PP 68 | Massachusetts Social Equity Opportunities

 

Fresh opportunities are waving to aspiring cannabusinesses who wish to take advantage of social equity programs in the state of Massachusetts. On the thick of building a business around this incredible opportunity is Flavia Hungaro, owner of a new company called Locomotion Cannabis. In this eight-part series, Flavia and host Tony Frischknecht walk us through these opportunities and the things that Flavia is doing to set her business up for success. In this first episode, we get to know the woman behind all of this. Immigrating from Brazil as a young woman in 2003, Flavia became a medical cannabis caregiver and eventually jumped into growing after she finished school. She created her company in 2019. Join in and take part in this engaging discussion that imparts important learning points on starting a cannabis business.

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Massive Social Equity Opportunities In Massachusetts Part 1 Of 8

I’ve got Flavia Hungaro, and she is in the thick of growing her cannabis business. We talk grow, dispensaries and partnerships. Flavia, what else are we discussing over our series?

We’ve talked about marketing strategies which is a big thing, and also about how to figure out what strategies that we should use in terms of the options that you have for locations and retail locations.

This is going to be a great series. I’m going to do half a dozen series going through what she’s in after two years of being involved in cannabis and where she’s going. Please come join us for the episodes. Thank you.

I’ve got a special guest with me but I want to first share with you the elephant in the room. I had a bit of an accident. The passion of mine is mountain biking. I was trying to enjoy a little bit more of the nice weather that we have here in Colorado in the mountains, and I ended up having a bad accident. I have my lips messed up, my nose is rashed up, and I’ve got some bumps and bruises, but I’m okay. It is what it is and life happens. As an entrepreneur, you can’t let things like this stop you. This show means a lot to me. I feel like I’d be doing you a disservice and I didn’t want to show my face because I had some bumps and bruises. I’ve got a fat lip right underneath my nose and then I’ve got some scrapes across the top of my nose. It’s an ugly sight but hopefully, my guest won’t mind too much because I hope to bring her some great information that she’s able to use.

Now that we’re done with that, I want to move into what we’re going to be working on. I’m starting a series of episodes with a young woman that has had her start in the cannabis industry. She needs to make some decisions on what she’s going to do next. As entrepreneurs in cannabis, once you start working for the first couple of months, 6 months, 12 months into 24 months, there are a lot of balls that are in the air. You’re trying to juggle different things, make the right decisions, and also understand where am I going to come up with the answers for financing and a retail space or growth space.

These are all things that we go through in the cannabis industry. To start off with it is like, “I have all these opportunities, now where am I going to go?” I have a special woman. What’s amazing about her is she an immigrant from Rio de Janeiro, Brazil. She came over here at the age of eighteen in 2003. She didn’t know English at all. She earned her Business Administration Degree at Boston University. She earned a Master’s Degree in International Business. She started a fitness company in 2012 called Start To Finish Fitness during the boom time in Massachusetts for fitness. She became a medical marijuana caregiver and jumped into growing after she finished school. In 2019, she created a company called Locomotion Cannabis. Flavia Hungaro, how are you doing?

I’m doing great. Thank you for inviting me to be on the show.

I’m happy to have you here because you are in a part of the industry that is starting to explore Social Equity Programs. If you are out there and you don’t understand what social equity is, I’ve got several episodes that I talked about this. What they are doing is certain states are creating their own programs to allow for the everyday person to try to get involved in cannabis. It’s leveling the playing field for people that don’t have all the connections and finances that it takes to get one of these going. This allows for a huge opportunity for you. That’s one of the big things that I want to share with you about Flavia. She is in the process of working through her Social Equity Program in Massachusetts. Before we get all into that, I want to allow you to share where you were a couple of years ago when you started this company.

In starting this business venture, I had to go through a learning process that hasn’t a mandate yet. Right in the beginning, going through the requirements to pursue a license in the cannabis industry, I’m looking for a property where it’s zoned and you can afford. From there, going after the right team of people to work with you, to accomplish the licensing process. You need to find the right attorney, the right traffic engineer. Those are all things that I was not aware of before. I learned as I’m going through the process. At that point, the most challenging thing was to find the property that was zoned.

