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October 10, 2022 | Posted in:

A Comprehensive Update on The Business of Cannabis in South Jersey

On October 6, 2022, Alloy Silverstein Accountants and Advisors hosted a virtual panel discussion with some of the top industry leaders and advisors of cannabis in New Jersey, featuring special guest Commissioner Krista Nash of the New Jersey Cannabis Regulatory Commission (NJ CRC). Each esteemed panelist brought their industry experience, advice, and perspective to a guided discussion full of informative insight for anyone interested in pursuing business within the New Jersey cannabis market.
 

Cannabis in South Jersey Panelists:

 

 

Free Recording

This free virtual panel provided an in-depth update on the NJ cannabis business market, featuring a lively conversations and Q&As on the background of cannabis in southern New Jersey, where it stands today, and the future business opportunities of the industry.

Were you not able to make the live event, but still interested in the insight provided by the panelists? Sign up to access the free recording:

 
Access the recording →

 

Q&A on Cannabis Business Opportunities in South Jersey

Following are excerpts from the panel and some Frequently Asked Questions (FAQs) on starting a dispensary, the cannabis licensing process and status, and becoming an ancillary business partner to cannabis business owners. For the full content of the panel discussion, please view the Zoom recording.

 


 
Q: What does the NJ CRC do?

A: The New Jersey Cannabis Regulatory Commission establishes and enforces the rules and regulations governing the licensing, cultivation, testing, selling, and purchasing of cannabis in the state. The Commission began its work in April 2021 and was tasked by law to develop and regulate and oversee the medicinal and recreational cannabis market here in New Jersey. Importantly, it is a diverse commission. There are a lot of perspectives, and we need that here in New Jersey.

We started with a strong statutory framework, which was set forth in the CREAMM Act. And we heard from the public during public meetings, stakeholders, and advocacy groups, and we built upon that. We also removed barriers by including a conditional licensure process, established the Office of Diversity and Inclusion to ensure that we meet the equity initiatives, implemented strong testing standards and labeling requirements to ensure that products are free from harmful ingredients and that consumers know what they’re buying, and implemented a social equity excise fee.

 

Q: What is the NJ social equity excise fee?

A: The Commission established a social equity excise fee, which is a fee on cultivation businesses and increases as prices decrease. This fee will raise money which can be appropriated to social equity initiatives in impact zones for many programs, including employment training, apprenticeships, economic development, after school program. The Commission will be holding annual regional hearings for North, Central and South Jersey to solicit input from the public on recommendations on how these monies could be spent.

The fee is 1/3 of 1% of the average retail price per ounce for first nine months of legal sales (Example: $300 (est/ounce) x .0033 = $0.99 EF). The fee is not imposed on medical cannabis and it increases as consumer prices decrease.

 

Q: When will funds from the social equity excise fee begin flowing to social equity applicants and programs to support them? When will municipalities in impact zones receive funds?

A: When developing the recreational cannabis program, the Commission focused on two core values, which are safety and equity. The CRC implemented a social equity excise fee, which is a weight-based fee, and all proceeds are dedicated to social equity initiatives in impact zones. As for when the proceeds can begin benefitting the intended recipients, the NJ EDA program is still forthcoming and an exact date is still unknown.

 

Q: What has been the tax revenue since the start of retail sales in April 2022?

A: $4.6 million in tax revenue. That is how much was collected in the first ten weeks since recreational cannabis sales began. That tax revenue came from nearly $80 million on sales of recreational cannabis between April 21 and June 30. What is striking here is that this revenue was generated by only seven cannabis businesses. These seven companies are multistate operators, or as referred to as MSOs.

 

Q: What are the hurdles or key market barriers for cannabis in NJ?

A: 1. Real Estate 2. Securing capital from traditional lenders and 3. Municipal opt outs. The Commission recently extended the conditional license phase for an additional 45 calendar days, thereby making the conditional license valid for a total of 165 days. And we’re seeing some of the challenges here that people are facing that applicants are facing. Like real estate shortages that’s caused by limited supply and inflated pricing, and compounded with the few municipalities in which cannabis businesses can operate and lack of access to capital, there are challenges in securing money from traditional lenders due to the Federal Classification of Cannabis, the Commission is working with the NJEDA on an initiative to extend financial incentives to cannabis businesses located in impact zones. But until these NJEDA funds are available or the passage of the Safe Banking Act, license holders are up against the clock to secure financing from alternative sources with fair terms.

