Calif. pot dispensaries told by feds to shut down

[Crusader Rabbit]

True story;

Friend of mine ...

I'm sure he appreciates your telling his story here in an international forum.

 

[Hydrosun]

Come on these places are raking in millions in profit (which obviously as profit that's after overhead has been covered) and most are relatively small, there is no way their overhead is so high as to justify the prices they charge. They like most other businesses are basing prices not on what their true costs are with a reasonable markup for profit but rather they're charging based on what they see as possible from the black market. Which is fine, it's just good business sense to get as much profit as the market can bare and still allow you to be competitive but if that's the way one operates they shouldn't tout themselves as being strictly about compassion for the sick.

Millions in profits my ass!

HarborSide stated that they top lined 28mm. With that 28mm they have to pay for all their inventory (7mm?) They have to pay 100+ employees (5mm?) Huge amount of city taxes (2mm?) Huge amount of state tax and sales tax (4mm?) Huge amount of federal tax (4mm?) Huge amount of rent / property tax (1mm?). Even these clowns aren't big balling.

Now to look at any little store front in Sac of San Diego that has to face letters from US attorneys and raids from the Feds, ain't none of them making millions in profits.

There are a few D owners here on ICmag, don't think any of them are living on Easy St. with all the pig activity that is going on.

I don't begrudge any making a living and I certainly don't hate on anyone who makes a living by working with cannabis.

 

[SeaMaiden]

Lets take for instance the car business. When a car is sold by a manufacturer to a dealer, and the dealer puts a 15,000 dollar price tag on it, he only paid 3,500 dollars to the manufacturer for it? Something about that just doesn't sound right.

Now in the food industry you might be right, especially with things like beverages.

I've worked a few different areas of retail, and dry goods is where it's at. Low to no shrink, certainly no loss from death or spoilage (live animals, produce, anything with a shelf life), and you can easily mark up in that range I mentioned. Petco's money-maker is dog food, for example. Home furnishings is another area where you can easily see a 300%-400% mark-up, with no shrink due to spoilage or death, only damage, shoplifting and the like.

I've never worked automotive retail, so I don't know what the mark-up is there. But damn near every other retail situation I've worked, mark-up is HUGE, people would be completely pissed off if they knew.

Whoops!

As far as I know the one week that is takes a dispensary to sell their product in no way equals the 2-3 months that the grower has put into it. In most cases that I am seeing the dispensary owner is making as much or more than the grower who has spent considerable more time to achieve the same amount, not to mention the fact that growers have overhead and expenses too, but it seems the only expenses that matter are the dispensary owners not the growers. Every grower is looked at like they have 100 pounds in the car and it only cost them 20$ bucks and some time to grow it, so why should they be charging anything. Well if you want quality and attention to detail and the ability for the grower to expand his product line well you have to pay for that or just like any other business they won't be able to stay afloat.

The only reason I'll argue in favor of dispensaries and a for-profit model is because there are folks who can't grow, and should be able to get their weed. I don't think that dispensaries even should be non-profit because I think it should be considered an honest way to make a living. Pharmacists and the like are able to make a profit, why not here?

This is the non-hippie Sea side coming it, and it conflicts sharply with the patchouli-wearing side of Sea. But, it's what I think, I don't see harm in it. If folks want a non-profit, let that be another model, a cooperative or collective that is specified to only cover costs. I have been trying to find where in the law profits are specifically forbidden, but I haven't quite found it. Of course, I'm not sure I understand all the language I'm reading in the code, nor am I certain I've found all pertinent code.

But specifically to the debate of whether or not dispensaries should be able to make a profit, there's no question in my mind--yes, as does any other business.

Come on these places are raking in millions in profit (which obviously as profit that's after overhead has been covered) and most are relatively small, there is no way their overhead is so high as to justify the prices they charge. They like most other businesses are basing prices not on what their true costs are with a reasonable markup for profit but rather they're charging based on what they see as possible from the black market. Which is fine, it's just good business sense to get as much profit as the market can bare and still allow you to be competitive but if that's the way one operates they shouldn't tout themselves as being strictly about compassion for the sick.

