are navigating the very complicated processes that exist at the local level, which can be used to help, you know, a client identify where they wanna open a retail store, win that license, and then get that store up and running as quickly as possible. And one of the things that, you know, Courtney is really good at, and she just kind of has that track record to show it is not only just winning those licenses, but opening them as quickly as possible so those stores can have a really enduring competitive advantage, uh, in those cities.

Hirsh:

So, um, that’s, that’s been a big part of what we’ve done

Isaac:

Together. Yeah. Have you guys noticed any, you know, so these are municipalities that are significantly easier or harder than others, or where’s kind of been the biggest issues as it comes to some of those merit-based applications or applications in general?

Courtney:

Oh, wow. So the merit-based application process I think is difficult in any city. Um, some of the cities will utilize an outside consultant, and I find that the cities that do utilize an outside consultant typically are a little bit more organized than the cities, um, that try to do it on their own. And that’s simply because some of the consultants like HDL have gone through this process so many different times that they have, um, you know, it’s, it’s pretty a well-oiled machine as far as how to roll out the process and then work through the different phases of the application process. Some cities try to replicate that on their own.

Courtney:

And, um, I have found that that has been a little bit more problematic because they just don’t have the insight that some of the consultants that have gone through this process have. And so it creates problems that they maybe weren’t, um, you know, able to foresee, uh, which then sets their program back.

Courtney:

There are also cities who use consultants who still have problems, and I really think it’s just because, um, this is extremely, extremely competitive. You have, you know, a hundred retailers and some of the cities vying for four licenses, and so obviously those who don’t get the opportunity to move forward are going to be upset about that. And that typically then, um, you know, releases this whole litigation phase, which slows the entire process for everybody. Um, as far as like cities that I think, um, rolled out a process that went really smoothly.

Courtney:

Um, I mean, hmm, <laugh>, I’m trying to, trying to think of one where it was seamless. Um, I can’t, I can’t actually think of any that ha so far have been seamless from start to finish. Um, the, the Fresno application process was lengthy in time in that after the applications were submitted, it took a really long time for them to go through the applications and identify the winners.

Courtney:

And then they had had an automatic appeal process that prolonged, um, uh, an applicant’s opportunity to apply for their entitlements, so for building plans and permits to get moving. Um, however, once that appeal process ended, uh, I found that they were extremely expedient in getting through the building plan process, um, for the artist tree. That was the first store to open in Fresno on July 11th of last year. And that process was pretty much from September 1st until July that the, the artistry went through the entitlement process entirely and built out the entire store and had that store open.

Courtney:

Um, and that was a, a pretty fast process.

Hirsh:

And, and Isaac, I would just say, I think your question goes to the heart of some of the challenges with the California cannabis market. You were like, Hey, are some of these cities difficult? And I think, you know, what Courtney basically said is they’re all difficult, but to varying degrees in California, a ton of power is given to these local municipalities to, to, to regulate these processes. And while that sounds good in theory, they’re just not well resourced enough to administer these processes. So a lot of what we do is try to be thoughtful and give guidance about where c you know, clients should or should not apply, right? So if a city passes an ordinance, but there’s a really vocal anti-cannabis minority in that city, which I know by watching these city council meetings, I mean, that attunes you to the fact that this might not be a smooth process, or if the city’s not very well resourced, you know, you know, they’re not gonna be able to administer the c U P process, um, that, that they’ve designed, or if the zoning right, like makes such little sense that all of the properties will be exorbitantly expensive.

Hirsh:

And so I think that’s how some of this strategy and looking at the landscape, like marries a lot of just, um, you know, just the, the nuts and bolts like skills of getting this over, uh, the finish line. And I mean, just to put a pin on it, you’re not gonna make money if you’re holding a property for three years and you can’t operationalize the business. But if you can operationalize that in 18 months and be the first store open, right, as, as Courtney’s really good at doing, um, then, then you can be in a good spot.

Isaac:

No, that’s extremely helpful context.

Eric:

Do you find that like retail specifically is more challenging from a license perspective than any other type of cannabis license?

Courtney:

I think it als I think that also goes to the city. So for example, if we look at Santa Barbara County, um, Santa Barbara County HA has not been Benny’s for anybody, whether it’s retail or whether it’s distribution or cultivation manufacturing. If you take a look at the city of Ventura, similar situations, so those cities that have, um, the coastal zone that you have to deal with that sort of, sort of causes a whole different layer of, um, difficulty in relationship to, um, opening your business, whether it’s retail or ancillary. And I’m just trying to get through the entitlement process, um, from the state of California perspective, um, squa has just really complicated.

Courtney:

Um, and I am not a SE Q expert, so I can’t even begin to really deep dive into that for you. But I can tell you that when we were able to apply for provisional licenses, if your city had not undergone a C Q A analysis, then the state would sort of step in and assist with getting your licenser through the process without having that city having done a full c q a analysis that has ended.

Courtney:

So now in order to get a state license, a city has to have completed their c e a analysis, or the state has to have made a deal with that city, like the city of Los Angeles, for example, to take on c e A and be the arbiter, I guess if, if you will, um, to deciding whether or not that business is going to have some sort of effect with, with, with the C E Q regulations. So from a state perspective, it’s really long process if your city has not undergone the se Q analysis just to get your licensing from the state. So while the city might issue you your letter of approval and you can submit that to the state without that C E Q A, you’re in this holding pattern that can take somewhere between three months to a year.