 

Q: What towns and municipalities have ordinances that allow recreational cannabis? What are the benefits to municipalities? Where can you see an updated list of South Jersey towns?

Of the 8 South Jersey counties, there are currently 77 participating municipalities as of publication (Oct. 2022). NJ CRC Staff is also working to create a database of these municipalities with a link to the resolutions on our website, so stay tuned for that.

South Jersey Counties and Towns That Allow Recreational Cannabis

While the law permits municipalities to collect up to 2% of gross sales, many municipalities have not taken advantage of that revenue stream. Members of the Commission are in constant conversations to provide guidance and support to educate these undecided municipalities on the monetary benefits and also job creation in these towns. This is huge. I think about the $80 million in revenue generated in ten weeks and how municipalities are missing out on the financial benefits from the transfer tax and also the numerous jobs that can be created both in cannabis businesses and ancillary services.

 

Q: What types of cannabis business licenses are there in NJ?

A: There are six types of cannabis business license, which is (1) Cultivation — growing cannabis indoors or outdoors. Outdoors, you would need municipal approval. New Jersey is known for its nutrient-rich soil for Jersey tomatoes, and now we will be known for something more. (2) Manufacturing, which is producing cannabis goods. (3) Wholesalers: storing, buying and selling in bulk. (4) Distribution, which is transporting bulk cannabis but not across state lines. (5) Retail, which is commonly known as dispensaries that sell cannabis products. And (6) delivery essentially like an UberEats for cannabis, and testing labs.

 

Q: Does the NJ CRC have any role in counteracting the black market?

A: The CRC doesn’t have enforcement powers, but we’ve been working to reach out or welcome those in the illicit market into the regulated space. We have a Director of Diversity and Inclusion, Wesley McWhite, and he has put together a legacy work group and that is comprised of individuals across the nation and then also here in New Jersey to hear their concerns about how to get safely into the regulated market. And also we communicate through our website, social media, and forums such as this that purchasing from a licensed Dispensary means that you’re going to get a tested product and that state safe and that you’re not, you know, if you’re buying from someone other than a Dispensary, that you’re not practicing unsafe or abusive labor practices.

 

Q: Is the CRC considering drafting rules and regulations regarding mergers and acquisitions within the cannabis industry in NJ?

A: Unaware of that at this time.

 

Q: Right now we are limited to 37 Class 1 cultivation licenses. Will there continue to be a cap on licenses or will be moving to an unlimited cap?

A: There’s currently a cap of 37 for cultivation, and in February 2023, the CREAMM max states that the commission can assess whether we need more. The CRCs believe that we need to see where all these conditionals are going to land. We’ve issued over 500 and go from there.

 

Q: Is there an anticipated turnaround time lately by the CRC on approval of conversion applications?

A: I can’t give specific times, but I would say we are going through right now conversions and annuals. What we’re seeing here is that it’s out of our control, compliance and investigations are requesting fingerprints and that’s on the ownership and others involved in the business to get those in. So there is some delay in that regard.

 

Q: What is the CRC doing as far as the backlog of pending applications?

A: The NJ CRC received 1,300 applications, and the staff has been phenomenal about carefully reviewing them. All the commissioners review them, and we’ve gone through most of them. We’re going to have an upcoming meeting. There will be a large bulk of applications being approved at that time. We are currently, as I mentioned, reviewing conversions and annuals, and that involves what I mentioned earlier about going through compliance and getting the fingerprint cards in. So I hope to have some annuals and conversions in the next couple of months, but don’t hold me to that. We’re moving through it very quickly, but it is time-consuming.

 

Q: One of the challenges that the cannabis community is reportedly facing is transparency and communication with the CRC. What are the best ways to communicate and receive status updates from the CRC, besides just receiving an auto-generated response?

A: The CRC has the information, the email link to information on our website, on inquiries. So if you’re referring to that where they’re not getting answers, if it’s related to follow up on their specific application and they’re not in a priority order, that they may need to hang on until we go through the application processes. Again, familiarizing one with the priority order here is very important. We do go through all of the emails.

