weGrow Founder and CEO Dhar Mann via MMJ Business Daily:
This is the second column in a three-part series.
Once you have carefully considered the unique challenges involved in opening a medical marijuana dispensary and the various ways to mitigate risk, the next step is to identify the right opportunity.
If you’re looking to capitalize on the “Green Rush” in a state that allows medical marijuana dispensaries, you likely have three choices: 1) invest in (or buy) an existing dispensary; 2) apply for a dispensary permit during an open registration process; or 3) launch a dispensary in a jurisdiction where no moratorium is in place.
Whichever approach applies to your situation, it’s prudent to assess the market opportunity before you start to invest a lot of money. In the second part of this series, I’d like to examine the important factors to consider when assessing the financial opportunity of owning a dispensary.
Before I dive into the details, I’d like to make one point of clarification. I will use the term “financial opportunities” frequently. With the exception of Colorado, each medical marijuana state requires you to be a not-for-profit entity. So the term financial opportunities refers to sales potential, not profit potential.
Why were dispensaries in Los Angeles, the second most populous city in the U.S., closing doors while a dispensary in Oakland reported tens of millions of dollars in sales? A large contributing factor is scarcity (or, in economic terms, artificial scarcity).
In cities and states where medical marijuana distribution centers are heavily regulated, there’s usually a larger financial opportunity.
Oakland, for instance, placed a moratorium on medical marijuana dispensaries to limit the number to four (although it recently increased this number to eight), effectively legislating an oligopoly. Los Angeles, on the other hand, did not cap the number of dispensaries. As a result, medical marijuana centers sprouted up in L.A. at a rapid pace, and in some cases two or three opened within one city block.
Which city offers the better opportunity? Oakland.
The same principle is at work when taxi medallions in major metropolitan cities sell for hundreds of thousands of dollars: Restricting the number of licenses limits the competition, resulting in a larger economic opportunity.
Read more at Medical Marijuana Business Daily.