Business Plan

1. Describe your POS system
2. Do you have a plan to track denials of sales?
3. How will you maintain purchaser confidentiality?
4. What products and services will you offer?
5. How much cannabis will you store at the facility?

Proposed Floor Plan

This section stands out compared to most other exhibits. The IDFPR provides a list of nineteen (19) items that the floor plan must show at a minimum. The full list is here, and should be reviewed in full. In addition, consider the following issues:

1. What are the specific security devices you will be using? Are they up to the specs provided for in the CRTA?
2. Do you comply with the Americans with Disabilities Act (ADA)?
3. Do you comply with the Environmental Barriers Act?
4. How does your facility design handle product handling and storage?
5. Will your facility impact the nearby community? Have you talked with local community groups, neighbors, and the local government?
6. Does your security vault meet the standards of the DEA’s requirement for Schedule I controlled substances?
7. Is there a restricted access area as set forth in Section 15-25(d)(11)(B) of the CRTA?
8. Do you have a plan for delivery vehicles to safely and securely access the facility?
9. Do you have a proposed alarm service provider?
10. Does the facility comply with local zoning laws regarding the number of purchasers allowed in the dispensary?
11. Is there a solid barrier between the public access area and the limited access area?

Operating Plan

1. What are the day-to-day staffing plans for the facility?
2. What percentage of workers will be paid a living wage?
3. Do you comply with the restrictions on hours of operation (6:00 a.m. to 10:00 p.m.)?
4. How will you ensure proper handling of products, including inventory?

NOTE: Information like health care benefits, retirement benefits, and so on should be part of Exhibit Q, Labor and Employment Practices Plan, and not the Operating Plan

Financial Information

1. Does your financing plan give up ownership of the company? If so, do you lose social equity ownership status?
2. Do you have access to additional capital if necessary?
3. Are you self-financing? To what extent?
4. If you’re applying for financing from the Department of Commerce and Economic Opportunity (DECO), did you inform the Department as required in Exhibit O?
5. If you’re applying for multiple licenses, do you have financing for all of the proposed sites?
6. Do you have future financial projections demonstrating the ability of future financing?

Knowledge and Experience in Cannabis or Related Fields (30 points)

The applicant’s principal officers must demonstrate experience and qualifications in business management or experience with the cannabis industry. This includes ensuring optimal safety and accuracy in the dispensing and sale of cannabis [410 ILCS 705/15-30(c)(4)(A)]

The applicant’s principal officers must demonstrate knowledge of various cannabis product strains or varieties and describe the types and quantities of products planned to be sold. This includes confirmation of whether the dispensing organization plans to sell cannabis paraphernalia or edibles [410 ILCS 705/15-30(c)(4)(B)]

Knowledge and experience may be demonstrated through experience in other comparable industries that reflect on the applicant’s ability to operate a cannabis business establishment. [410 ILCS 705/15-30(c)(4)(C)]

Key Documents: Exhibit N.

This section gets to the main tension in cannabis business applications. The state wants experienced, reliable, Illinois-based professionals to spearhead the Illinois adult-use market. Of course, the Illinois medical market is a few years old, and the adult-use market is a few months old. So in theory, anyone with meaningful legal cannabis experience is from another state (California, Washington, Oregon and Colorado in particular). Applicants want to show business success in similar or related fields, such as consumer goods and retail.

Applicants can also show success in security or highly regulated industries- some of the biggest names in Illinois cannabis were started by lawyers.

The IDFPR gave some particularly useful guidance in this area. In the second round of QA, the IDFPR stated that:

Points for Exhibit N (Knowledge and Experience of Principal Officers) for both the knowledge and experience elements of this Exhibit will be awarded on a binary basis, meaning applicants will receive either 15 points or 0 points for demonstrating knowledge of cannabis and either 15 points or 0 points for demonstrating experience and qualifications in business management or experience with the cannabis industry.