 

Q: Is there any information on when/where the new CRC in person meetings will be held?

A: The New Jersey Cannabis Regulatory Commission will now host their public meetings in-person.  Starting with the next scheduled one on Thursday, October 20 at 1 p.m., the meetings will be held in the hearing room at the Civil Service Commission building, 44 South Clinton Avenue in Trenton. The meeting will also be live-streamed on the Commission’s YouTube channel.

 

Q: The rules seem to be changing by the minute.  How can you stay up-to-date with CRC announcements and updates?

A: Visit the CRC website  https://www.nj.gov/cannabis/, and you can also follow on Twitter and social media. There’s a lot of information there, and I just want to say that we have a list of FAQs. Earlier a question was asked about communication. What we do see when people reach out to us is that a lot of questions that are sent to us have already been posted to our Frequently Asked Questions. So please check out those resources.

 

Q: Is there a specific license type for outdoor cultivation? Is it within the cultivation license application?

A: Yes, it is. And there is criteria that the applicant would have to follow in terms of securing it with a fence and lighting and certain security. But what is most important is they have to find a municipality that would allow that. That’s the key. So but by all means, yes, they can apply for it. If they have a community that would welcome it.

One more thing, cultivators are not allowed to grow on farmland-assessed property.

From the insurance side, if anyone is considering outdoor cultivation, please reach out to a cannabis insurance advisor. Outdoor crops and operations are much different from an insurance standpoint. So that’s one definitely to work through early on and understand the nuances to it. It’s getting better, but that is a caveat to the insurance base of the outdoor crop. Something that we all preach is the proactive approach. Start having those conversations early to truly understand the options you have available.

 

Q: If a retail store was doing both retail and delivery before the new CRC regulations came out, does the retail business now have to apply for both a retail and delivery license separately?

A: A retail store, I believe, can have delivery as well, and I don’t believe they need to file a specific license for that.

 

Q: When are rules on lounges and infused pastries forthcoming?

A: Consumption Lounges, which is a space that would be attached to a dispensary where someone could consume marijuana, cannabis legally, and other cannabis products. And we’re fine-tuning the rules. Stay tuned. Hopefully you’ll see something soon. Edibles are something that we’re looking at and that is involving more of Health, another state agency. There’s health and safety involved in that, with commercial kitchens. So we will visit that at some point.

 

Q: Is there a common plan for cultivators to deal with regulated cultivation waste materials? 

Yes. They have to provide their standard operating procedures, which would show how they’re going to dispose of it, whether it’s shredding it or make it into any unusable form. They have to also have someone haul it, that’s licensed to do so. Everything can be found in the regulations and the notice of application. I encourage everyone to read that.

There isn’t exactly a common plan per se, like a template that’s available, but Commissioner Nash hit on the biggest headings in the SOP for that particular-topic and an SOP for that particular-topic must be included with your application submission for your license for cultivation.

 

Q: As we get into the debate sometimes of North, Central, or South Jersey, do you do you see a greater interest in cannabis business pursuits in certain parts of the state versus others?

A: The CRC does not have the breakdown on that at this time. To determine whether it’s a stronger interest up north, what I would say is that South Jersey has land available and more space at lower prices. So I would encourage people to focus on South Jersey.

 

Q: What is the potential of Atlantic City being the cannabis hub of South Jersey? Do they feel there are any opportunities in Cape May County for successful cannabis companies or will it be a small, limited market?

A: There is an Atlantic City Cannabis Commission that is working to try to get as much information out there as possible about Atlantic City to let people know that it is very much the municipality’s desire to be a green district. However you want to put it. A green light zone. I’ve heard it all different ways, but they want to be a cannabis epicenter for the East Coast, let alone in New Jersey. So, of course, that’ll lead to some saturation and some competitive market dynamics that you’ll have to be prepared for to do business in Atlantic City. Atlantic City also has some very different infrastructure as municipalities go. They’re one of the few that have a massive portion of the city that’s actually governed by the state. So these are just things that I say at the highest level to say, yes, Atlantic City, but also understand the market, understand how the city works. They have created a pretty big zoning rectangle, which basically goes from Boston Avenue all the way to the end of where the casinos sit. And then from Atlantic and Pacific, you can take a look at that online. They’re very open to conversation about coming to Atlantic City. You can access Kashawn McKinley, assistant to the Mayor, who makes himself very, very accessible to anybody looking to come into that town. In terms of Atlantic City, they are open for business. And it is a place that if you can find real estate at this stage, you could succeed in securing a license there.

