Although I don’t smoke weed and have never been inside a weed shop, I’ve always been interested in the business of cannabis. So on 4/20, when a friend of a friend invited me to his medical marijuana dispensary in Los Angeles, I jumped at the opportunity to, uh … research.
As long as you have the right licenses and operate as a nonprofit corporation, opening a medical marijuana dispensary is perfectly legal under California law. However, it’s still illegal under federal law, so the federal government could still try to shut you down. They may send threatening letters, scare your landlord into breaking your lease, have your utilities turned off or even have officials raid your store. This is why I can’t disclose the exact location of the dispensary I visited.
Upon first entering the dispensary’s door, I find myself in an empty room save for a couple chairs, a single window on the left corner and a lone door on the right. I walk up to the window and give the security guard my name, which he heads toward the back to confirm.
After a brief moment, he gives me the gesture to enter. He presses something underneath his desk, and then I hear a buzzing noise and the click of an unlocking door. All of this, a precaution against robbers and federal raids.
I’ve always imagined weed dispensaries to be run-down and janky-looking, so upon stepping into this one I am immediately surprised by how clean and classy it seems.
I glance at the wall and can’t help but notice the numerous special deals and promotions colorfully scribbled out across multiple whiteboards.
The owner is a successful internet entrepreneur who got into the marijuana dispensary business for fun. He told NextShark:
“It’s my first brick and mortar. I’ve started many internet businesses. The business model is completely different than e-commerce. I have to deal with landlords, HR, rent, looking for good locations. It’s fun, but it’s a lot more work. You’re not reaching as big an audience in a brick and mortar as you would in an internet company.”
This particular dispensary seems to sell pretty much every kind of weed product imaginable. Buying weed to stock your shelves is not an easy task, according to the owner. You’ll need to find a dependable weed vendor, otherwise known as a “flower vendor,” to buy from. To do this, you either need to ask around or contact a dispensary that’s already listed online. Like any business, the cheaper and better you can get your product, the higher your profit margins and competitive edge.
Since medical marijuana dispensaries must operate as nonprofits, purchasers are referred to as patients, and payments are “donations.”
When I ask how he determines the price of “donation” for a particular product, the owner tells me it really depends on the location of the shop and the type of deals they get with the vendors:
“Pricing really depends on the location. L.A. has about 1,000 dispensaries, so there are a lot of choices available to the consumer. Because of that, we need to be more competitive with our pricing. However, for places like Orange County, which is a harder place to open a dispensary, the shops there can charge whatever they want because there’s less competition.”
I then asked to see the shop’s most expensive product. He brought out a jar of nugs labeled “Private Reserve,” which they sell for $55-$60 for an eighth of an ounce.
What’s so good about this particular strain of weed? The owner says it’s better in appearance (greener, has more THC crystals and hairs) and feel (“stickiness,” not too dry) than lower-tier weed and provides a better high. However, he says he personally doesn’t think there’s a difference when comparing it with the cheaper products.
As I looked around the fully stocked store, I wondered how much startup capital I’d need to build a business like this. According to the owner:
“The longest it’s taken me is three weeks. It’s a pretty simple buildout. There’s a lot of companies that specialize in turn-key buildouts. So it’s actually easier than people think. A setup like this cost me $30,000, not counting the product.”
The owner then showed me to the store’s edibles section. There are brownies, cookies, bars and other tasty stuff.
There’s even weed-infused pizza and ice cream!
While the startup cost doesn’t seem bad, it can shoot up if you’re looking to obtain a “Pre-ICO” license, which is a license that registers your dispensary with the city and gives you immunity from getting shut down. However, a license like this ranges from $700,000-$1 million, according to the owner.
But all these costs can be offset by how much money a dispensary can potentially make:
“Some break even because the rents are so sky-high or because the landlord doesn’t like dispensaries. Depending on the location, some locations can make up to millions a month.”
This particular owner did not reveal how much his location made, but when I phone up a friend of a friend who owns a dispensary in Orange County, he told me his store makes $120,000 in its best month.
While the cannabis business can be quite lucrative, sellers have to find a way to store and manage their cash, as most banks don’t want their brands tied to the cannabis industry. With the recent legalization of marijuana for recreational-use in Colorado, some businesses have resorted to hiring armored trucks.
With marijuana laws still a topic of debate, the owner has, at least in regard to cannabis use, a libertarian view of what he thinks the government should do.
“I think the government should stay out of everyone’s business. People should do what they want to do as long as they aren’t hurting anyone.”
When asked how long he’s looking to stay in the weed business, the owner says:
“Right now, I’m just having fun with it. So until I stop having fun, then I’m going to keep going.”
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