Interview with: Andrew & Adam Powers
Interview By: Heru Amun
Konsider: This is Konsider Group… engaging in a discussion … with Andrew and Adam Powers, the co-founders of The Powers of Cannabis, a cannabis consulting company in Washington State.
We are discussing the Washington state announcement on September 23 that the Liquor Control Board intends to open the licensing process in Washington for a second phase of the industry. They are accepting licensing applications starting October 12th. The question is what does this second phase mean for Washington?
Adam: The Phase Two announcement means more stores and more licenses will be handed out. This means… everyone gets to play the game; not just those with big pockets. Those willing to put in the hard work have a chance. That is a huge change from Phase One.
Konsider: That’s actually a good point. In retrospect, we are calling it phase one but what was that initial process and how does it stand out in comparison to the new rulings?
Andrew: That’s a good question. Really, what it comes down to is – Phase One was a lottery system with a large barrier to entry into the cannabis market. They gave a 30 day window in November 2012 to apply for one of the 334 retail licenses.
Most waited for two years, hoping and praying that their ticket would be picked for one of those 334 stores in Washington. During our three years in this new industry, we experienced first-hand all the issues you could imagine. And we found out a lot about the industry.
The average cost to open has been $1 to 1.5 million dollars. One of our clients told us that they were renting a place for two years and didn’t win a license. That is money down the drain. And worst of all, they are one of many to experience the unfortunate setbacks of entering a risky market. A limit of 344 stores with an industry tax of 75% and uncertainty of the rules and regulations made Phase One no joke.
With the opening of Phase Two of the licensing applications, there is less volatility in the market due to the cost of entrance dropping and changes in tax laws. However, Phase Two will not be without its unique struggles.
Adam: Yes, the brand war already started and established companies are already dominating their areas. But there is still good news, the cost to enter drops from that $1.5 million average to around the $300,000-$600,000 range. There will no longer be a limit on the amount of retail stores.
Even the tax structure has dramatically dropped from 75% to 37%. Unfortunately, the federal status has not changed so no help this year with federal taxes. If you want to survive in the second phase, you need to get connected fast.
Konsider: So how does one get a retail license in Phase Two?
Andrew: The Liquor Control Board will be giving out licenses to three different priority groups.
The first priority will be applicants who applied for a marijuana retail license prior to July 1, 2014, or operated a collective garden prior to January 1, 2013. Second priority will be applicants who operated a collective garden prior to January 1, 2013.And the third priority will be applicants who do not meet the requirements for priority one or priority two. We predict first priority opening up March 2016. The second priority opening up late June 2016 and last, but not least, the third priority hopefully – at least – the last quarter of 2016,but most likely early 2017.
Konsider: Remarkable changes. So what’s next for The Powers of Cannabis?
Adam: We have quite a few projects lined up. We are developing certification programs for the cannabis industry. We are working closely with the Science of Cannabis Institute and GreenBits to create training for the stores, employees, and cannabis entrepreneurs with real experience.
We are already working with new retailer businesses with the applications and development process for Phase Two. We are starting a whole new department of data acquisitions for the local market. The last major project is creating video advertisements and kick-starting promotional campaigns for emerging cannabis businesses.
Konsider: What three tips can you share with potential Phase Two applicants?
Andrew: Study the industry. The plant, packaging, and traceability systems are some of the things that are unique to cannabis industry and operations. The biggest problems for new cannabis companies or ancillary companies is they enter the market believing the structure is similar to retail and they can just take their experience and paste it into cannabis. Well, that doesn’t work! This industry is a mixer of the regulations of banks; security of casinos; branding of beer and wine; and in Washington, it is operated like liquor with a hint of the coffee business. Having the basic knowledge, especially in this early stage, makes all the difference.
Adam: Don’t try to do it alone. There is a lot of research and investment of time and capital in starting up a recreational facility. Consultants work as mentors to help you navigate how to open up and run a successful operation. We know the industry pitfalls and how to avoid them. We have known too many Mom & Pop stores that thought “I got this, I have some experience running a store”. This is a legal cannabis store. You’re dealing with a seed to sales traceability system, selling a controlled substance one drug in an experimental state of the industry. Most people don’t have a clue how crazy jumping into this industry is.
Andrew: Lastly, don’t miss this opportunity. If you are not convinced that this industry is a money maker, log on to FrontRunnerData.com and check out the industry numbers. See for yourself the $103 million – just in tax revenue – and that’s just from July 8th of 2015. This is real business. So, if you are looking to jump in, do it now.
Konsider: Thank you guys for the exciting information about the second round of the Green Rush here in Washington.