The Most Important Considerations Before Applying for a California Cannabis License.

The question we are asked most by businesses considering applying for a cannabis license is, “how do I get a cannabis license so I can open my doors and start making money?” The most accurate and straightforward answer is… “it depends.”

What kind of license do I need?

The type of license(s) a cannabis business needs is determined by its scope of operations. As a basic example, if a cannabis business is selling adult-use cannabis products, then it will only need to acquire a Retailer License from the Department of Cannabis Control (DCC). However, suppose a cannabis business intends to engage in a different type of commercial cannabis activity, e.g. cannabis manufacturing or running one or more testing laboratories. In that case, it will need one or more commercial cannabis licenses issued by the DCC and authorization from its local jurisdictions for the additional cannabis activities.

What does “local approval” mean in the California cannabis industry?

California is the world’s largest cannabis market. Despite the crushing demand for marijuana in the state, California’s dual licensing program has slowed the licensing process. California requires cannabis businesses to acquire state and local authorization before a business can operate.

What should my first few steps be when applying for a cannabis license?

Before choosing a home base for its business, a new business should research at least 3-4 cities/counties to determine what those local jurisdictions require concerning cannabis permitting, licensing, and what the respective application processes look like.

In many smaller cities, cannabis licensing is a political event. Before investing significant capital, a smart business owner will contact local officials in charge of cannabis licensing to learn more about the permitting process. It is also wise for an applicant to stay connected with city officials throughout the entire cannabis licensing and application process in case any changes occur that could impact the applicant’s ability to obtain a license.

Why does it matter where cannabis businesses are headquartered?

As mentioned above, local approval is a must. Without local-level approval, there will be no state license; therefore, in the early stages of cannabis licensing, local jurisdiction approval should be every applicant’s primary concern.

But beyond just licensing, there are huge impacts to deciding which city limits to start a cannabis business. A new business can be stifled and limited by an oppressive tax regime in a poorly selected city or county. Conversely, a business with a new retail license can be aided by a locality with a younger demographic with a high level of discretionary income.

What if I don’t have local authorization for my retail cannabis business?

A cannabis business without at least a provisional license is an unlicensed operator. It is that simple. These operators are subject to hefty fines and potentially even criminal prosecution for something as simple as recreational cannabis sales.

At the local level, penalties can be just as severe. Local governments have broad authority over cannabis licensing in their jurisdictions. They will usually take swift action against unlicensed businesses operating within their boundaries, especially against those businesses with a high risk of posing a danger to the public, like cannabis manufacturing businesses.

What are the different types of cannabis licenses?

Cultivation licenses are required for any business intending to grow or process cannabis. Distribution licenses allow businesses to transport cannabis products between other license holders in California. Retailer licenses are necessary for businesses wishing to sell adult-use cannabis products, including delivery services and online sales. Testing laboratory licenses enable businesses to verify the quality and potency of cannabis products. All licensees must comply with applicable cannabis regulations.

Cultivation

Similar to other license types, legal cultivation operations require city or county approval. In many smaller jurisdictions outside of Los Angeles, a business must apply for a license and conditional use permit through the local planning board to be licensed as a commercial cultivator.

Cultivation licenses are broken down by canopy and growing types (indoor/outdoor/mixed light).

Specialty cottage
Specialty cottage outdoor – up to 25 mature plants

Specialty cottage indoor – up to 500 square feet of canopy

Specialty cottage mixed-light tier 1 and 2 – up to 2,500 square feet of canopy

Specialty
Specialty outdoor – up to 50 mature plants or up to 5,000 square feet of canopy

Specialty indoor – 501 to 5,000 square feet of canopy

Specialty mixed-light tier 1 and 2 – 2,501 to 5,000 square feet of canopy

Small
Small outdoor – 5,001 to 10,000 square feet of canopy

Small indoor – 5,001 to 10,000 square feet of canopy

Small mixed-light tier 1 and 2 – 5,001 to 10,000 square feet of canopy

Medium
Medium outdoor – 10,001 square feet to 1 acre of canopy

Medium indoor – 10,001 to 22,000 square feet of canopy

Medium mixed-light tier 1 and 2 – 10,001 to 22,000 square feet of canopy

Large

Nursery – for cultivators that only grow clones, immature plants, seeds, or other types of cannabis used for propagation

Processor – for cultivators that only trim, cure, dry, grade, package, or label cannabis.

Manufacturing

There are several different types of manufacturing licenses (Type 7, 6, N, P, and S). Getting a cannabis manufacturing business permitted, especially a type 6 or 7 manufacturing business, can be extraordinarily complicated. Applicants typically need approval from not just the local cannabis regulator, but also several reviews from the fire department, the building department, and the planning department before the business is licensed. This approval process can take anywhere from several months to over a year.

Retail

One would be excused from assuming that making retail sales of cannabis would be as simple as hanging a shingle outside of a refurbished convenience store, loading the store with cannabis and cannabis accessories, and inviting consumers in. But that is not reality. As a first matter, the number of retail licenses issued by every city or county is typically limited to a small number. Moreover, ownership of retail licenses can be tightly controlled with specific individuals prohibited from obtaining a dispensary or delivery license, e.g. individuals convicted of unlawful cannabis manufacturing, individuals with a conviction for unlawful sale of marijuana to minors, and individuals with ownership interests in one or more testing labs.

Testing

Fewer license applications are submitted for testing laboratories than any other commercial cannabis activity type. While the process of obtaining a testing laboratory permit or license is straightforward, onerous state-level regulations and crushing startup costs have made cannabis testing laboratories an unattractive option. Moreover, the legal consequences of an inaccurate test have deterred many prospective applicants from applying for a license or even exploring new jurisdictions where an applicant can easily become licensed as a testing laboratory.

Distribution

The California Department of Cannabis Control licensing portal issues more distribution licenses than any other license type. The trend isn’t slowing either. In 2021, of all the commercial cannabis license applications, distribution applications were the most common. And in the world’s largest cannabis market, one would expect to see the distribution license dominate them all.

Cannabis Events

Temporary cannabis events are multi-day events where people can sell and consume cannabis. These events last one to four days at a location approved by the city or county. Cannabis event organizers host temporary cannabis events.

Event organizers need a separate license for each event, which must be applied for at least 45 days before the event. Cannabis event organizers are responsible for ensuring that all cannabis products used at their events meet state regulations and local rules. Event organizers also have to set up several safety measures such as security, ventilation systems, and fire protection systems.

If you are considering applying for a cannabis license, contact us today!

If you’re interested in getting started in the cannabis industry, contact us today. Our team of experienced professionals can help you navigate the complex regulations, paperwork, and permits needed to get your business up and running. We provide a personalized approach tailored to meet the needs of each individual client.