November 28, 2023
Minnesota’s cannabis law does a good job of making licenses available to a broad swath of entrepreneurs in the North Star State. Still, the application process is likely to result in significant expenses for applicants before they even know whether their cannabis business will qualify to receive a license from the state of Minnesota.
Among other things, applicants may have to be in a position where they have:
- Negotiated and signed a lease (and/or signed a letter of intent)
- Entered into a purchase agreement to buy a location
- Hired and paid an architect and/or designer to draft floor plans
- Taken a big risk on cannabis zoning compliance
- Hired a security consultant
In order to provide information that is likely to be required in a cannabis license application for a Minnesota business, applicants may have to spend sizable sums just to file an application. The problem is that at least some of these expenses are going to be unrecoverable even if the applicant is denied a license for whatever reason or even if the applicant’s proposed location falls within a restricted zoning district.
There’s a potential option to mitigate this problem. Washington, D.C., for example, has made the licensing process more accessible (particularly to those without access to a lot of funds).
Washington, D.C., like other legal cannabis jurisdictions, has an extensive application process. Required information includes zoning compliance, a lease/purchase agreement for the location, a floor plan, a detailed security plan, neighborhood input, etc. The nation’s capital has, however, created a less expensive alternative for those who may not be able to afford lease or mortgage payments, architect fees, security consulting fees, etc. unless and until they know whether they have met the other qualifications for a licensee. This alternative route is through a “conditional license” application.
The Cannabis Licensing Application Process
Under a conditional license application, the applicant must provide information about their proposed business, but it does not require that they have a lease/purchase agreement for a location, floor plan drawings, or detailed security plans. A conditional license applicant can still, however, find out whether or not they have a chance of obtaining a license. In Washington, D.C., conditional license applicants are given a year from the date of the conditional approval to find a location, ensure zoning compliance, provide a floor plan, etc. This drastically cuts down on costs to apply for a license – especially for those that may not be able to attract investors without at least some indication that they will be able to obtain a license .
This seems to be a good way to approach the cannabis licensing application process so that those without initial access to large amounts of money can obtain conditional approval before they spend or obligate themselves to spend the tens or hundreds of thousands of dollars it will ultimately cost to apply for a license.
Moreover, when it comes to zoning, cannabis entrepreneurs in Minnesota are waiting to see what cities and towns do with their zoning authority. While many have zoning ordinances in place, those are subject to change when full cannabis legalization kicks in. This means that committing to a location early on (whether through a lease or purchase agreement) comes with the risk of being zoned out of business. With a conditional license application, the applicant can first find out whether they are on the path to obtaining a license before committing to a location. This should give cities and towns enough time to establish zoning ordinances when it comes to cannabis businesses, giving the conditional applicant more flexibility should a preferred location have zoning problems.
With respect to leases, it takes time and money to properly negotiate a commercial lease. Some landlords will offer contingencies allowing a cannabis applicant to withdraw from the lease if they are not awarded a cannabis license, but the applicant may end up incurring costs associated with the lease regardless. With a conditional application, this problem can be avoided and while there is no guarantee that a conditional applicant that is conditionally approved will obtain full approval after selecting a location, it could reduce the potential costs and risks for the applicant when it comes to renting space.
Neighborhood associations may also have an influence on whether an applicant is awarded a license or not. By allowing conditional applications, applicants would be in a better position to scout neighborhoods and meet with local residents to determine whether or not the identified location makes sense.
Cannabis License Applications for Minnesota Businesses
Minnesota does not have a statute authorizing conditional applications, but it is something the legislature and Office of Cannabis Management should at least consider because it can make the application process more accessible.
As you read, the requirements for obtaining a cannabis license are challenging to overcome alone. The experts at Garner, Ginsburg & Johnsen, P.A. can review your business plan, help you through the licensing requirements, and set your cannabis business up for compliance. Contact us for a consultation.