The Ohio medical marijuana program is scheduled to become operational in September of 2018. The rules governing the issuance of dispensary applications will not become final until September of 2017.
Currently there are proposed rules available for review, but are subject to change prior to September of 2017; public comment closed on January 13, 2017.
Entrepreneurs who believe in the market viability of Ohio’s medical marijuana program may consider filing a dispensary application to secure a license. The following is a summary of the key issues produced from a review of Ohio’s proposed regulations.
Fees for Filing
The proposed fee for an application is $5,000 and is not refundable. If the initial application is granted, there is an additional fee of $80,000 every two years to maintain the license.
The proposed regulations state that the business must have $250,000 in funds available to the company to be used for the business. In addition, the company itself must show it will be able to pay all expenses for the first year of operation.
Building and Location
At the time of the application, the business must also have the right to occupy the building upon issuance of the license. The business must either own a building or have signed a lease. If you do not own a building, it may be challenging to convince a landlord to sign a lease for a dispensary and include a contingency of approval for your application.
The location of the business may be challenging as well. Specifically, a location must be at least five hundred feet from the boundaries of a parcel of real estate which includes a school, public library, public park, or church (Ohio Revised Code 3796.30).
The building itself would need bank level security with extremely strict access protocols. The work necessary for planning and executing such a build out would require an experienced architecture and general contractor team.
If you purchase a building or sign a lease, it is worth noting, local communities can restrict the location of a dispensary beyond the 500 feet requirement provided above. For communities which are welcoming, the board will evaluate the number of applications for a given area against the anticipated demand.
When evaluating an application, the board will identify anticipated demand and number of dispensaries necessary. If the demand is going to be served by one location in a community, it is possible two equally qualified applicants will only result in one company securing a license.
Application Granted
There are only 40 licenses which will be issued with the first round of dispensaries; more could be added in the future. If your application is granted, a provisional license would be awarded.
After the provisional license is awarded, the dispensary location must be open for business within 180 days after approval. If it is not open, your license may be lost. In many cases, building remodeling projects will have some delay; be it due to weather, availability of supplies, or personnel. Thus, aside from securing a building you would need to secure a strong general contractor who has experience with meeting construction deadlines.
For those thinking about securing a provisional license and then selling your interest before opening, the proposed regulations do not allow for the assignment of a provisional license. Even after you open for business, there are significant limitations on the transfer of ownership provided in proposed section 3796:6-2-12.
Business and Legal Concerns
For those considering an application, any business plan should include an important risk factor beyond the typical commercial risks. That risk factor is the potential change in federal drug enforcement policy.
The sale of marijuana to the public, in any context, violates federal law. There is no protection from a violation of federal law if that sale comes from a prescription.
The Obama administration has taken a hands off approach to states who have legalized, in any capacity, the sale of marijuana. The Trump administration could take a stronger position against states who sell medical or recreational marijuana. Thus, any business plan must account for the risk of not only losing the ability to sell goods, but also potential fines and incarceration.