So, you either have cannabis knowledge, or you don’t. And you either have business management/cannabis industry experience, or you don’t. Here are some things to consider:

1. Scoring is based only on the principal officers; outside consultants do not count
2. Do they have experience in the comparable industries listed by the IDFPR, such as liquor stores, pharmacies, grocery stores, tobacco stores, restaurants, or retail stores
3. Do the principal officers have any cannabis experience, either as employees, owners, or outside consultants?
4. Do the principal officers have high level experience and/or success in business more generally?

Status as a Social Equity Applicant (50 points)

The applicant meets the qualifications for a Social Equity Applicant as set forth in this Act. [410 ILCS 705/15-30(c)(5)]

Key Documents: Exhibit P

Social equity status is fairly straightforward– you either qualify, or you don’t. Since social equity status is worth 50 out of a possible 250 points, it is difficult, if not impossible to win without qualifying as a social equity applicant. The biggest hurdle many applicants will face is providing appropriate documentation. It is not enough to simply say that you live in Illinois, or have been convicted of a qualifying cannabis offense. You need documentation to prove it. To qualify as a social equity applicant, you need to establish the following:

1. Evidence of status as an Illinois resident:
   1. For businesses, this means your incorporation documents such as articles of incorporation or articles of organization
   2. For individuals, you need two of the following: a signed lease agreement, property deed, school records, voter registration card, Illinois driver’s license or ID card, paycheck stub, utility bill, or any other proof of residency. You need to be an Illinois resident for at least 30 days.

AND one of the following:

1. Evidence that 51% of the ownership has lived in a Disproportionately Impacted Area (DIA) for 5 of the last 10 years (through tax filings, leases, mortgages, paycheck stubs, etc.)
2. Evidence that 51% of the ownership has been arrested for, convicted of, or adjudicated delinquent for any of the offenses expunged by CRTA
3. Evidence that 51% of the ownership has a parent, guardian, child, spouse, dependent, or was a dependent of an individual who was arrested for, convicted of, or adjudicated delinquent for any of the offenses eligible for expungement under the CRTA.
4. Evidence that the applicant employs 10 or more full-time employees and that 51%+ of those employees qualify as social equity applicants for reasons #1-3 above
   1. You need evidence that the employees were engaged in full time work as of the date of the application (for example, payroll reports)

Labor and Employment Practices (5 points)

The applicant may describe plans to provide a safe, healthy, and economically beneficial working environment for its agents, including, but not limited to, codes of conduct, health care benefits, educational benefits, retirement benefits, living wage standards, and entering a labor peace agreement with employees [410 ILCS 705/15-30(c)(6)]

Key Documents: Exhibit Q

As with social equity, the points for the Labor and Employment Practices Plan are awarded on a binary basis- you get all five points, or you get zero. Your plan should have the following components:

1. Code of conduct
2. Employer-provided health benefits
3. Employer-provided education benefits
4. Employer-provided retirement benefits
5. Commitment to provide a living wage
   1. This is an amount above the minimum wage in the BLS region in which you’re applying
6. An executed labor peace agreement
7. Specific and verifiable employee benefit plan, other than the benefits listed above

Environmental Plan (5 points)

The applicant may demonstrate an environmental plan of action to minimize the carbon footprint, environmental impact, and resource needs for the dispensary, which may include, without limitation, recycling cannabis product packaging. [410 ILCS 705/15-30(c)(7)]

Key Documents: Exhibit R

The environmental plan has a paltry 5-page limit. As with several other exhibits, you either get all of the points, or none of them. The IDFPR provided very little guidance on this issue, but here are some things to consider for your environmental plan:

1. Do you have a plan for renewable energy?
2. Do you have a plan for recycling cannabis product packaging?
3. Will your building meet some kind of green standards, such as LEED certification?
4. How will you reduce or eliminate paperwork?

Illinois Owner (5 points)

Key Documents: Exhibit S.

