Top 5 Strategic Tips for New Cannabis Businesses in New Jersey
Top 5 Strategic Tips for New Cannabis Businesses in NJ
Each state and local municipality with a cannabis program has its own idiosyncrasies and regulations. Understanding these rules and cannabis compliance is one of the most, if not THE most, important element to the success of securing a cannabis business license. As one of the most highly-regulated and competitive markets, its essential to start building a foundation for your cannabis business even before the license application process.
Here are top five things New Jersey cannabis stakeholders should consider now.
1. Know Your State
New Jersey issued only 12 vertical medical marijuana licenses (referred to as Alternative Treatment Centers “ATCs”), and only 10 are currently operational. Additionally, the state was supposed to issue additional medical marijuana business licenses (5 cultivation only, 15 dispensaries only, and 4 ATCs), but the licensing has been blocked by litigation, which is still ongoing.
For the adult-use market, the state intends to issue only 37 Cultivation Licenses for the initial 24 months of the program.While the newly governing agency, Cannabis Regulatory Committee (“CRC”) will determine the maximum number of licenses for each other class based on market demand, which includes:
Of which, 30% of licenses must be allocated to businesses owned by women, minorities or disabled veterans.
2. Define Your Mission and Vision
Typically, a state will establish their medical cannabis/cannabis program with a mission in mind, to resolve an ongoing health/equality issue the state currently faces. Make sure your mission and vision for your proposed business aligns with the state’s. For example, Maryland issued additional medical cannabis business licenses to ensure minority participation in ownership. In West Virginia, the medical cannabis program was geared toward reducing opioid related deaths, while Illinois looked to rectify social injustice through their social equity program. In New Jersey, the program is focused on ensuring access with supply/demand in mind.
3. Build Your Team
When selecting your business partners, knowing their motive is essential. It’s not about dollars and cents. Look for partners who are fair, have a background that will contribute to your venture, and someone you trust! At a minimum, you want the following individuals on your team:
- Local Business/Community Leaders who truly understand the community and the state as a whole.
- Cannabis Operators/Consultants who have experience with submitting and winning applications/licenses, as well as opening and operating a cannabis business. Ask your consultant what state(s) they have worked in. This is especially important because every state’s program is different and while a consultant might have worked in California, the East Coast states run their programs differently.
- Legal Counsel, the documents you prepare for applications are highly legal. It’s always good to have a local attorney who understands local laws to lend advise, where needed, throughout the application process.
4. Real Estate / Knowing your local municipality
Go where you will be accepted in the community or township, make sure you have a population base (if applying for a dispensary), and your building has easy access to highways.
In New Jersey, a municipality will have 180 days from when the bill’s enacted to prohibit adult-use operations. Additionally, priority would be given to applicants based in “impact zones” (municipalities negatively impacted by unemployment, poverty or past marijuana enforcement activity).
Zoning: Typically, you will have two sets of zoning regulations to abide by – the state’s and the local municipality (if it’s an unincorporated area, it’s regulated by the county). While every state and local municipality is different, standard zoning parameters are 500 – 1000 ft away from schools, daycare centers, churches, libraries, public parks, etc.
In my opinion, freestanding buildings are best because parking and security will always end up being an issue in shared spaces.
5. Financial Funds/Capital for Applications
You will need at least $50,000 for your application. Pending on professional services and the state’s and/or local municipality’s application fees and requirements, applications could run up to $250,000. Other costs you may incur during an application process include real estate costs, professional services – legal, consultant, architect, CPA, etc.
Capital for Opening & First Year of Operations: Unfortunately, cannabis businesses cannot get a traditional business loan. You will be responsible for raising capital on your own. Put a three to five-year financial projection together to understand your opening costs and first year of operational costs to determine funds needed, start building your business plan and investor deck.