The one thing I will say just about the coastal community is that a majority of those communities have opted out of not only adult-use, but also medical as well. The UFCW has put a lot of resources to go into these council meetings. The shore towns are going to take a little bit more conversation, personal touch type of thing. Local community activism is needed. When that market does open up, it’ll be some of the most active areas in the state, especially in the summertime. You’re going to have a lot of outside folks coming in from other states, vacationing, so they’re going to be busy locations. It’s just going to take a lot of work. On a local level, you have a senior population that lives there year-round. And again, there’s still a lot of propaganda out there about cannabis, and the local level does push that still. So it’ll take a little bit of work in that area, but eventually, it will be a great area to get into.

I can definitely add to that because I am looking to be in Atlantic City and my real estate is in Atlantic City. So in understanding that, there are a couple of things I think we can’t forget that we need to have great community-first partnership plans with the city. It is an impact zone. It is severely under-sourced, and any cannabis dispensary or business entity in and of itself that looks to come within there needs to make certain that they provide something that is strong, robust, and is executable. Also, we need to look at making certain that we’re connecting with the local colleges and universities in the area. I know Stockton University is having a Cannabis Career Fair and Business Expo on November 10. So I think when you have those types of advantages, along with a municipality that is highly supportive, you can be very successful. And again, it will drive a lot of competition to the area and it will be one of those “the strongest to survive” type of opportunities. But it also can be one where you can be highly collaborative and with all ships rising at the same time as we support one another. It’s a great opportunity if done right.

 

Q: What will the nationwide effect be from the NV court decision redirecting the NV Board of Pharmacy to move Cannabis from Schedule 1 to Schedule 2? Do you expect that to influence other states to do the same?

A: I think that’s going to be on a state-by-state basis. I imagine there will be some other states to follow suit. I can’t tell you whether or not that’s going to have any real impact in terms of I don’t know how much of an impact it’s going to have. I mean, they can say it’s not a Schedule One drug in the state side, but it’s still in the Federal.

 
Q: What is the first thing someone should do if they’re interested in becoming a cannabis operator?

A: If you want to be a cannabis operator, you’re going to need to secure a license. And so to do that, first do your homework, look into what it takes. Generally speaking, attending events like this is a great start. You have to know the terms of the application that we just saw in Commissioner Nash’s presentation. Conditional, annua,l diversely-led, impact zone. All these things are words that have huge meaning, so understanding the language of the application process is important. Consultants can serve as interpreters, but also enjoy working with clients that are willing to educate themselves, really dig in and understand the process they’re participating in.

It helps to hire an attorney. Attorneys and legal advice throughout this process is key. At Longview Strategic, we offer consulting advice and that goes hand in hand with legal advice. We generally operate within a suite of vendors that are all necessary. Each vendor offers some different specialized aspect that you’re going to want to work with them to dig in on what they can offer. So everything from legal consulting, accounting, architecture, insurance, banking, the list goes on and on. But that’s just starting out. That’s the main thing to look for, (1) understanding the language and (2) who your vendors would be. Try to avoid working with folks who are approaching the cannabis space for the very first time.

And lastly, now you have a good chunk of evidence from what the CRC has done with current applicants when you’re making your strategic decisions about how to proceed. There’s a lot more data today about how this application process works then there would have been a year ago. So that’s accessible to you, and you should use that information.

 
Q: How much does it cost to open a cannabis dispensary in New Jersey?

A: It depends how you’re proceeding, what type of license you’re pursuing, what scale operation you’d like to develop. One of the toughest parts is real estate. It is more available and less expensive here in South Jersey. But in general, just to give ballpark numbers, it comes down to real estate as the biggest chunk of that first initial budget. For a year-one operational budget, it should be less than a million. With vendors, with purchasing real estate, with getting your application submitted… If you’re pushing over that, talk to some other vendors. Try to figure out more creative ways to approach the matter. Staff, inventory, security, professional fees, they’re all expensive. And these things can absolutely add up. Though it can certainly be done for far less.

