Jacob Redmond
Well-Known Member
Donald Morse looked at a former coffee shop in Oregon City when he was planning to open his medical marijuana dispensary. The rent was $3,500 and Clackamas County officials had at the time placed a moratorium on the sale of medical marijuana inside county limits.
Morse passed, deciding he'd rather have a more stable business location.
A year later, he noticed the spot was on the market again. For the rights to the lease and a medical marijuana retail license, the seller wanted $1.2 million. The price sounded absurdly high.
Morse, the director of the Oregon Cannabis Business council, said there seems to be a widespread expectation of making millions off Oregon's newly legalized marijuana market. But that gold-rush mentality is part of what's actually leading medical marijuana dispensaries to close faster than ever.
Some dispensary owners had hoped October 1, the day recreational marijuana sales became legal in Oregon, would be the saving grace for struggling businesses.
"Most people are hanging on until the climate gets better," said Sam Heywood, co-owner of dispensary Farma, just days before the new rules went into effect. "If it didn't have that horizon where the regulatory climate is expected to improve, I suspect a lot of people would have given up by now."
Morse, though, is skeptical recreational pot will change the fortunes of struggling dispensaries.
Industry insiders say a mix of factors is causing shops to close: oversaturation, bad locations, a lack of business savvy and the difficulty and added costs of operating cash-only businesses.
Outside companies are increasingly investing in the wider recreational audience, too, putting an extra squeeze on the existing dispensaries: competition.
"The medical market will go away within a year," Morse predicted.
Oregon is not unique in this. Before recreational marijuana was legalized in Colorado, medical marijuana dispensaries were already closing. The industry contracted 40 percent between 2010 and 2013, according to the Denver Post. Washington state purposefully started moving all medical marijuana dispensaries into the recreational market when pot became legal there.
Morse's organization is pushing for a bill in the next legislative session that would give tax-exempt status to medical marijuana patients who buy from recreational outlets, keeping some advantage for patients who go through the trouble of getting a card.
Too many stores, not enough patients
Sam Chapman helped lobby for the law that allowed medical marijuana dispensaries to sell a limited variety of pot products — no edibles or extracts — starting October 1. The idea is to give them a headstart before new competitors join the race.
In January 2016, the Oregon Liquor Control Commission will take over recreational sales and allow recreational-only retail outlets to open their doors.
Chapman, who works for New Economy Consulting, said "mom and pop" dispensaries need the early advantage if they hope to survive. Many were growers who decided to try their hand at business, but don't have the experience or financing to keep themselves afloat in an increasingly competitive marketplace.
He estimates that there are only about 50 medical marijuana patients for every dispensary in Portland now. Even if that number is low, the influx of new dispensary licenses suggests there are too many dispensaries for the number of patients.
There are 71,094 people in the medical marijuana program in Oregon, a number that is holding relatively steady after climbing for years. At the same time, the Oregon Health Authority is approving more licenses to sell every day.
This time last year, there were 193 licenses for dispensaries, with 88 in Multnomah County. By July, 310 licenses had been approved. A month later, there were 345 — 119 in Portland alone.
"There's just not enough patients to support that many dispensaries," said Heywood, of Farma.
In that same time period, five dispensaries changed ownership, some with new names that drop the "health" aspect of the business.
Chapman figures some people are sitting on licenses and leases in hopes of selling to big investors as Oregon's recreational market picks up steam. But he isn't sure those speculators will make out as well as they'd hoped.
"A lot of these licenses trying to sell on the open market have been overpriced, and a lot of the larger investors looking to acquire the license will continue to wait for those business to go under or will (enter the market) through other options," Chapman said.
Cash business woes
There's also the fact that the marijuana industry is still illegal as far as the federal government is concerned, so banks tend to be reticent to work with dispensaries.
Former U.S. Assistant Attorney General James Cole wrote a memo in 2013 saying the federal government would not prosecute a bank or credit union for taking deposits under some circumstances.
But that hasn't opened the bank doors to normal business operations for pot dispensaries. Banks and credit unions still worry they will be held responsible for taking drug money — and decisions are often made at banks' headquarters in states where marijuana is not legal, so the problem can seem far removed.
"That Cole memo is as only as good as the administration it was written in, and how long will that last?" said David Tatman, Oregon's top banking regulator at the Division of Finance and Corporate Securities.
Without banks, dispensaries are forced to work in cash, which increases cost and complexity. And they can't deduct the business expenses from their federal taxes the way other companies can, either.
Even so, there are other ways for dispensaries to get loans, Chapman points out. Investors are rushing in.
"There is so much money being offered out there, it's kind of ridiculous," Chapman said. "The downside of that is a lot of that might not necessarily be smart money."
