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Will ‘Microbusiness’ Licenses Let Craft Cannabis Flourish in California?

October 5, 2017
Forest Gray’s resume reads like that of a man who has finally found his passion.

A biochemist whose academic studies focused on the benefits of psychoactive drugs, Gray entered the pharmaceutical world after college. A few years later he decided to abandon the sterility of the laboratory in pursuit of something even more noble: beer.

'The microbusiness model is akin to the beer microbrewery.'
Forest Gray, founder, Relativity Labs cannabis

He founded Speakeasy Ales & Lagers in 1997, and grew the San Francisco company to employ 50 people and produce a peak annual revenue of $10 million. Gray oversaw nearly every angle of the business, from beer recipes to logo design, packaging choices, equipment selection and quality assurance.

Then, in the months following the passage of California’s Proposition 64, Gray decided to trade in hops for cannabis.

Earlier this year he launched his new venture, Relativity Labs.

“Even though I was in beer for 20 years, it was essentially a ginormous detour,” he told Leafly.

Gray plans to translate his Speakeasy experience into building a craft marijuana brand, where he can shape the product and consumer experience, “nose to tail.” That means controlling everything from cultivation to retail. This process would typically entail multiple permits, properties and start-up costs, but under a microbusiness license proposed by the State of California, entrepreneurs like Gray would be able to submit just a single application.

“[The] microbrewery is akin really in a lot of ways to the microbusiness model,” Gray said.


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A New Licensing Model

First introduced as part of Proposition 64 in relation to adult-use operations, the microbusiness license is now poised to be available to medical marijuana businesses too, courtesy of SB 94. The license would allow small businesses to act as a one-stop-shop; owners could grow cannabis on an area of less than 10,000 square feet, while also acting as distributor, non-volatile manufacturer and retailer.

This is essentially a smaller version of a typical vertical integration model, and can apply to indoor or outdoor cultivation sites, said attorney Habib Bentaleb of Harris Bricken.

Microbusiness growers don't want to compete with the Budweisers of cannabis.

“It is supposed to be a nice way for craft cannabis companies to differentiate themselves [from] what will inevitably be large-scale grow cultivations throughout the state,” said Bentaleb, who specializes in cannabis regulation and represents Gray.

Not only does this help preserve the type of small-scale or cottage operations much of the industry was built on, it streamlines and simplifies the application process, allowing entrepreneurs to apply for just one all-encompassing license. This doubles as a dramatic cost-cutting method, which offers mom-and-pop shops a slight leg up when competing against large, venture capital-fueled businesses.


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Keeping With the Craft Beer Model

The microbusiness model is especially valuable for manufacturers who rely on effective branding and want to oversee the entire process leading up to sales, Bentaleb added.

People like Gray, who’ve opted to focus on production instead of cultivation, since that market is already flooded with big capital.

“To me, that’s like going against Budweiser in the beer world,” Gray said.

Will Consumption Be Allowed?

While the concept for this license is attractive and Bentaleb has seen some client interest in pursuing it, they stand to face quite a few logistical hurdles, he said. For one, there’s the issue of on-site consumption. It’s allowed under state law, and it could be huge asset to microbusinesses. But it’s also subject to the discretion of local jurisdictions, and many of their decisions have yet to be made, said Bentaleb.

The key: Patrons can consume in a microbrewery. They'll want to do the same in a cannabis microbusiness.

The idea of smoking or ingesting weed at the very spot it’s made, where customers can witness its careful production from seed to sale, could prove highly profitable.

Just look at California’s craft brewery and winery industries. In fact, it’s this format that Gray is envisioning for Relativity as he scouts possible shop locations in Sonoma County. He plans to build an artisanal cannabis operation where he produces oils and edibles to be consumed by visitors on site.

“I’m looking forward to hosting busloads of tourists from wherever and walking them through the whole process,” Gray said. “I envision it more as an extension of the brand than as a drug store. I don’t want to run a drug store.”


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Depends on Local Zoning

While the region of California that Gray is targeting is notoriously cannabis-friendly, many microbusinesses will have to grapple with individual municipalities that have their own zoning laws, which dictate where certain types of operators can set up shop.