As a consultant, one of the things that Longview Strategic does is we serve as a project manager to try to ensure that an applicant who may not understand the ins and outs of what their vendors are supposed to be doing is served well in sort of quarterbacking for them to make sure that things are prioritized in the right order so money isn’t wasted. We are working with clients on shoestrings, doing our best to try to make them capable of getting through this process, sometimes on a wing and a prayer. But we will support a client that has the desire to get through it, regardless of budget, so long as they can keep the process moving towards their goal. And I think a lot of the vendors in my ecosystem at least, are the same. So if that number sounds sort of unattainable a million dollar budget for year one, don’t be afraid. I think it’s important for applicants to still look at ways that they could participate. And if it’s that far out of your reach, there are certainly applicants that can be combined at that point that bring different value sets. Some have funding and some have other things together. And so if you find that you don’t have enough funding to get through the process, we recommend partnering with those who do.

 

Q: The success of a retail dispensary depends on the location of a bricks and mortar store. For now, and for the foreseeable future, retail cannabis operators are limited to restricted zones within a limited number of municipalities.  Within these restricted zones, what makes a good retail cannabis site? What are the differences in building code requirements compared to other commercial spaces?

A: It’s mainly about what the town wants to see. For real estate, it essentially comes down to how the zoning of the local ordinance is laid out. Certainly commercial real estate could work. Retail shops that were existing retail shops for other purposes, for a dispensary can work really well depending on the square footage and the layout. But ultimately, in terms of whether it can be used, it’s about the town determining which areas of their zoning overlay are permissible. So when you’re looking to find a piece of real estate, what you generally would do is look specifically at particular parcels and then work backwards and pull for each of those parcels the town’s general zoning ordinance, any ordinance specific to cannabis. And again, if you’re going the other way and you’re looking for parcels that haven’t been identified, start out by looking at those things that the town has released and then start to look specifically in those zones for things that might be available for your license type.

As somebody looking from a general management standpoint and a revenue-generating standpoint, I think you need to also make certain that you’re focused in on: Do you have the right traffic in your area? Is it in a viable space in terms of will be highly revenue generating for you? What’s your demographic? What are you looking for in terms of that? What are you willing to spend in terms of dollars per square foot for your real estate? And, will your revenue generate on that and bring you the return on investment that you’re expecting? This is a retail establishment so you have to consider a widget is a widget. At the end of the day, it’s no such thing. “If they build it, they will come.” That’s not true. Everybody says, oh, if you just have a dispensary, they’ll come to you. That’s not true. If it’s not in a highly visible area with some great traffic patterns, with the right demographics, you might be in trouble and you don’t want to invest or sink money into an initiative that won’t project and provide you with the revenue that you’re expecting your return.

 

Q: How to bank Marijuana-Related Businesses (MRBs) and mitigate the risks?

A: The banking is not exactly an easy answer. There are people out there, vendors, who say that they can get you banking, but they’re not actually a bank. They’re fintech. There’s some kind of an organization that resembles a bank, but not truthfully, they’re not a bank, but there are some banks, at least in the state of New Jersey, that will work with you even if you’re a cannabis business. Generally speaking, if you’re a federally chartered bank, they won’t work with you because it’s still a federally prohibited product. They can get into some serious issues where they could lose their charter. If you work with a state-chartered bank and you want to just talk to the banks that you know, you should definitely see if they’re able to take it. But specifically, state-chartered banks in your state that has legalized cannabis, that generally is a good place to start.

 

Q: What exactly is 280E?

A: One of the biggest things you need to think about when it comes to running your cannabis business is 280E, because at the moment, most of your deductions are not actually deductible by federal law because cannabis is a schedule one drug, so you’re not able to deduct most of your expenses. Now, for those who have been in the business for a while, they know that already. For those who haven’t, it could be a bit of a shock when you see what you’re actually paying in tax. I mean, when I tell you your effective tax could be double what any other business could be, I’m not kidding…

280E is a federal law that prevents you from deducting anything from your gross income other than your cost of goods sold. Essentially what happens is any type of expense that you have that isn’t related to your cost of goods, inventory, cost of goods sold, things like that, will not be deductible. You’re going to have to have that as non-deductible and pay tax on it. Why is that bad? Because your operating income could be $100,000 net, but your taxable income could be 200, 300, or $400,000. So your taxable income could be significantly higher than what you would expect from any other business in any other industry. And that could be a serious problem for a lot of people because of cash flow problems. You have to make sure you have the cash to pay the tax while also having the cash to run the business.

