February 27, 2024
People want to know what Minnesota’s cannabis license application process is going to look like. While we likely will not see the finalized application forms for at least 6 months, it is important to start planning for the substance that you will likely want to and/or have to include. While the statute legalizing cannabis does not provide much detail about the application itself, it does provide some useful information that can serve as a working guide, which you can leverage while fleshing out your business plan for selling cannabis.
Working Guide for the Cannabis License Application
We know from the statute which legalizes cannabis that:
(a) The office shall award points to each completed application for a license to operate a cannabis business in the following categories:
- Status as a social equity applicant or as an applicant who is substantially similar to a social equity applicant as described in paragraph (c)
- Status as a veteran or retired National Guard applicant who does not meet the definition of social equity applicant
- Security and record keeping
- Employee training plan
- Business plan and financial situation
- Labor and employment practices
- Knowledge and experience
- Environmental plan
Each of the categories above will be worth a certain number of points to be decided by the Office of Cannabis Management. So starting to plan for these elements of your Minnesota cannabis application is a good idea.
Social Equity Applicant
Social equity status in the bill is fairly self-explanatory. We have included veteran A person can qualify as a social equity applicant if that applicant:
- (1) was convicted of an offense involving the possession or sale of cannabis or marijuana prior to May 1, 2023;
- (2) had a parent, guardian, child, spouse, or dependent who was convicted of an offense involving the possession or sale of cannabis or marijuana prior to May 1, 2023;
- (3) was a dependent of an individual who was convicted of an offense involving the possession or sale of cannabis or marijuana prior to May 1, 2023;
- (4) is a service-disabled veteran, current or former member of the National Guard, or any military veteran or current or former member of the National Guard who lost honorable status due to an offense involving the possession or sale of marijuana;
- (5) has been a resident for the last five years of one or more subareas, such as census tracts or neighborhoods, that experienced a disproportionately large amount of cannabis enforcement as determined by the study conducted by the office pursuant to section 342.04, paragraph (b), and reported in the preliminary report, final report, or both;
- (6) is an emerging farmer as defined in section 17.055, subdivision 1; or
- (7) has been a resident for the last five years of one or more census tracts where, as reported in the most recently completed decennial census published by the United States Bureau of the Census, either:
(i) the poverty rate was 20 percent or more; or
(ii) the median family income did not exceed 80 percent of statewide median family income or, if in a metropolitan area, did not exceed the greater of 80 percent of the statewide median family income or 80 percent of the median family income for that metropolitan area.
The next portion of the social equity provision states: “The qualifications described in paragraph (a) apply to each individual applicant or, in the case of a business entity, every cooperative member or director, manager, and general partner of the business entity.” This is important to pay attention to because even if a majority shareholder qualifies for social equity status, that does not necessarily mean the business will qualify for social equity status. Moreover, because it is possible that a veteran or National Guard member will not qualify for social equity status, such persons may still receive additional points.
Security and Record Keeping
Likely to be worth a substantial point value, security and record keeping will be a critical requirement for the cannabis license application. Break-ins at cannabis businesses are all too frequent. Because federal law still considers it illegal, credit card companies will not work with cannabis businesses, meaning it is an all-cash business (although debit cards may be used in most cases). With so much cash on hand, cannabis businesses become theft targets. Having a detailed security plan to reduce this risk is important and will involve things like maintaining security cameras, locked inventory rooms, and determining how cash will be delivered from the register to the bank.
Record keeping is also significant – part of the rationale for legalizing cannabis was to allow the state to track cannabis sales and to reduce the illegal sale of cannabis. This means that every plant and product will be tracked and it is important to have policies in place to ensure such record keeping is properly maintained. Also, it will be important to keep records on employees – if there are problems with employees (e.g., showing up late, sexual harassment, etc.) write down as much as you can about each incident and keep it on file. Not only will this likely help secure points in the application process, but it will make the HR side of the business much easier to manage.
Employee Training Plan
Legal compliance is – of course – important and employees will need to learn the ins and outs of the law (as well as the rules and regulations, when issued). The OCM is likely going to pay close attention as to how each applicant plans to train its employees to ensure compliance. There are a number of options to consider when it comes to employee training:
What topics will training include?
- Applicable laws and regulations
- Inventory policies and procedures
- Opening and closing procedures
- Cash handling procedures
- Safety and security procedures
- Health and safety standards
Also, how will you verify each employee has been properly trained? Will you provide continuing education? If so, how will you provide that training? What will be in your employee handbook? Training options include Minnesota Cannabis College, St. Paul College, Cannabis Training University, and St. Cloud State.
Business Plan and Financial Situation
Your business plan should be detailed in terms of start-up financing, short-term financial plans, and longer-term financial projections. It should also include branding and marketing plans (which will have to comply with the statutory restrictions on advertising), and information about owners and officers of the company.
Labor and Employment Practices
When it comes to labor and employment practices, the OCM will likely want to know about your hiring and recruiting practices. Recruiting employees who live in areas disproportionately affected by cannabis may be a good idea, and you should also consider your plans for employee advancement opportunities. You may also want to think about hiring an employee for HR purposes (or contracting with an HR firm to help you manage labor and employment practices) and how you will ensure compliance with various federal and state labor laws, including minimum wage and overtime requirements, paid time off and sick leave requirements, and workers’ compensation laws.
Knowledge and Experience
This will include topics like why you want to be in the cannabis industry and what your employment history looks like.
Environmental Plan
This can include things like use of renewable energy, what you will do with wastewater (if that is an issue for your business), what sort of cleaning products you intend to use, and what sort of vehicles you intend to use in your business. You should also review local and federal environmental regulations.
Put Our Legal Expertise to Work for You
Minnesota-based Garner, Ginsburg & Johnsen, P.A. has accomplished attorneys who are experienced in working with small businesses across industries, including startups. Contact us for a consultation for legal guidance. View our firm’s blog for more cannabis licensing-related resources.