This is perhaps the most straight-forward exhibit. You simply need adequate proof of Illinois residency, the same as with social equity status. Specifically, you need two of the following:

1. A signed lease agreement that includes the applicant’s name;
2. A property deed that includes the applicant’s name;
3. School records;
4. A voter registration card;
5. An Illinois driver’s license, an Illinois Identification Card, or an Illinois Person with a Disability Identification Card;
6. A paycheck stub;
7. A utility bill; or
8. Any other proof of residency or other information necessary to establish residence as provided by rule.

There are a few pitfalls to avoid. Remember, you have to be a resident for five of the last ten years. And if you’re going to use just your tax forms, you need to provide your IL-1040 tax forms. On the other hand, if you use an Illinois driver’s license, that license shows residency for each year in which the license is valid. So if you have a license valid for, say, the last five years, you qualify.

Status as a Veteran (5 points)

The applicant is 51% or more controlled and owned by an individual or individuals who meet the qualifications of a veteran as defined by Section 45-57 of the Illinois Procurement Code. [410 ILCS 705/15-30(c)(9)]

Key Documents:

The Illinois Procurement Code provides a very broad definition of “veteran.” Nearly anyone who has served in the military should qualify, so qualifying as a veteran is simply a matter of providing the appropriate documentation. Section 45-57 of the Illinois Procurement Code defines a “veteran” as follows:

“Veteran” means a person who (i) has been a member of the armed forces of the United States or, while a citizen of the United States, was a member of the armed forces of allies of the United States in time of hostilities with a foreign country and (ii) has served under one or more of the following conditions: (a) the veteran served a total of at least 6 months; (b) the veteran served for the duration of hostilities regardless of the length of the engagement; (c) the veteran was discharged on the basis of hardship; or (d) the veteran was released from active duty because of a service connected disability and was discharged under honorable conditions.

In our experience, veterans most commonly show proof by producing their DD214. Obtaining your DD214 can take some time, but it’s a fairly easy process.

Diversity Plan (5 points)

A diversity plan (5 points): that includes a narrative of not more than 2,500 words that establishes a goal of diversity in ownership, management, employment, and contracting to ensure that diverse participants and groups are afforded equality of opportunity. [410 ILCS 705/15-30(c)(10)]

Key Documents: Exhibit M

Points are awarded for the Diversity Plan on a binary basis- you get all 5, or you get 0. The Diversity Plan has a limit of 2,500 words (around 10 pages, double-spaced), so make sure to use the full amount! One especially important thing to remember is that a diverse company should reflect the local community. What this means is that a Diversity Plan in Chicago is different than a Diversity Plan in Springfield, because the two cities have very different demographics. On the other hand, while the cannabis industry is disproportionately male, your community is probably 50% female and your Diversity Plan should reflect that. Here are some factors to consider in evaluating your Diversity Plan:

1. Do you address equality of opportunity in ownership, management, employment, and contracting?
2. Talk about the social equity status of your owners, managers, and employees (e.g., “we are proud to be a minority-owned business”)
3. Will you seek out Minority and Women Owned Businesses (MWOBs)?
4. What is your policy towards discriminatory behavior and harassment? Is it a zero tolerance policy?
5. If you’re a social equity applicant, how will you ensure that you keep social equity status?
6. How will your hiring practices reflect the community around you (e.g., going to local job fairs, working with local diverse chambers of commerce)

CONCLUSION TO CANNABIS APPLICATION REVIEW

Simply put, there is a lot that goes into a cannabis dispensary application review. That’s why even the most sophisticated, well-financed applicants should consider retaining a consultant to guide them through the process. At the same time, applications are going to be scored by humans, by a scoring criteria developed by humans. And that means there will be mistakes, inconsistencies, and other problems. Use this guide to determine whether you really submitted the best application you could. And if you did (and that’s great!), maybe it’s time to consider taking serious action against the State.

Thomas Howard has been in business for years and can help yours navigate towards more profitable waters.

Our cannabis business attorneys are also business owners.  They can help you structure your business or help protect it from overly burdensome regulations.