Second new Cannabis dispensary is open in Sacramento under social equity banner
Cannabis got Mike Snell kicked out of the Air Force.
It is also leading the Sacramento man to a potential big financial payout as the owner of Sacramento’s newest cannabis dispensary.
His Off The Charts dispensary at 8125 36th Ave. on the Power Inn Road corridor opened in July. It is the second dispensary to open under the city of Sacramento’s CORE program, a social equity effort to offer reparations in the form of dispensary licenses to victims of the war on drugs.
Snell was forced out of the Air Force after being found guilty of using and distributing cannabis. Snell admits to using marijuana but said he abstained while being deployed overseas and while he was on assignment at Beale Air Base in Marysville. He denies he distributed the drug.
“This is a recovery here, being able to own my own dispensary and make a 360 degree turnabout,” he said.
But the road to opening a dispensary wasn’t easy and Snell and another applicant say finding investors is a difficult proposition.
The city of Sacramento allows investors to hold up to 49% of the equity in the CORE dispensary owner’s business. The licensee must hold the other 51%.
But Snell and and another social equity licensee LaKisha Young, both African Americans, said fees charged by investors as part of complex loan agreements can end up giving investors majority shares of the dispensary agreement over the long term.
City law allows the investors to take over a majority share of the social equity dispensary business after 10 years.
Background of Sacramento's core program
The social equity program goes back to a racial justice effort by city officials and lawmakers.
The idea was to help give minorities who had been arrested for drug possession or anyone who lived in poor areas of Sacramento a chance at business ownership in the cannabis industry.
From a pool of 125 applicants, the city awarded 10 dispensary licenses in the spring of 2021 under the social equity umbrella.
They are the first new Sacramento dispensaries since state voters approved the use and sale of recreational marijuana in 2016.
Sacramento already had 30 medical marijuana dispensaries that were able to convert to also selling recreational cannabis. But none of the dispensaries were operated by African Americans or those impacted by the war on drugs.
That led lawmakers in 2018 to approve offering the new licenses, but the licenses weren’t awarded until April 2021 as the city developed the rules of the new program.
Snell said it took him months to find investors who would give him a fair deal. He said he is happy with the arrangement he worked out with a cannabis company called Off The Charts.
He has reason to be happy if it goes the way he anticipates, making at least $1 million in profits in his first year of operation.
Snell said the dispensary took his investor’s brand name because it is a familiar one to cannabis users given Off The Charts location in San Francisco and in various locations in Southern California.
He said he and Off The Charts agreed to a 50-50 revenue split. Snell said the company pays his $50,000 a month rent and pays distributors for the cannabis sold in the store.
Snell contributed his $67,000 city grant that was given to him to help start his business, as part of the deal, and of course his license, which allows the business to operate.
Some core dispensaries have floundered
Most of those granted a license have struggled to open their dispensaries.
While the city granted 10 social equity dispensary licenses, eight remain unopened. Only two of the remaining eight licensees have received a conditional use permit, meeting a key zoning requirement that allows them to operate their cannabis business.
The process requires a public hearing. After that is over, meeting city requirements for a business operating license can take months.
Some of the applicants haven’t even finalized locations for their dispensary.
But the 10 licensees only have until April 1 to open their business or they must give back their license.
“There is no plan at this time to go to Council and request an extension of the three-year time to become operational,” said city of Sacramento spokeswoman Kathleen Weir-Ebster in an email.
LaKisha Young is struggling to make good on her plan to open a dispensary in south Sacramento after being chosen to receive one of the Sacramento social equity cannabis licenses.
Young said she received her conditional use permit, but she has lost her outside investors, Culture Cannabis Club.
She said Culture became skittish after a drug rehabilitation clinic that was near her planned dispensary filed papers with the city of Sacramento in an unsuccessful attempt to deny her zoning permits.
She said after the controversy Culture increased the financial amount she had to put into the dispensary deal, making it unfeasible for her.
Officials of Culture Cannabis Cub, which is based in Southern California, did not respond to emails and phone calls. The company owns dispensaries in San Francisco and in multiple locations in Southern California.
Young said she is seeking new investors.
“I am still determined to open by next April,” she said.
Huge costs
Snell said opening a dispensary in Sacramento can cost upward of $1 million, leaving the social equity cannabis owners dependent on finding outside cannabis investors.
He said the investors are sophisticated cannabis companies who know how to structure a deal that gives them the upper hand and dilutes the social equity license holders financial share of the business.
Snell said that is what happened to him with his first few attempted deals before he forged a positive working relationship with Off The Charts.
He said the problem with the Sacramento social equity program is that the city awarded licenses to people often without business experience.
“We had to find our financial capital and figure it out,” he said. “It left a lot of room for local sharks or sharks from out of town. They dangle a carrot in front of you and then take your business.”
Snell, who was raised in Sacramento, said his introduction to the legalized cannabis business was in 2015 when he helped improve operations of a friend’s Sacramento-based medical marijuana delivery service.
Snell’s expertise in the military was in supply chain logistics.
“So that was my first peak into the industry,” he said.
Snell said he started researching the war on drugs and saw that while African Americans got arrested for possession in Sacramento, white kids on college campuses were untouched.
Snell, a former staff sergeant, did not receive a court-martial after he was accused of using and distributing cannabis back in 2017.
But the following he year he said he was given a general discharge just a month short of a 12-year military career, stripping him of medical and other GI bill benefits such as low-interest loans to buy a house.
Snell admits to using cannabis but not on active duty. He said that a relative asked him if he had any marijuana in a recording on his cellphone that was confiscated by investigators. He said he never distributed cannabis.
