A cohort of new cannabis licensees in Maryland are facing their first hurdles and finding their identities as they set out on an 18-month venture to get their business up and running.

The 205 prospective businesses were selected at random earlier this year through the state’s social equity lottery for cannabis licenses. Many of the people behind them are entering the legal pot industry from other careers — some are lawyers, some are educators, others are engineers and electricians. Many of them are now getting their conditional licenses, starting the clock to hit certain benchmarks and ultimately get their businesses operational.

“It felt almost like ‘Willy Wonka & the Chocolate Factory’ for the first couple of weeks,” said Tracee Cheek, whose business, The Righteous Hippie, won a license to open a dispensary in Baltimore County. She intends to operate in the Pikesville area. “And then for me, it was like, ‘Now, do we want to just be happy, or do we really want this to happen?’”

Maryland set up its cannabis reform package with a social equity system intended to give communities harmed by cannabis prohibition a fairer shot at competing in the newly legal market, in part by regulating access to the state’s limited amount of business licenses. The lottery drew from a pool of applicants who have lived in or attended school in areas disproportionately impacted by cannabis possession charges.

Currently, just under 100 dispensaries that converted their licenses over from the state’s old medical cannabis system are licensed, as well as just over 40 growers and processors. After the first round of 205 new licenses this year — 84 dispensaries, 50 growers and 71 processors — state law also provides the means for another lottery that would issue 227 more licenses.

In the lottery results, state officials saw promise as far as diversifying ownership in the legal pot industry. More than three-quarters of the new licensees self-identified their race as something other than white, including 110 of the 205 businesses reporting African American ownership, according to data from the Maryland Cannabis Administration. About a third of the new businesses identified themselves as woman-owned.

That comes after a wave of smaller, women- and minority-owned cannabis firms stepped out of the industry in the weeks before legalization took effect due to uncertainty about the new recreational market. At least 27 businesses transferred their ownership in the weeks ahead of July 1, 2023, the cannabis administration wrote in a report that attributed the shift to tax and banking issues due to marijuana remaining illegal at the federal level.

There have already been challenges for the lottery winners — namely weary investors and the struggle to find the right space, as well as unnecessary consultants and over-priced seminars looking to take advantage of those new to the cannabis field. And once they open, the new businesses will have to compete with longer-running, well-funded cannabis operations.

Sales of legal cannabis in Maryland totaled $1.1 billion in the first year of legalization. Three-quarters of those sales were recreational cannabis purchases, which have also driven more than $63.7 million in state revenue from a 9% sales and use tax in their first year. Although the wide scale of Maryland’s social equity program instantly set the state apart from others when it became law, state officials must now work with the new businesses see it through in practice.

“There was no blueprint for anything of this size,” said Audrey Johnson, executive director of Maryland’s Office of Social Equity. The nine-person office formed through Maryland’s cannabis reform legislation works closely with regulators to implement the state’s social equity vision. They’re also charged with helping new licensees get their businesses in order and ready to compete with large, multi-state cannabis companies that have already operated in Maryland for years.

“We’ve been talking a lot up to this point, but this is where the real action starts,” Johnson said.

For many prospective business owners, the challenge seems worth it.

Attorney Brandon Taylor and cinematographer Jerry Aquino, both Navy veterans, are eager to get their cannabis processing business, MunchNFly, operational as soon as possible.

Taylor, who came to Baltimore to work as a public defender and opened a private criminal defense practice two and a half years ago, saw firsthand how prohibition broke people and communities — while simultaneously watching the legal cannabis industry take off in states like Colorado and Washington.

The so-called War on Drugs, a decadeslong U.S. campaign to curb the drug trade through criminal enforcement, led to millions of Americans — disproportionately Black, Latino and other racial minorities — with criminal records for drug offenses. Meanwhile, executives in the legal cannabis industry throughout the U.S. are largely white.

“You see all these people making millions and billions of dollars off of marijuana, but in some states, people are going to jail for it,” Taylor said. That made Maryland’s social equity system look “like a golden opportunity, to kind of get into a game that has really drastically impacted people who look like me and came from backgrounds like me.”

