Under current regulations, a new company is on the clock from the day the license is granted and is expected to be up and running within six months. Obtaining a license, however, is the beginning of an expensive, risky, and complicated process. Even under ideal conditions, countless steps occur between the issuing of the license and the opening day – from the planning and construction of the system to the passing of all inspections and permits.
Extensions are currently granted individually, not generally guaranteed.
The land rush situation was completely avoidable. The Illinois Cannabis Social Equity Program was launched as part of the Cannabis Regulation and Tax Act, which legalized recreational marijuana from January 1, 2020. Many large cannabis companies were formed on the condition that medical cannabis dispensaries operations could immediately move to recreational sales, while new social equity companies had to wait over 18 months.
The state has hesitated and is now letting vulnerable new businesses ask for permission for the extra time they clearly need. Licensees can apply for a six-month extension – but are not insured.
Without intervention, 400 companies compete for resources within overlapping six-month timeframes. Knowledgeable design / construction companies like us, as well as legal, financial and risk advisors, will guide licensees through the bottleneck, but more challenges lie ahead.
Problems with the construction supply chain are compounding the land rush.
Cannabis entrepreneurs with tight construction deadlines are also struggling with supply chain bottlenecks caused by pandemics. For example, license winners who want to build down-to-earth, prefabricated steel buildings see delays of six to nine months in the shell construction alone, without the expansion of the cannabis plant inside.
Materials like high performance HVAC systems have stalled while the wood supply also remains volatile. Eventually, these delays occur as we approach the challenging winter season.
Construction costs and time horizons have skyrocketed since the approval applications were submitted. Most new licensees strive to provide reassurance while soliciting investors for the capital needed to start their multi-million dollar businesses. These factors converge as the confidence of cannabis investors in Illinois fluctuates in part due to the state’s ad hoc licensing approach.
Time, flexibility and security help.
The solution is simple and is in the hands of the state: Immediately and universally move to extensions. Cannabis licensees need more time, flexibility, and the assurance that they can start their business with high quality resources, goods, and services. Time will allow entrepreneurs to confidently seek investment and create the generational wealth that was intended with the social justice cannabis program.
The state must make up for its own delays and treat new cannabis entrepreneurs for the business partners they are, major future producers of significant tax revenues for Illinois, and leading companies in the cannabis industry.
Andy Poticha is CEO of Cannabis Facility Construction, a subsidiary brand of Mosaic Construction, a national design / construction company based in Northbrook.