Touting as being strictly for the sick, like Cancer Centers of America, or whatever they're called? How about what we pay for health insurance compared to the coverage we (don't) get? I'm currently embroiled in a battle with Aetna over the need for a manipulation under anesthesia to regain range of motion post-ACL reconstruction after two months of intensive PT. We've paid through the nose for Aetna, rarely using the coverage, yet now they just won't pay. Why? Profit. I've begun costing them too much so now they're saying my procedure was out of policy coverage.

I agree with you about what the market will bear, as I was taught it's about what the market will bear. This is why I grow my own cannabis as well as other things, like organic produce, because the market will bear a much heavier price for those things, but my pocketbook won't. I also agree with you about false advertising, except that it's completely rampant in this country, everywhere, so I see no good reason to single out dispensary operators and leave out anyone else who's guilty of exactly the same thing.

In the meantime, patients DO have a right to visit any dispensary they wish, yet that's being impinged upon to no small degree, with the rallying cry being centered on profits and making that alone comparable to a crime, in and of itself. I just don't see things quite that way.

Are there high profits in the distilled liquor business? I wouldn't be surprised if there were.

 

[Hydrosun]

True story;

Friend of mine started a small dispensary in this county. When he started it with his friend they both shared a very small mobile home (renter's) they barely had enough money to pay for the first 4 months expenses, within a year and a half he bought a house (uhh all cash deal too ...eyebrows raised) in Live Oak, 2 blocks from the ocean.....I'd say their was a LOT of profit in the dispo biz....and this guy was NO flippin brain surgeon.

Just saying.....

Is his store front still open, or has his business been crushed by the government?

 

[abellguy]

 

[abellguy]

 

[vta]

I know of no other business that has a 100% mark-up on the products they offer, if that is normal that is news to me. I always thought it was around 30-35%.

Way off the mark. Example...At my friends head shop you would pay around $250 for a nice piece....that same piece cost him about $40. That cool glass pipe that costs $59 really costs about $8-12.

 

[abellguy]

 

[Hammerhead]

what is the ave markup??? for retail I know its very high.. When I purchased my custom glass bubblier it was 450$. Im sure it cost him 20$ in material the rest was for his labor. When I worked for HD some things cost a few pennies and sold for 20$

 

[Zen Master]

you've gotta be kidding me, you're delusional if you think 100% markup is "outlandish" thats NORMAL if not on the low end for PHARMACEUTICAL items.

actually I take that back, its on the EXTREME LOW END of markup of pharmaceuticals.

the market makes the price, all factors being accounted for (risk/competition/overhead included) are part of the equation so saying "it costs this much to produce, so why should it cost xxxx" is just naivety at its best.


those china folk making the hammer you're referencing, they have a job today, will probably have one tomorrow, might even have health insurance, they never have to worry about their factory or houses getting seized, Oh and theres hundreds upon thousands of them in existence therefore competition drives down the margins to what is barely acceptable. Growers have absolutely none of those luxuries.

 

[kmk420kali]

I am in no way advocating that a dispensary should work for no profit, but by that same standard why should the grower be left with no profit? Its seems pretty simple to me if it takes me lets say 3 months to make X off of a plant and it takes a dispensary 1 week to make double X of the same plant is the percentage correct? Their expenses and overhead aren't that much more than growers, but they certainly are being passed on that way.

That is just the way things work-- Laborers work the hardest, and make the least $$-- Superintendent makes more $$, with less physical work-- The Owner makes the most $$, with the least amount of physical work--
I am a Grower, so don't think I am taking sides....I just see that the guy who puts up 100 grand+ to open a D, is going to have to make the most $$, or he wouldn't do it--
Whoa...did you just say a D's expenses and overhead are not much more than Growers?? Lol!! Did you know, for instance, above all the Legal Fees, Medicine, Wages, Taxes, Computers, Security, Utilities, Consumable Items, etc...that they also have to make substantial Donations to the Community, in order to keep their non profit status??

Not all dispensaries are falling into this description though, but unfortunately it seems like the majority are. I agree with HempKat in that they are charging not what a normal market would bare but rather what they know is possible from the previous black market.