 

Q: Would rent be considered a cost of goods sold allocation in its entirety?  Especially considering the micro license applicants are limited to 2,500 sq feet if that stand-alone entity were to rent that space from a non-280E business would that allow the rent allocated to COGS entirely.

A: There are specific rules and regulations that will tell you whether or not rent is a direct or an indirect cost. And that does say it’s an indirect cost, so they could be allocated. It’s something you can allocate the costs a good sold, but it’s not a direct cost, so you can probably get a piece of it not all of it.

 
Q: How do you get around 280E?

A: You cannot necessarily “get around” the 280E because there’s really nothing you can do to get around it completely, there’s just techniques and practices that you can put in place to make sure that you’re getting the best bang for your buck. You have to be very, very good at allocating your expenses to your inventory and cost of goods. If you’re able to allocate expenses to your cost of goods, the more you can do that, the more of a deduction you can get on your actual tax return. What can you actually do to allocate? So you’re able to allocate your direct expenses, like your direct labor, if you’re a cultivation facility, your nutrients to grow, things like that. But there could be some indirect costs that you may be able to allocate through overhead. Now, when it comes to inventory evaluation, it’s incredibly important that you follow the rules prescribed by the IRS. They require you to do a full absorption cost method, which requires you to do just this. Allocating the expenses between your direct cost and your indirect costs. What has to happen is a clear allocation that is both consistent and also represents a clear calculation of your income. So if you’re doing this correctly, you’ll be able to have a consistent application of these indirect costs period after period. And if you’re able to do that, you may be able to skirt around and get some of those expenses allocated out of your regular expenses into your cost of goods sold, which will allow you to have a higher deduction.

Also, If you have any type of business segments or divisions within your company that are not really related to the cannabis segment, you may be able to get regular deductions for that segment. This is something that can be very technical, and that’s when you have to bring somebody in, a CPA like myself, or any other adequate professional who knows what they’re doing when it comes to cost accounting, because being proficient in cost accounting is incredibly important when it comes to 280E. You don’t want to have somebody who has no idea what they’re doing or doing it for the first time. It’s too big of a risk.

 

Q: What would be your general guidance with respect to either my formation as a business?

A: In terms of the formation, it really depends on what you want to do. I know that when the ATC’s (alternative treatment centers) came out, I’m pretty sure they all had to be nonprofits. But with the new application, I don’t think that’s the case anymore. You have a choice of entity status there, in which case you could be a corporation or a flow-through entity. Now what you decide to do really does depend on what your ultimate goal is. If it’s something where you think you’re going to have to raise capital, you may want to just stick with the tried-and-true corporation. It’s probably going to be easier for you. If you want to have some more complex ownership, you’re going to do a flow-through entity where all the income flows directly into your personal returns. Now, when it comes to that, depending on the type of formation that you have, whether it be an LLC tax or the partnership or an S corporation, whatever you want to choose, there’s different rules and regulations that you have to follow. So you want to make sure that the entity that you ultimately choose will ultimately work for what you’re trying to accomplish. And it’s hard to give you a concrete answer. That said, you definitely need to do this. This is the way to go regardless of anything else because ultimately it comes down to what are you trying to accomplish, what’s your ultimate goal?

 

Q: If I can’t use my bank, how will I do my cannabis business’s payroll?

Well, it can complicate things a little bit, but generally speaking, if you’re a lot of businesses that are in this area, they may be using a payroll service provider and some payroll service providers will be able to work with you. It’s just a matter of having to take extra steps to do certain things, like direct deposit may be an issue, for example, depending on banks that are being utilized there. There are some companies that work with you there to get things done, but it definitely could add some complications, without a doubt.

 

Q: Can cannabis companies get pay as you go workers comp?

A: Yes, that is one of the solutions that I can offer, which is really nice, especially for current operators. It just kind of eliminates the estimating is the more trueness, where each month you’re kind of just paying on your exact payroll. So I have clients who love to set up, some who go the other way. But the nice thing is, and kind of working those, we can really figure out the best solution and structure that kind of fits best with your company.

