In the ever-evolving landscape of the cannabis industry, California presents a unique challenge. Despite being one of the first states to legalize recreational marijuana, the Golden State’s cannabis business environment remains one of the toughest in the nation. Over the past three years, industry advocates have placed much of their hopes on repealing city-level bans on cannabis commerce. However, despite numerous victorious pro-marijuana ballot measures and ordinances, progress has been slow.
Since 2020, at least 50 California cities have moved to allow marijuana retail shops, according to a tally by Hirsh Jain at Ananda Strategy. However, the vast majority of these shops haven’t yet opened for business due to local and state red tape. Jain calculated that in just 15 specific localities – including Fresno, Costa Mesa, and Santa Barbara County – there should be 129 legal dispensaries operating by now. However, only 18 have managed to open their doors.
The numbers paint a stark picture:
- Fresno, two of 21 stores open
- Corona, three of 12 stores open
- Stanton, one of four stores open
- Costa Mesa, five of 20 stores open
- Redwood City, two of six stores open
- Oxnard, one of 16 stores open
- Tracy, one of 11 stores open
- Daly City, one of six stores open
- Santa Barbara County, two of six stores open
- Ventura, zero of three stores open
- National City, zero of six stores open
- Encinitas, zero of four stores open
- Vacaville, zero of six stores open
- Santee, zero of four stores open
- Woodland, zero of four stores open
The bureaucratic process at both the state and local level has made it nearly impossible for these stores to open. Jain stated, “If these stores were open, as they should have been by now, then the California market would not be feeling the pain it is today.”
Cannabis Law Group’s attorney Damian Nassiri says that one of the major problems is “that the cities still treat these businesses as if you were applying for a job at the FBI. It often takes up to a year to have a cannabis business license approved by both the city and state with background checks, building permits and property inspections. This jive bleeds businesses dry before they even open.” Nassiri, who helps clients obtain their cannabis business permits, went on to say, “I believe this is partly due to the sad fact that marijuana remains illegal at the federal level, and so the cities take much longer to review applications and approve licenses. It could also be that the cities are not hiring enough people to process the applications, administrative bottlenecks, if you will.”
If these stores were operational, it would increase the roughly 1,100 legal retailers across California by more than 10%. For instance, Fresno was expected to be at least a $300 million market. However, with only two stores open, it’s currently a small fraction of that.
“If we just got these stores open, which we anticipated when we passed these ordinances back in 2019 and 2020, then this would be an $8 billion market,” Jain said. Instead, the legal California cannabis trade is estimated to be worth around $5 billion.
By contrast, more than 40% of the legal retailers are located in just seven cities: Long Beach, Los Angeles, Palm Springs, Sacramento, San Francisco, Santa Ana, and Santa Rosa. This concentration of retailers has led to intense competition, driving some legal retailers out of business.
“It’s a bloodbath if you’re in those markets,” Jain said, adding he keeps hearing of more retailers closing, either permanently or temporarily, in cities such as L.A., Palm Springs, and Santa Rosa.
At Cannabis Law Group, we understand the complexities and challenges of the California cannabis market. We’re here to help businesses navigate the legal and bureaucratic hurdles that stand in the way of opening and operating a successful cannabis retail shop. With our deep understanding of cannabis law and our commitment to our clients, we can provide the guidance you need to navigate this challenging landscape. Contact us today at 949-375-4734 to learn more about how we can assist you.