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selling to dispensaries in michigan 2020

New marijuana rules could translate into higher prices, short supplies of legal weed

Michigan logged its first day of recreational marijuana sales Sunday, attracting long lines to three shops in Ann Arbor. Detroit Free Press

Michigan’s marijuana market just got a little bit tighter at a time when the legal weed supply is already struggling to keep up with demand.

In an effort to ensure that all marijuana produced and sold in Michigan comes from licensed growers, processors and retailers, the Marijuana Regulatory Agency began Sunday to phase out products grown and processed by caregivers, who have been cultivating weed since Michigan voters approved marijuana for medical use in 2008.

And that’s going to put a crucial crimp in Michigan’s supply of weed. Currently, the cannabis grown by caregivers — the people registered by the state who can grow up to 72 plants for up to six medical marijuana cardholders — makes up 60% of the marijuana flower in the marketplace. Under previous rules, the caregivers have been able to supply marijuana flower and infused products to state licensed growers and processors to supplement the medical and recreational marketplace

The new rules went into effect Sunday and until May 31, caregivers can only supply marijuana flower to state licensed growers and processors, who can, in turn, have the product tested and either turned into other pot-infused products or sold to legal weed shops. They can no longer supply the marijuana oil, also known as distillate or concentrate, to the legal medical or recreational marketplace.

From June 1 to Sept. 30, licensed marijuana growers and processors will be limited in the amount of flower they can get from caregivers. And by Sept. 30, no caregiver products — flower, oils or infused products will be allowed in the licensed marijuana marketplace.

The caregiver-produced infused products, including vapes and edibles, already on the shelves of medical and recreational pot shops can be sold until the product is gone, said David Harns, spokesman for the Marijuana Regulatory Agency.

“Whatever they have on their shelves, they can sell,” he said. “And by the time caregiver flower is phased out, licensed growers should be able to fill the difference.”

The first impact is going to be on price, said Dennis Zoma, one of the owners of Liv medical marijuana dispensary in Ferndale. The caregiver product has been much cheaper because it isn’t subject to state mandated regulatory fees and assessments that licensed facilities are required to pay and they don’t have the same overhead costs.

“It’s going to drive up pricing on the distillate oil, which is going to affect the price of vape carts to edibles to everything else,” he said. “And when the caregiver flower is phased out, that’s going to really hurt.”

At shops like The Reef, a medical marijuana dispensary in Detroit that doesn’t have a grow operation attached to the shop yet, the problem gets even tougher.

“Most of the wholesalers are vertically integrated, and they’re only going to supply their own shops. So there is definitely a big concern about product availability,” said Rush Hasan, head of operations at The Reef. “And once the Marijuana Regulatory Agency shuts down the caregiver market entirely, then we’re at the mercy of any of the suppliers out there.”

The wholesale price for marijuana in Michigan is running $4,000 to $4,500 a pound, one of the highest prices in the nation. Those prices are then getting passed on to customers. And many of those customers are reverting back to the much lower black market prices.

“We’re seeing less of our loyal customers coming in,” Hasan said. “We’re assuming that they’re going to places closer to them or the illicit black market.”

At Arbors Wellness in Ann Arbor, which sells both medical and recreational marijuana and is vertically integrated with a grow operation, processing plant and retail shop, supply has been steady, but phasing out caregiver flower and infused products will make business challenging.

“It will kick licensed producers into high gear, which is a good thing,” said James Daly, president of Arbors. “And I think the state is looking for more aggressive action and production from licensees.

“But there are a lot of good caregivers in the state who do a great job and the market is absolutely dependent on their product. I think we’re going to see a lot of market volatility this year.”

That uncertainty comes at a time when the state is adding more and more recreational business licenses in the state to accommodate a growing desire for legal weed in the state. Since Dec. 1 when recreational marijuana sales began, $31.9 million in marijuana products have been sold. That amount has generated $5.3 million in tax revenue from the state’s 10% excise tax and 6% sales tax.

There are 61 licensed marijuana retailers, but only roughly 35 of those are actually selling recreational pot. And there are 26 licensed recreational pot growers and 11 processors in the state.

In an effort to ensure that only licensed marijuana businesses are operating in Michigan, the state sets new rules to phase out caregiver products

How to Open a Marijuana Dispensary in Michigan

Created byВ FindLaw’s team of legal writers and editors | Last updated April 21, 2020

Starting a marijuana dispensary in Michigan requires strict attention to compliance issues and regulations. The laws allowing adult-use of recreational and medicinal cannabis were passed in 2018 by Michigan voters, but legal frameworks for cannabis-focused businesses are still in development. Expect the laws and regulations to change as businesses open and the frameworks develop.