 

Q: Is there any truth to the rumor I’ve heard that cannabis workers in cultivation and sales can’t use their earned income toward applying for an FHA loan or any other federally reg. loan? Also, how does the panel see that effecting these workers ability to apply for any federal job down the road.

A: The UFCW has had workers in the past say that they’ve had issues with FHA loans specifically, because there’s a line in the policy in the handbook that talks about “not being derived from illegal entities”. So I know there’s been some cases in 2018, but there are ways around it. Again, banking is a huge issue. That’s why the Federal Level Safe Banking Act is so important. Because not only does it allow owners to have the ability to be treated like equal part of society, but it allows workers to be treated like an equal part of society too. So yes, there have been issues, but there are banks out there that will help those workers out. Again, the only issue sometimes can be is you’re dealing with fines and fees because they can do it right.

 

Q: Why is a labor union involved with cannabis businesses?

A: Our goal is one goal and one goal only is to make sure that the workers are protected long-term. When marijuana was first legalized on a medicinal level in the 1990’s, the federal government had no problem raiding facilities and there were little to no allies for the industry to help the impacted workers and owners. So when we saw that workers were being arrested and zip tied and put on the covers of USA Today, we saw that that was a problem. These workers deserve the same respect as any other industry. They deserve to know that when they walk in, not only won’t they get zip tied, but they’ll get a fair wage and good benefits on top of that, be treated like any other professional in the healthcare or regulated industries. We made it not just about cannabis, but about workers, we made it about labor. The conversation wasn’t about cannabis, it was about workers and good jobs. And we made it clear to politicians, if you don’t support our partners, the employers, and you don’t support our members, then you don’t support labor. So we started that conversation and changed it from just being about the flower and the product to this affects communities.

On day one in New Jersey, the UFCW was already on the ground for a decade having conversations about workers rights for when the industry would be born in the state, making sure there would be actual long-term careers, not just part-time retail jobs. Because of the Union’s longevity, history, and many years of hard work, we were able to obtain strong language in both the medical bill and the adult use Bill for labor requirements for the protections of workers. Social justice, economic justice, cannot be done if workers are not part of the conversation. And our hope is that with the upcoming approvals of conditionals and standard licenses, even micros, that we’re going to have some really great employers. We’re going to have a strong and robust industry here in New Jersey, and it’s going to be because labor and industry are working together in the state.

The UFCW is not anti management. We’re not anti profit. We’re just anti-bad person. And if you come to New Jersey to do the right thing and treat people with dignity and respect, we’re going to be the hugest ally to you.

 

Q: Cannabis in the workplace: How should an employer handle identifying if an employee is impaired?

A: We are being thoughtful and careful. We have a proposed guidance on this, but right now there has been no specific curriculum proposed just yet.

The Commission recently released interim guidance for employers on workplace impairment recognition experts, or referred to as wires. Some of you have questions about that and may have read about it in the media. I will stress that guidance, which is the Commission’s interpretation of existing law, is all about reasonable suspicion of impairment. Impairment is the key, not cannabis use. According to the CREAMM Act, WIREs are employees of a company, or they could be some contracted to a nonprofit, that will be trained to detect and identify an employee’s impairment from a cannabis item or other intoxicating substance. While the intent here is to promote a safe and drug free workplace, this presents many challenges. One is that New Jerseyans have the right per law to consume cannabis medicinal and recreational on their off-time. And two, currently there is no reliable way to measure cannabis impairment in real-time. Marijuana metabolites can stay in one system for several days or even weeks after usage. And three, a study published in the American Journal of Addictions conducted by Yale and University of Pennsylvania shows that significant racial and ethnic differences exist in drug testing practices at the workplace level. As someone who has years of education and experience assessing and treating people with substance use disorders, we need to be mindful on the far-reaching implications for employers, for workers and their livelihoods, their health, when we’re developing these wires regulations. And we need to do it right.

 

Q: What type of ancillary business opportunities exist for the cannabis market at this time?