Municipalities that permit cultivation may not allow manufacturers or dispensaries, and vice versa, Bentaleb explained. Some municipalities have already capped or outlawed dispensaries outright. This means it may be incredibly difficult for microbusiness owners to find property where they can fully exercise all portions of their permit, said Bentaleb.

“It’s almost a non-starter in most places,” he said.

Still Not an Easy Process

Even for those enterprises that do manage to find a place to legally operate and obtain a license from the Bureau of Cannabis Control, microbusiness applicants will have to meet requirements set by additional state agencies including the Department of Public Health and the State Water Resources Control Board.

“I don’t foresee it being an easy process for the unsophisticated applicant,” Bentaleb added.

Making things even more complicated is the fact that the Bureau of Cannabis Control has yet to issue the final regulations for the state, and many local jurisdictions seem to be following suit. California’s are expected to be released sometime in November, with the application process opening January 2, 2018.


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Hayley Fox's Bio Image

Hayley Fox

Hayley Fox is a freelance writer based in Los Angeles. She writes about cannabis legalization, news, crime, and culture in Southern California and beyond. Her work has been published online and in print for Leafly, Rolling Stone, Playboy, VICE, LA Weekly, and others.

View Hayley Fox's articles

  • J T

    👌Great article, Hayley! Interesting stuff.

  • lovingc

    The biggest problem California has is an over abundance of cannabis. If they don’t manage to stop the growers of the extra that will have to go to the black market and Jeffy isn’t going to put up with that.

    • President Gas

      That’s been going on for more than 50 years and it’s not going away anytime soon.

      • lovingc

        Well I enjoy the effects of your over production, in Texas we have no hope of relief from legislative stupidity. What I am referring to is the DOJ and DEA . Jeffy will cause problems with the legalization, over the excess production. Personally i would prefer importing from California. But the over production is one more thing the evil people in our lovely government under Trump will object to and this is a problem for the rest of the country. One successful foray in to state laws about cannabis could open the rest to more of the same.

    • BenSamizdat

      Here is why that is not going to be a problem. A lot of the product that is being sold today is slathered in pesticides and molds because Cali doesn’t have the same testing requirements of other States. As Cali catches up, a massive amount of that product just will not be able to be sold at market. Also, there is a storm on the horizen as the Canna States continue to test for carcinogenic compounds and realize that a lot of the products used to treat and combat the 300 pests and 300 pathogens that attack Cannabis are cancer-causing. That is also going to stop a lot of product from being sold at market, until growers transition to the Dutch Method (no pesticides or fungicides). Also, there is a lack of sophistication in Cali bulk mono-crop growers. What are you growing? “Oh it’s Fire. It’s good shit”. Yah? So…. what the hell are you growing? The answer is – what sells on the streets: cookies, sour, etc. Rarely do you see the gourmet strains down here, it’s all just bulk fluff and that is not going to last long when Dispensaries have to actually start competing with each other. They will demand better quality and I just don’t see the growers of SoCal able to deliver that. NoCal, yes, to an extent. Like any business, three tiers of quality will develop along with three tiers of price-points. And quality will rule over quantity, and force people out of the market that really should not have been there in the first place. In short, good old fashioned demand for better supplies will force a Sea Change. Lastly, a lot of these growers just won’t be able to turn the corner wiith the Legalization requirments. They don’t have the water rights, their methods and equipment are outdated, they dont have the proper manpower, they dont’ have the legal setbacks, the sound and smell ordinances coming down the pike will be too onorous, they won’t be able to afford the security systems or to replace those lights that are violating Federal frequencies. The Bureaucratic maze will be too much for most of these growers. Yes, lots of them will go back to the Black or Grey market, but will Cali have the Strike Force needed to smoke them out? So far, OR, WA and CO have not. I don’t see CA creating a Canna Gestapo either.