If you charge less than Street prices, your Meds will simply be bought up by street dealers...leaving the sick without meds still--

That being said....I don't personally go to D's, even though our Collective owns one...but I know many ppl that gladly pay the $$, for the convenience--

 

[abellguy]

 

[Zen Master]

you are the owner of the grow and are paid for your grows production. Supermarkets have a manger, employees, and overhead just like the farmer growing their tomatoes does. Just because one person takes on the responsibility of growing herb, does it entitle them to 90+% (or even <80%) of full retail value? Are THEY breaking those pounds down?

nope, its the immobile building with a target set right on it... that is,... if they are still even open right now.... making that bullseye even that much more defined. Meanwhile you're merrily tending your plants.

they assume risk that you wont or cant. That's not a free service. On top of that, theres thousands of vendors now, I'm sure you've heard the term 'Green Rush' before. So if the guy next to you in line is willing to vend his similar product for 3/4 of your price, who do ya think the D does business with?

If your shit is that fire, you wouldn't be haggling with people.

and one more comment regarding markup... what is your markup? Obviously you aren't doing it at a loss otherwise why would you.

 

[abellguy]

 

[maxmurder]

When I first started vending herb to clubs about 3 years ago, the prices were I feel commensurate for the work a grower does. Since then the price of herb within the club has gone down maybe $5 but the price to the grower has gone down thousands. That is all that needs to change. I personally don't care how much the dispensary charges as I don't purchase there but what I do care about is how much they pay for herb and all the bs stories they try to give to get it for as low as possible and when you head out the door its the "fire" that just dropped at the shop for top shelf prices. Sound familiar?

YEP!

 

[SeaMaiden]

I think a lot of folks have been unpleasantly surprised to learn what a typical retail mark-up is, on damn near anything.

It's interesting how this discussion has morphed, I'm going to pull up that letter I'd gotten via the listserve regarding whether or not dispensaries should be allowed to make a profit.
Here we go, with a link as well: http://drugsense.org/temp/xog2dLGqSs30775.html

There is a widely held misperception that businesses in the California medical cannabis industry are prohibited from making a profit. In reality, no California law prohibits cannabis-related businesses from making a profit.

Opponents of medical cannabis, however, have done a masterful job of spreading disinformation since SB 420 was signed into law in 2003. That disinformation has become so prevalent that it is affecting safe access to medical cannabis by patients around the state, and has prompted retired state Senator John Vasconcellos to release a letter debunking the widely held misinterpretation that profit is not permitted for medical cannabis providers under California law. A link to a copy of his letter is attached.

Sen. Vasconcellos co-chaired Attorney General Bill Lockyer’s Medical Marijuana Task Force that drafted what eventually became SB 420, which was passed by the Legislature in 2003. (By the way, I was a member of that Task Force, where I was Chairman of the Caregiver Issues Subcommittee and also served on the Drafting Subcommittee.)

As stated in his letter, Sen. Vasconcellos, is “deeply concerned that in the nine years since we passed SB 420, certain people have evidently been advocating a marked misinterpretation of . . . SB 420 - with regard to whether ‘making a profit’ is somehow not permitted for medical cannabis providers under state law.”

The confusion stems from a passage in SB 420, codified at Section 11362.765(a) of the Health and Safety Code, stating as follows: “. . . nor shall anything in this section authorize any individual or group to cultivate or distribute marijuana for profit.”

Sen. Vasconcellos denotes a self-evident fact about the language quoted above, namely, “Nothing in that section prohibits profit. Nothing in that section explicitly authorizes profit either. But I must point out that nobody is required to obtain an ‘authorization’ from the Legislature to make a profit in California.”

In the most direct terms possible, his letter states that SB 420's “language does not in any respect purport to prohibit profit -- if that had been the intent, the language would have so stated clearly. It obviously does no such thing.”

This misinterpretation arose because the words in SB 420 were “the result of intensive and laborious compromise and consensus.” The issue of profit in the California medical cannabis industry was one over which opinions differed on the Task Force. “Although certain members of our Task Force did advocate for a prohibition on profit-making, that position was firmly rejected by the Task Force” in favor of the compromise language quoted above.

