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When Gov. Kathy Hochul announced an overhaul at the Office of Cannabis Management, she said her inquiry into the agency was prompted by the “miniscule” number of dispensary applicants regulators were approving.
With Executive Director Chris Alexander on his way out of the agency, and a clear directive from the governor’s office for the OCM and Cannabis Control Board to issue many more dispensary licenses at a faster pace than they’ve been doing, conventional wisdom in New York’s legal cannabis industry says stakeholders will see many more retail licenses issued in coming months.
The move is music to the ears of people of all license types who have complained for years that the state’s slow marijuana retail rollout cripples the industry with deleterious effects ranging from cultivators having too few dispensary customers to the proliferation of illicit shops filling the retail void. But others – including the state’s largest cannabis trade organization – worry a rapid increase of legal dispensaries could flood the market.
However, a NY Cannabis Insider analysis of data on licensing and dispensary openings for shops in the state’s Conditional Adult-Use Retail Dispensary program, along with interviews with licensed store owners, show a more nuanced situation.
Data show it’s been taking people between six months to one year to open their doors after getting licensed – and a heavy majority of CAURD licensees never opened at all.
Current store owners and consultants who spoke with NY Cannabis Insider said it can take as little as three months after gaining a provisional license to open a dispensary, but hold-ups related to real estate, paperwork or municipal officials can prolong that a great deal.
“When you have a client that is already built out and on top of everything, it can actually move pretty quickly,” said Jason Klimek, an attorney and co-leader of the cannabis team at law firm Barclay Damon who advises New York cannabis licensees “But we’ve also had other clients where it’s lagged more.”
Additionally, these stakeholders believe a proliferation of retail licenses will very much change New York’s legal weed landscape – but not necessarily in a bad way.
Debate over how concerned New York regulators should be about the risk of flooding the market with too many legal shops – something that’s happened in states like Oregon and Oklahoma – emerged when the Cannabis Association of New York urged state officials in April against issuing too many cannabis licenses.
While CANY’s board encouraged caution when adding more licenses, organizations – including the New York Cannabis Retail Association, Association of New York Cannabis Processors and the Black Cannabis Industry Association – argued that maintaining a slow licensing pace would be a misguided move that’d encourage illicit shops to persist.
But a look at licensing data from the CAURD program shows that receiving a provisional license doesn’t necessarily mean a licensee will open anytime soon – or at all.
Since late 2023, the CCB has approved about 500 CAURD licenses, but as of early May, only about 120 had opened for business – meaning nearly 75% of CAURD licensees haven’t opened a store.
Out of a random sample of 60 licensed dispensaries currently open in New York State, data show it took anywhere between one to 14 months after receiving a license to open. The average time between provisional licensure and opening for these stores was eight months.
Data from the CAURD program cannot serve as an apples-to-apples comparison with general licensing since many stores were delayed because injunctions from lawsuits – as opposed to operational or regulatory delays – prevented them from moving forward.
However, CAURD program data do demonstrate that real estate roadblocks and applicants’ attention to detail make it difficult to state with confidence that a large number of new provisional retail licenses will necessarily result in enough new dispensaries to seriously drive down profit margins.
“The unfortunate reality is a lot of these people will never end up opening their doors,” said Paul Lepore, co-owner of Long Island dispensary Happy Days.
Happy Days opened in early January, about nine months after the CCB issued a provisional license. Lepore said he and partners had fewer problems in working with regulators to open the store because he made sure to submit paperwork in the format OCM asked for – and contained all necessary details – and paid close attention to every detail of each regulation as they came out.
Being fastidious about paperwork is a key component in opening within a reasonable timeframe because any mistake will likely lead to prolonged back-and-forths with an understaffed regulatory agency, Lepore said. Even putting aside staffing issues at the OCM, most government bureaus demand exact paperwork, and incorrect filings always lead to delays, he said.
“I think it’s similar to submitting any application to any government agency,” Lepore said. “If you go to the DMV and you don’t have the correct form – or something’s not filled out – you go to the back of the line.”
