Not an average business

Illinois will gain $17.5 million in the process once business operations start next year.

The Illinois River was quiet on June 15th, 2006, until a speedboat slammed into a barge. Tammy Warnke, 30 at the time, she lost her ability to talk and forgot how to walk, because of severe brain injuries as a result of the accident. She had to learn everything all over again.


Distribution of planned marijuana dispensaries and cultivation centers in Illinois.
The next few years were extremely challenging.

“Have you seen the movie, Memento?” said a young lawyer and healthcare entrepreneur Fadi Rustom. “She has no short term memories. She has to write down everything just like in the movie.”
Rustom met Warnke in 2011. To Rustom, Warnke is a client, patient, and friend.

Warnke took a combination of several pain relief medications, amounting to around $1,000 a month. These medicines made her drowsy and had other side effects. Later, she began to illegally medicate herself with cannabis to reduce her anxiety about the pain, according to Rustom, who believes cannabis legalization could help people like Warnke.
“Why spend thousands of dollars of tax payers’ money on Tammy’s medications when there is a natural alternative?” said the 35-year-old.

In 2013, Illinois legislature passed regulations for growing, dispensing and registering patients for legal use of medical marijuana. A “pilot program” will allow approved applicants to start to cultivate and sell pot to registered patients.

The Peoria lawyer submitted two applications last month to open a cannabis cultivation center and a dispensary. He is hopeful that these plans will be approved in November.

When people talk about medical marijuana, they immediately think of Colorado or states where recreational marijuana is widely available, said Sara Gullickson, executive director of a consulting firm, DispensaryPermits.com, specializing in the cannabis industry nationwide.

In Illinois, “these are medical and wellness centers that focus on safety and quality of the drug and wellbeing of their patients,” she said.

Many applicants come from strong business background with a shared passion in healthcare, according to the professional who works with many applicants in Illinois.

Rustom is among 159 cultivation center applicants at the Department of Agriculture, and 214 dispensary applications at the Department of Financial and Professional Regulation. The state will eventually grant 21 cultivation centers that will supply quality products to 60 dispensaries for the pilot period.

Requirements for applications are complicated due to the nature of the industry. “This is definitely not an average business. Not even close,” said the 35-year-old lawyer.

The Illinois Department of Financial and Professional Regulation breaks down its criteria for dispensary application into several areas, with the most weight on business operation, security and inventory plans.

Some essential elements in Rustom’s applications include 24-hour surveillance and security personnel plans, plotting plan, and proof of fund.

In Rustom’s dispensary application, he had to show that he and his investors have enough liquid assets to support the business. The program requires a minimum of $400,000 asset proof for every dispensary application and half a million for potential growers.

Although the state of Illinois has legalized medical cannabis, selling pot is still illegal on federal level. Transactions at a future dispensary have to be in cash. For the same reason, only state chartered banks can take cash deposits from these businesses, but dispensaries and cultivation centers cannot get any loan from banks.

Dispensary applicants paid a non-refundable $5,000 fee each upon submission in September. Prospective planting centers paid $25,000.

Once approved, business owners will have to make license fee payments before they start their operations. Fees range from $30,000 for dispensaries to $200,000 for cultivation centers.

During the program, license holders will pay annual renewal fees of $25,000 if the business is a dispensary, and $100,000 if it is a cultivation center.

The math tells us the State of Illinois will profit $17.5 million in application and license fees before the end of the program.

The pilot program has an expiration date, said Rustom. The approved businesses will have to stop in December 2017, if the state does not pass a new law.

This means Rustom and other applicants will only have three years to break even and make profit to cover their initial investments.

“It’s a risk, but it’s an educated risk investors are taking,” said Rustom.

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