Missourians compete with out-of-state marijuana businesses

ST. LOUIS -- Some Missouri business owners looking to profit from the state's burgeoning marijuana industry worry they'll lose out to established out-of-state organizations that have been aggressive in applying to process or sell medical marijuana in Missouri.

Nearly 700 groups filed a total of 2,163 marijuana businesses applications in Missouri, the St. Louis Post-Dispatch reported. The state will issue only 60 licenses to grow pot, 86 to make marijuana-infused products and 192 to open dispensaries. The state has contracted with a company that will use a blind scoring process to assess the applications and issue licenses to the top scorers by the end of the year.

But a point-based licensing competition can make it harder for small businesses to compete because of the money and resources required.

"There are rich men in suits coming from all over this country with bags full of cash," said Richard Rodriguez, a St. Louis restaurant owner who applied to open a dispensary. "I'm all for competing in a fair playing field. But that's not what appears to be happening here in Missouri."

Rodriguez paid $6,000 for an application fee, plus the cost of hiring an architect firm, attorneys to answer regulatory questions and pay a property owner for a conditional lease. In all, he has spent a nonrefundable $40,000 during the application process for just one dispensary.

Missouri became the 33rd state to legalize marijuana for medicinal purposes last November after a ballot measure was backed by 65% of voters.

The state has collected more than $13 million in nonrefundable fees -- $6,000 per dispensary or processing license and $10,000 per cultivation license.

The most licenses any one business can win is 11, including five dispensary licenses and three licenses each for cultivation and processing operations. At least 21 groups, most of them marijuana retailers from other states, applied for 11 or more licenses.

Chicago-based Cresco Labs, which owns 22 dispensaries across 11 states, submitted 30 applications to open marijuana operations in Missouri. Verano, also headquartered in Chicago, put in 18 applications in Missouri.

It is unclear how many marijuana business applicants are from outside Missouri. State law requires at least 51% local ownership of any group applying for a business license, but applicants in other states with similar requirements have worked to get around them. In Ohio this year, regulators placed on hold marijuana business licenses awarded to a company that reportedly lied about its ownership.

Applicants must be prepared to describe the details of their business plans, from controlling odor from marijuana facilities to keeping the drug from entering the illegal market.

Most banks are reluctant to issue loans to marijuana companies because the federal government classifies marijuana as an illegal substance.

"Having more access to capital definitely improves one's chances of getting a license, and that is disadvantageous to small businesses that don't have access to angel investors or deep financial pockets," said Morgan Fox, a spokesman for the National Cannabis Industry Association. "It doesn't preclude their ability to get in the market and win applications, but it's much more of a financial burden for them."

Information from: St. Louis Post-Dispatch, http://www.stltoday.com