Massachusetts recreational cannabis sales are expected to begin in July, but that does not mean business will be booming—at least not initially.
While the recreational cannabis market is expected to be worth $1 billion in Massachusetts by 2020, members of the industry expect less than 12 shops to be operational in July.
There are several obstacles in the way for operators including local restrictions on dispensaries and grow facilities as well as reluctant landlords not willing to lease space to cannabis businesses.
“We’re just at the starting line,” said David Torrisi, the president of the Commonwealth Dispensary Association (CDA). “It’s going to take 18 to 24 months until there’s a robust retail marketplace. People who want to get into this industry need to be in it for the long haul because it’s going to be a slog getting it established.”
The Commonon Wealth Dispensary Association is expected to be among the first businesses to receive a license this summer.
Torrisi feels that local bans are the largest obstacle for businesses trying to enter the legal cannabis market. Approximately two-thirds of Massachusetts’ 351 municipalities have outright banned cannabis businesses. As for the remaining third, not all have exactly welcomed the industry with open arms. Many are only approving a small number of businesses.
“A lot of towns really don’t want us,” said Colonel Boothe, the chief financial officer of Holistic Health Group Inc., which is seeking to open dispensaries in Worcester and other communities. “The vote [to legalize marijuana] was well over a year ago, and they still haven’t finalized their [zoning] bylaws. It’s as if they don’t want it to happen. We’re sitting here waiting and waiting.”
Some local officials are asking for large payments before they will sign off on “host community agreements”—a requirement before the state will issue a license. The payments are not permitted to exceed 3% of the recreational business’ revenue and are supposed to be linked to the actual costs a cannabis facility costs local governments.
But these numbers do not always seem tied to revenue and local government spending.
CommCan, located in Medway, already has agreed to pay $262,000 for local fire equipment, in addition to other payments to local officials including the costs of maintaining a public road that leads to its grow facility.
For its recreational license, CommCan will an additional $500,000, the maximum allowed by state law, over the course of five years.
Ellen Rosenfeld, president of CommCan, says that Medway officials have been easy to deal with but admitted the fees are not necessarily tied to their revenue or the financial impact on local government.
“It’s not calculated,” she said. “That’s just what they wanted.”
Medway town administrator Michael Boyton claimed that CommCan entered the agreement willingly and specific calculations are not necessary.
“I have not sat down to calculate every bit of [the cost imposed by CommCan] because the company didn’t require us to do that,” said Boynton.
While there may be a handful of companies that can afford the steep price to enter the cannabis industry in Massachusetts, most small businesses will not able to especially as most banks will not do business or loan capital to businesses. The Cannabis Control Commission approved low fees to increase business participation from minority and low-income residents. But such high fees charged by local governments could present a large barrier for entry into the Massachusetts cannabis industry.
