The Real Cost for a California Cannabis License

California Cannabis License

Have you Ever Wondered What was the Actual Cost to Get a Cannabis License?

Look No Further

In this article we’ll break it down for you drawing upon our experience in acquiring cannabis licenses in 2 states and participating in over 17 successful cannabis licenses. Over this time, we identified the 6 main barriers-to-entry. Of course, the primary concern for everyone is:

How Much Does it Actually Cost to Start a Cannabis Business?

We hope our experiences can help people take knowledgeable steps so they aren’t wasting their own, investors, or other people’s resources and time. We intend this to be a mini walk through of how much it costs to start a small facility 3000 square foot manufacturing facility in California. However, most of this is easily swappable/transmutable to all other legal/quasi-legal cannabis states. So, let’s get started.

The Average Cost to Open a Cannabis Business is $750,000+

This amount is a combination of a LOT of steps which no one says anything about, mostly because everyone is trying to get ahead of everyone else, attorneys have an overwhelmingly new area to learn and navigate through so they charge a ton, and everyone puts a premium on “cannabis” because well – it’s the future holy money-making grail.

First Step – Property Identification

First and foremost is identifying property. Cannabis is vastly different from any other industry in the world. This is because unlike alcohol, pharmaceuticals, cigarettes, or just purely illegal drugs – cannabis is a quasi-legal product which is not legal under federal law.

Green Zone Properties

In California, the cities and states have all the power in deciding zoning for cannabis properties. Commonly known as “Green Zone” properties, these properties automatically 2x to 5x in value if they are in the legal “Green Zone” for a city. So your first hurdle is making sure that the property you selected is even the Green Zone.

A cannabis consultant could charge anywhere between $1,000 to $10,000 or even equity depending on the length of time to go look for properties, check their zoning, then verify its location with the city. For us, it took us 16 cities and 43 different properties before we found one. Let’s just average it at $5,000 which is relatively cheap.

Leasing or Purchasing Green Zone Properties

As a result of the state vs federal law conflicts: No federal bank will give loans for cannabis properties.

Cannabis Property Costs

That’s right. This means you have two choices as a cannabis business – (1) own a property outright with NO loans or (2) Rent from a landlord who owns a property outright with no bank loans. With a 2x to 5x in value for no reason other than it’s Green Zone, this means that your property costs shoot up vastly.

Let’s average the cost for purchase at $300.00/Sqft and leasing at $3.00/Sqft. With a 3000 sqft facility, we’re looking at $900,000 (purchase) or $9,000 a month (Lease).

Second Step – City Application

The second opening cost of any cannabis application is the city or county fees. We break this down to two types of city fees: (1) Explicit Fees & (2) “Discretionary” Fees.

The explicit fees are what are publicly stated and the discretionary fees are while you are on the process – what a city a can charge you for any reason at any rate at their discretion.

Express Fees

Cannabis Property Costs and Fees

The express fees usually range from at a minimum, $5,000 to up to $25,000+ in some outlier cities. Most will charge between $5,000 – $15,000 For example, the city of Long Beach charges $5,925.45 in fees for 1 owner. If you have multiple owners – they add $145.00 for each additional owner. In Los Angeles, each license requires $8,059 per activity type. We’ll average it at $15,000.

Discretionary Fees

The discretionary fees are more interesting, in order to ensure that your premises meets the code, you’ll need to make sure your property is up to code from the local fire, police, architectural, and engineering departments – or however many departments the cities decides are necessary. Los Angeles Fire Department charges $918 + $216 for inspections exceeding 4 hours. However, they say nothing about any other departments. Basically, if a city likes you, they can charge you as little as a couple thousand and if they dislike you or think you have deep pockets – they can charge tens of thousands.

Cannabis Startup Pricing

It’s also incredibly common for a city to point out an issue and ask you make a modification so that they can come back in for another inspection, or simply put down a random number of how many hours it will take them. Most cities will also charge you a security deposit, legal fees, consulting fees, and operating agreements with the city, etc. In all of our licenses, we have never paid less than $35,000 for these discretionary fees. As a result, we’ll average these out at $30,000 to be really nice and overly optimistic.

Third Step – Premises Diagram

Almost all cities have a multiple-phase application process. At some point, you must have a premises diagram that meets all state and local cannabis codes, and specifically for cannabis. Unless you’re a cannabis architect yourself – you’ll need someone who can do this. Cannabis Architects charge a premium as they have to consider a lot of factors that most regular architects do not. Expect to pay about double to triple for cannabis architects.

Our cannabis architect states “While normally an architect would charge $1.50-5 for a commercial project – expect to pay closer to $8-$10 per square foot for a cannabis facility for a good cannabis architect.” Taking the low range of this, let’s tack on another $24,000 for premises diagrams.

