Cannabis Equity Applicants Still Face Barriers
Red tape and vulture investors prevent SF’s equity program from working as intended.
The image has become familiar: presented by floor-to-ceiling shiny windows and a smiling, iPad-holding greeter, dispensaries in California look far more like an Apple Store than the smelly back alleys and strip mall parking lots where we used to buy our weed.
No longer the “devils lettuce,” cannabis is now a feature of “wellness,” and “plant medicine.” If Don Draper were real and working today, he’d certainly be pushing pot.
However, as more money has flowed into the recreational cannabis sector, the industry has predictably presented the same kind of bias found across the business world. Legal weed is overwhelmingly white — with white owners making up 80-90 percent of cannabis business owners nationwide. San Francisco’s Cannabis Equity Program was supposed to address exactly that problem by uplifting the mostly Black and brown communities hardest hit by the War on Drugs.
Shawn M. Richards is an equity program success story. By fall of 2019, the sterile-looking marijuana dispensaries emblematic of legal weed had not yet materialized in the Haight-Ashbury neighborhood, San Francisco’s hub of pot-smoking hippiedom. Known for illicit sales of herb and psychedelics, Richards once ran his own hustle here; he was selling drugs at 12 years old on the streets of the Haight. Now, he owns a dispensary three blocks from where he grew up — a hip, music-blasting, bright blue storefront called Berner’s on Haight.
Richards thought he would be the first in a long succession of similar businesses. However, two-and-a-half years since the program’s inception, his is still one of only three equity dispensaries to open in the city. As of December 2019, 133 equity storefronts were “in queue” for permits by the city, though obtaining a permit is only one item in a long list of hurdles equity partners must overcome before they can open their store. A total of 277 applications are being reviewed by the city, including those for delivery, manufacturing, and distribution.
So, what’s the hold up? The problem boils down to money and access to information. The equity program, which pledges to “foster equitable participation in the cannabis industry and create business opportunities for those negatively impacted by the War on Drugs,” gives qualified applicants a pass on their introductory $5,000 permit as well as access to industry incubators and technical assistance. However, most equity applicants cannot cover startup costs on their own, and many are still discouraged by a long, bureaucratic process they don’t always have the institutional know-how to tackle.
“There’s been a lot of people who have been getting rich, and getting paid, benefiting off the backs of people like myself that have been affected by the War on Drugs,” says Richards.
Richards believes that the arduous process makes it easy for his peers to get taken advantage of — especially when it comes to finding an investor partner to cover costs. “They’re preying on equity applicants, trying to give them a lump sum pay, or pay them monthly,” he says. San Francisco currently only allows equity partners to apply for a cannabis permit to give equity applicants a well-deserved advantage. However, this policy also encourages San Francisco vulture investors to find equity applicants they can partner with in name, but ultimately exclude from business operations and long-term financial profits.
Amber Senter is an Oakland-based cannabis activist and entrepreneur who is also concerned about these investors. “You could easily have a straw man as your equity partner,” Senter says. She says these cases are frequent and easy to identify, because oftentimes vulture investors all flock to the same vulnerable candidate. “You’ve got equity applicants who are on 12 different applications,” she says.
Even without the threat of vulture investors, the process applicants must navigate is complex, and full of fire, police, and safety inspections, piles of permitting paperwork, and several layers of review by bodies including the Office of Cannabis, City Planning, and the Cannabis Oversight Committee. It took Richards nearly three years to complete, and city requirements included that he have ownership of his retail space the entire time. If his store had ultimately not passed the approval process, he said his team would have lost over $200,000 on rent alone.
After making it through the legal gauntlet of opening his dispensary, Richards and eight others founded a coalition of professionals called the San Francisco Equity Group to help future equity partners navigate the process.
To qualify for San Francisco’s program, an equity applicant must have below a certain threshold of household assets. For example, a family of two must have less than $73,800 in savings, checking, or investment accounts. This makes sense — after all, social equity programs like San Francisco’s are meant to give disadvantaged business owners a leg-up. But because cannabis is still a Schedule 1 substance at the federal level, most cannabis businesses don’t have access to banking, nor can they write-off many business expenses on their yearly taxes. Add that to the fact that startup costs to open a marijuana dispensary in San Francisco range from $1.5 million to $3 million, and equity applicants are essentially forced to partner with someone who wouldn’t otherwise qualify for the equity program.
In Richards’ case, he insists that Cookies and their famous CEO, Wiz Khalifa-signed rapper Berner, sat down and entered a fully amicable 50-50 partnership. But other applicants aren’t so lucky.
“More education needs to be out there,” says Cindy De La Vega, who has been working on opening her own store since 2017. After years of setbacks, her store, a partnership with the massive vaping company Stiiizy, will likely open in the next two months. Like Richards, she says this brand partnership was amicable — in fact, she says the partnership with Stiiizy encourages her to succeed because they have Women of Color in many decision-making roles.
De La Vega grew up in the Sunnydale Housing Projects, and says that jargon-filled, bureaucratic processes such as this simply don’t suit people from her community. She is a board member for the San Francisco Equity Group with Richards, and says that, without their support, she likely would have given up on opening a store by now. “You gotta start with where we are from,” she says. This process, she says, “is built for failure, not for success.”
The city’s Office of Cannabis also faces its own budget problems. Applicants face long response times when working with the San Francisco Office of Cannabis, and while the Office of Cannabis has grown from a staff of four to a staff of five in the last year, that’s still not nearly enough people to comb through hundreds of pages of application paperwork. Long wait times can make the process more expensive and thus more discouraging for equity applicants, who are least likely to have funds to burn. “As an individual, you have to stay more active, and more involved,” says Richards. “They want you to bug them so they don’t forget about you.”
However, Richards also adamantly argues that the Office of Cannabis seems to have applicants’ best interests in mind. “They have really been pushing hard and trying to make sure they process all the applications with a limited staff. So you have to give them a clap on the back for that,” he says.
Met with the worsening city-wide financial crisis after COVID-19, it will be difficult for city officials to find the funds to further develop San Francisco’s Cannabis Equity Program. The city faces a $1.5 billion budget deficit, and, ironically, experts have noted that $831 million is going to pay for the police and sheriff’s departments, alone — the biggest chunk for any one department. While Mayor Breed’s budget proposal last year included the Office of Cannabis in a city-wide hiring increase, funds allocated to uplifting marginalized communities are far outweighed by that spent on public safety initiatives.
De La Vega, who still lives near the housing projects where she grew up, emphasizes that future improvements to the equity program will only help disadvantaged communities like hers. In fact, opening a store under San Francisco’s Equity Program, though it has been difficult, gives her a sense of pride. “It feels so good to know we’re trying, and we have been, doing good for our communities,” she says. “We’re doing all of this for our communities.”
SF Weekly Link: https://www.sfweekly.com/culture/cannabis-culture/cannabis-equity-applicants-still-face-barriers/