MJBizMag January 2022 - 36

especially those looking to start small
There is no statewide license
cap except for a temporary limit
on cultivation licenses that expires
Feb. 22, 2023. That doesn't mean an
unlimited number of licenses will be
available-local municipalities will be
able to prohibit or limit the number of
cannabis businesses in their areas-but
it will still allow for a healthy number
of licensees, analysts said. And while
many municipalities already have opted
out, some observers believe towns will
opt back in as they better understand
the regulations and financial benefits of
licensing cannabis companies.
New Jersey is the fourth-smallest
state by size but the 11th-biggest by
population, giving entrepreneurs
easy access to nearly 10 million
residents living within a drive of only
a few hours. State businesses also are
likely to attract recreational cannabis
consumers from New York-home
to roughly 20 million people-and
Pennsylvania, with 13 million. Nearby
Maryland and Delaware also have
about 7 million people between them.
" Because of its location and vastly
underserved market, both internally
and externally, (New Jersey) will be a
boon for cultivation and dispensaries, "
said Steve Schain, a cannabis attorney
who specializes in the New Jersey and
Pennsylvania markets at Smart Counsel.
Of the license types available, retail offers
the most opportunity and has been
getting the most attention, analysts say.
" It's the most economical and the
most practical, " DeVeaux said. " It requires
less capital to start. It's easier to
find land. And the New Jersey commercial
landscape lends itself to retail. "
While industry observers welcome
a cap-free recreational retail regime,
they warn that the unfettered num36
January 2022 | MJBizMagazine
ber of retail licenses and lower cost of
launching a store is already making for
a highly competitive sector.
And because a limited number of
towns are allowing cannabis companies,
real estate is being bought up
" like hot cakes " in these areas, said
Fruqan Mouzon, chair of the cannabis
group at the law firm McElroy, Deutsch,
Mulvaney & Carpenter. " It's very hard
to find a location and a town that allows
it, " he said.
Mouzon estimated that, based on
studies, the state needs about 200 retail
licenses to handle the expected number
of consumers.
While launching a cultivation facility
is vastly more expensive than starting
a retail operation, some analysts see
opportunity in that sector as
well-especially once the cap on
cultivation licenses expires in
February 2023.
" New Jersey ... only has 12 functioning
grows and is vastly underserving its
plus-or-minus 150,000 patients. It
needs a heck of a lot more cannabis-
especially if it expects to also serve outof-state
residents, " Schain said.
DeVeaux said complaints from
patients about the quality and
quantity of medical cannabis are
not uncommon, suggesting that the
state will need many more cultivators
to meet demand for a recreational
marijuana market.
New Jersey has made solid efforts to
promote small businesses-especially
those owned by women and minorities.
The state has created microbusiness
licenses with fees of $1,000-far less
than what is required for most other
cannabis license types. The only catch:
Microbusiness license seekers must locate
their company in the municipality
where the owner lives or a neighboring
municipality. If an aspiring microbusiness
license owner lives in a town that
forbids cannabis businesses and none
of the neighboring towns allow them,
either, the license seeker is out of luck.
New Jersey also will offer conditional
licenses to help less-capitalized
individuals. Conditional licenses can
be awarded to entrepreneurs who
are on the pathway to full licensure
but require more time because of the
capital constraints needed to obtain a
full license.
" That favors new business owners,
who will be mainly minorities and
women, " DeVeaux said.
The state also has prioritized social
equity. " I think the state has gone
above and beyond, " Mouzon said. " It's a
priority if you have diverse ownership,
a priority if you're owned by women,
a priority if you're owned by disabled
vets, a priority if you're owned by social
equity applicants. "
Mouzon is hopeful the regulations
will increase the chances of minorities
and women attracting the attention of
Another way New Jersey has sought
to help small businesses is to eliminate
vertically integrated licenses (not
including the existing vertically integrated
companies in the state's medical
marijuana program). The state's
reasoning is that vertical integration is
costly and something that only large,
well-capitalized operators can afford.
If vertical licenses were allowed, it
would make it harder for smaller, less
well-capitalized entrepreneurs to compete,
DeVeaux said.
Companies would still be allowed
to vertically integrate, but they would
have to obtain the sector licenses
individually-and they couldn't obtain
them concurrently; they would have
to acquire one at a time, with one year
between each license.
" Vertical integration equals exclusivity, "
DeVeaux said. " We are avoiding
vertically integrated operators to allow
more people in. "

MJBizMag January 2022

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