Flood of Dispensary Applications in Arizona Signals Keen Market Interest

By John Schroyer

Arizona recently opened the door to a new wave of licensing for medical marijuana dispensaries, and got flooded with 750 applications for just 31 permits.

It is perhaps the largest ratio of applications to licenses in any market, and signals that cannabis entrepreneurs are bullish on Arizona.

The deluge comes ahead of the November elections in which Arizona residents will vote on Proposition 205 to legalize recreational marijuana.

If voters approve the initiative, licensed dispensaries would get first crack at rec licenses. Still, those in the Arizona industry say the tsunami of applications likely would have been just as big if that werent the case. Thats in large part thanks to the states sizable patient pool of almost 98,000.

It didnt surprise me in the least, actually, Steve White, the CEO of Harvest of Tempe dispensary, said of the hundreds of MMJ applications. It has been a market that has largely flown under the radar for quite some time, but thats an acknowledgement of both the movement and Arizona as a good medical marijuana state.

White and his partners, who already operate two dispensaries in the Phoenix metro area, submitted 30 dispensary applications for locations all over the state. He estimated his company probably spent between $7,000-$10,000 per application or up to $300,000 on the application process.

But if Proposition 205 is approved by voters this fall, that could be chump changefor anyone who wins a single license from the new MMJ permitting process, which the state expects to finish sometime in October.

Itll be a huge payoff either way for the winners of the 31 new dispensary licenses, said attorney Jeffrey Kaufman, who helped 21 clients put together applications.

Kaufman noted Arizona has a lot of potential patients waiting in the wings, because of the high cost of becoming an MMJ patient. And those individuals may be waiting to see if Prop 205 passes.

If it does, Kaufman added, those individuals are probably hoping that the new act will be implemented immediately and come December theyll be able to buy marijuana without a license. So even if it fails, I think the number of patients will increase dramatically.

Kaufmans wife is a member of the board of directors of the White Mountain Health Center dispensary in Sun City, Arizona. Kaufman said that based on the steady increase in customer traffic that hes witnessed at that storefront, he reckons the current patient numbers will more than double over the next year if Prop 205 fails.

The estimated sales via dispensaries in Arizona for 2016 are between $200 million and $250 million, according to the Marijuana Business Factbook 2016.And currently 93 dispensaries operate in the state, with another six licensed but not yet up and running.

Another reason Kaufman thinks the patient base will continue to expand is because hes seeing a growing demographic in seniors. Simple acceptance of medical cannabis as a therapy for various ailments has become a burgeoning trend among those over 50, he said.

J.P. Holyoak, president of the Arizona Dispensary Association and owner of Arizona Natural Selections, a dispensary in Scottsdale, cited two more reasons the states industry has attracted so much attention:

• The risk-reward ratio has gotten very low for prospective MMJ business owners.
• Theres no longer a residency requirement for licensees.

The reason and the rationale behind it is the risk profile has changed dramatically from back then to today, Holyoak said.When I first applied, people were telling me, J.P., youre ...