A: There are not only benefits to those who are directly engaged what we call the plant-touching business, or the towns that will reap the financial benefits, there is a strong and growing demand for ancillary businesses complementing and serving the cannabis industry. Some of the biggest opportunities in the medical and adult-use cannabis markets include involve the ancillary side of the industry, accountants, consultants, insurance agents, lawyers, to name a few, and companies that provide growing equipment and supplies, whether it’s lights or fertilizers or climate control or all-in-one grow systems, these will be among some of the biggest beneficiaries of the cannabis industry here. And we know that cannabis is mainly a cash business, and the industry really requires specialized security solutions. Companies that fill this niche should have plenty of business for years to come.

There are many opportunities to be had in this industry, whether it’s in the plant-touching sector or ancillary services that do not require licensure from the commission.

  • Packaging and Labeling Companies
  • Security companies
  • E-commerce websites
  • Licensing and branding companies
  • Marketing and design agencies
  • Horticultural lighting companies
  • Nutrient suppliers
  • Extraction equipment
  • Consultants
  • Lawyers
  • Insurance
  • Payroll companies
  • Compliance
  • Software and mobile application developers
  • Retail design firms
  • Hydroponics
  • Greenhouse systems
  • Real Estate

As an ancillary business, it’s about developing your brand, your pitch, focusing on the cannabis industry participants as your target consumers or customers.
 

Q: If I am an ancillary business, such as a printer or merchant services provider, can you explain how we can get started doing business in this state for Marijuana-related businesses?

A: If you’re really good at what you do, we need what you do in the cannabis industry. Just like any other industry, this space needs each of those supporting business lines. It is, of course important to face your brand towards the cannabis space. You don’t have to create a separate entity just to serve cannabis industry participants, but look at it as a segment of your business.

I would advise and, as a good example, attorneys who have a cannabis practice. They have a cannabis practice web page that’s specific to cannabis industry information about their practice, their services, their fees. Same thing can be done in almost any industry. For printers, you almost barely need to pivot to face the cannabis space. You just need to compete on pricing and be where the people are that are making the purchasing decisions. For something like merchant services, it is much more specific in the cannabis segment than it is in other industries, so you would really need to develop more of a specific practice or sector to sort of answer the questions of people who might have merged services questions.

if you’re just servicing the industry and you’re not actually touching the plant, not touching the flower, you don’t necessarily have to have any kind of a registration. There’s not a formal process that has to be done. If you’re just kind of providing marketing services, print services, there’s nothing that has to be done for you to register with the state.

One thing I’ve noticed and have helped with those for those ancillary services is making sure the insurance is set up right. Sometimes there are companies who are okay if you are normally working with cannabis, while some have a little bit more concern. A lot of what I do as an insurance agent is help review for companies like that just to make sure the structure is there and there’s nothing they’re entering into that’s going to be out of compliance or an issue with their current insurance program. Just something else to keep in mind as you begin to venture into the cannabis space.

 

Q: Do you need to register with NJ CannaBusiness Association to be a vendor for support services with print and marketing?

A: It is not a mandated requirement, but since the NJCBA is in a similar capacity to a Chamber of Commerce, membership can be very, very useful. There are a lot of other supporting businesses and members on there to network with and the events that they provide for networking and education, being at those events would be the right place to network at since their events are full of folks that are looking for those ancillary types of services.

 


 

More questions addressed in the recording

  • What is the cannabis application process in NJ?
  • What is the first thing I should do if I am looking to start a cannabis business?
  • How much does it cost to start a dispensary in New Jersey?
  • What is 280E, why does everyone talk about it, and how can you get around it?
  • What insurance coverage(s) will my cannabis company need? What will it cost?
  • What is an LPA? PLA? Collective Bargaining Agreement?
  • The UFCW Labor Union represents the workers, but how does the UFCW help the cannabis business owner?
  • What challenges has a cannabis business owner faced with real estate, acquiring capital, and municipality approval?
  • Why is an advisory team so important early on?
  • And more…

 
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Cannabis Business Advisory Solutions

To quote cannabis business owner Faye Coleman in this presentation, “In terms of this business, the formation of your team will really dictate how you move forward.” Having the right cannabis advisory team in place to guide you from idea to reality is how you will stand out and give yourself the best chance of success. Advisors include attorneys, real estate brokers, insurance agents, lenders, application writers, municipal support, and a trusted CPA.

Alloy Silverstein’s team members are versed in cannabis accounting and business operations and can help you from the early licensing process to the later, thriving stages of your legal cannabis, hemp, or CBD-based business.

 

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