10 Things You Need to Know About the Application Process for a Cannabis Business License

So you are taking the leap to start the application process for a cannabis business license. But applying for the license that allows cannabis manufacturing and dispensary management to operate legally can be a mountain to climb since the cannabis industry itself is so heavily regulated.

Compliance requirements vary from state to state, city to city, and even depend on the business operation type you are planning for (cultivation vs. retail, THC vs. hemp) causing applicants to feel overwhelmed with not knowing where to begin the process.

That’s why the Ask The Regulator* podcast hosts Kady Cravens and former Regulator of the Colorado Marijuana Enforcement Division Tom Mohan invited the cannabis business license application guru Layle McFatridge to discuss the typical application process from start to finish and share helpful insights that all applicants should know.

In their discussion, these cannabis industry experts weighed in on regulatory myths, the application process itself, and tools that they recommend for applicants to implement in the process to better their chances of obtaining a cannabis business license.

In this article, we are sharing the takeaways from the episode and compiling our top 10 things you need to know about the application process for a cannabis business license, including specific project management tools like Standard Operating Procedures, and the application requirements themselves.

WHAT YOU NEED TO KNOW ABOUT THE APPLICATION PROCESS FOR A CANNABIS BUSINESS LICENSE

Location of the jurisdiction you are applying to
Have the business model and plan ready
Regulatory violations that you may have already received
The costs involved in applying
How & where to research regulations
Project management strategy & operational plans
Application process timeline
The specifications of the application
How to manage the application
How to submit the application

1. Location of the Jurisdiction You Are Applying To

It may seem like a no-brainer, but the very first step in obtaining a license is for potential applicants to know where they are wanting to set up their cannabis business.

Each state, city, and township has its own regulatory model and they all differ from one another.

So knowing where you want to set up shop is crucial in moving forward with obtaining the necessary documents and information to know what is possible in terms of regulation and zoning in that particular jurisdiction.

It can be especially eye-opening for operators who are wanting to expand their business into other jurisdictions. A Cannabis multi-state operator will need to approach obtaining a license for the new business as though it is a completely separate entity from the existing operation.

Franchise models are becoming more popular and will likely continue to rise as a profitable approach to cannabis operations. But they too need to apply for licensing in their jurisdiction the same way as independently owned businesses, each obtaining its own cannabis business license under the appropriating jurisdiction.

2. Have the Business Model & Plan Ready

At this stage, knowing who you are growing for and what you are growing is key in planning the business and should be decided before the application begins. You should know if you are looking into adult-use or medical, THC or Hemp, etc.

Different cannabis business models include:

Cultivation
Lab testing
Manufacturing
Distribution
Dispensary & Delivery Services
Social consumption

When deciding on a business model, prospective applicants should think about the core reason behind their wanting to get into the cannabis industry.

When reviewing the application, Regulators want to know more than simply how you are planning on running the business, they will want to know why you are wanting to get into the business to start with.

It is recommended that applicants seriously consider the community in which they want to be a part of, and how they will work to protect that community, comply with the laws to maintain safety, and have little to no resistance from their neighbors.

Finally, like in all business planning, branding and marketing research should be done in order to know the business’s positioning, brand values, who the ideal customer is, and how you are going to serve them.

3. Regulatory Violations That Have Been Received

Jurisdictions will often ask applicants to report regulatory violations they have received, but often applicants are unsure of what actually constitutes a violation. This is where knowing the specific language of the application is necessary.

Warnings vs. Corrective Action

Depending on the State, ‘warnings’ and ‘violations’ are most often different where a warning is not a violation. For example, in Colorado, a regulatory warning letter is not a regulatory violation.

If you are still unsure, consider what corrective actions you had taken following a warning or violation. The applications are often inquiring about how you handled the violation, whether or not paid a fine, or had to take action.

Know what you are legally obligated to report and don’t offer more information than that which is necessary. Reporting warnings as violations will not help you in your application process.

It is necessary to mention that regulatory records follow your business, so if there is a violation, you must report it. Moving a cannabis business license to another jurisdiction is not an escape route, so it is pertinent to be transparent when it is obligated.

4. The Costs

Applicants should budget the pre-licensing costs that will add up in relation to the license application. They will also need to have a plan in place that shows the financial health of their existing operation and what they project to happen in 3-5 years.

Applications themselves can be costly and range anywhere from $5,000 to $500,000. Depending on the jurisdiction, some are refundable and some are not refundable.

Considering construction costs is also important. Knowing how much supplies would need to go into the business and sourcing materials to have an estimate for the overall project costs.

Cannabis business license application costs come in the form of:

Technical Writers
Document fees
Notaries
Subject matter expert advisors
Accountants
Tax professionals
SOP professionals
Additional software solutions needed for the process

Many applicants believe that expensive attorneys and their exorbitant technical writing fees are necessary for the application process.

On the contrary, there are service providers who are experts in this field and who will advise you on your Project Management Systems, Standard Operating Procedures, Technical Writing services for the application itself, and even Real Estate services for Cannabis businesses that are experts in zoning and regulations.