      • reggiec

        I operated a small collective for about 8 years but will be leaving the industry. Typically I grew between 10 and 20 different strains including some I cross bred myself. Growing outdoors required that several different harvest “batches” were often required for the same strain.
        The new testing requirements at about $275 per sample set of 4 samples (potency, pesticide, microbials, and now heavy metals) will make it impossible for me to continue as I did in the past.
        Last year I had what the state would consider 60 harvest batches, That comes to about $16,500 just for testing. Add in all the other costs for security video, alarms, strong rooms, fencing, seed to sale tracking hardware and software, all requiring connectivity with the state and I can no longer make a profit.
        I am very isolated have my own water and power and my closest neighbor is over a mile away. Even with that going for me, the regulations ended my business.
        I believe that instead of encouraging people to go legitimate it will drive many “craft” growers like myself out of business and make black market even more competitive thal legal cultivation because the black market will not have any of the regulation compliance costs.
        As far as catching all the black market people; that is a joke and always has been.

  • President Gas

    I like the idea of the mico-business license model and plan to pursue one but it’s not being embraced by any local municipalities the way it was designed by the state. For a mico-licensee ………….. one has to apply for all four local licenses seperately and pay for each one individually. That is an expensive proposition.

  • BenSamizdat

    This is an excellent idea! If Cali really wants to help growers transition from the Black and Grey markets to the White market, then this is the answer, because most of those growers are tiny ops.

  • Shoreline1

    I like this idea, as well. I hate the idea of turning cannabis production over to large scale corporate production while all the freedom fighters that have made it possible get cut out.

  • reggiec

    The document “The Case to Remove Cannabis From The Drug Schedules Completely” can be found on line at 420 magazine. It is a compilation of my research into the reasons why cannabis is still listed as a Schedule I narcotic and why I believe there are very valid reasons to disagree with that classification.
    The below is an effort to inform those in government of why I and many others would like Congress to act to declassify cannabis entirely. It is also a call for individuals to act through individual efforts, including the petition process to pressure Congress to declassify cannabis.
    You can copy and paste “The Case To Remove Cannabis From The Drug Schedules Completely” from the 420 site for a petition or individual letters to your elected officials and attach it to the following cover letter.
    Cover letter for declassifying cannabis (Copy and send this to your elected members of Congress)
    To the Honorable _____________________
    You are receiving this letter because you are a member of The House of Representatives or a Senator from a state that has legalized the medical and/or recreational use of marijuana (cannabis).
    Over twenty-five states and The District of Columbia have legalized the medical use of cannabis. Several states and the District of Columbia have legalized the recreational use of cannabis.
    Over the years there have been several efforts to reclassify cannabis downward to a lower level of the drug schedule. The main resistance to these efforts has been orchestrated by special interests that lobby against any rescheduling effort. These special interests are major contributors to political campaigns and exert undue influence in the legislative process.
    The attached document, “The Case to Remove Cannabis from the Drug Schedules Completely”, identifies these special interests and illuminates their often egregious reasons for opposing any reclassification of cannabis.
    In a majority of the states, the people of These United States of America have spoken through either an initiative process or through their legislatures, that the federal government’s stance on cannabis is no longer logical, is not based on scientific fact, and is in direct opposition with the vast majority of the citizens of the United States. Are we a Democratic Republic or are we ruled by special interests?
    The attached document points out how cannabis remaining in Schedule I actually undermines the very rights of many Americans.
    The ATF has stated that anyone that uses cannabis is a dangerous narcotic user and can be denied their Second Amendment rights. The background application for buying a firearm asks, “Are you addicted to or do you use marijuana”. If you have a medical recommendation for cannabis in a state that has legalized medical Marijuana and answer yes, you are not allowed to purchase the firearm. If you answer no and you are a legal medical cannabis patient you are in violation of the law and can be fined or jailed or both. The only justification for this stance is that cannabis is in Schedule I. This is explained in detail in the attached document. Specifically, and contrary to the stance of the ATF, cannabis use has not been connected with violence.
    Those who are, according to state law, legally involved in the medical cannabis industry are denied financial services available to pharmaceutical companies that manufacture and sell drugs many times more dangerous than cannabis. Those in the cannabis industry are also denied the ability to take the normal deductions for expenses when filing income tax with the IRS. Is this a violation of the Fourteenth Amendment?
    Tobacco and alcohol combined, neither that are listed at all in the drug schedules, cause over 490,000 times more deaths each year in the United States than are caused by the use of cannabis. See the attached document “The Case to Remove Cannabis From The Drug Schedules Completely” for verification.
    The logical approach to the problems created by cannabis being in Schedule I is to remove it from the drug schedule completely.

    (place with your name or the names of petition signers here)