The time for microbusinesses is finally here! With more and more Michigan municipalities opting in under the state’s Adult Use Cannabis law, more and more microbusiness opportunities are opening up throughout Michigan. In 2020, we saw several larger municipalities accept municipal applications for microbusinesses, including Westland and Lansing. We also saw highly sought-after municipalities like Royal Oak allow for microbusinesses in their MRTMA ordinance.
Breaking the municipal bottleneck has been the biggest challenge for many aspiring cannabis microbusiness owners. Quite simply, there was more interested microbusiness applicants than there were viable municipal opportunities. However, we’ve seemed to have turned the corner and are seeing new Michigan microbusiness opportunities open up in municipalities across Michigan.
But that’s not to say that this has come easy, or that the fight is finally over. Over the summer I was at a municipal meeting advocating for microbusinesses to be included in the municipality’s MRTMA ordinance. I faced opposition not from the “not in my backyard” anti-cannabis crowd, but from the owners of the municipalities’ MMFLA licenses. Apparently fearing the competition that microbusinesses would pose, they spoke overwhelmingly against allowing microbusinesses. Though we did eventually win our fight to have microbusinesses included, it did get quite nasty, including personal attacks against me. Luckily, I’ve learned not to take those personally and to be prepared for a fight.
Nonetheless, it does seem like word has gotten out on the marijuana microbusiness and many more municipalities are allowing or considering them as part of their adult-use ordinance. For those who put their microbusiness plans on the backburner while they waited for municipalities to come around, now it the time to dust off your business plan and start your licensed cannabis business in Michigan today!
With that said, let’s review some of the recent happenings in the microbusiness realm here in Michigan as there have been a number of exciting recent developments in the space since we last posted.
Michigan’s First Microbusiness
In October, the Michigan Marijuana Regulatory Agency licensed the very first microbusiness in the State of Michigan, Sticky Bush Farms, a longtime client of Scott Roberts Law. Obviously, we were excited to help obtain the state’s very first microbusiness and work through the initial regulatory kinks with the MRA, including the initial caregiver plant transfer.
While Sticky Bush is located in rural Northern Michigan, we will soon be seeing microbusinesses in many metro-Detroit municipalities as well, such as Hazel Park, Royal Oak, and Westland. Detroit’s current draft ordinance also includes 35 microbusiness licenses, though it is unclear whether the version in place at the time of this article will survive legal challenge. Nonetheless, it is clear that metro-Detroit will likely have its very first microbusiness opening up sometime in 2021, with many more sure to follow.
Changes to Plant Counts
While the actual plant count number—150—hasn’t changed, how the MRA counts those plants did change in the summer of 2020. The old rule was once a seed sprouted or a clone took root, it was counted as a plant for plant count purposes under the MRTMA. The new rule now defines a for plant count purposes under the MRTMA as being at least 8 inches tall or wide. For microbusinesses, that means you do not need to count your clones as plants, which should increase your total output.
And it may get even better than that. Legislation was recently introduced that would change the definition of a “plant” for microbusiness licensees to only those plants in flower, as opposed to “veg.” If passed, this could once again increase the total output of your microbusiness. Since this is an ever-evolving concept, we would recommend you consult a Michigan cannabis regulatory attorney prior to designing your facility, as these changes could affect your business’s operations.
As an MRTMA facility, a microbusiness can only purchase genetics from other facilities licensed under the MMFLA and MRTMA. That can pose a problem for microbusiness owners who want to bring in their own rare or proprietary genetics. While not a new problem, it is important to remind microbusiness owners of the one-time caregiver plant transfer provided in the MRTMA rules. This allows a caregiver under the MMMA to do a one-time transfer upon receipt of their state license of all 72 of their caregiver plants to their microbusiness. Doing a caregiver-to-microbusiness transfer can be the difference between opening 6 weeks after licensure and opening 6 months after licensure.
Unfortunately, microbusiness owners only get one shot to easily bring in their own genetics, though this requires them to be a caregiver at the time their microbusiness is licensed. So far at least, the process for this has been relatively simple. MRA will allow you to enter the caregiver plants directly into METRC once you receive your tags and no special forms are currently required. Just make sure not to forget this powerful tool for getting a running start prior to opening.
Converting Caregiver Facilities
Our microbusiness clients that have been able to get off the ground the quickest, and open up for the least amount of money, have been clients that converted their caregiver facility to a microbusiness facility. Whether you are able to do so will depend on how your municipality ends of zoning microbusinesses. If you are caregiver in a residential home, then converting your facility is simply not in the cards. But if you are instead caregiver out of a commercial or industrial property, there may be some hope.
Oftentimes, when a municipality is looking to “opt-in” to marijuana, the municipality’s planning commission will hold meetings to discuss the zoning of marijuana facilities. These meetings are open to the public and are open to public comment. If you own property in a municipality and know that your municipality is considering opting into cannabis, then you may want to check out your local planning commission meetings and make your voice heard. With any luck, you may be able to simply convert your existing caregiver facility to a microbusiness, saving you both time and money.
Easing Up on Testing
One predicament we faced prior to the summer 2020 rule change was the idea that a microbusiness would need to test “processed” marijuana products twice—once as flower / trim, and then again as a final product such as an edible. MRA’s 2020 revamping of the rules changed this such that now only the final marijuana product must be tested. This eases the testing burden on Michigan microbusinesses, saving them both time and money.
Adding Hemp Products and Potentially Gaining Access to “Outside” Distillate
MRA has quietly started allowing hemp products to enter into the MMFLA and MRTMA supply chains and be utilized for marijuana products in Michigan. While retail outlets were always allowed to sell separate hemp and CBD products, now hemp products can be added to your licensed cannabis products.
This could be a game changer for Michigan marijuana microbusinesses, who may be able to utilize hemp-derived THC distillate to provide additional processed marijuana products in their stores. Essentially, this would allow you to legally source hemp flower and then utilize that to create THC distillate.
However, it needs to be noted that the process for creating THC distillate from hemp products requires expensive equipment, takes a good amount of time, and is quite complex. In addition, the distillate created will have lower THC levels when compared to marijuana-derived distillate, but when you are creating edible products, that can easily be remedied by simply increasing the amount of distillate you utilize.
Battling Common Misconceptions
There are a number of common misconceptions when it comes to the Michigan microbusiness license. As a cannabis business attorney, I’ve heard more than I can list, but let’s dispel a few of the myths circulating the industry. First, you can be a caregiver AND own a microbusiness. The two are not mutually exclusive. Second, there is not “net worth” requirement for microbusinesses, unlike MMFLA licenses, and you no longer need to provide bank statements as part of your state microbusiness application.
Another misconception is that microbusinesses will be a cyclical business—i.e. continuously opening and closing your doors based on your crop cycles. This does not have to be the case. As cannabis business consultants, we often advise our microbusiness clients to have multiple flower rooms, as opposed to one or two large flower rooms, in order to harvest every 2-4 weeks. This both ensures a perpetual supply of product, as well as mitigates risk, as one contamination incident would only cost you 25 plants instead of 75 plants.
There are plenty more misconceptions about microbusinesses, such as the “microbusiness license is going away”, a “microbusiness cannot be profitable”, or you cannot franchise your successful microbusiness concept. All are untrue. The microbusiness is here to stay in Michigan. If you are interested in learning more about this concept, give us a call today!