Once you find it, it doesn’t mean that you have it because sometimes, the property owners don’t even want to deal with you because they either don’t understand your industry or they are completely against the whole cannabis. It was very challenging. At some point, I went over at least four properties in the same city or town to find a property that I could finalize a deal. That was the biggest challenge in step number one because once you find the property that is zoned, then you have to go and start communication with the city or town that you’re working with. From there, start the negotiation process for the agreement.

PP 68 | Massachusetts Social Equity Opportunities

Massachusetts Social Equity Opportunities: It’s important to have two different attorneys: one to make communication easier at the local level and another one who is cannabis-specific.

 

You brought up something there that I want to touch base with everyone on. I wrote a book, it’s From Black Market To The Man: 10 Steps To Becoming A Multimillionaire. I wrote this back in 2019. What I plan to do with you is work through some of the steps that created a multimillion-dollar business for me, and some of the stuff that will be very valuable for you as you move forward. One of the things you touched on here and it’s a step in my book is step number three, if you guys are out there checking online or looking at the book. It’s professional advice. When you started stepping into the zoning side of finding land and finding a location, how did you figure out, “I need some help to do this, I didn’t know where to start?”

Different towns and cities have different zoning. For example in one of the cities that I’m working with, everything has to happen for retail at least in the business district. As long as it’s considered business property, then you’re okay. If you have to go for cultivation then you’ve got to go to an industrial area. Some other towns don’t have much specifications. It depends on the city or town that you’re willing to work with. I started looking on Craigslist and LoopNet, those are the basic things. Besides that, you can’t find everything online.

I spent a lot of time driving around, walking around, seeing for sale or for rent signs, trying to talk to the owners, see if they would be willing to work with somebody in this industry, and checking the property and zoning. Sometimes some cities and towns give you a map that shows the district or the overlay of cannabis districts that they specify according to their regulations. That’s how I started. Some of them gave me a map that I could use as a base. Some of them told me, “These are the zoning,” and then I have to go on my own and find it because they are not going to provide that information.

I remember as we were going through the zoning scenario, they gave us a map of the City of Denver. They had little zoning areas like you couldn’t be 1,000 feet from a school. You couldn’t be from a park. It was the same thing. We had to take a quarter, put it on this map, find our location and move that quarter. That was a 1,000-foot distance so we could find a zone. We found one of the very last spots in the City of Denver. It was extremely frustrating and we were all the way on the edge of town.

At that time we thought, “We’re away from everybody, we’re not going to get any business.” Fortunately, in the latter part of our business after the first year, we found that we were in an amazing spot because we had a zone right next door to us where they didn’t allow any dispensaries. That was cool but had we not fallen into the last spot, we would have never found this location. All in all, it turned out well. Going through zoning and having those issues, you found an attorney you’re working with now.

Over the course of this past couple of years, I’ve established a relationship with different attorneys. One thing that I found that was very important is to have two different attorneys even. One for the local level that knows everybody in the city or town. It makes the communication easier at the local level. In addition to that, find a cannabis-specific attorney which I’ve worked with quite a few of them depending on which city or town that you’re working with. That would be my approach. Using a local attorney and then having somebody who knows and understands a lot about the regulations for cannabis. Once you go for special permit hearings and things like that, the local attorney might not be knowledgeable about specific terminology or regulations.

That’s very important because it’s new to everyone, not just for us as entrepreneurs getting into this disruptive industry, but also dealing at the local level. They have a lot of concerns regarding traffic, if you’re doing cultivation regarding the smell, and how that’s going to impact the community. That’s why they’re interested in hearing how can your company bring all the benefits like the tax revenues that you’re saying you can bring to the city and towns but on the other hand, not bring negative aspects or negative outcomes.

It’s incredible the amount of professional advice you need to get through everything on here. It’s hard for people to understand, “I’ve got to pay him $100 an hour or $500 an hour to help me work my way through it.” It’s extremely important because if you go and you rent a place that’s not zoned for growing or for retail, you’re finished. That’s your business. You have to figure that out early. You had to negotiate your way through finding these people as you were finding properties. You were finding about, “What direction is my business going to head? Why do I need the certain people that I need?”

That’s when you start understanding that it’s necessary to have a good team behind you, depending on where you’re working.