Courtney:

Um, and that’s also while you’re paying rent on your building.

Hirsh:

Yeah, and you know, I’ll also just say as we’re talking about different cities, you know, one of the benefits of California system of local control, especially as more cities come online, is we have more examples to look to about what works and what doesn’t work. And that’s something that Courtney and I tried to do a lot of, just because we have, because we spend so much time looking at all of these cities, we’ve essentially committed to memory, right? Like what each of these cities have done. And so we often try to share these examples to drive towards better policy outcomes. And so I think that’s, that’s really the goal, both within California, but also on the state level in this industry, which is we’ve tried a bunch of things, we’ve had a number of intended goals, we’ve seen the results of those experiments, and now there’s a role for just sharing those policy ideas so we can achieve what we said that we wanted to achieve.

Hirsh:

And so that’s another lens that we try to, to bring to these processes. And where cities will, will listen to us, we try to provide guidance about different tax structures and, and zoning, but um, obviously every municipality makes their own decisions

Courtney:

And even just the different application processes. So in the state of California, we see really three different types. You see a lottery, you see a merit based, and you see, um, just a free for all. So I’ll give you a couple of examples. Costa Mesa, uh, free for all. So anybody that wants to apply for a retail license had the opportunity to do so in Costa Mesa. What problem did that cause? Um, 68 or 63, I can’t remember. It’s right around there, um, applications and a backlog as far as city staff was concerned trying to process those applications.

Courtney:

So that process has been going hirsch, I think about a year now. And there are only 14 of those 63 applications that have been processed. Um, and by processed, I mean have gone through phase one and, uh, through building, uh, I think some of those have gone through building and planning.

Courtney:

I don’t even think all 14 have made it through building and planning. Um, and everybody else is just in a backlog and just has to wait. And when you speak to the city about it, they say, well, we just don’t have enough staff to process all of these applications. But from Hersh and my perspective, that would’ve been something that, um, would’ve been a wise, um, area to look into prior to opening this type of application process. And the reason being that Costa Mesa is in an area where there isn’t a lot of Orange County cannabis retail dispensaries around.

Courtney:

So that was going to be an extremely, um, attractive city for cannabis retailers to apply. But the real estate is extremely expensive. Yeah. So everybody went in and said, I’m gonna be the first to open. I’m gonna get in here, um, grabbed up these properties only to find out that the city doesn’t really have the staff to process all the applications at the speed that would really be required.

Courtney:

Um, so that’s a, a free for all, um, example of a free for all type city. Then you might have some, some location like, um, you know, Ventura, Oxnard, Fresno, um, who have merit-based application processes, Chico, Redwood City, um, where they’re only gonna give a handful of licenses. And while a lot of, um, cannabis retailers would like to see, um, well, this is probably up for debate, a lot of cannabis consumers would like to see more options as far as retailers in their, um, particular cities. Um, narrowing the number of licenses that are available obviously makes it easier for the city to process those applications once winners have been selected.

Courtney:

But what it also does is narrow the number of licenses that are going to be in a particular area. And in some cities that number of licenses is far fewer than it should be for the population of that city, which is also a problem that you have to try to tackle.

Courtney:

And then you have lotteries, I guess, that the most, uh, infamous city with a lottery system would be Los Angeles, and we saw that through their lottery system, which had multitude of problems. Um, it ended up in litigation, which then, uh, caused, uh, another a hundred licenses to be released. Um, and I, I think Hirsch may actually have a better understanding of the number of those licenses in the social equity round of Los Angeles that have actually opened, um, the artistry was the first social equity license to open in, um, the city of Los Angeles. And I think since then, it really has not been nearly as abundant as the city had, um, suspected.

Courtney:

So there isn’t a process that particularly works perfectly. Um, but I think it goes back to just saying that having the right consultants and understanding the landscape is so important when deciding which type of application process to open in your city. And then of course, using that information to guide clients as far as whether or not that city is really going to be meant for them, their business structure and, uh, really their ultimate goals as far as, as being a retailer is concerned.

Hirsh:

And I, I just wanna say, you know, I think the policy d details that Courtney is drilling down into there are very important. Like, there’s a superficial way of looking at the California market and saying, you know, this market is challenged because not enough cities have opted into to legal retail sales, which is a problem. But all of the details that she’s walking through basically point to the conclusion that there are cities that years ago have passed ordinances to theoretically allow the sale of cannabis in their city, but they have designed policy structures that don’t achieve any of those goals. I mean, Costa Mesa, as she was walking through, they had a ballot measure in November of 2020, the last presidential election, right?

Hirsh:

It’s been more than two years, and none of those stores have a chance of even opening. And so as Courtney was laying out, like, what has happened in the interim, people have been paying property and going broke, like, you know, paying rent on empty storefronts, landlords are getting even richer, right? Um, people in Costa Mesa have no place that they can buy legal cannabis. The city isn’t making any tax revenue because there’s no business going on. And so, um, I, I think that it’s, it’s just necessary for us to get smarter about which of these policy frameworks work. And, you know, a city can design a really elaborate like, you know, um, fancy looking process that, that, that, you know, does just doesn’t work in practice.

