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Ask the Cannabis Expert: Adam J. Horowitz & Robert M. DiPisa – What are the biggest challenges facing cannabis operators?

Bridge West Consulting had an opportunity to speak with Adam J. Horowitz, Associate Attorney and Robert M. DiPisa, Member and Co-Chair of the firm’s Cannabis Law Group, at Cole Schotz P.C. Cole Schotz is an Am Law 200 firm, that provides legal services throughout the United States from its offices in New Jersey, New York, Delaware, Maryland, Texas, and Florida. They represent hundreds of businesses, large and small, and select individuals. Cole Schotz brings together over 170 attorneys in 15 practice areas. 

What is the background on Cole Schotz’s cannabis expertise?

In 2013, Robert M. DiPisa, Member, started practicing in the cannabis space and later launched Cole Schotz’s cannabis niche along with several other attorneys in 2018. Adam J. Horowitz, Associate, began working in the Firm’s cannabis law department in 2020, and assisted with the ramp-up in anticipation of legal cannabis in New York and New Jersey.

Adam J. Horowitz, Associate Attorney - Cole Schotz P.C.

Adam’s background is in litigation, and Robert’s expertise is in real estate. Before concentrating his practice on the cannabis industry, Adam focused on commercial litigation and employment law. This background is valuable to cannabis companies that are still in the “start-up” phase as Adam can assist them in establishing employment policies that will reduce the likelihood of litigation or regulatory enforcement down the line, and Adam can help in preparing contracts with suppliers and vendors in ways that avoid the troublesome contract language Adam often has to litigate. As the cannabis industry becomes more mature and established, Adam’s background can help owners navigate any of these issues in the adult-use cannabis market.

Adam comments, “I’m already anticipating helping business owners in the recreational cannabis market with their employment and commercial needs and how that interacts with the stricter regulations for cannabis. This will be especially helpful to cannabis employees since there will be a greater need for more background checks and licensing. I look forward to assisting and supporting those who are new to the cannabis market.”

Cole Schotz’s attorneys are experienced in a wide range of areas within the cannabis industry –including commercial real estate, corporate structuring and capital raises, environmental, intellectual property, taxes, employment matters, and many other areas and services.  Adam explains, “Cole Schotz can handle all the needs of any cannabis business from start to finish. This aspect of my job is fun and interesting because I have an opportunity to work with many people I wouldn’t normally work with if I weren’t in the cannabis industry.”

Adam attended law school in Massachusetts, where cannabis legalization happened sooner than in New York and New Jersey. As a result, he had an opportunity to see cannabis legalization in Massachusetts, which is an important and interesting component of his learning experience. 

Robert M. DiPisa, Member - Cole Schotz P.C.

Can you tell us about Cole Schotz’s clients in the cannabis industry?

Cole Schotz has clients all over the country, including Illinois, Florida, applicants in New Jersey, New York, and Massachusetts. The Firm covers a variety of clients in all spaces in the cannabis industry, both plant-touching and plant-adjacent, and of all different sizes, from big to small.

Recently, the Firm has worked in New Jersey with annual and conditional license applicants in cultivation, manufacturing and retail. Conditional licensing is typically limited to the companies or individuals based on income, and annual licensing usually suggests that the business is already well-funded and may be able to start as a larger enterprise.

Cole Schotz also works with multi-state operators (MSOs). The Firm assists these clients with the many industry issues and challenges they experience, from real estate to environmental issues, which have been mainly in New Jersey. The Firm is also working closely with clients seeking licenses in New Jersey and New York, including social equity applicants.

Do you have any ‘Best Practice’ advice to share with cannabis business owners?

Adam explains, “You really want to have your team, including legal and consultants, put together at least six months before applications open if you are looking at being in the first wave of applicants, which I recommend if possible. The Firm recommends this because, in areas like the East Coast, where the recreational cannabis market is developing quickly, there are not many cannabis attorneys in the space who can take on all the work. Cole Schotz personally does not take more work than they can handle so that there is no conflict. Adam continues, “You really want to make sure your team is in place to run the whole process smoothly. If there is an attorney or consultant you really like, you want to make sure you have them on your team to help you throughout the entire process. The best suggested time to start thinking about gathering your team is six months, but we have even had clients who have retained us two years out.”

