Navigating Authority - Part 2
Written by CMG News Contributor, Sebastian Wicker
In Part 2, we’re looking at competitive licensing, also known as merit-based licensing. On the surface, it’s exactly as it sounds: limited slots, many applicants, and the need to score higher than the next applicant. So, what actually makes the difference between a winning and losing application? If you’ve been following along with my previous blogs, you’ve probably already guessed there’s more than one factor. To best understand the process of competitive licensing, we’re going to use the Illinois Adult-Use Dispensary application as an example. Why Illinois? Of the applications I’ve worked on personally, the requirements are amongst the most comprehensive while also serving as a great example for the topics we’re going to cover. Just keep in mind, what holds true for the application example may not hold true for another.
The Field
When Illinois legalized recreational use in 2019, with sales set to begin on January 1st, 2020, they laid out a two-phase approach. Phase One gave existing medical operators the chance to apply and become operational before anyone else. This is not an uncommon practice amongst states. It allows the state to lean on existing operators that they have come to trust to lead by example. It also allows for producers to begin building up a supply, before sales commence, to meet demand. Phase Two was to issue a second set of licenses for adult-use only operators.
For this second phase, a state-wide limit of 75 licenses was put into place, to be distributed geographically. Applicants were allowed to apply for more than one license, but each license applied for had a $5,000 application fee ($2,500 for Social Equity Applicants). If all of the locations were in the same region, you only had to submit one application (but multiple fees). If you wanted to submit in a different region, it required an entirely new application. If your application did not win in one region, it wouldn’t be considered for another area, unless you submitted for it.
The Application
An applicant could score a maximum of 252 points (410 ILCS 705/15-30) based on the following criteria:
Employee Training Plan (15 points)
Security and Recordkeeping (65 points)
Business Plan, Financials, Operating and Floor Plan (65 points)
Knowledge and Experience (30 points)
Social Equity Applicant Status (50 points – Optional)
Labor and Employment Practices (5 points - Optional)
Environmental Plan (5 points - Optional)
Illinois Owner (5 points - Optional)
Veteran Status (5 points - Optional)
Diversity Plan (5 points)
Community Engagement Plan (2 Bonus Points)
When you review the actual application form, you’ll notice that this list doesn’t quite match up. The form exhibits are in a different order, and there is no mention of how many points each one is worth. This is our first key to a successful application: using all of the resources. A common trap for applicants is that they try to go off just what the licensing authority has put together with the form materials. It’s critical to remember that applications are created based off of requirements in legislation and regulation, and that applications are often missing information or context.
In both our list and the application form, you will also see items listed as “optional,” which leads us directly to our second key: take suggestions or examples as a requirement. Every point matters, so it’s worth treating every exhibit item (regardless of points) with the same diligence. The last thing you want is to find out you lost because of 5-point section you didn’t think would matter.
An item you will find on the application form but not the regulations is page limits. Employee Training – 15 pages, Business Plan – 30 pages, Security Plan – 50 pages, and etc. Just counting the page limited sections of the application, and assuming you use every page available to you, your application narrative would have to be no less than 200 pages. Now factor in exhibit items, reference documents, and the rest. It’s a lengthy read… and someone has to read it. Which gives us our third key: remember the person on the other side. Your narrative in any application environment is going to be read by a person (often multiple individuals). Their educational backgrounds will vary. Their understanding of cannabis will vary. Your narrative must speak to both the subject matter expert and the layman.
A common misconception is that the individuals on the reading side need lots of visual aids. Put yourself in the shoes of a reviewer. You’re being scored on information and content, not aesthetics. So, too much aesthetic (overuse of color or images) can be a distraction from what actually needs to set you apart. It can actually signal to the reviewer that you’re trying to compensate for a lack of detail. But, that same reviewer is responsible for many applications and could be suffering from eye sore when your application crosses their desk. They will welcome an application that is clean, clear, and concise over one jam packed with color, images, and unnecessary narrative.
This leads us to our last and absolutely most important key to a winning application: follow the instructions. It’s not groundbreaking insight, and yet we often hear about applications losing out before even getting started because they missed a filing requirement. This is no different from turning in homework without a name on it and getting a zero because of it. Let’s look back at our first key: using all of your resources. In the legislation, regulation, and application form there is nothing about fonts, font size, or page size. It’s reasonable to assume that there is no requirement, but in fact, there is! It’s referenced in the state released Q&A – Round 1. The exact language states, “All submitted materials should be readable in a business appropriate font. A font of 12-point Times New Roman would meet this standard.” You’ll notice they don’t require 12-point, Times New Roman outright. If you follow the second key though, you’ll know to use exactly that font and size. Could you use another? Of course! But why take the gamble when the answer is right in front of you? The bottom line: read all of the requirements and actually follow them. It’s as simple as that.
Unique Factors
Specific instructions on submission envelopes, page limits, font sizes, times, and similar are not unusual. Illinois’s application was unique in a variety of ways but we’re only going to touch on two major points. The first is that unless it was explicitly stated for an exhibit item, all submissions had to be anonymous. You couldn’t mention your company by name, or by acronym. You couldn’t explicitly reference strategic partners or owner experience. Anything that was considered “self-identifying” had to be removed. This was to eliminate any bias by the reviewer based on brands or personal relationships.
The second was allocating an additional 50 points just for qualifying as a social equity applicant (SEAs). It is not unusual to see specific licenses available only to SEAs, or benefits such as reduced licensing fees. It was, however, unusual to see an open application include that as a point factor. This meant that if you had any hope of securing one of the 75 licenses, you would have to be a SEA or have one on your team. This is exceptional for ensuring diversity amongst license holders but it can come with complications.
In the next article, we will explore what exactly is a social equity applicant, how to qualify, and the pros and cons of state programs.
Sebastian is a Regulatory Compliance Specialist and Technical Writer. He is the Founder and CEO of LTF Consulting, a company that provides project management, licensing, and compliance services to the legalizing cannabis industry. If you would like to contact him directly, you can reach him at sebastian@livethefrontier.com.