Hirsh:

So

Courtney:

One, one final thought just on the application process. Um, I think that the city should really need to be a little bit better at, um, navigating through the information that is provided. And so I’m gonna use the city of Fresno as an example here. So it, in October, it will be two years since the city announced, um, who is going to move forward of the 21 licenses that were selected from, uh, the pool of applicants in the city of Fresno Embark. And the artistry opened in July, and those are the only two who have opened.

Courtney:

There are about 14 or 1314 who have made it through the, the C U P process. But most of those finished that c u p process three to six months ago and have done absolutely nothing since then to move forward. And when you reach out to some of those companies and you try to find out what’s going on, you’re finding out that funding is a really big issue, especially in California at this particular moment in time to open a dispensary, it’s somewhere between 501.5 million, depending on how elaborate your layout is.

Courtney:

Um, and when folks apply for these applications, uh, they typically are doing so multiple at a time. So you may have an application in Redwood City, you may have an application in Chico, you might have one in Fresno and, and Ventura all pending at the same time because of the length of time it takes to, to score a merit-based application and identify who the winners will be to move forward. And a lot of the companies aren’t thinking that all of that’s gonna happen at once. And so they figure they’ll open a store and then the next, and then the next, and they’ll be generating enough revenue in order to do so, but it doesn’t exactly work that way.

Courtney:

And so some cities will also give you multiple licenses In Fresno, um, several different retailers hold two or three preliminary approvals in the city, but haven’t had been yet to open even a single store.

Courtney:

And the city, when they were going through the financial, um, portion of the application, maybe should have asked a few more questions. Because what we’re finding out now is people are holding these preliminary approvals in cities, but are unable to open because they simply don’t have the finances to do so. Um, and I think that that’s another problem. Cities don’t, don’t often put a timeline on how long you have to open. And so, uh, these preliminary approvals are just held by these companies who are intending to open, um, or hoping to find some investors or maybe even try to flip the license, which is a whole, we could do an entire podcast on that <laugh>.

Courtney:

Um, and I think that the, the, the problem with that is that really the consumers are the ones who, um, lose out in that scenario because they are limited in the choice that they’re going to have.

Courtney:

Or the retailers that are open, like the artistry and Embark are working so hard just to, and, and I’m, again referring to the city of Fresno are working so hard to try to, um, meet the needs of that city being the only two retailers when that wasn’t necessarily how the program was designed. And then the city, of course, is frustrated because they’re receiving no tax revenue that they had budgeted, um, at some point in time, um, for, you know, the, the year of 2022 or 2023, and they’re realizing that their program is failing. Um, and it probably goes back to the root of the way that the system was set up, the number of licenses that were given, and then not really reviewing the information that was provided as, um, closely as it should have been reviewed to, to really ensure that companies actually had the funding to move forward.

Eric:

Do you, do you find it’s, this is super fascinating. There’s so many nuances and intricacies. It’s, it’s unbelievable the, the wealth of knowledge that you have just, you know, obviously California specifically and, you know, drilling into counties and cities. Um, would you say that a lot of the struggles and, and hurdles that you’ve outlined are California specific or really extend to, you know, a lot of different cannabis markets? Um, in the us?

Eric:

I know we’ve been primarily focused on California, just like from when we have conversations with, you know, prospects. It seems like a lot of similar issues, you know, across different states, but wanted to get your feedback.

Hirsh:

I would, I would say like, you know, many of these challenges do exist across different states. We can talk about the lack of access in high taxes, but to put a kind of a different spin on it, I think other states also offer us the example of different ways that we could be approaching cannabis policy. And while those other states are not perfect, there’s a lot that we could learn from them. So I’ll just mention a few states that don’t really get much attention. So New Mexico, super small state, right? Legalized in April, so it’s only been open 10 months, you know, that that state already has 500 stores open. Um, on a run rate, it’s generating 500 million a year.

Hirsh:

It’s, you know, in total sales it’s doing like, you know, 40 million a month, right? And, um, you know, it has about 5,000 people that work in the cannabis industry, which is almost 1% of its workforce.

Hirsh:

Now, is New Mexico, the, the state that we’re all reading about often? No, but it shows the potential of adult use cannabis if it’s treated like any other business and how it can be a massive economic driver. Um, and similarly, a state like Montana, which again is a state of 1 million people, there’s not a ton of people there, but it’s already a 300 million market. I mean, if Montana, which has 1 million people, can be a 300 million market than California, right? Which has 40 times as many people surely can be a 12 to 15 billion market. So I think there are certainly examples of California’s challenges that show up in other states, um, Illinois and New York being good examples.

Hirsh:

But what is exciting, right? I mean, n you know, like America at its best not to be dramatic, but the point of the Federalist system is to be able to have these laboratories of democracy and compare these different experiments.

