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Bud business: Cannabis clubs explained

As part of the fact-finding process of the cannabis dispensary moratorium, the Sacramento city government is taking a look at how, exactly, medical pot stores operate. Without many precedents to refer to, dispensaries don’t have solidly established business practices. All dispensaries are somewhat similar, but none are alike.

Dispensaries all have the same basic foundation. By state law, pot shops must be collectives or cooperatives of medicinal cannabis patients.

After ill Californians get cannabis recommendations, they have the ability to medicate and cultivate as they see fit. Last year, California Attorney General Jerry Brown published some guidelines on how many plants (six) and how much prepared cannabis (8 oz) independent patients should grow or possess at one point in time, but such guidelines aren’t law. Instead, these guidelines are sort of a threshold of acceptability to avoid state legal action. Brown’s recommendations are more binding of cooperatives, which he requires to operate within the law.

"California law isn’t really specific on any of this stuff," a spokesman from Capitol Wellness Collective said, who requested SacPress to not use his name. "It’s still evolving."

If multiple patients pool their resources, they can quickly come into possession of far more cannabis than the guidelines suggest or that they’re even capable of using. Remember, this plant grows like a weed. A single indoor plant can grow up to six feet tall, producing up to 10 ounces – so even within guidelines, stockpiles can overflow.

If they feel like making a practice out of it, state law allows them to open a dispensary. Dispensaries often start with several growing patients and occasionally another entrepreneur who may not grow or have a doctor’s recommendation for THC medicine.

Aspiring club owners must then make the difficult decision of where to set up shop. Dispensaries have to take on a number of concerns when shopping for property, said American Association for Medical Cannabis State Director Ryan Landers. "They need to be a good distance from other dispensaries to avoid being redundant, and they have to be away from parks or kid-friendly businesses."

AAMC is a nationwide activist group that works with lawmakers and law enforcement to make medical cannabis safer and more available.

Friendly landlords are also a must, as opening a pot shop can be a touchy matter.

"Nobody wants to lose their property for renting to a dispensary, so they usually think twice," Landers said. "It’s never happened in Sacramento, though."

Accessibility is another major component of a shop’s location. Many cannabis patients have limited mobility, and private transport may be a luxury they physically or financially can’t afford. Local dispensaries choose to open near bus or light rail lines. Clubs usually avoid busy metro areas: None are presently open in the heart of the downtown grid. Capitol Alternatives, a club on 16th Street, was raided by DEA agents and local police in April 2006, though no charges were made, according to news reports. The club reopened the next day at another location.

Then there’s the question of how the medicine gets to the dispensary in the first place. As mentioned before, most dispensaries are run by cultivating patients, but once demand goes up, for the sake of stable prices, so must supply. Patients outside the dispensary are invited to donate their excess medicine if they have an abundance, which is common. Contributions are given free of charge and serve to keep prices down and to increase the variety of strains available. According to local club owners, there is a wide network of patients making regular donations.

Dispensaries are always nonprofit businesses, as required by state law. This means that all of their profits need to be redistributed back to the community. Employee salaries are included in that interpretation of ‘community.’ According to a spokesman for Hugs Alternative care, about 25 percent of profits go back to salaries. With the remainder, clubs also give back in other ways.

Every club gives a charitable amount back to patients who donate their excess medicine, usually in the range of $100 an ounce, according to local club owners. Doing some quick math, at $50-60 per eighth-ounce, this adds up to a $300 or more profit margin on each ounce sold.

Some clubs also use their excess earnings for other health services, like massage therapy or group counseling, and a few even offer hobby classes and other services.

"At Capitol Wellness Collective, we have a lot of basic outreach programs," CWC’s spokesperson said. "We have a full-time spiritual counselor, condition-specific support groups, a masseuse, cooking classes and peer counseling, all of which are provided free of charge."

Some local clubs also make donations to charities to redistribute their income. Capitol Wellness donates to Loaves and Fishes, the local Shriner chapter and "other people that are just doing great work," according to its spokesperson.

Lastly, dispensaries point out that they usually offer ‘compassion plans,’ that reduce or eliminate the cost of medicine for disadvantaged patients. Veterans can often get a discount, as can the disabled and patients with MediCal and Medicare.

"Clubs should never present an undue hardship to the people that need medicine most," Landers said. "Medical cannabis saves lives."

Dispensaries are almost always incorporated. They charge sales tax for their wares and pay federal and state taxes, although they aren’t federally listed to avoid DEA entanglements. They usually employ between five to 10 full-time employees and pay a "comfortable" salary, according to club owners and employees.

"As profits go up, so do salaries. If we’re in a good time, we’ll meet up and discuss pay," Clyde Baker from Hugs Alternative Care said.

Patients can volunteer their time to help out at some local dispensaries, and some receive free medicine in return for their time. Alexander Skibo volunteers at Northstar Healing Collective and positively loves doing it.

"This is the most convenient arrangement I’ve ever had with any medicine," he said. "I haven’t been able to drive a car since my injury, so walking in to volunteer is just great. I’m definitely a proponent."

Specifics on the actual cannabis commerce that takes place at dispensaries are tough to get. Questions on profits, salaries and even day-to-day business are usually met with "that’s a private matter." Some general facts can be learned, but accounting figures will be checked out by the city government, if even then. Clubs still have two more weeks to register with the city and prove they were open before the moratorium’s June 16 requirement. After that point, if clubs fail to register, they’ll get hit with a misdemeanor every day they stay open.

"That’ll add up really quickly," Landers said. "Most clubs have already registered, but we’re still expecting more."

For more information on the legality and aesthetics of local medical cannabis, or the moratorium, refer to these previous SacPress articles.

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