Cannabis Startup Pricing & Licensing

Fourth Step – Engineering Plans

Once you have this set up, now you’ll need to get all your electrical, plumbing, and other items in order. Also known as MEP, these engineers are crucial in ensuring you have sufficient utilities coming in to operate your cannabis business. The average cost of this is probably around $2.00 – $4.00 per square foot. Taking the low range of this, another $6,000 for MEP.

Engineering Costs

Fifth Step – Interior Design

Now comes whether you want your place to look nice or not. This really is aggressive for retail but for other parts of the cannabis chain – the interior design really isn’t taken into account. So while normally it would be about $4.00 a square foot for retail, for our facilities only minimal costs were put into design costing about $1.00 square foot. We’ll tack on $3,000 for this.

Startup Pricing Design Costs

Sixth Step – Construction & Equipment

Now comes the REALLY expensive part, how much is your equipment and construction? A CO2 extraction machine goes from about $135,000 for small ones to $500,000 for larger ones. Then there is rotary evaporators, centrifuges, and much more depending on the needs of your engineer or scientist. Ultimately, the equipment probably averages around $250,000 for a small 3,000 sqft operation.

Then let’s also tack on general contractor costs (unless you are one yourself). General contractors get paid by taking a percentage of the overall cost of the completed project. Some will charge a flat fee, but in most cases, a general contractor will charge between 10 and 20 percent of the total cost of the job. This includes the cost of all materials, permits and subcontractors. The average cost per square foot for a commercial cannabis property goes from about $80 to $200.00 per square foot or more with most settling around $100 per square foot. This includes all the material, subcontractors, and labor. So let’s tack on another $300,000.

Cannabis Construction Costs

Seventh Step – State Licensing

Now that you’ve finished building out everything. Let’s assume that everything went PERFECT, and that you only need to do the final checkups. You can apply for your state licenses.

A 3,000 square foot facility with anticipated revenue of less than $500,000 – you are looking at a $1,000 application fee + $2,500 licensing fee. When you’ve received this and passed all inspection – now you can finally start operating. However, there’s a few more costs here that most people don’t account for.

Cannabis State Licensing Costs

Eighth Step – Legal Consultation

Hiring a cannabis consultant or attorney is expensive. The average cannabis attorney rate is around $750/hour being able to charge a premium as it’s a really exclusive field right now. This is coming from one of our founders who also runs a law firm specializing in cannabis contracts.

For example, the city of Los Angeles requires public notices, community meetings, pre licensing inspection etc. This includes having someone stand in front of the public population of a city at city council hearings, meet and greets with city officials, negotiations and more.

If you want to have a specialized, knowledgeable cannabis attorney – expect easily about 50 – 150 hours of legal work. Let’s take the mid area at about 100 hours.

Legal Aspects of Starting Cannabis Business

Ninth Step – Burn Rate

Here’s a super fun one for everybody. If you are leasing property – keep in mind that while you are struggling – this doesn’t mean your landlord lets you off the hook. We’ve spoken to a lot of people about the pain they have during this time frame – some are hitting about 14 months of processing time with over $30,000/month in just rental fees.

Everything above takes a long time to complete. Let’s estimate a “short” time frame of 12 months * the rent = $108,000. Let’s also add in the security deposit which is usually 3x normal rates. $108,000+$27,000 = $135,000.
TOTAL COST FOR 3,000 SQFT FACILITY BEFORE OPERATIONS BEGIN WITH GOAL OF $500,000 REVENUE

LEASE: $846,500

PURCHASE: $1,611,500

NON-REFUNDABLE AT ALL STAGES

Now comes the really fun part for us

Let’s compare the opening costs for you to start with us in making your own manufactured cannabis products versus the opening costs that everyone else has had to suffer.

My Green Network Cannabis Operational Costs

So if you’re ready to enter the United States largest edibles market (now and in the future): Contact a community curator and ask about our Early-Bird Commitment Program to secure your spot today!

Where is the Future Largest Edibles Market in the United States?

The Future of Edibles in the Cannabis Industry

Los Angeles

And the best part is that there are oceans of opportunity for anyone to be the next cannabis version of Nestle, Pepsi, or Wrigley. Let’s take a look at how we came to this conclusion of the future largest edibles market in the United States.

The Emerging Edibles Market

In 2018, U.S. Consumers Ordered Cannabis Every 8 Seconds Source – Forbes
Let’s combine this statement with another fun statistic:

Cannabis Statistic

Edibles are no longer limited to homemade brownies and cookies. Edibles today include gummies, breath strips, chocolates, beverages, mints, gum, popcorn, potato chips, etc. – if you can imagine it, someone can make it.