Hirsh:

And so I’m excited for the phase where we start to say, Hey, what’s going on, um, in other states. And, you know, I guess just one other thing that I’ll add. We talk a lot about equity and diversity in this space, which we ought to. Um, but it’s interesting to me that a state like New Mexico that has no formal equity program actually has one of the most diverse industries in the country because they make it easy for ordinary people right? To participate and gain ownership in the process. You don’t have to be a hedge fund manager or a titan of high finance or know someone that has $10 million to open up a store. And so those states, they resemble more traditionally the American entrepreneur.

Hirsh:

And so they might have something to teach us if we’re actually trying to make this industry available to everyone. Even if you don’t use the word equity in your regulatory framework, doesn’t mean that it doesn’t matter. Um, you know, in, in terms of the, the, the racial and diverse outcomes, I’d say.

Isaac:

Yeah, I was gonna say, do you think that some of the more traditional states, like in California, Colorado, and now New York and Illinois have almost overthought the regulations a little bit, um, and tried to make it so complex and unique to cannabis only that they kind of missed the, missed the Mark A. Little bit to your point.

Hirsh:

I, you know, I, i I certainly do. I mean, um, look, look, I mean, no, no state is perfect, but I think, um, it is challenging, right? To only have three adult use stores open in New York two years, um, after, uh, we’ve passed adult use, right? It’s challenging that in Connecticut, we have less than than 10 stores open. And I think to a state like, like Missouri, right, for example, that, you know, voted for adult use three months ago, already has 200 stores open, and, and folks in that state can reasonably access cannabis. So I, I think it’s, um, important to try different policy models, but sometimes we forget, like, what, what is the, what are some of the primary reasons that, you know, we, we legalize cannabis in part because it’s, it’s a huge public health intervention, right?

Hirsh:

That can improve all of our lives. And in practice, if the framework we design makes it really hard for people to access that product. Like, are we really serving these patients and consumers, which should be one of our primary constituents? Well, um, I, I would say probably not.

Courtney:

And Hirsch and I have had multiple conversations on, um, the restrictions that California puts on on cannabis businesses and just the difficulty associated with opening a license. And I think we could break that down just a little bit by taking a look at what exactly is required. So in California, um, pretty much every city requires that a cannabis business have a pretty robust community benefits plan. Now, I am a, a, a philanthropist by nature. Um, my husband would tell you that I would give my last dollar to charity, um, because I truly believe that there are good works being done by, by nonprofit organizations, um, across, across the United States and across the world, really.

Courtney:

Um, but in California, uh, each city has the right to decide what they’re going to do with their cannabis program. And so many of the cities have, um, not only implemented just a general policy that you’re going to have a community benefits plan, meaning that you are going to identify specific amount of funds that you’re going to give back to the community, but they then set an additional fee that you have to pay aside from your tax, um, just to play ball.

Courtney:

So let’s, like a look at Oxnard, the city of Oxnard has a $250,000 fee that you have to pay in order to open a cannabis store in the city of Oxnard, but that’s not your community benefit fee. You still have to, to, to, to, uh, play ball with, um, between usually a half of percent to 2% of your gross revenues that are then, then funneled through to your community benefits plan and given back to, um, different non-profit organizations and community related events within the city. On top of that, there’s a tax.

Courtney:

So you now have your tax being charged to your customers, um, which oftentimes stores are actually assuming some of that tax costs through the different discounts that they’re offering on products. And you’ve got this $250,000 fee, and you’ve got your community benefits fund. So just to operate your store, you are already in the hole before you’ve even opened the door, um, by way of the fees that are, are associated with operating within the city.

Courtney:

Um, if you look at the shoe store on the corner, they don’t have a community benefits fund that they have to pay. They don’t have a $250,000 fee. They don’t have any of those things. And, and the bars don’t either. Um, liquor stores don’t. You have cannabis stores. Cannabis stores do cannabis stores have to pay all of these absorbent fees to the cities in order to operate within that city. And, um, I think that that really prohibits the number of people who are able to enter the industry because not everybody has a quarter million dollars sitting in a bank account ready to go to, um, open a cannabis store.

Courtney:

Um, and even when you look at 2% gross, uh, uh, revenue, the cities are looking at that before you have subtracted your tax. So it’s actually not even that great of a number of, of a, of a, um, a method to go about it, because you’re gonna have to take 2% of that growth and then pay your tax.

Courtney:

That’s still based on the 2% growth that you’ve already given up for your community benefit plan. Um, now, uh, I would say that, uh, applicants could say we’re going to give half a percent, 1%, 2% of net profits. You could do that. Um, but when you’re in a, in a, um, competitive program, you really want to give as much as you possibly can because you know that one of the other people is probably one of the other applicants is probably going to give more than you. And if it’s a city that’s really looking to make that change, like the city of, um, union City, for example, then how you structure your community benefit plan is extremely important.

Courtney:

Um, and it really does undercut the amount of, of, um, revenue that you are, um, you know, able to utilize to, to, um, continue your, your business.

Courtney:

I think there’s a real misnomer that owning a retail store is going to make you rich. Um, I think cities believe that when you open a cannabis store that you are an immediate millionaire, and that is just simply not true. Um, I represent so many retailers who are just making it. They are just making it each month. They are not, um, taking salaries. Many of them, um, themselves, they’re paying their employees, they’re paying to keep their properties open, and they are hoping that there’s some sort of regulatory shift in relationship to either the taxes, um, you know, or the fees that are assessed by the local governments in order to help them actually turn a profit.

