Evaluating the True Value of Cannabis Dispensary Licenses in New York State.
In the past week, an influx of dispensary license holders and people representing their clients’ interests have reached out to me about the price tag that my clients are looking to pay in cash to procure an additional retail cannabis dispensary license here in New York State.
My clients are a skilled team of operators who have proven without a doubt that they can run a cannabis retail store, provide consistent high-quality customer service to a consumer base and build and maintain an attractive assortment of products on their menu while keeping with the newest and best offerings available.
However, this is not all that is needed to run a successful dispensary in New York. Other qualities include paying vendors on time; building a strong, efficient staff that is loyal; generating consistent income on a daily basis to run a business at a profitable level; and really knowing the market you serve.
My clients are not the first group to see the benefit of having multiple locations throughout the state and using the proven formula they have created in-house to scale up their business efforts towards a multi-location approach. Just look at retail stores such as USTA, which now has three locations currently operational in New York City and were the first to do so. Or, the FlynnStoned group, who have been putting in the work, canvassing the state, and making deals to expand their footprint with the confidence that they can run a chain of stores successfully, further building upon the quality customer service, efficient business practices, and product assortment to consumers that they have come to be known for with their Syracuse retail location.
There are two schools of thought currently percolating throughout the New York industry when it comes to retail licenses and their value.
Many believe the licenses are a golden ticket to generational wealth, and if you open a store, you now have the keys to the kingdom to print money (the dream that OCM sold to applicants).
The other is the mindset (reality) that your store and license are only worth anything if you:
- Have site control over a great retail location and know your area.
- Have a skilled team of operators who have experience running dispensaries.
- Have the financial backing to fund a proper store buildout and keep it growing.
- Figure out #1-3 before your 12 months are up on your provisional license.
- Can get your store open and operational to the point of profitability.
So, what is the price of a dispensary license actually worth on the open market right now? In my personal opinion, the license is worth what someone is willing to pay for it.
However, there is some hard data and comparative pricing that can be used to determine the value. Looking at a recent report from MJBizDaily using data from Poseidon, a retail license value varies due to the age of the market in which it exists and the license type. I would also add that the amount of licenses given out by a regulatory body also affects the value like any other commodity in a market. Supply and demand.
From my recent conversations, many believe their New York retail license is worth well over $400,000, but this is typically not an all-cash upfront offer from would-be buyers.
Some would-be sellers might believe that’s way too low a number. With my client offering $200,000 cash up-front with no strings attached, I believe that this is still an amount of money that would and could change someone’s life for the better, especially if they have no actual interest in doing all that is needed to have a successful dispensary.
Based on the MJBizDaily report, a New York retail license currently holds an open market selling value of $250,000 with an asking price of $1.3 million, and from what I have seen over the last few years, that asking price has not ever been achieved in an all-cash buy. The report goes on to show that a dispensary license in our neighboring state of New Jersey holds an open market selling value of $280,000 with an asking price of $1.7 million.
I can honestly see this being the case as New Jersey is selling more weed than New York, and the price point for products is higher across the board. This also adds to the idea that New Jersey retailers are making more profit per transaction, as even on keystone priced items, store owners will be making a larger amount per transaction.
Every month that goes by, the OCM gives out more retail licenses to hopeful licensees who applied and paid their $1,000 admission fee to the bingo drawing, thus lowering the price and value of a New York State retail dispensary license. I see the future here not being one of only chain stores surviving the next few years, when ultimately the bottom falls out and the industry plateaus as a whole, but a mixture of those two things. They built this upon the liquor store model, and we all see the chains of liquor stores seemingly thriving along with the smaller mom-and-pop shops on corners serving their communities as well. But let us not forget, this isn’t liquor, this is cannabis. Two in the same, these things are not.
The OCM can tout as much data as they want that they are not “flooding” the market with licenses and that they are balancing the supply side to match the retail side’s demands with their two-tier system, but I for one am and never will be convinced that this can occur – or will occur, for that matter.
A great example is that the OCM has already flooded the market with distribution licenses due to basically every AUCC/AUCP licensee who transitioned to adult-use licensing receiving one. That means over 300 distribution licenses right there, allowing every company to deliver their own goods to stores with microbusinesses allowed to do the same thing.
For so long, many have wondered what the values actually looked like, and now we have data and actual figures to go off of.