Time lags from paperwork issues or response times from regulators aren’t the only factors that create issues for retail licensees, said Aaron Van Camp, owner of Dank 716 in Buffalo. Real estate can create major headaches for people who receive a provisional license before finding a storefront, he said, and there are more details to finding a compliant spot than many people realize.
Dank 716 opened last July, about three months after receiving a provisional license. Van Camp said his timeline didn’t get held up by real estate, but he’s heard of others running into trouble for unexpected reasons.
First, there’s finding real estate compliant with buffer zones imposed by regulators, but there are other discrete issues, he said. For example, landlords that have mortgages with FDIC-regulated banks cannot rent to cannabis companies since the drug is still federally illegal. Sometimes landlords don’t realize this until after they’re well into negotiations with a prospective cannabis tennant.
Van Camp has also heard of cases in which a storefront at a strip mall meets all regulatory requirements, but another store in the complex has a condition in their lease that the landlord/building management company will not rent storefronts within the plaza to weed companies.
“The biggest delays that we found with opening was meeting with people who didn’t understand that they couldn’t lease to us,” Van Camp said. “There’s so many different scenarios that can arise.”
Klimek, the Barclay Damon attorney, said it’s been taking his clients an average of about three months to open their doors after receiving provisional approvals. Klimek said he doesn’t think the application itself is particularly onerous compared with what other state agencies require.
An issue Klimek has seen licensees run into is a higher-than-expected cost of compliance, he said. Surveillance requirements, for instance, are more costly than many realize – regulations say dispensaries must have security cameras that cover every inch of the shop, and have an eight-hour battery backup in case of a power outage. This could cost up to $50,000 for a larger store, Klimek said.
“At the end of the day, it’s not the complexity that’s an issue, it’s the cost,” Klimek said.
Terp Bros in Astoria, Queens, opened about six months after receiving a provisional license, CEO Jeremy Rivera said. Rivera, who is also a construction consultant, said his time frame was likely accelerated in part because his experience and connections in construction allowed for a faster buildout of the storefront.
Like others, Rivera said that the amount of time it takes a dispensary owner to open their doors is mostly related to how quickly and diligently they are with paperwork and finding a compliant location. But with an influx of licensing expected, finding real estate could take longer for new licensees.
“Now the game is changing a little bit, because there are a lot more general licenses out there, there is a lot less real estate,” Rivera said.
However, Rivera is skeptical of the idea that issuing a large number of new retail licenses will flood New York’s market and create problems seen in places like Oklahoma and Oregon.
The state has nearly 20 million residents, according to U.S. Census data, and includes New York City – where people consume more cannabis than any other city in the world, according to the 2023 Cannabis Global Price Index.
Additionally, regulations don’t allow dispensaries to open within 1,000 feet of each other – or 2,000 feet, in sparsely populated areas – which could help prevent pricing competition that lead to an unprofitable “race to the bottom,” Rivera said.
“There’s enough consumers, I believe, in New York State – especially New York City – to feed all the dispensaries,” Rivera said.
Klimek said he agrees that increasing retail licenses in and of itself would probably not lead to oversupply issues, as long as the licenses are distributed geographically based on demand.
Right now, prospective licensees enter a lottery to get a queue number that determines the order of which applications are reviewed. Because the lottery is random, regulators could unwittingly license too many dispensaries in some areas, and not enough in others.
Van Camp said there are negatives in increasing the number of retailers, even though he sees the effort as an overall good thing for the market. The more licenses there are, the less value the license for his store holds, if he decides to sell the business, he said.
It’s also true that with more stores operating, some will likely go out of business, Van Camp said. But while that’s bad for some individuals, Van Camp said it will ultimately build a stronger legal cannabis market for New York.
“I think it’s a really good thing, because it’s going to bring competition … we have to have people who are more built to do this to make [the legal cannabis market] successful,” Van Camp said.