Courtney:

It’s expensive to operate a cannabis store, um, all the way from obviously insurances that you’re providing through, um, benefits that the cities are requiring, um, you to provide to your employees, uh, all the way down to just, um, you know, the, the cost of, of out and the cost of property from landlords who are charging you two and three and four and five times, um, you know, what the typical market rate would be for that particular area.

Courtney:

So in California, um, I just think that it’s really difficult to even be part of a cannabis industry as a, um, an average person, um, uh, just simply because there’s just such a, a, a cost associated with being involved.

Eric:

Wow. Um, really, really, really, really challenging, um, at the end of the day, um, as, as you know, Courtney and, and her, as you’ve outlined to, to operate a retail location in, in California, and hopefully, you know, there’s some reform moving forward to alleviate that burden. And, you know, I, I would, I wanted to dive into a, a few things that, you know, Courtney and Hirsch you’re excited about in, in the coming year that, uh, that you’re looking forward to, um, whether it’s, you know, I personal projects or, um, any sort of regulatory reform.

Eric:

We’d love to just hear that from you.

Hirsh:

Well, first I’m excited to go to some of the lounges that Courtney is opening, but I’ll let her tell you about that, including her own lounge. I’m super excited to go to that, so that should be fun. Um, what I’m excited about in 2023, there’s many things, but I’ll try and pick just one or two. One, um, is I’m excited about legalization in the American heartland. You know, to date, there have been a ton of states that have gone adult use, but they’ve been primarily on the West coast, kind of like east of the Rocky Mountains. There isn’t much or concentrated in the northeast, you know, in, in kind of like the central time zone. Illinois is the only state that is legalized, but I think culturally and geographically legalization in the heartland is gonna be impactful just given the number of states that they border and the cultures in those states.

Hirsh:

So, um, you know, we all know, well the Missouri, a couple of weeks ago, when adult use, and again, it’s only a state of 6 million people, but if you just look at it on a map, it borders seven prohibition states. Like people are driving in from Kansas to Kansas City, Missouri, and from Little Rock and from Memphis. So I think that’s really impactful, and I see that same pattern playing itself out over the course of the year. So, um, you know, uh, Missouri’s a big one. Oklahoma’s gonna vote in a couple of weeks. And again, right, like Oklahoma, we forget that there are 7 million people that live just a few hours. Um, in Texas, right south of the Oklahoma border, there are people who are gonna be driving over that border to purchase cannabis, right?

Hirsh:

So, Oklahoma’s another exciting one, Minnesota, which seems very likely to legalize, they have a Democratic trifecta in the house.

Hirsh:

Um, there’s a really, I I really encourage, if anyone hasn’t seen Jesse Ventura’s testimony last week on cannabis legalization in Minnesota, it is awesome, and I highly recommend watching it. It’ll make you a believer. I don’t think anyone here is a cannabis skeptic, but it’s incredible to hear him talk about it. So, Minnesota, another, you know, Midwestern state, and again, you know, people forget the Twin Cities are like 30 minutes from the Wisconsin border, right? So there’s gonna be tons of people driving in. Um, and then Ohio, which will likely, uh, legalize in in November. So, um, that’s one thing I’m excited about, which is the American heartland opening up, which I think open, you know, facilitates normalization and consumption.

Hirsh:

And then the other thing that I’m excited about, um, which I won’t go into too much depth in now, cause we can talk about it for a long time, is just how this interstate commerce issue plays out in, in California, what speed it takes, um, what other states do. And again, I, I won’t say much cuz you know, we could talk about that for a long time, but that’ll be very exciting to watch.

Eric:

Maybe on the next one, Hirsch, we’ll have to have you back. <laugh>. Uh, Courtney, how about yourself?

Courtney:

Yeah, cannabis consumption and cannabis events can ofour in general. Um, as Hirsch mentioned, California’s is finally making some strides in the cannabis consumption space. Um, as we know, they’re already consumption lounges open. Just very few, uh, the artistry in West Hollywood, the woods also in West Hollywood. There’s a couple of, um, smoking lounge models, uh, uh, consumption lounges in the Bay Area. And Palm Springs has recently, um, allowed consumption lounges in Palm Desert as well. There’s some other cities that are, um, excuse me, desert Hot Desert Hot Springs, not Palm Desert.

Courtney:

Um, there are a couple of other cities that are also opening up to the idea of consumption lounges. Um, but the model has not yet been laid out. So are they going to have just smoking rooms? Are they going to allow you to have it be more like a bar without the alcohol and, and cannabis, um, you know, substituted in.

Courtney:

Um, what I’m excited about is that, uh, in, in December of 2022, the code of California finally allowed for there to be at least some food on site sold. Um, that’s pre-packaged food. And that’s, um, you know, according to to, to the, um, 15 4 0 7 of the code, you can now do that. You can now have, um, packaged drinks and pre-packaged food. We call it the Starbucks model without the coffee, right? The, the fresh made coffee. So when you walk into a Starbucks, you’ve got the cold case and you have, um, grab and go style foods that is leaps and bounds from what we had before, which was nothing.

