by Michael Nocella
Like everyone else hoping to operate a cannabis business in New York, the clients of longtime consultant Jay Czarkowski are in preparation mode while the state’s cannabis committee writes the rules. But unlike most potential license applicants here, they are betting that Jay’s experience and insight will set them on a successful course.
“In New York right now we don’t have all the answers, but all indications are that there are going to be a limited number of licenses,” he explained recently from the Colorado headquarters of the firm he founded, Canna Advisors. “Any time there’s a limit on licenses, there’s going to be great demand. Let’s say the limit is “X” – well there’s going to be 5X, 8X amount of people trying to get one.”
(That’s the bad news.)
“Now the good news is that X is going to be a big number, which it should be,” Jay continues. “It needs to be a really big number: you have 23 million people in your state! To me, it looks like New York will have many hundreds, if not close to a thousand licenses available.”
He can make educated guesses like that because, for the past 10 years, he and his team have helped customers build cannabis businesses in 31 states and internationally. “We’re always intimately involved with every state that goes through the legalization process,” Jay explains. “We’ve been involved with New York since 2015 when it went through the first round of medical licenses.”
Before Jay became a consultant, he and his wife opened one of Colorado’s first medical marijuana dispensaries. “In 2009, there was no licensing, application or regulations,” he explains. “It was the wild, wild west. By 2011, we had probably the highest-grossing cannabis operation in the state.”
That’s when they sold their dispensary and grow operations. The following year, they were hired by a group of people in Westport, Connecticut, who were applying for one of four medical-marijuana licenses there. Canna Advisors was born. Today, with a staff of 24, the firm is working with clients on 30 active projects; several of them in New York. Some have hired the firm to help them secure real estate and/or local support. Others are looking for help building their business plan.
As for the specific license Jay is telling his New York clients to pursue, it’s the one he tends to favor in every state: dispensary retail. It’s his go-to for a number of reasons, mostly because of its earning potential.
“Even if state laws allow for unlimited retail spots, I’ve yet to meet a city official that’s okay with an unlimited number of dispensaries in town. If you’re fortunate enough to get that one location, and it’s in a good part of town, it’s a goldmine. You can sell that license, that location, for millions and millions of dollars.
“You can also make a ton of money with a cultivation license, but you have to grow plants, and plants die sometimes. They get diseases,” he explains. “And in my opinion, the plant material is eventually going to become a commodity. Take the hops flower, the plant that is closest, genetically, to cannabis. You and I can go out today and buy a pound of organic hops for $25.
“Right now, a pound of cannabis in a state with a limited supply, like Massachusetts, goes for $4,000,” Jay continues. In Colorado, it’s $800 to $1,200 today – maybe $1,800 for the really good stuff. In California it’s even less. So at some point in the future – and it might be way in the future – it’s going to become more of a commodity.
“I just think dispensary retail plays a lot of ways,” he concludes. “It’s conservative. It’s safer. And it can still be very lucrative.”
Next up in New York – licenses
The next big shoe to drop for New York is finalizing regulations and choosing how to award licenses. Not all states do it the same way, says Jay. Some issue licenses based on a lottery. Others choose to go with limited licenses at the state level. Still others, like New Jersey, choose to have no limits at the state level but limits and control at the local level. “Let’s face it, if a local municipality doesn’t want you to do business there, you’re just not going to. It can kill your business in a dozen different ways.
“The application process in New Jersey was like a race,” he recalls. “The mindset was ‘first come, first served’ so people were racing to be the first to get their application in by the December 15, 2021, deadline. In actuality, you don’t get bonus points for getting the application in early, but you want to make sure you get it in on the day that it’s due.
“In locations like that, where everyone is after the same thing, it’s competitive,” Jay adds. “It’s contentious, and often between friends and neighbors. There’s a lot of tension.”
Growing and growing
The cannabis industry has come a long way in the 10-plus years that Jay’s been involved in it, but the potential exists for exponential growth. “The U.S. cannabis business, as it exists today, is probably only 5 percent of what it’s going to be some day. Imagine when every state has cannabis businesses, and interstate commerce is available. In Canada, cannabis is legal at the federal level, and Canadian cannabis companies are able to export cannabis all over the world. But that part of the business hasn’t really taken off yet because there are not a lot of places for them to export to. But that could be us – American companies exporting to England and Germany, and everywhere else. There’s a lot of upside still. A lot of room for growth.”