What do you feel are the biggest challenges facing cannabis operators?

From experience, Adam says there are three significant issues with applicants: real estate, start-up costs, and assembling a team.

Real Estate 

Real estate poses a challenge for applicants, especially in New Jersey where municipalities were permitted to ban certain license-types, which greatly reduced the amount of viable real estate. Getting properly zoned real estate for a reasonable price is also a significant issue for applicants. A lot of cultivators and manufacturers are looking for warehouses, which is difficult in New Jersey due to the proximity to New York City and Philadelphia. This puts would-be cannabis operators in competition with non-cannabis businesses, such as Amazon and Walmart, which makes it more difficult for cannabis business owners to find warehouse space. This, combined with property-owners recognizing the value of real estate already zoned for cannabis use, has led to the price spiking in this area, making it much more difficult for those new in the cannabis space to get this commercial real estate property. Adam said, “This is an issue when you have a lot of cannabis clients who are start-ups or entrepreneurs who do not have the funds. This leads into the second major issue I see in the cannabis business, which is start-up costs. Which I think is much more than people realize.”

Start-Up Costs

The application process can cost up to approximately $200,000 to obtain a license. Then, securing the real estate, building a facility, the security, and buying the cannabis inventory to stock up the business. People seem not to realize how expensive regulated cannabis is due to the quality, taxes, and the process of receiving inventory for the store is quite expensive. Many people do not realize the costs of stocking a store before you even open the doors to customers. “Right now, the average retail price of an ounce of legal, medicinal cannabis in New Jersey can be as high as $500,” Adam states. Since the cost of starting a cannabis business is so high, Cole Schotz assists their clients with capital raising and funding. Just because you are low to middle class does not mean that it is unachievable to start a cannabis business. Many entrepreneurs cannot afford to start a cannabis business, and people need to know that there are ways to raise capital to make this possible. “It doesn’t have to be limited to the wealthiest people these days. You are probably going to need investments from people. However, you will still run the company, and there are many ways to get the funds for your business, legally get investors which will also protect you from liability if the company doesn’t work out.”

Assembling a Cannabis Team

Adam said, “You need to have those connections to get up and running and know what’s reasonable contracts and unreasonable. Know who’s experienced in the industry. There are also many opportunities for people to claim their experience in cannabis when they might not be. If you’re not in the industry already, it might be difficult to recognize that.” Cole Schotz provides referrals and recommendations to their clients regarding forming their team. The Firm can assist with those relationships and set up interviews between their clients and the necessary vendors and contractors needed to have a successful cannabis business. It really helps those in the start-up phase have the right team from the beginning. The Firm can negotiate the details for you, write up contracts, and make sure you’re protected throughout the entire process.

How do Cole Schotz’s environmental attorneys service the cannabis industry?

A number of environmental attorneys at Cole Schotz have worked with several cannabis clients, including multi-state operators, (MSOs). Most of their work focuses on environmental regulations, assisting them with environmental compliance, and addressing issues such as complaints from neighbors about the odors. Adam said, “Of course, the environmental law comes more into play when you are currently operating your cannabis business since there are some requirements meant to mitigate those issues before beginning operations. Most issues arise after your business is up and running.”

Do you have any advice to share with investors?

Adam said, “Understand the risk of investing in the cannabis industry. It is a high-risk situation.” You also need to understand the taxes involved in cannabis and how it is regulated to understand your returns. If you are looking to get outside investors, another critical piece of advice is to make sure both parties have their legal sides in order. “You need to do your homework; it’s just like any other investment.”

Do you have any interests and hobbies outside of work?

In his free time, Adam is an avid Star Wars fan, and he loves the New York Mets!

We Can Help.

If you own a cannabis business or are thinking about starting a cannabis business, we’d like to help. Bridge West Consulting’s team of highly skilled and seasoned cannabis industry consultants and advisors is ready to guide you through this exciting and challenging landscape. Feel free to reach out to us anytime to schedule a consultation.