Courtney:

Um, beforehand, you basically had to make a, an arrangement with a nearby, um, restaurant, um, or really just have an iPad that allowed people to order from Uber Eats or something like that and have it delivered to the lounge.

Courtney:

Now we have a new, um, uh, assembly bill that’s, that is being sponsored through San Francisco. And that, um, that bill is, is going to allow for onsite preparation of food, um, and, uh, onsite service of beverages, um, non-alcoholic beverages. So we’re hoping that that will pass becau uh, and also, um, it will allow for like, uh, more entertainment value. So live music, um, that sort of thing to happen on site. Now, some cities already allow that. West Hollywood already allows you to have live music on site at your consumption lounges, but some of the cities that just operate as a smoking lounge don’t.

Courtney:

And so what this will do will, it will really give, um, uh, uh, significant change to the way that people can consume in public and the way that we can gather and consume in public. Um, and I think it will sort of open up an a, a slightly new, um, uh, business model in the cannabis industry, um, if you will, that should make consumers really happy.

Courtney:

Um, operating a lounge is not profitable now because you don’t have the food and beverage services. Most of the lounges are attached to a dispensary, so most people just buy their, um, cannabis in the dispensary and then utilize the lounge space as a place to consume. Um, and if we wanna see something really great happen in the consumption space, then we really do need, um, you know, a a additional legislation to pass that will broaden, um, the, the, um, legalities of what you can and can’t do on site with consumption. Um, cannabis events, uh, are awesome because they can pop up in any city that allows you to have a cannabis event.

Courtney:

Um, we’re seeing new legislation in West Hollywood come about that will allow cannabis events in that area. Um, and I I suspect that we will see more of that, um, to come as the year, um, continues to progress. And as cities start to see models that work in neighboring cities, and perhaps they will, um, you know, uh, lighten their opinion as far as can’s consumption is con is concerned. Um, as Herrs mentioned, I am actually, um, a lounge owner with Elevate out of Los Angeles, and we are go

Isaac:

<laugh>. Yeah, that’s awesome. Lounge.

Courtney:

Um, the city of Lindsay. I’m on my way up there today, in fact, and again next week to, uh, walk through the property and do some, um, uh, look at some of the structural changes we need to make there. Um, and, uh, I think that that’s gonna be really great. It’s a, a 10,000 square foot building that will have cultivation, um, and cultivation education center. So it’s an entire glass, um, cultivation grow that folks can come and watch the process of cultivation. And, um, from there then, uh, you can shop in the retail store, you can step upstairs to the consumption lounge, and I think it’ll be really great for the Central Valley because it’s a relatively dry area in the, um, I mean both figuratively and literally, uh, in the Central Valley where cannabis is concerned.

Courtney:

And so this will, um, really provide, um, a space for all of the neighboring cities to, to come and consume and to really start to understand that, um, there’s nothing wrong with cannabis consumption, especially, um, public cannabis consumption when it’s, when it is, is done in, in a classy way, like elevate plans to, um, provide for the Central Valley

Hirsh:

And, and Courtney’s from the Central Valley. So I think it’s really cool that she’s bringing her talents to, to build this and open this up in, in the Central Valley.

Courtney:

So I also am an owner of the Fresno Artist Tree Store, which, um, was my first, uh, first, um, opportunity to, to own, um, you know, a portion of a cannabis retail store. And the artistry is so special in what they do that, um, I really believe that the city of Fresno has one of the best models you could possibly have, um, by having the artistry open and operating in, in the city of Fresno. So I’m very fortunate in that way that I’ve met some clients that have provided me with an opportunity to also become part of the retail space.

Courtney:

Um, and, uh, I love it. It’s remarkable.

Eric:

That’s amazing. And, and you have the, the insight, you know, being an operator as well as consulting operators, I think that’s, you know, really, really nuanced and, and, uh, no, I, and look, I think, I think we always want to bring it back to what are we most excited about and what are we looking forward to, because at the end of the day, there are a ton of hurdles, right? As you know, we’ve spoken about at length, but there’s also a ton of momentum and excitement, right? And so we always just want to try to touch on that and, um, and, you know, make note of the, the progress that has really happened over the past three to four years has been, you know, incredible and, and continued progress is definitely needed.

Eric:

Um, and just need leaders such as yourselves to, to continue to push it forward. So, um, I wanted to, uh, to, to give it over to, to Isaac on the next segment. Um, just kind of delving into some, some experiences, um, that you’ve had previously, you know, where things didn’t go as, as well as planned in, in the lessons that you learned from.

Isaac:

Yeah, like Eric said, you know, progresses, you know, a lot of times, uh, a cause of learning experiences. So, you know, Courtney, I’ll start with you. What’s kind of like one of the biggest, you know, screw ups, learning experiences, issues you ran into that kinda helped you learn and continue to push on forward and do all the awesome things you’re doing now?

Courtney:

Um, I mean, if we’re looking at, I mean, I, I would like to say I don’t screw up very often. <laugh>, you know, my clients rely on me not to screw up. So I try really hard not to have that happen. Um, I would say if we’re looking at the cannabis application process, there are mistakes that can be made and they can be made very, very easily, simply not by reading. Um, the, the, uh, information, um, that’s provided to you is, uh, over and over and over again. Um, but I would think that the, the biggest issue we’ve had, I think is portals, um, the cannabis industry.

