Monday, January 17, 2011

Marijuana law may lead to new industry of educating dispensaries

Gus Escamilla is a pioneer in an industry that is just taking root in Arizona.

Escamilla, the founder and CEO of Greenway University in Denver, plans to offer Arizona entrepreneurs an education in the fledging business of medical-marijuana dispensaries.

His team, he said, helped open more than 225 dispensaries in California, Colorado and the western United States.

"The demographic that we recognized, it's not the 21- to 28-year-olds," he said of future pot-business owners. "It's the 35- to 65-year-olds, the displaced professionals, the people that want to get into this industry in total and complete compliance with the state laws or jurisdiction that they live in."

Later this month, the university, whose curriculum is provisionally approved by a division of the Colorado Department of Higher Education, plans a two-day seminar in Scottsdale. For $295, students can learn about the politics and legal issues linked to marijuana, as well as how to grow the herb and put it in a snack form called edibles.

Those who excel can become "budtenders," helping patients match the best strains of marijuana for their ailments.

Escamilla is not alone in seeing the opportunity. Phoenix chiropractor Bruce Bedrick, for example, already is marketing a dispensing system. Once regulations are in place, many entrepreneurs are likely to want to get in on the beginning of what some believe is sure to be a high-growth industry.

In November, Arizona voters passed Proposition 203, which will allow qualifying patients with certain debilitating medical conditions to receive up to 2 1/2 ounces of marijuana every two weeks from dispensaries or cultivate up to 12 marijuana plants if they live 25 miles or farther from a dispensary.

The Arizona Department of Health Services is reviewing more than 1,000 comments on proposed medical-marijuana rules. A new draft is expected at the end of the month, followed by a second comment period. Final rules aren't expected until March.

Escamilla described those who attend his classes as "flat-out entrepreneurs" who see the industry as more than cultivating and selling marijuana. For example, insurance brokers who sell medical-marijuana insurance, real-estate agents who lease or sell space and security people who provide security for dispensaries have attended the program, he said.

"There's a lot of outside interest just from those who are more entrepreneurial," Escamilla said. "There's a lot of people that kind of see it as a savior from a business perspective."

There are similarities between starting a pot dispensary and launching other entrepreneurial efforts, said Gerry Keim, a professor of entrepreneurship at the W.P. Carey School of Business at Arizona State University.

There are the standard forms of risk in terms of learning how to cater to the customer, measuring the competition and building relationships with suppliers, he said.

"But this is one where you have uncertainty about the future of the rules of the game," he said. "They will be emerging."

While the market has been legitimized, the business could be impacted significantly in the future, Keim said, likening the industry to what he saw when he worked in the Czech Republic after the fall of the Berlin Wall.

"They were trying to move to a market economy and lots of people were coming over, including lots of young Americans, but you knew the rules of the game were in their infancy and they were going to change," he said. "You've got to be a risk-taker. You've got to be careful about what sort of investments you make . . . because they could have their value reduced significantly."

Those able to land a spot in the market early may be best able to influence legislators and regulators, Keim said.

"It's the classic high-risk, potentially high-return situation," he said.

Bruce Bedrick, a Phoenix chiropractor, has held local seminars to inform others about medical-marijuana permitting and how to properly operate a dispensary.

He is marketing what he said was the most technologically advanced solution to get patients marijuana: a medical-dispensing system that looks similar to an ATM and could be run from a business office. It's called Medbox.

Bedrick said the system was the most affordable way for entrepreneurs who see potential in medical marijuana because it requires as little as $25,000 to get into an investment pool.

"We are the most-compliant, most fraud-free, safest and most lean business model," Bedrick said, predicting there will be more security and regulations as rules come forward.

The licensed technology he offers was devised after regulatory problems plagued California and dispensaries shot up in large numbers.

"The best way to be compliant is take human error out of it," he said, adding that the machines offer video security and biometric scanning if necessary. They take cards so patients don't have to pay cash for medicine.

Software that will meet state requirements for a real-time database would be able to shut dispensing down to patients with expired medical-marijuana identification cards or those who already received their supply, Bedrick said.

"Our technology and software does that whole job for the state," he said. "Whatever system Arizona creates, we will seamlessly integrate with that."

Traditional sources of money for startups are hard to come by in the marijuana business, Escamilla said.

"People either self-fund or they put together business plans and attract friends and family to fund their startups," he said.

Greenway has lawyers, CPAs and dispensary owners speak at seminars. He suggests future shop owners hire a good attorney and accountant.

"It's more for business transaction and formation as opposed to criminal defense, which, for most people, that's their first thought process," Escamilla said.

Finding landlords who are agreeable to the idea can also be a challenge, he said. But if you follow the rules, he said it's possible for some owners with several dispensaries to earn seven figures annually.

Startups costs run from $25,000 to $500,000. He expects annual license fees to be about the same as they are in Colorado: $7,500 for less than 300 patients, $12,500 for 300 to 500 patients and $17,500 for more than 500 patients.

Escamilla said setting standards would be key to wooing the more conservative Arizona residents Also key is the taxable revenue that will help dwindling state and city coffers.

"We express to the student base it's a professional environment, that we have to be mindful of the neighbors, the communities that we live in, and to tailor your marketing in such a way that it's tasteful," Escamilla said. "It's an approach where you want to have a 42-year-old mother of two be able to come into your facility and use this as an alternative form of medicine."

One of the ways to make people more comfortable with marijuana, he said, is to educate them that medical marijuana is not just available through smoking.

He emphasizes that patients can get their medication through edibles, sodas, ice creams and vaporized forms, a technique that eliminates the irritating respiratory toxins found in marijuana smoke by heating the herb to form a mist.

by John Yantis The Arizona Republic Jan. 16, 2011 12:00 AM

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