Thanks for that baseline. That helps me out a lot. I’m sure it helps the audience understand where you’re coming from. Let’s get into the types of opportunities that you have now. You’ve got some growing retail opportunities that are in front of you. We had discussed a little bit of this. I met Flavia over LinkedIn and we started chatting. I liked the direction she was heading especially understanding what is happening with Social Equity Programs in these different states. I offered my expertise to her. I’m donating my time to help her out because I love her entrepreneurial attitude and I love what she’s doing. We’re going to work through some stuff. One of them is the massive amount of opportunities that she has in front of her. Flavia, will you share with the audience and myself, what are some of the things that you have in front of you? Lay it all out, retail, grow and everything else.

If you’re just starting your cannabis business, it is extremely necessary to put up a good team behind you. Click To Tweet

Those are the licenses that are available out there for retail establishment, for cultivation, manufacturing and also deliveries. One more thing, there’s also consumption cafes which are not allowed yet in Massachusetts, but that’s something that will happen soon. That’s something that I’ve thought about before but I have to understand a little bit more. It’s going to take a while for that to happen, so I don’t want to be ahead of myself. At first, I decided to start with cultivation and then as I’m having more progress, at the same time I decided to also go out and look for retail establishments.

The reason why I decided that way is because retail is usually kept depending on the number of liquor stores that each city or town has. That’s how they manage to make up the exact number of retail establishments for cannabis. Those were being taken at a fast rate because once those are gone, there’s no way anybody else can get it anymore. I thought I’m going to focus my time on looking for retail establishments and that’s what I decided to do. Unfortunately, I had to put my cultivation plan a little bit on the back burner so I could focus more on the retails and I was fortunate enough.

I have two retail licenses at the provisional level with the Cannabis Control Commission in Massachusetts. It’s been a long road, but having provisional licenses means we are able to start construction. I’m hoping for those licenses that I’ll be able to have at least one, if not both of them, operational by the first quarter of 2021. I also have a cultivation application which is at the state law review level. That’s the third agreement that I’ve had established with a city. Besides that, there’s another cultivation that I also have. It’s the initial permit which is the Host Community Agreement. Once you find that property, you see that it’s zoned properly and you made an agreement with the owner, then you can go ahead and go for a Host Community Agreement. That’s what it’s called in Massachusetts. I’m sure there are different names out there depending on where you are. That means that you are agreeing to pay a certain amount of taxes and follow certain regulations that the city has established. Once you agree to that, then you can move on and start your process.

Is that agreed by yourself and the landlord?

No. Host Community Agreement is between my company and the city or town.

You’re agreeing for round number’s sake, “We’re going to be paying $1,000 per month for the next twelve months,” to some average. Is that how it works?

Usually, the numbers are 3% of your sales and impact fee that could be up to 3%. Everybody goes for the maximum amount. Besides that, you can do additional donations, which the state has created a community impact plan so you can help communities or nonprofits that your company is willing to provide them funding to help them somehow.

PP 68 | Massachusetts Social Equity Opportunities

Massachusetts Social Equity Opportunities: There are licenses available out there for a retail establishment, for cultivation and lecturing and also deliveries. There’s also one for consumption cafes, which is not allowed yet in Massachusetts, but that’s something that will happen soon.

 

Is there a tax on you for taking advantage of the Social Equity Program? Are you paying back into the system in any way?

It’s the same way as any other company. We agree to the same percentage with every seed that we grow as any other regular company. Even if you’re not a social equity, you still pay the same amount.

There’s no difference. There’s not a hype because I’ve looked at other Social Equity Programs and they instate a higher tax so that they’re able to get some of the value of the program. For example, some states are allowing for reduced licensing costs. In turn, they’re taking that extra tax to pay back into the Social Equity Program so other people can have a chance.

At the state level, they have reduced the cost of the fees. They have to pay for a license. There are benefits that they gave to social equity participants. At the local level, not that I have experienced, there is now an exception to the tax agreement they create with the city or town because that’s how they make their money anyways. It puts you in a disadvantage if they will do that for you, but at the state level, they do reduce some of the fees.

That’s one of the benefits that these programs allow for. It depends on the state. Massachusetts has their stuff in line already, but if you go to LA, you might find some different regulations for this program.

Thank you for reading. Please come back with us next time as we look into a deeper dive with the opportunities that Flavia has coming for her. We look forward to digging deeper. If you have any questions, please reach out to me at PlantProblem.com. I hope you can join us next time for the second in the series of eight. Thank you. I’ll see you soon.

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