Courtney:

For some reason, these cities keep trying to use portals for, um, you know, filing of applications or, uh, maintaining of documents. And, um, without fail, the portals never work. Uh, they don’t upload your, your information correctly.

Courtney:

If it’s not done by a particular deadline, then you have to circle back around and you have to take all these screenshots and like build your case so that the city will actually accept your application. And I’ve had clients have this problem over and over and over again, um, and we’ve had to go back to the cities and fight for it. And some of the cities have said, Nope, your information didn’t make it in, in the portal. It’s not our problem. They’re not willing to look for it. And then you have to decide if you wanna sue ’em or, um, they will say, oh my gosh, let’s go back and try to look at, um, and I’m not all that technologically savvy in this way, but like, try to look at the, uh, the backend side of, of the portal, um, where they can see which buttons were clicked and at what time they were clicked, and so on and so forth.

Courtney:

And they’re able to identify that there was a problem. So, um, I can think of four cities where we have had portal problems, um, which to me, what have I learned? Um, let’s not wait till the day of to file the application. Like, let’s try to do it three days beforehand so that if there is a portal problem, you have time to be able to fix whatever that problem is and not have everybody, uh, stressed out at the very last minute. No,

Isaac:

Definitely. I think, uh, not waiting to the last minute and most things in life is probably the, uh, best course of action. So I think our industry as a whole could probably do that a little bit better. Um, Eric and I run and

Courtney:

In my whole life <laugh> than my clients,

Isaac:

Of course. No, Eric and I, I I, I think, go ahead, Hersh.

Hirsh:

Sorry. Yeah, no, I, I was just gonna say, I, I think when you’re sitting in our seats, there are a bunch of things that you can screw up and that I, I have screwed up before. I mean, just little, little things like, hey, a property is only eligible if it’s like 500 feet for the sensitive use, and you don’t know if it, that’s measured based on, you know, as the crow flies or based on a walking path. And, you know, there are a ton of little things like that in cannabis that can, um, have drastic consequences. And so to Courtney’s point, try to minimize that, um, as much as possible. But maybe my other answer to your question is I’m constantly being humbled in this space. The things that I thought I knew, I realized I didn’t know.

Hirsh:

I think price compression is the best example of this.

Hirsh:

It’s a constant topic in the industry, like, hey, prices are compressing in all these states, and now it’s just a fact. I didn’t even think about that two years ago. Like, these prices might come down in retrospect, that’s such a silly, silly error, right? And nobody was really talking about it. So I don’t know, maybe that’s a weird example, but I, I constantly feel like the hypotheses I have about how things are going to play out just prove to be incorrect. And it’s a reminder of how little we know, you know, we might, we might dress up our ideas in fancy language, but sometimes we really have no idea what’s gonna happen. And I, I’m constantly finding that.

Isaac:

No, and I think that’s a good point. I think price compression’s actually a very, um, good example of that because I don’t think anyone was really expecting what happened to happen. So, um, I think that’s why the industry as a whole is kind of where it’s at currently. So, um, I don’t think that the foresight issue is, uh, you know, solely stuck on you, Hirsch. I think that everyone kind of ran into that over the last couple of years. Um, totally. Cool. Well, last couple quick questions. Um, kind of more fun ones. So, you know, Hirsch and Courtney, what’s, uh, what’s number one on the Spotify or Apple Music these days?

Isaac:

What’s, uh, what’s getting you guys going music-wise? <laugh>,

Hirsh:

It’s so hard to pick. I mean, I’m listening to a lot of Kendrick Lamar recently, but, you know, that’s, that’s not really, um, different, you know, um, the Beatles was the first band that I ever kind of like fell in love with. The first thing that ever cha changed music for me. And like a lot of things that you fall in love with initially, you put them aside for a while. So now I’m going through like a renaissance phase of like, nice rediscovering my, my younger self and, and how, how I know these songs by heart, even if I haven’t listened to them for years. So that’s another, that’s

Isaac:

Amazing thing.

Courtney:

Um, so my husband’s actually, um, a music manager and, uh, vice president of a record label. So we hear a lot of music around here constantly. So, uh, I think the most recent, um, is the Warning, which is an all female, um, rock band out of Mexico. And, uh, they’re, they’re pretty amazing. They’ve been touring with Muse lately, so I had the opportunity to fly down to Mexico City and watch them open for Muse. And, um, they’re extremely talented ladies. Um, uh, completely opposite from the warning as a, as an artist named Grace. Um, she’s pretty remarkable.

Courtney:

Got to, uh, watch her perform at the Rose Parade, um, a few weeks back. And, um, she’s, she’s, uh, pretty remarkable. And I’m gonna tell you on the horizon, we should all be looking out for Nelly Verdo because she’s coming back with some great

Isaac:

Stuff. That’s amazing. <laugh>. No, I love that you gave a, a little unique taste of all the music. That’s awesome. Um, and then last one, you know, what’s, uh, one book that you’re currently reading or have read in the past that you, uh, have taken a lot of value out of?

