Microbusinesses could be king in Minnesota, as over 1,000 applications were submitted for the uncapped license type ahead of this summer’s lottery for retail, cultivation, manufacturing and mezzobusinesses.
Aspiring cannabis operators submitted a total 2,085 applications to the Office of Cannabis Management during the one-month window that ran from Feb. 18 to March 16.
Of those applications, 1,322 were for microbusinesses. There are no caps on the total number of microbusiness licenses OCM will ultimately award, and each license is allowed to open a single dispensary.
“I think this is a little bit more than we expected, but we knew that the number was going to be big,” said Michael Mayes, CEO of cannabis consulting firm Quantum 9. Mayes noted that retail and mezzobusiness licenses allow for more than one dispensary, meaning that consumers in Minnesota could theoretically have an abundance of options when shopping for pot.
“Microbusinesses get one dispensary, retailers get five, and mezzobusinesses get another three, so this makes an incredibly saturated market,” said Mayes. “There are too many dispensaries, just right off the bat. A lot of these will never open.”
Mayes said that he expects fewer than 700 microbusinesses will actually open their doors.
Other applicants included 394 retailers, 48 cultivators, 47 manufacturers and 64 mezzobusinesses. Those license types are capped at 150, 50, 24 and 100, respectively, split evenly between social equity and general applicants.
Cannabis business lotteries planned for May/June
Lotteries, which are tentatively scheduled for May or June, will be used to select the winners of the capped license types. The remaining uncapped license types include delivery, which drew 94 applications, transportation (64 applications), wholesaler (39 applications), testing facilities (seven applications), and hybrid medical combination license (six applications).
The window was originally supposed to close Friday, March 14, but it was extended for two days after a glitch and subsequent maintenance knocked the state’s application system offline.
“Maintenance issues with Accela’s system nationwide caused issues for those accessing the licensing system late on Friday evening, and so we initially extended the deadline by a day,” said OCM spokesperson Josh Collins. “After determining that Accela had additional maintenance planned for Saturday evening, we extended the deadline to noon on Sunday, to account for anyone who may have been delayed by the maintenance both Friday and Saturday evenings. As the deadline was extended, impacts on those submitting applications were minimal and messages to our customer service inbox reflected that.”
OCM is also working on a compact agreement with the state’s indigenous tribes that would allow them to license up to five dispensaries outside of tribal territory, potentially giving them a head start on the state’s emerging adult-use market.
With a potential flood of new licenses suddenly coming into the state, the legal cannabis market could see a land race as license holders compete for limited real estate options and difficult local government approvals.
“In other states like Michigan, we’ve seen the battlegrounds being at the municipal level where they dictate how many dispensaries, how many cultivators, or even microbusinesses, they allow in,” he said. “And then you may see merit-based or even lottery systems set up at the local level, where it could become more difficult to get a special-use permit.”
Mayes also noted that it cost $500 to apply for a license, making access to the approval process significantly less expensive than actually opening a business with that license.
“You may have an individual obtain a license, hoping that having the license is enough to garner the investment,” he said.
Final adult-use market rules pending
OCM also announced on March 25 that it had submitted proposed regulations to govern the adult-use market. Once those rules are formally adopted, OCM will have the authority to grant final licenses.
“With the rules now in the hands of an administrative law judge for final approval, we’ve reached a crucial milestone. Following approval, prospective businesses will be able to complete their final steps and receive a cannabis license,” OCM Interim Director Eric Taubel said in a press release.
Last fall, the state opened applications for a set of social equity lotteries, but then canceled the drawings. Of those applicants, 211 were pre-approved for social equity status and opted to roll their application over to this current cycle, according to OCM.
