Retail marijuana a slow burn in Fresno after nearly a year. ‘Some of them will never open’

The timeline for the adoption of legal marijuana in Fresno has never been fast.

It took two years after the statewide passage of Prop. 64 in 2016 for voters in the city to pass a marijuana tax measure and pave the way for cannabis sales. It would be another two years before the city would amend its ordinances to allow for recreational marijuana sales, and another year to process applications and start awarding cannabis licenses.

At the time, Fresno was the largest California city without recreational, brick-and-mortar dispensaries.

Even now, more than a year after preliminary licenses were given to 19 businesses across the city, only two cannabis shops are open and operating, leaving a major gap in the expected tax revenue from cannabis sales.

The shortfall could be a high as $3 million in 2023, according to an update from city staff given at a city council meeting last month. The adopted budget for this year put cannabis revenues (taxes and fees) at $5.37 million, according to the city.

It is now projecting that number to be $2,113,100, a situation that councilmember Nelson Espaza called “insanity.”

“We keep over-projecting cannabis every fiscal year.”

What’s the status on Fresno pot shops?

Two businesses — Embarc on Blackstone Avenue at Gettysburg and The Artist Tree on Palm Avenue at Nees — opened on the same day in July of last year. Of the remaining businesses, all have completed their conditional use permit applications, according to the city.

Thirteen have had CUPs approved.

A CUP is needed before businesses can begin working on building permits or actual construction.

We could see new shops opening by May, though the final construction process happens on the businesses’ timeline, not the city’s.

“So, we can’t say for sure,” director of communications Sontaya Rose said in an email to The Bee.

“Overall, it is taking longer for the sites to open than was originally anticipated.”

On average, businesses took five months just to submit their CUP applications. By contrast, of the two open dispensaries, one submitted the application the day after they were issued preliminary approval, according to the city.

So, why the delay?

According to the city, several cannabis businesses are rehabbing old buildings and may not have known exactly what they were getting into. Others are dealing with landlord issues, like waiting on current tenants to move out of a location.

Embarc experienced both problems, said CEO Lauren Carpenter.

The company was awarded two retail cannabis licenses, but has just the one store open. It is “working expeditiously to open our second location later this year,” Carpenter said.

“A variety of factors influenced the timing” of the first and second location, Carpenter said, “including site conditions driving duration of build out and the speed in which tenants were able to vacate the premises.”

“Fortunately, our first location affords us the ability to serve Fresnans while training our team to become leaders in our second.”

But there is also a larger economic outlook also in play.

Lauren Fontein, founder of the Artist Tree, said there was a boom in the industry at the start of the COVID-19 pandemic. But since then, the cannabis industry has been in a downturn. The market is saturated — there’s too much flower being produced for the number of retail stores — and the product is expensive with high levels of tax (which can be as high as 30% when combined for local and state).

Companies are struggling, she said. Some, are having to downsize staff and sell off licenses.

See: the “Apple Store of Weed,” MedMen, a one-time empire now on the verge of financial ruin.

“There’s much less an appetite for investing in the cannabis industry,” Fontein said.

“It’s not this kind of cash cow business that people thought it was.”

So, some of the funding that may have been available to shops when Fresno awarded its licenses might not be available now and companies with multiple locations across the state might find themselves unable to expand in the way they had hoped to in 2020 or 2021, Fontein said.

Indeed some some companies may be choosing to move forward on locations in other cities, leaving Fresno to wait it out, according to the city.

What’s being done?

As it stand, there is little the city can do but wait.

While there is a one-year timeline for cannabis retailers to submit CUP applications, there is nothing in the ordinance that gives them a deadline of when they have to open, the city said during its council update.

The licenses do come up for annual review, at which time they can be revoked, but that period does not start until the businesses actually open. So, the city can’t force a business to open at the risk of forfeiting its license; though during the council meeting, there was some question as to whether the city manager has the discretion to revoke preliminary licenses if a business was not moving quickly enough.

It should be pointed out these timeline issues are not unique to Fresno.

Embarc was the first to open in each of the seven cities in which it operates (it shares the distinction in Fresno) and in many of those communities, other stores were months, or even years, behind.

In one city, Embarc was open for a full year before a second shop opened.

The city has yet to see a third shop open.

The Artist Tree saw the same thing opening its six locations across California, including its consumption lounge in West Hollywood. She points out that in Los Angles proper, only a handful of the city’s 200 social equity licenses have ever opened stores.

“A lot of the people that win (licenses) don’t end up opening,” she said.

“Some of them will never open.”

There are things that the cities can do to help.

West Hollywood actually amended its ordinance to allow for for more licenses. The city of Riverside did another round of licensing. Fontein said Fresno could amend its ordinance to add hard deadlines through each step of the process. It could also loosen restrictions on the transferring of licenses, she said.

“The city just kind of needs to get practical at this point,” she said.

The city manager’s office is working with the city attorney’s office “to determine options for establishing additional deadlines for applicants to make progress towards opening,” Rose said via email, but there were no details or timeline on that action.

For its part, the Artist Tree is in works to reach a legal settlement with the city that would allow it a second license, which it was originally awarded for the old Club Fred building in the Tower District. It was later appealed and denied by city council. The company is prepared if and when that happens, Fontein said.

“We’re ready to go.”