Courtney:

Ooh, Hersh. You wanna go first on that? I gotta think about that a minute.

Hirsh:

Yeah. I just read a book about a man named Byard Rustin, um, who was a, is a civil rights hero that was basically lost to history. He was one of the mentors of Dr. King. The reason I am really interested in this man is he was the guy who sort of schooled Dr. King in Gandhi in nonviolence. He traveled to India in the 1940s and learned about Gandhi’s campaign of civil disobedience and then integrated those ideas into the civil rights movement. Um, he was like one of the organizers of the march on Washington, for example. So really consequential person in American history. And the reason I care about him in particular is he’s kind of the link between the Indian and the American citizens, which, you know, for understandable reasons is of interest to me.

Hirsh:

And, you know, he was the one, for example, that changed the immigration laws that made it possible for my dad to immigrate to this country where, you know, before 1965 restriction from, you know, non-white European countries was, was heavily restricted in the us. So, really incredible. Um, man, I think kind of like James Baldwin, there’s kind of like a renaissance in, in re-exploring his ideas. So Byard Ruston, um, again, good book. That’s awesome.

Courtney:

And I, I actually just looked over and I saw it over here, but I’m reading again, unself. I’m a mom of three kids, uh, six and under. I have a six-year-old boy, uh, uh, almost four year old boy and a one-year-old little girl. And this book is about, um, how to raise our kids in a world that’s all about me and teaching empathy in children. And, um, I think that we are in a world that is very much all about, um, ourselves and how do we all prosper and how do we, we, um, you know, continue on, on a, a path of success. And I think that every once in a while we have to take a step back and, um, think about, uh, those who are not necessarily on the same path we are.

Courtney:

And part of that, as in, in the parenting world, is teaching our children how to be empathetic for those who don’t have what they have. And, um, I work very hard to provide for my kids. And so I am constantly rereading chapters of this book to try to identify how, um, to teach my children, um, you know, to be compassionate and empathetic people, um, in a society that doesn’t necessarily embrace that. Oh,

Isaac:

That’s amazing. Sounds like, uh, both books, uh, um, a lot of people should, uh, look into these days. Seems like a lot of good lessons that are very applicable, uh, at this time in everyone’s lives. So, um, no, I really appreciate it. Thank you both. Uh, e you got anything else?

Eric:

No, I think that’s it. I, I just wanted to say thank you to, to Courtney and Hirsch, and, and this has been a, a really amazing episode. Uh, learned a ton, and based off my understanding, I don’t operate a cannabis business nor as Isaac, but if you are in California and looking to open up a retail shop, these are the two people that you should be talking to. Um, just no, honestly, like incredible wealth of knowledge and just honestly, the, the nuances and the little details that you mentioned, such as like the portal, right?

Eric:

Like how many people outside of your own experiences have probably dealt with similar instances. And so, um, I think those nuggets are tremendously valuable, right? We always, we always talk about how the big, the obvious everybody’s doing, that those are the easy things to see, right? It’s the subtleties, the little details that really separate, you know, good from great and, and, uh, really appreciate everybody’s time today and, uh, have a great day.

Eric:

Yeah.

Courtney:

All right. Thank you so much.

Hirsh:

This is great. Thank you. Thank you

Isaac:

Both <laugh>.

Eric:

Wow. That was, that was awesome. I’d be, I mean, you, you know, you and I have been in the industry for, for quite some time now, you know, obviously Alfred full, full-time since 2018, and I, I didn’t know half of that.

Isaac:

No, I mean, I think, you

Eric:

Know what I mean,

Isaac:

I think it’s interesting because they dive, like we give a nice high level overview of, you know, the clients and the rules and regulations and, you know, all 50 states and what our clients have to deal with. But, um, I don’t think I’ve ever had like that much, you know, kind of a knowledge dump on specific municipalities in the different way the licenses run. I mean, it’s, it’s incredible how much information those two, you know, provided us in the audience.

Eric:

Yeah. And, and you know, it’s, it’s all about, you know, what, what I gather from that, it’s all about the intricacies and the little details and the, and the subtle nuances, right? You know, the, the big things that are very obvious every single applicant is gonna gravitate towards. Where I think, you know, based off of this segment, you know, where they separate themselves is understanding every single nook and cranny at local levels, not just looking at California abroad is, is fascinating

Isaac:

For sure. I mean, I think, uh, their insight into how different states do things differently and what’s working, what’s not working was extremely kind of insightful. And, um, you know, hopefully as the industry continues to mature, we can start taking more of the good things from various places and get rid of some of the, the issues that they mentioned and, um, you know, help make life easier for, you know, a lot of these businesses are just trying to, you know, have a fair chance like every other, you know, business model in the country.

Eric:

100%. 100%. Couldn’t agree more. And, uh, fired up for the next one. Fired up for the next one. I think that, uh, we, we continue to uncover a, a lot of knowledge that I think is, is really valuable for multiple parts of the, the supply chain. Truthfully, whether you’re an operator or ancillary like ourselves, it’s just really important information to understand.

Isaac:

Absolutely. Next week as well,

Eric:

Let’s do.

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