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How to Open a Pot Dispensary

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By Jen Bernstein

So your bags are packed, the U-Haul is loaded, and you're ready to join the thousands who want to try their luck at starting a marijuana business in Colorado. It's a big business: CNBC estimates that, nationwide, cannabis may be as much as a $45 billion industry these days. And as of January 1, 2014, anyone is able to walk through the doors of a pot dispensary in Colorado and purchase their first bag of legal weed.

Thanks to legalization, Colorado medical dispensaries that have successfully applied for special licenses will be able to sell recreational pot to the public. But the cost of marijuana retail sales ain't cheap: Dispensaries and cannabusinesses can expect to shell out tens of thousands of dollars on application fees and operating licenses. The residency requirements and background checks that business owners have to pass are a given, but not just anyone can start selling pot legally. Currently operating dispensaries have the advantage, since they can convert from selling medical pot to card-holding patients to serving recreational smokers. Interested would-be dispensary owners starting from scratch will have a tougher time -- new applications for businesses won't even be considered until 2016, according to Colorado state legislators. The transformation from operating a medical pot dispensary to operating a legal marijuana store will not be an easy one -- just ask Ryan Cook, general manager of The Clinic, which operates six dispensaries in Denver.

In July of 2011, Colorado's Medical Marijuana Enforcement Division (MMED) passed regulations intended to monitor and account for every ounce of pot legally produced in the state. One new law required each cannabusiness to produce 70 percent of its product (the remaining 30 percent could come from other Colorado growers or dispensaries.) Another regulation that took effect created a seed- to-sale program: From the moment a seed is planted to the moment the resulting bud is sold in a dispensary, every plant must be tracked through each stage to the final packaged product.

The Clinic operates its six dispensaries and multiple growroom facilities in compliance with the MMED. When a Colorado patient is prescribed medical marijuana, they can select a dispensary, such as The Clinic, to grow their medicine--up to six plants per patient (approximately two ounces). Colorado currently has more than 100,000 patients.

Medical marijuana inspections are random and can happen at any time. When inspectors visit a medical marijuana grow, they want to know the number of plants onsite, how much plant matter is drying (dry weight), total cured weight, and how much is ready to ship. Inspectors may even request to see a specific patient's plant in what can be a very full or disorganized warehouse. Cook prepares for these unannounced visits by performing mock inspections with his staff. "I'll pull up the patient list and ask an employee to go and locate a patient's plant," he says. "The systems are quite complicated, but when we can show the general location of a plant or answer any question -- I watch the med officers stand back in awe."

To track each plant, The Clinic uses a tag that includes patient ID, dispensary ID, strain information and the date it was planted. The tag stays with the plant from harvest to drying, packaging and delivery. Cook estimates that one plant passes through 25 sets of hands during the process.

The Clinic takes its system a step further by tagging plants with color-coded flags. "When a med officer walks in and sees a sea of flags that are all different colors, he'll be able to identify different Clinic locations and destinations for the harvested plants. It helps them visually understand our process," Cook says.

Amazingly, every single leaf is accounted for in The Clinic's operation under the seed-to-sale law. Its methods are so fine-tuned, The Clinic can track down to 1/100th of a gram -- a weight so small that it's hard to imagine.

In the end, being required to keep meticulous logs doesn't bother Cook, the growers or the operation. Keeping daily, weekly and quarterly records that analyze the grow locations, strains and yields has been useful in helping him determine best practices and how to successfully run the business.

"Those numbers are important for the state, but they're also important for us to continually better our product and the growing, curing and trimming process," Cook says. "At the beginning, we wondered: 'Why would you want to track all this information?' But three and a half years down the road, we're like, 'Thank God we tracked all that!' -- because that's how we now analyze our business. This is how we create our next concept -- we ask ourselves, 'What's the most efficient way to build one of these grows?'"

When Cook opened the first Clinic in 2009, he had a total of six employees -- mostly a team of friends from college that he assembled after finishing architecture school. "Some were engineers, some studied real-estate investment -- and we literally gave it all up to do this," Cook says. They called everybody they knew and asked if they were willing to get involved in a medical marijuana business. Cook knew it was a big risk. "We didn't know what was going to happen with this industry. But we said there was a potential upside and that we'd love for them to take part."