The agencies estimate commercial sales from dispensaries will not begin until Spring 2020. However, you can plan by knowing the laws and requirements before you begin your business plan.

Note: Michigan state legislatures use different spelling to describe cannabis, so you may see the laws and regulations use the term “marihuana” instead of the more common term “marijuana.” This spelling comes from the spelling in the federal Controlled Substance Act, which used the spelling from the Marihuana Tax Act of 1937. It is antiquated spelling but cannot be changed without an act of Congress. Michigan law also refers to dispensaries as “provisioning centers.”

What to Expect During the Process

You can expect to have a prequalification phase to fill out all the documents and submit them for consideration. Everyone involved in a marijuana industry business will have a background check during this phase. If your application passes the first step, then you will enter the license qualification phase.

This requires more specific information for the specific licenses you are seeking. The following sections give an overview of the specific elements you need to consider when opening aВ recreational orВ medicalВ marijuanaВ dispensary.

Michigan Marijuana Facility Licenses

Your dispensary can sell both recreational and medicinal marijuana. You must apply through the state government for a Medical Marihuana Facilities License. through the Department of Licensing and Regulatory Affairs. Read about the full act and its requirements in Michigan’s official document. This license covers jobs from growers, processors, transport, provisioning, event organizers, lab testing and medical marijuana facilities, and dispensaries.

Consider Your Location Before Starting Your Dispensary

The first thing to consider is where you want to locate your Michigan dispensary. You need to find the right building or lot to build on and get permission and licenses from the city. Your building must be 1,000 feet away from liquor stores, other dispensary and drug free zones, such as schools or daycares. Check the locations of existing dispensaries or marijuana businesses online to narrow down acceptable locations.

Michigan has a unique initiative to help communities previously affected by marijuana prohibition and criminal enforcement. The Marijuana Regulatory Agency (MRA) started a Social Equity Program in 2019 to promote adult use of marijuana from local dispensaries. Applying for any of these program locations will have reduced fees for your dispensary licenses and renewal fees.

Business Models for Your Dispensary

The cannabis company model you create, the investors you select and the partners you choose can all have an impact on your license approval. Know that every person – from an investor to an employee – will be carefully background checked throughout the process.

There are also unique elements to consider, such as allowing dispensary-only sales or if you will support medical marijuana home delivery shipment and sales. During the process, you will need to submit a site plan that covers everything from the building layout to security to trash management, and you may need to lobby for approval.

Staying Compliant at Your Michigan Dispensary

Federal law sets the minimum age for recreational marijuana use at 21 years old and the state requires a government-issued license or passport. Medical marijuana licensees can also apply for a recreational license when they are 21 years old. Checking proper licenses is essential during all cannabis product sales.

The table below reviews typical laws, compliance issues, and regulations you need to follow for your marijuana business in Michigan:

Michigan Marijuana Laws

General Business Considerations

The market in Michigan is fast-moving and lucrative for marijuana and cannabis products. You may want to perform a competitor analysis on local pricing. In Michigan, retail products are legally restricted to the following amounts per customer per day:

  • 2.5 ounces of marijuana
  • Seven grams of vapor cannabinoid extract or concentrate
  • 16 ounces of marijuana-infused solid products
  • 36 fluid ounces of liquid marijuana-infused products
  • 12 cannabis plants
  • 15 grams of concentrated cannabis

You must have a marijuana software tracking system to keep a record of the time, date, price and quantity of each customer’s sale.

Cost to Open a Dispensary

Retail Store Regulations

Dispensary Owner Requirements

Organizations to Know in Michigan

    Marijuana Regulatory Agency
    Licensing Division Phone: 517-284-8599
    Enforcement Division Phone: 517-284-8597

Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.

Related Resources

  • Michigan Marijuana State Laws
  • State Marijuana Laws

Learn About Marijuana Dispensary Owner Basics

  • Setting Up a Marijuana Business: The Basics
  • Marijuana Business Licenses, Permits, and Planning
  • Medical Marijuana Overview

Call a Business Attorney When Opening A Marijuana Dispensary

Marijuana use in Michigan is moving steadily toward mainstream recreational use. As the cannabis regulations develop, there will be changing rules and regulations to follow to ensure compliance. Get your business off the ground and start on the right foot with the help of a cannabis business attorney that knows Michigan laws.

Michigan laws and regulations for marijuana are still in progress, but business owners can get ahead of opening a dispensary and apply for their licenses ahead of time. Learn what you need to do and what to expect in the process on Findlaw's page on opening a Michigan dispensary.