The cannabis industry is one of the fastest-growing industries in California, and if you are thinking about getting involved, there are a few things you need to know. In this blog post, we will give you an overview of different cannabis license types, what you need to know before getting involved in the cannabis business, and some key ideas for you to consider if you decide to enter the industry.
What You Need to Know Before Getting Involved in the Cannabis Industry.
There are a few things a prospective applicant should consider before getting involved in the cannabis industry, including the legal landscape and the different types of businesses that make up the industry. In our experience, the most critical differentiator that separates successful cannabis businesses from others is a solid business plan that accounts for and appreciates the risks associated with starting a business in a constantly changing industry.
Who Regulates Commercial Cannabis Activity? The California Department of Cannabis Control.
This Department is responsible for regulating the commercial cannabis industry in California, including licensing and enforcement. The Department of Cannabis Control (DCC) ensures that all businesses comply with state laws and regulations regarding selling, transporting, distributing, and testing of cannabis and cannabis products. In addition, the DCC regulates the manufacturing, packaging, labeling, advertising, and tracking of cannabis products.
The DCC also works with local governments to ensure they are taking steps to regulate commercial marijuana activity within their boundaries. For example, a cannabis business typically will not receive a cannabis license form the DCC unless a city or county government has notified the DCC that the business has sufficient local approval to engage in commercial cannabis activity. This is just one of many areas where the DCC works in cooperation with hundreds of local agencies.
California Cannabis License Types
The first question new market entrants typically ask us is, “what cannabis licenses are available?” A simple list includes:
Retail licenses, also called Type 10 licenses, Retailer (Storefront) licenses are for those cannabis businesses that want to run a brick-and-mortar dispensary. However, applicants should be aware that a local jurisdiction is under no obligation to issue a retailer license. Many local jurisdictions have either banned dispensaries or limited the issuance of these licenses to only a handful of businesses. The main reason is local police departments routinely instill fear in city council members that commercial cannabis activities conducted by storefront retailers will attract crime to the retail premises.
Type 9 Licenses (Non-storefront) are for those businesses that want to sell cannabis products to consumers through delivery only. While delivery services do need a physical location to operate out of, no cannabis products cannot be displayed on the business premises. Moreover, the business is prohibited from allowing any customers into any areas where business activities take place. Retailer (Non-storefront) license holders will still need a location for their business to hold their inventory and serve as a hub for their delivery driver employees.
The Type 11 license is the most common cannabis license. Distributor licenses allow cannabis businesses to transport cannabis products between licensees. For example, a distributor may use its cannabis license to lawfully transport cannabis products from a cultivator to a manufacturer or to a retail licensee.
Distributors may also: (1) arrange for testing of cannabis goods; (2) conduct quality assurance review; (3) package, re-package, label, and re-label for retail sales; and (4) provide storage services for cannabis accessories, licensees’ branded merchandise or promotional materials, and packaged cannabis goods as they will be sold at a retailer.
Distributor (Transport Only)
A Type 13 license is a unique type of cannabis business. A typical Type 13 cannabis business will employ ex-law enforcement or military professionals experienced in armed transport. A type 13 licensee may transport cannabis goods between licensees but is restricted to only transporting cannabis goods. Type 13 licensees are not allowed to engage in any of the additional activities listed above for a Type 11 license.
Manufacturing licenses are associated with the extraction or distillment of cannabis. Manufacturers also package flower and roll/package pre-rolls on their licensed premises.
Previously, manufacturing licenses were issued by the department of public health. Due to the inherent risk of fire or explosions, a company’s manufacturing premises is always given a strict review by the DCC, with even minor issues delaying licenses for several months. For example, issues like the placement of flammable gas, carbon dioxide sensors, the storage of plant material, and cannabis product are each reviewed by both line analysts and supervisors.
There are five (5) different types of commercial cannabis activity associated with a manufacturing license:
Type 7 licensees may manufacture cannabis using volatile solvents such as butane, hexane, or propane. The use of volatile solvents is typically subject to strict oversight and a vigorous local approval process. A Type 7 license allows a license holder to conduct activities of a Type 6, N, or P license.
Type 6 licensees may manufacture cannabis using non-volatile solvents or perform extraction using mechanical methods. Type 6 licensees may also conduct activities of a Type N or P license.
Type N licenses are for manufactures that want to infuse cannabis. Type N licensees may also conduct Type P activities.
Type P licensees may only package or label cannabis products. A Type P licensee may only conduct Type P activities.
Type S licenses are for manufacturers operating on a registered shared-used facility. The shared-use manufacturing facility must be approved before Type S licensee may submit license applications.
The most sought-after cannabis business. Cultivation licensees are for those that want to grow cannabis. Currently, the state has 14 different cannabis licenses, differentiated by light source and size. Cultivation licenses encompass Type 1, Type 1A, Type 1B, Type 2, Type 2A, Type 2B, Type 3, Type 3A, Type 3B, Type 4, Type 5, Type 5A, and Type 5B. Type 5, 5A, and 5B is reserved for “Large” sized cultivation operations (greater than 22,000 sq. ft. of total canopy) and will not be issued prior to January 1, 2023.
Also called a Type 12 license, a Microbusiness license allows the licensee to engage in vertical integration. All microbusiness licensees must conduct at least three (3) of the six (6) possible activities: (1) Retailer (Storefront); (2) Retailer (Non-storefront); (3) Distributor; (4) Distributor (Transport Only); (5) Cultivation less than 10,000 sq. ft of canopy; and (6) Level 1 Type 6 Manufacturer.
Also called a Type 8 license, Testing Laboratory licensees are permitted to perform testing of cannabis goods. Testing laboratories must obtain and maintain ISO/IEC 17025 accreditation; they may be issued a provisional license allowing them to operate while obtaining accreditation, so long as they meet all other requirements.
This is a license required for those looking to organize cannabis events. A Cannabis Event Organizer Licensee may apply for a Temporary Cannabis Event License for a specific event the licensee wishes to hold. A Temporary Cannabis Event License is required to hold a temporary cannabis event where onsite sale and consumption of cannabis goods is authorized at the located indicated on the license. A Temporary Cannabis Event License will only be issued to an Event Organizer licensee.
Contact Us Now to Learn More About Different Cannabis License Types!
There are a few things you need to know before getting involved in the cannabis industry, including the legal landscape and different types of businesses that make up this rapidly growing sector. With a solid business plan and an understanding of the risks involved, you can be well on your way to starting a successful business in this exciting industry! Contact us today!