Brandon Taylor, CEO of MunchNFly, left, and Jerry Aquino, COO. MunchNFly received a cannabis micro-processor license from the social equity lottery. Taylor is a lawyer, former Baltimore public defender. Aquino is a filmmaker. Both are both Navy vets. (Lloyd Fox/Staff photo)

Their brand’s specialty is infusing food products — mac and cheese, biscuits, mashed potatoes, Hawaiian sauce for chicken wings — with THC, the psychoactive component of marijuana. First, they need to get funding together, then find a location and get the permits to build out a lab, which they’ll also need to staff up.

Over the summer, the state started issuing the first new conditional licenses for all types of cannabis businesses — dispensaries, growers and processors —  to the license lottery winners. Prospective cannabis businesses have 18 months from the date they received their conditional license to commence their operations. They also have benchmarks to reach every few months, such as getting capital, getting a space, entering into partnerships.

“They’re not saying, ‘Hey, you have 18 months, holler back at us and let’s see if you got a facility running,’” said Taylor. “It’s almost as if they’re step-by-step making sure things are done the right way — so when the time comes, the rollout is already way smoother.”

The new licensees are coming into the field with a “wide range” of business experience and cannabis knowledge, said Johnson, whose office is linking them to technical training as well as grants intended to help them afford those educational opportunities. The social equity office has been helpful from the application process into the starting stages so far, business owners said.

Part of Johnson’s office’s role over the next year and a half is to help the new businesses get running through training, advocacy, outreach and other support, she said.

“At the end of the day, we want as many of these businesses to open their doors as possible,” Johnson said.

Orlando Walker, a Hanover resident who grew up in Baltimore, started considering the cannabis industry as he reflected at home during the coronavirus pandemic.

He took a cannabis class at Anne Arundel Community College and studied up on starting a business, applying for the social equity lottery after seeing a reference to it in The Baltimore Sun. As he watched the numbers get called, he just had a “weird feeling” that his planned dispensary business, Gaslyte, would get drawn.

The aerospace system engineer is dreaming up what the business will look like on opening day. The Morgan State University graduate wants to sell local art and incorporate music and visuals into his space. He also wants to prioritize products from other minority-owned businesses and give back to the city that made him who he is — and has been more welcoming to cannabis shops like his.

But Walker also sees the obstacles ahead. He and his business partner have been seeking out retail space in Baltimore, though there are rules limiting where they can be located, and potential landlords tend to hike up the price when they hear the word “dispensary.” Investors are hard to come across, too — he’s still setting up meetings but considering refinancing his home or dipping into his retirement funds as a backup to cover some of the costs.

Tracee Cheek, whose business, The Righteous Hippie, won a cannabis dispensary license through the state’s social equity lottery. (Lloyd Fox/Staff photo)

“It’s a challenge; it’s a mighty lift,” said Cheek, who currently works as a program manager at a nonprofit. She believes that The Righteous Hippie will be able to get to the finish line — opening day — ahead of most of her cohort and remain on track to serve as a model of the success of the social equity program. But that has meant calls during lunch breaks and evenings and paying “quite a bit” out of pocket to move her project along, leverage investors and be taken seriously in conversations about partnerships.

She sees it paying off as a way to build a business that reflects her values — educating customers, engaging with the local community, being politically active and just having fun.

“This is something I’ve just been very dialed in and laser-focused” about, dedicating time and money to be successful, she said.

Taylor and Aquino hope to build out their workforce by recruiting veterans and establishing a structure, operating procedures and chain of command that’s familiar to those who served in the military. Starting as a “little fish” in a market with bigger businesses already established, the pair said their goal is to use their branding to set them apart, marketing to professionals with little to no time to cook and seeking a buzz.

“We won the lottery, so it was almost impossible, right? It could have gone the other way, but we got the chance to do a good deal with this,” Aquino said.

Got a news tip? Contact Dan Belson at dbelson@baltsun.com, 443-790-4827, on X as @DanBelson_ or on Signal as @danbels.62.

Originally Published: October 18, 2024 at 5:00 a.m.