CannaBusiness: The Ins and Outs of LicensingApril 28, 2021
According to a national Gallup poll from 2020, 68% of U.S. adults support the legalization of marijuana, a stark contrast to when Gallup first measured the public’s view of cannabis legalization in 1969. Back then only 12% of Americans backed legalization measures.
Michigan is among the 17 states and Washington, D.C., that has made the recreational use of marijuana legal for adults. In Michigan, medical use was approved in 2008 and recreational use was approved in 2018 for adults 21 and over.
The Detroit Regional Chamber hosted experts Andrew Brisbo, executive director of the Michigan Marijuana Regulatory Agency; Eric Foster, group director of strategy and business development for Banks & Company LLC, and national policy director of cannabis and hemp policy for the Minorities for Medical Marijuana; and Saulius K. Mikalonis, senior attorney of Environment, Energy and Resources, and Cannabis law for Plunkett Cooney, to discuss the process for obtaining a commercial marijuana license in Michigan.
“Since 2008, Michigan has developed a robust regulatory system by which licensed operators can legally grow, process, and sell cannabis,” said Mikalonis. “The cannabis business in Michigan poses unique legal, scientific, and business challenges. Licensing is constantly evolving through new regulations and guidance.”
Cannabis Regulation in Michigan
As of March 1, 2021, Michigan does not require a medical license in order to obtain an adult-use license.
“This will start to open up the market and see a lot of new entrepreneurs coming into the adult use space, without having to stop and get the medical license first,” said Brisbo.
In Michigan, obtaining a license is a two-step process:
- Pre-qualification through a background check
- Regulatory compliance and fire inspection of site or facility
For individuals interested in starting a cannabis business, the pre-qualification step can be completed before the individual even has a full business plan or a site secured, to determine overall eligibility through the process.
On the medical side the process takes roughly 90 days for step one and 125 days for step two. On the adult-use side, it takes roughly 56 days for step one and 32 days for step two.
“The market here in Michigan is growing and continues to expand. In March we saw $145 million in retail sales, up 179% from March 2020 in the combined medical and adult use markets,” said Brisbo. “And that’s even accounting for the fact that retail prices are down 46% since last March in the adult-use market.”
Capital Intensive Process
Aside from licensing steps, the process for starting a medical or commercial marijuana business is a capital intensive one. A key method of addressing the need for capital is through partnerships.
“This is an industry where the opportunities are there, but not a lot of people are going to be able to independently do it. So being able to partner with other people who have that same ability to pull resources together,” said Foster. “Our experience during that first 90-day period when you start the licensing process, you’re going to need to pull between $100,000 to $250,000 in capital.”
Rules Regarding Advertising or Marketing
For Michigan marijuana businesses there are specific rules and guidelines that must be adhered to when marketing a business.
“The agency requires that there be a marketing analysis that at least 70% of the attended audience for whatever the advertising might be, whether it be billboards, radio, or social media. They must have marketing analysis that shows 70% of the viewers or recipients of that information would be the appropriate target audience,” said Brisbo.
What has been seen as the marijuana market develops in Michigan, is that it is an incredibly complex business type, on top of being a rigorous regulatory process with compliance as a high-level expectation.
“Do your homework. The clients that we have that succeed are the ones that have really put in the elbow grease and hours putting their documents together,” said Mikalonis. “You want a license, you want a permit. Put it in a format that makes it impossible for them to say no.”