The return on investment has been solid: The company now has more than 80 employees. The Clinic offers full benefits including health, dental, vision, a 401(k), paid vacation and "all the kinds of things you would expect to get out of a larger corporation," Cook notes. The business has received accolades from the Denver Post and the Denver Business "Those numbers are important for the state, but they're also important for us to continually better our product and the growing, curing and trimming process," Cook says. "At the beginning, we wondered: 'Why would you want to track all this information?' But three and a half years down the road, we're like, 'Thank God we tracked all that!' -- because that's how we now analyze our business. This is how we create our next concept -- we ask ourselves, 'What's the most efficient way to build one of these grows?'"

Cook maintains a strict harvest schedule in order to meet the needs of all six locations with a steady supply of medicine. But with four to six rooms of plants in varying stages of growth, ensuring a constant supply can be tricky. Offering the best medicine requires planning and availability. For example, harvesting everything at once could mean that the product sits on shelves longer and deteriorates before the next harvest. Also, the growth cycle of some strains can mean that without proper planning, a patient might wait 55 to 70 days until the next crop is ready. And nothing ever goes quite as planned: If a clone dies, it could set back the schedule by six months, and throw off store inventories.

The first step in seed-to-sale starts in The Clinic's clone room, where the well-tended babies are tagged before being moved to the veg room. The Clinic's workers enter numbers into a spreadsheet to monitor every step of growth. Using a batch number that's assigned to a certain group of plants -- say 10 Sour Diesels -- they can track five of those plants headed to one Clinic location and five to another. The batch number is attached to each plant throughout the entire process. Batch numbers track where in the growroom a plant is located and, when it's purchased, the number can also be seen on the patient's bag of medicine.

In The Clinic's growrooms, the real tracking fun begins at harvest, when the plants' wet weight is measured using a scale hanging from the ceiling. The gross weight is entered on a spreadsheet with the weighing date and when the plant was cut. Then the plant's fan leaves are removed and collected for waste recycling.

The Clinic uses grow software called MJ Freeway that organizes and tracks all of the information once a plant is harvested. It also keeps a daily log that records the amount and strain of plants on the production line, which tent they're drying in, and what dispensary they're going to. "We have to have the totals of how many grams, ounces, pounds are curing at any time on hand for the MMED or drug task force. We always have to be prepared -- even tracking the weights of the trim," Cook says. "We have to keep those batch numbers, and... "Ashe trails off. I can see just how complicated keeping track of every last 1/100th of a gram can be, and how literally it weighs on him.

Just-harvested plants are dispersed throughout the warehouse to tents housing a range of humidifiers and fans. Each grow location tracks inside temperature, outside temperature and humidity levels. And they all keep a watch on the weather, since humidity is one of the biggest environmental factors: In Denver, it may be snowy and damp one day and sunny and dry the next.

After drying in the tents for a maximum of 10 days, the tagged plants are weighed once more to account for any moisture they've lost before finally reaching the trimmers' hands.

During trimming, another form is filled out, on which all of the trim, shake and waste amounts are tracked and the final weight of the batch is recorded. After the trimmer manicures and shapes each bud, the nug is placed in a Tupperware bowl along with the tag. From here, the batch goes on to bagging, where eighths are weighed out, nitrogen-filled and heat-sealed so that the final product is at its freshest when it arrives at the dispensary.

Marveling at all the information his grows have amassed, Cook can't help but be impressed. "We can pull up all this data and say, 'If I'm going to start a new warehouse, exactly how many plants do I need to produce this much product? And how much trim?' -- because I want to know how much bubble hash I can make, how much wax. We can give you those breakdowns."

Once finished, the bags of medicine are ready to be shipped to The Clinic's stores, where they're weighed again, placed in plastic bins, labeled with shipping forms and marked on a master list. With state approval, couriers may drive and deliver as much marijuana as The Clinic has grown, as long as each package is divided into one pound increments. Once at the store, the manifest is finished and inventory management happens in real time.

If you think the seed-to-sale process finishes here, you're not quite right. There's one more step, and Cook has a story to tell about it. You may think that 1/100th of a gram is too small an amount to pay attention to, but it's not a joke: Cook was at a Clinic store on the day of a random inspection. The med officer walked up to the counter, pointed at a scale and asked, "Who's accounting for this?" The tiniest morsel of pot had spilled, but as Cook can tell you, it all adds up over time -- and yes, there is a regulation for waste weight which has to be recorded and properly disposed of. So, if you're ready to play with the Colorado big league, brush up your seed-to-sale knowledge and enjoy all the profits of legal marijuana.