Client Alert: Ready to Dominate the Cannabis Delivery Market?

CLIENT ALERTS · June 22, 2020

Ready to Dominate the
Cannabis Delivery Market?

Last month, the Cannabis Control Commission (CCC) released its long-awaited forms of application for Delivery-only Licenses and add-on Delivery Endorsements. The applications do not reveal all answers or all of the requirements, but the following is a short introduction to key provisions relating the new license types. As always, we invite you to reach out to any of our attorneys, to learn if a Delivery-only License (“Delivery License”) or Delivery Endorsement is right for you.

HEADLINE ISSUE:  Applicant Eligibility
For the first time, the CCC has limited Delivery Licenses and Endorsements, exclusively to businesses majority-owned and controlled by Social Equity Participants (SEPs) and/or Economic Empowerment Applicants (EEAs). The exclusivity period is expected to be enforced for two years beginning on the date the first applicant receives a notice to commence operations. The Delivery License and Endorsement application fees will be waived for SEPs and EEAs and, if approved, the annual Delivery License fee of $10,000 will be reduced to $5,000. Note that EEAs and SEPs must maintain majority ownership and control of their businesses during the entire exclusivity period.

Delivery License Specifics
A Delivery License allows a licensee to deliver retail and medical cannabis products directly to consumers, patients and caregivers, with some limitations. Deliverable products must be obtained from a licensed Adult-Use Marijuana Establishment Retailer (“Retail ME”) and/or a Marijuana Treatment Center (“MTC”) (not cultivators or product manufacturers) with which the Delivery Licensee has a CCC approved delivery agreement. Note that there is no limit on the number of Retail MEs or MTCs that a Delivery Licensee may contract with.

Adding Delivery License to Current Retailers
Delivery Licenses are not needed by MTCs (as they can perform home deliveries if approved by the CCC to do so), but may be an advantage to Retail MEs.  However, the first CCC Guidance issued with respect to Delivery Licenses announced that a Delivery License does count as one of the three retail licenses that a control entity/person is allowed to hold.

Pre-Certification For Delivery License Applicants
The Delivery License application begins with a new pre-certification phase offered to SEPs and EEAs. Pre-certification is intended to be a less arduous, low-to-no cost application review that is based solely on the applicant’s disclosures, of  1) business, tax and insurance information; 2) identity of all persons/entities with direct or indirect control; 3) background check disclosures; 4) its business plan and 5) operating procedures that comply with CCC regulations with an acknowledgement that certain procedures will need to be updated at the provisional licensure phase.  Pre-certification is granted by CCC Executive Director/Staff and is estimated to take as little as 90 days. Once pre-certified, an applicant has twelve months to start the provisional license application, during which an applicant may use its pre-certified status to gain community support and/or investors.

Delivery Endorsements
Currently, Delivery Endorsements may only be sought by Microbusinesses with an existing  provisional license.  A Delivery Endorsement is not a distinct license type, but rather an expanded permission to perform delivery operations. Microbusinesses are only allowed to deliver their own retail marijuana products to consumers.

Residential Delivery Rules
Residential deliveries are limited to municipalities that:  1) allow retail marijuana sales (whether or not an operational Retail ME exists), 2) enter into a host community agreement with a delivery business, or 3) opt-in to residential delivery via bylaw/ordinance or regulation. The Commission will maintain a database of municipalities that have opted-in to residential delivery. Up to one ounce of marijuana, or its dry weight equivalent in marijuana concentrate and/or edible products, may be delivered per customer, per day. Note that only “shelf-stable,” non-perishable products may be delivered.

Security and Safety Requirements
There is a relatively robust set of security requirements: the regulations mandate body cameras, GPS, in-car video, lock boxes, two drivers, and others.  All customers (excluding patients/caregivers with Registration Cards) must be pre-verified before their first delivery.  Strict rules regarding maintenance of delivery logs and manifests also exist. While not in the regulations, delivery businesses should expect to provide their drivers with adequate personal protective equipment, and given the current pandemic, delivery businesses would be forward-thinking to devise ways to make deliveries as “contactless” as possible.

Whether you are an existing operator looking to capture additional market opportunities, or a new business looking to join the growing cannabis market, a delivery license might be right for you.  Please feel free to contact a member of the Prince Lobel Cannabis Practice Group  for more information.  And stay tuned for an upcoming virtual Cannabis Roundtable–more information to come.

The authors of this alert are Michael Ross (mross@princelobel.com; 617-456-8149) and Jill Schafer (jschafer@princelobel.com; 617-456-8142).

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