The problem is that opponents of medical cannabis, for reasons of their own (having nothing whatsoever to do with the safety or efficacy of cannabis), having not achieved their goal in the language of SB 420, instead spread disinformation as a way to try to make it more difficult for California patients to get access to medicine. Sen. Vasconcellos’ letter is an attempt to overcome that propaganda.

As with many aspects of California’s medical cannabis law, there will be no definitive resolution of an issue until the California Supreme Court directly decides it. For the foregoing reasons, I expect the Court to concur with Sen. Vasconcellos’ analysis if the question ever reaches the Court. In addition, a few local ordinances do purport to prohibit profit or “excessive profit” by cannabis providers, but those provisions are of questionable legality under our state Constitution, and under any circumstance, they have no relevance to the statewide applicability of SB 420.

I should point out that there may be many good reasons for cannabis providers to operate on a nonprofit or not-for-profit basis, but adherence to California law is not necessarily one of them. For example, a cannabis provider may feel it can enhance its image by portraying itself as a not-for-profit entity, but that consideration is a public relations issue, not a legal imperative.

-Robert Raich

Link to the letter (pdf) written by Vasconcellos: http://drugsense.org/temp/VasconcellosXSBX420Xltr.pdf

 

[megayields]

I'm sure he appreciates your telling his story here in an international forum.

He was more of an associate than friend and I hate dispo owners, damn thieves. Most of us here who grow never even vend to local dispo's, in fact to be honest. 75% of my primo fire never even sty's in the state.

Btw CC, my "associate" is doing quite well, he just drove up to his dispo in a brand new BMW 750 IL, while I drive my 1998 Ford 4 door, I love my car but dyammmn, He certainly IS NOT an example of "compassionate care"! And to be even further transparent, I have already started my own delivery service, because I do this for the paper boo boo and a few patients and clients.

pfffffffffft

 

[Zen Master]

When I first started vending herb to clubs about 3 years ago, the prices were I feel commensurate for the work a grower does. Since then the price of herb within the club has gone down maybe $5 but the price to the grower has gone down thousands. That is all that needs to change.

YEP!

$5 a gram less equals a drop of $2240 per bow in retail value compared to before lowering it 5/g. (using street herb math, not 28.35g=oz)

they are getting thousands less per P too. Don't even start with me about how "they still charge 65/70" if you go to those places thats on you as a consumer because I can find the dankest co op herb for 40-50. 55 MAX. (and if you wanna drop it $20 an eighth (60 3 yrs ago is now 40) That's a 'loss' from what they 'used to make' of 2560 a p

cut that in half for retail markup value.

so that means splitting the loss in retail value between wholesaler and retailer means you'd be eating $1280 off the top of what you USED to get 3 years ago. If you had $4500 quality product then, you should still be able to get about 32 (edit: if you can find an open dispo) , if you can't then you need to step up your pitch or your quality. Perhaps both.

if you can't make money on a 3k p, you need to find new work.

 

[Zen Master]

ATM I make my bills by the skin of my teeth and that is all, I don't have some warehouse or huge operation but if I did I couldn't grow with the same attention to detail to get premium herb grown. So I guess that would mean markup would be zero from expenses. When I first started it wasn't anything like that.

okay so you're gonna factor your outside costs (rent/food/bills etc etc) to your markup value (even though its kinda a required part of production, just like a store is for a dispo), however you conveniently leave that out of breaking down the dispensaries markup. You didn't include their rent/bills/employees/lawyers/taxes etc

so saying "they mark it up 300%" is just blowing smoke. Get some hard set numbers on what that shit costs, not the figures the budtender behind one of the 600 dispos told you.

have you ever owned your own business? I mean a legal one with customers and inventory and and and? There is a LOT of shit under the surface you don't see as a consumer, and all of it costs money.




not trying to be a dick and say you should give your stuff away to sick people. Hell I utilize the resources co ops and dispensaries have given me However I look at it from both sides because I know some of the shit they need to go through. You dont think theres some other vendor right behind you with "the dankest herb you've ever seen"?

I think growers should be paid for their work, however paying your mortgage and all your bills by just blowing out one small room? c'mon its not like that any more and you know it.

 

[SeaMaiden]

Shrink!