When Andy Cookston and his wife opened Denver's first medical-marijuana dispensary three years ago, they hung no sign outside their door.
They did no advertising; patients were drawn exclusively by word of mouth. They were unsure whether the state would even allow them to include their dispensary's full name — Cannabis Medical Technology — on their business license because of its pot-tinged terminology.
Such modesty is no longer a concern.
"Now that the door's been cracked open," said Cookston, who also owns a graphics company, "people are rushing it."
Colorado's medical-marijuana industry — just in its infancy — is already in the throes of a dramatic change.
As tens of thousands of patients applied for medical-marijuana cards in the past six months, dozens of new dispensaries opened. The number of dispensaries — in essence, shops where approved patients legally buy marijuana — is likely more than 200 in Colorado, though no official tally exists.
And, even as new mom-and-pop dispensaries continue to open weekly, the money flooding into the industry has also attracted the interest of big players with big checkbooks. A 5,000- square-foot dispensary — billed as the largest in Denver — recently opened just north of Invesco Field. Two powerhouse dispensaries from California are opening outposts in LoDo.
Offshoot businesses abound
Meanwhile, small-time dispensary owners have resorted to ever more adventurous business models to create a niche in a suddenly crowded marketplace. There are delivery-only dispensaries and dispensaries with hair stylists on site and one dispensary that claims to be the country's only medical-marijuana restaurant.
And this doesn't include the offshoot businesses that dispensary owners say have arisen around the cannabis industry — including not just the paraphernalia and growing supply shops but also insurers, electricians, security firms, ventilation contractors, real estate agents and lawyers. One local bail bonds company took out an ad in the alternative magazine Westword's 64-page special medical-marijuana insert, offering a discount to people charged with marijuana-related crimes.
Commercial real estate for dispensaries now leases at a premium, several dispensary owners said. Warehouse space for marijuana-growing operations is even tighter.
"The average guy starting a storefront now, you definitely better have some legitimate business skills compared to what it used to be," Cookston said. "It's definitely getting harder."
Despite the harsher competition, dispensary owners remain a diverse set. Many, like Cookston, are patients themselves and longtime advocates of using marijuana for medical purposes.
Because dispensary owners remain largely cut off from traditional financing like bank loans, they must scrounge together all the money necessary to open their shops — in most cases anywhere from $20,000 to $50,000 — on their own.
For Steve Horowitz, who used to sell promotional magnets to Realtors until the housing bust, that meant skipping the mortgage payment on his space for three months in order to come up with the cash to start a dispensary. Horo witz's creation — the Ganja Gourmet, which serves marijuana-infused pizza, lasagna, hummus and desserts — opened last week on South Broadway in Denver.
"I'm lucky I didn't run out of money before I opened this," he said.
Posting ads for investors
Pierre Werner — a Nevada transplant who moved to Boulder earlier this year in search of a friendlier climate for medical-marijuana distribution after receiving three felony convictions on marijuana-related charges in his home state — opened his Dr. Reefer dispensary on University Hill after posting ads to Craigslist seeking investors.
"I think everybody is throwing every last dollar and maxing out their credit cards and getting every kind of loan they can," Werner said of new dispensary owners.
Well, perhaps not everybody. In LoDo, at least two new dispensaries have the backing of major players from California's booming medical-marijuana industry. The Farmacy, at 14th and Market streets, is a branch of a dispensary chain with three shops in the Los Angeles area. Local Product, at 15th and Larimer streets, has the backing of Harborside Management Associates, a for-profit offshoot of the Harborside Health Center in Oakland, one of California's largest dispensaries with about $20 million in annual sales.
"It's David versus Goliath"
Representatives from the two dispensaries did not respond to inquiries, but the Californians' entrance into Colorado has a number of local dispensary owners concerned.
"It's David versus Goliath," said Jason Irwin, the 27-year-old owner of Highland Health dispensary in Denver. "They didn't strong-arm their way in, but they have a blank checkbook."
In response, Irwin said, he plans to expand his business. The dispensary just completed the first harvest at its own growing operation in southern Colorado. Irwin said he hopes to build an even bigger growing operation soon, all to be overseen by his mother.
"When I was in high school, she used to flush my weed down the toilet," he said, marveling at her shift in attitude. "She was not cool with it."
Cannabis Medical's Cookston said the current growth will only help boost dispensaries' legitimacy, making them all the more entrenched in the community.
"It's all coming," he said. "It's like the sunrise. It's getting brighter and brighter."
December 20, 2009
Medical pot dispensaries growing at a fast clip