In fact, the experts at BuildMySOP have been hired to help customers with their State applications, including the largest hemp manufacturer in NM.

5. How & Where to Research Regulations

It is important that you locate the correct regulatory website for the jurisdiction you are applying to.

Many invalid websites and businesses will try to gain web traffic and obtain customers by offering unnecessary application services, often exploiting the truth. Do your own due diligence and research and ask notable professionals for guidance if necessary.

Once you find the right website, you can download an application packet that includes a checklist of everything you will need to submit, documents that need signing and/or attestation, and all other important information concerning the requirements of the application.

These packets contain a lot of information about applying for a cannabis business license and it is crucial that you read everything in them.

6. Operational Plans

Additionally, part of the application process will be writing operational plans and procedures that show the step-by-step procedures of business operations, such as security plans, day-to-day operational tasks, and anything that ensures the business stays in compliance.

When applicants are drafting these plans, they need to think of these plans as the what, (ie what the tasks are to operate in compliance), and the Standard Operating Procedures as the how (ie how the business will carry out these tasks, step-by-step).

In particular, applicants need to consider the community where they are planning to set up their business and the neighbors that will be running their own businesses next door. When immersing into a community, cannabis business owners should have plans in place for probable issues such as odor control and public safety.

Applicants can submit their plans for how to handle these types of complaints or issues, providing SOPs for how to manage odor or handle complaints, lock dumpsters for public safety, etc. This approach will reflect positively for the cannabis business license applicant and set the business operator up for better success within their own community if the license is granted.

7. The Application Process Timeline

Typically, the application process will take about 8 weeks from start to submission, but it requires that the applicant know their responsibilities and what is expected in the application.

Since the application and business plan is an enormous undertaking and investment, the applicants should not hesitate to invest in knowledgeable professionals to assist with any questions or tasks along the way, ensuring that the steps that are being taken are correct and complete.

8. The Specifications of the Application

The application will ask open-ended questions pertaining to the operation plans so writing clear and concise narratives is a huge part of the process. Part of the narrative might require citing regulatory law, so the writer must know the exact language that regulators use in that jurisdiction (ie “marijuana” vs. “cannabis” vs. “adult-use”).

When citations are included, be sure to cite the source exactly as it is written, including any grammatical errors that may exist.

Because the applications contain so much information, the guidelines specify the style and narrative requirements, including specifications for the formatting, font type, font size, margins, word count restrictions, etc. to help the review process run efficiently.

9. How to Manage the Application

Throughout the application process, you will find that there are a lot of documents that need to be acquired, some that need specific signatures, some that are written by the applicants, some needing attestation, all following specific steps that are to be taken in a particular order.

Therefore, you will need a project management strategy and system that keeps the required documents and plans in order. You will also need to have all of this information on file for Regulatory purposes if you are awarded the license to operate, so investing in a management system from the start is a very wise approach.

Applicants can hire a technical writer who can help write out the operational plan for the application, or the what of the business, and invest in a Cannabis SOP provider to organize the how for the operation plan to be carried out.

There are management systems specifically designed for a Cannabis business, like BuildMySOP, which is a file storage solution that organizes and stores all of your documents, Standard Operating Procedures, and more.

Cannabis business owners who have applied for licensing with SOPs already in place for future use have been successful with obtaining a license and in their future operations, employee training and performance, and are prepared for regulatory inspections.

10. How to Submit the Application

When submitting an application, every jurisdiction will have its own conditions, some require hard copies of the thousands of pages of documents, and others request digital submissions either by flash drive or through a designated website.

It is noteworthy that some states mandate that any hardcopy (paper) files submitted to the government for review become public records while there is an open case.

So if you are wanting to avoid your business plans and other personal information being publicized this way, you can first ensure that digital copies are not allowed for submission, as many states will simply say “submit” but not specify how.

Next, request with legal assistance that certain paragraphs or pages or sections of the application are blacked out from view on public record Lastly, request the paperwork back so that it is no longer on public record after the “open case” is closed.

When you are ready to submit the application, make sure to keep two notarized copies (hard copy and digital) in case of loss, corrections, copies for local entities, for your own records, SOPs, business partners, lenders, etc.

And most importantly, when submitting the finalized application, all fees must be paid.

What`s Next

The cannabis business license application process requires many steps to be taken, lots of paperwork, and enormous amounts of money. It is a serious investment meant for serious business owners.

Again, when approaching the application process, be sure to consider the following:

Read the application in its entirety
Know the rules
Remember that you are solely responsible
Know your strengths and weaknesses
Extract the knowledge from professionals who understand the industry
Know the state-mandated software or hire managers who do

The biggest recommendation for people who are ready to invest millions into a cannabis business is to work in the industry for more than one day and really know what it’s like. Know the personalities of the employees and customers, know the day-to-day tasks involved in the operations, and know how much work goes into running it all consistently.

If you decided to move forward in applying for a cannabis business license, there are experts who can assist you in the application process and with the final regulatory review to verify the accuracy of the application, so do your own research and take the necessary steps to work with experts in the cannabis industry.

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