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SF has quietly revised its cannabis laws, hoping to help small local operators

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The city changed the rules for cannabis business licenses, hoping to help small businesses get a license more easily, but also added a loophole that could speed up buying Big Marijuana in stores. smaller.

There is an ongoing ‘daddy joke’ in the age of legal marijuana where lawmakers intentionally introduce or schedule votes for their cannabis laws on April 20, aka 4/20. There weren’t many headlines that Mayor Breed did as well this year, with a bill that hoped to bolster the city’s equity agenda – a program that aims to “create business opportunities for the city. those who are negatively affected by the War on Drugs’ as opposed to the big multi-state chain operators who typically dominate this burgeoning legal pot industry. After months of bickering in the committees, Breed’s new cannabis license adjustments were passed unanimously by the supervisory board last week.

These changes are unlikely to affect you, the casual marijuana dispensary buyer (unless you specifically prefer to buy from small, local stores rather than chain retailers). But as smaller local operators have tried to compete with Big Marijuana chains, some local owners have decided that if you can’t beat them, join them. That is, they “partner” with a large chain as the owner of local shares, in a partial stake in a store, allowing the large chain to pretend it is a business. ‘local actions.

But the inhabitants are sometimes thwarted by their more informed “partners”, the vultures. Take the case of the former John Varvatos dispensary in Union Square, which, after local approval, was sold to the large marijuana conglomerate High Times. The local owner got screwed into the business, telling SF Weekly that he had become a ‘straw CEO’ and that ‘I am the CEO of my company and nothing came on my desk. business “. Meanwhile, the High Times deal imploded and the local landlord lost his lease.

The new Breed legislation hopes to avoid similar results. “We are looking at fundamental and very solid improvements to the action program,” SF Office of Cannabis director Marisa Rodriguez told SFist.

These “improvements” don’t just affect cannabis dispensaries. San Francisco has all kinds of other less visible marijuana handling companies, such as delivery services, testing labs, legal indoor pot cultures, and even event growers who coordinate sales during the event. ‘events like GrassLands at Outside Lands.

But one of the new changes could paradoxically help big names to dominate the local scene. According to a press release from the mayor, the new legislation “shortens the time frame for a transfer of more than 50% interest in a cannabis business from ten years to five years”.

Local lawmakers have chosen the ten-year rule as a barrier to restrain retail chains from formulas. “Lawmakers wanted to make sure these companies had time to really take root and establish themselves before Big Canna came to wipe them out,” Rodriguez says. “They really wanted the businesses to be, in essence, San Francisco businesses.”

But she supports the shortened deadline. “Five years, I think, is a reasonable amount of time,” she tells us. “We will see those who want to continue to persist as these unique little cannabis companies, and then others will develop in different ways. This provides flexibility.

But part of that is the ability to sell faster to a big chain. The legislation takes that into account and basically tries to extract a bigger pound of flesh from the big buyer and then reinvest that larger amount in local interests. If the larger company buys a stake of more than 20% from the local owner, it has to make a number of concessions.

“One of them is that this business can contribute the equivalent of 1% of gross revenues to one or more community organizations that have been negatively affected by the war on drugs,” Rodriguez said. The legislation itself requires the buyer to “provide hiring, training and mentoring and provide other forms of support to cannabis capital firms or local organizations”, but it is questioned whether smart lawyers could. find ways to minimize that investment.

Some of the other changes will clearly benefit local small businesses. A new rule puts unique owners at the top of the permission priority stack. “If you are a sole proprietor, you should be given an even higher priority on equity,” Rodriguez said, “because you don’t have any investors to lean on.”

Another change is that smaller operators can get “incubator support” (one of those “creepy” measures forcing large companies to support small businesses) before the smaller operator has actually received. his license. “Before, you couldn’t receive incubation assistance until you got a license. It was really to prevent people from taking that money, ”she says. “They might disappear.”

Almost four years after the legal marijuana experiment began, it is clear that no one is attempting this scam, as the initial investment is greater than any potential ill-gotten reward. In addition, we have learned that obtaining the permit is much more expensive and time consuming than expected. The dispensary offered by Flore Store next to Café Flore, for example, was approved by the Town Planning Commission more than two years ago. But they’re still struggling through the red tape to get state and regional cannabis retail licenses.

“If you’ve been through the planning phase of your application and are now in the build phase, you are in for that,” Rodriguez said.

It’s important to remember that we are the first generation to try out this great legal cannabis company. And for all of her warts, now has been a lucky one. During the pandemic period, 17 new cannabis companies opened (and hired staff!) In San Francisco. It’s not like there is a lot of competition for the empty storefronts they take over, which makes cannabis a rare economic bright spot under COVID-19.

San Francisco goes out of its way to try – to try – to structure the local cannabis industry as fairly as possible. This means that we are likely to be stoned at times by unintended consequences. And in those cases, we can hopefully come up with further legislative fixes.

Related: One of SF’s biggest cannabis dispensaries is about to hit Valencia Street [SFist]

Image: Mikaella D. via Yelp