By the time it figures everything out, though, the retail landscape may not look anything like it does today. And it may be a bumpy ride for business owners between now and then.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Dispensaries Struggle While Recreational Marijuana Takes Off
Author: Molly Harbarger
Contact: Email The Author
Photo Credit: Kristyna Wentz-Graff
Website: Oregon Live
Morse passed, deciding he'd rather have a more stable business location.
A year later, he noticed the spot was on the market again. For the rights to the lease and a medical marijuana retail license, the seller wanted $1.2 million. The price sounded absurdly high.
Morse, the director of the Oregon Cannabis Business council, said there seems to be a widespread expectation of making millions off Oregon's newly legalized marijuana market. But that gold-rush mentality is part of what's actually leading medical marijuana dispensaries to close faster than ever.
Some dispensary owners had hoped October 1, the day recreational marijuana sales became legal in Oregon, would be the saving grace for struggling businesses.
"Most people are hanging on until the climate gets better," said Sam Heywood, co-owner of dispensary Farma, just days before the new rules went into effect. "If it didn't have that horizon where the regulatory climate is expected to improve, I suspect a lot of people would have given up by now."
Morse, though, is skeptical recreational pot will change the fortunes of struggling dispensaries.
Industry insiders say a mix of factors is causing shops to close: oversaturation, bad locations, a lack of business savvy and the difficulty and added costs of operating cash-only businesses.
Outside companies are increasingly investing in the wider recreational audience, too, putting an extra squeeze on the existing dispensaries: competition.
"The medical market will go away within a year," Morse predicted.
Oregon is not unique in this. Before recreational marijuana was legalized in Colorado, medical marijuana dispensaries were already closing. The industry contracted 40 percent between 2010 and 2013, according to the Denver Post. Washington state purposefully started moving all medical marijuana dispensaries into the recreational market when pot became legal there.
Morse's organization is pushing for a bill in the next legislative session that would give tax-exempt status to medical marijuana patients who buy from recreational outlets, keeping some advantage for patients who go through the trouble of getting a card.
Too many stores, not enough patients
Sam Chapman helped lobby for the law that allowed medical marijuana dispensaries to sell a limited variety of pot products — no edibles or extracts — starting October 1. The idea is to give them a headstart before new competitors join the race.
In January 2016, the Oregon Liquor Control Commission will take over recreational sales and allow recreational-only retail outlets to open their doors.
Chapman, who works for New Economy Consulting, said "mom and pop" dispensaries need the early advantage if they hope to survive. Many were growers who decided to try their hand at business, but don't have the experience or financing to keep themselves afloat in an increasingly competitive marketplace.
He estimates that there are only about 50 medical marijuana patients for every dispensary in Portland now. Even if that number is low, the influx of new dispensary licenses suggests there are too many dispensaries for the number of patients.
There are 71,094 people in the medical marijuana program in Oregon, a number that is holding relatively steady after climbing for years. At the same time, the Oregon Health Authority is approving more licenses to sell every day.
This time last year, there were 193 licenses for dispensaries, with 88 in Multnomah County. By July, 310 licenses had been approved. A month later, there were 345 — 119 in Portland alone.
"There's just not enough patients to support that many dispensaries," said Heywood, of Farma.
In that same time period, five dispensaries changed ownership, some with new names that drop the "health" aspect of the business.
Chapman figures some people are sitting on licenses and leases in hopes of selling to big investors as Oregon's recreational market picks up steam. But he isn't sure those speculators will make out as well as they'd hoped.
"A lot of these licenses trying to sell on the open market have been overpriced, and a lot of the larger investors looking to acquire the license will continue to wait for those business to go under or will (enter the market) through other options," Chapman said.
Cash business woes
There's also the fact that the marijuana industry is still illegal as far as the federal government is concerned, so banks tend to be reticent to work with dispensaries.
Former U.S. Assistant Attorney General James Cole wrote a memo in 2013 saying the federal government would not prosecute a bank or credit union for taking deposits under some circumstances.
But that hasn't opened the bank doors to normal business operations for pot dispensaries. Banks and credit unions still worry they will be held responsible for taking drug money — and decisions are often made at banks' headquarters in states where marijuana is not legal, so the problem can seem far removed.
"That Cole memo is as only as good as the administration it was written in, and how long will that last?" said David Tatman, Oregon's top banking regulator at the Division of Finance and Corporate Securities.
Without banks, dispensaries are forced to work in cash, which increases cost and complexity. And they can't deduct the business expenses from their federal taxes the way other companies can, either.
Even so, there are other ways for dispensaries to get loans, Chapman points out. Investors are rushing in.
"There is so much money being offered out there, it's kind of ridiculous," Chapman said. "The downside of that is a lot of that might not necessarily be smart money."
By the time it figures everything out, though, the retail landscape may not look anything like it does today. And it may be a bumpy ride for business owners between now and then.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Dispensaries Struggle While Recreational Marijuana Takes Off
Author: Molly Harbarger
Contact: Email The Author
Photo Credit: Kristyna Wentz-Graff
Website: Oregon Live