Non-Flower Sales %

Non-Flower Sales %

When a state legalizes cannabis, the American hallmark of innovation, free expression, and creativity shine brightly in the edibles market. Edibles sales in America exponentially rise when a recreational cannabis industry grows. The historical preference for cannabis flower takes a back seat for more convenient and discreet ways to ingest cannabis.

The reason is clear why this is the case too.

Global Trends

Less Americans Are Smoking

Less Americans Are Smoking

Smoking rates in America are falling with the adult smoking rate down to 15.5% in 2016 from more than 40% in the 1960s. But that’s not it, edible products are rapidly becoming the preferred product to sell due to a key driving factor…Edibles are the most profitable cannabis product to sell.

Flower to Infusion Journey

We’re extremely experienced in the legal cannabis industry with operator knowledge and know this is a chance that can’t be passed up. With this opportunity, it’s no wonder why billionaires are jumping into the edibles market like the billionaire Wrigley heir, Arizona Iced Tea, and other huge companies.

California is the Largest Edibles Market in the United States

We’re going to go over some mind-blowing, super fun facts here. With a GDP of $2.9 trillion, California would slot between Germany and the United Kingdom in the world’s top economies. California actually accounts for 14% of the United States entire economy.

California Population

The California population is estimated to be approximately 39.75 million making it the most populated cannabis market in the America.

In fact, the population of California is bigger than the entire country of Canada which has a population of 37.5 Million.

California is the leading state in the United States for cannabis sales.

In 2018, California legalized cannabis and had $2.51 billion in sales eclipsing Colorado’s 6 year running cannabis market by 60% in the span of 1 year.

This goes into a really interesting statement that we have personally experienced.

As of 2019, California’s edibles market is still immature.

California only started issuing commercial cannabis licenses in January 2018. It is still an extremely immature market that is poised for explosive growth if we follow the edibles market trends of every other state that went recreational.

Evolution of Recreational Edible Markets

Year 1

Cultivators begin harvesting and get a jumpstart in the market with easy to sell packaging. Manufacturers and distributors are learning how to make products.

Year 2

Companies work out final formulations to consistently meet State THC requirements and make good edible market products.

Year 3

The third year and beyond – branding and marketing starts with aggressive competition to be “the brand” for a particular edible product. Right now, California is in its 2nd year of true legalization. As a result – the edibles market is still wide open.

It’s pretty clear that the California’s edibles market is the largest edibles market in the country (and potentially the world), now and in the future.

The Los Angeles County Cannabis Market is the largest in the United States

Fact

Los Angeles is the most populated county in the United States with over 10 million people.

If we’re talking about potential cannabis consumers, 85% of those 10 million are 21+ making it over 8 million potential customers.

Los Angeles Cannabis Statistic

Another fun fact is that “cannabis tourism” is quickly becoming a thing.

Los Angeles had over 50 million tourists in 2018 essentially 5x-ing the potential consumer market where people visit just to try California cannabis – known as the “best weed in the world”.

This makes Los Angeles the most populated cannabis county in the United States with the most aggressive potential cannabis tourism in the world.

How to Easily Enter the Largest Edibles Market in the United States

So let’s recap. We said it and we mean it that Los Angeles is the largest edibles market in the United States, now and in the future.

THE EDIBLES TRENDS

In 2018, with only 9 recreationally legal states, a handful of medical states – cannabis products were being purchased every 8 seconds. In mature legal cannabis states (those that have legalized and operated for several years), more than 50% of their sales were from edibles.

WHY THIS TREND IS HAPPENING

This is heavily influenced by a clear trend by Americans to NOT smoke + edibles have the highest profit margins in the cannabis industry.

Let’s couple it with the purchasing power and the size of the edibles market.

Purchasing power – California economy vs all other Countries – ranked 5th in the world ensuring plenty of money to spend.

Population – California vs all other states – Rank #1 beating 2nd place Texas by over 26% with almost 40 million population.

Cannabis Sales – California vs all other states – #1 in America beating the longest running cannabis market (Colorado) by 60% in less than 1 year.

Los Angeles edibles market – Los Angeles county has over 8 million potential consumers 21+ making it the largest cannabis market in the United States.

This means that entering the Los Angeles edibles market is an immediate opportunity to be part of the future largest edibles market in the United States.

The best part? It’s pretty easy to enter this market.

You don’t need to be the Wrigley billionaire or the Arizona Tea with millions of dollars of funding. You don’t even need $100,000.

Through My Green Network and its Cannabis Coworking platform – the costs to enter the largest edibles market is affordable, guaranteed, and easy. You’re also only 20 minutes away from Los Angeles situated in the largest edibles market in the United States, now and in future.

We already did all the heavy lifting and evened the playing field making it so you jump ahead of everyone else (including those billionaires) with a complete support system dedicated to your success.