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MedLeaf is the city's only mobile cannabis delivery service. File photo/Samantha Nelson
MedLeaf is the city's only mobile cannabis delivery service. File photo/Samantha Nelson
CitiesNewsOceansideRegion

MedLeaf ‘devastated’ by city’s proposed lottery for pot shops

OCEANSIDE — As the city prepares to review candidates for storefront cannabis licenses, owners and employees of the city’s only marijuana delivery service, MedLeaf, fear the company will go out of business if it’s unable to open a brick-and-mortar shop. 

In April, the City Council directed staff to develop a program allowing two permits for retail cannabis shops. The city currently allows for up to two delivery-only dispensaries, one of which is owned by MedLeaf.

MedLeaf owners Karen and George Hannawi, and Justin Baker, a U.S. Army veteran and Karen’s brother, said they were excited at the prospect of moving into a traditional storefront after more than two years operating in the city but were discouraged after learning staff’s recommendations do not include giving the business preference for a storefront license.

“We are devastated and fighting for the survival of our business,” said Karen Hannawi (formerly Tomlinson), MedLeaf’s general manager.

Since the city established its cannabis business tax, MedLeaf has contributed more than $530,000 in taxes to the city, according to its owners. The Hannawis said the business has operated in good faith and followed the rules — even supporting the cannabis tax while employing more than 40 residents.

For years, Karen Hannawi and the MedLeaf team have advocated for the cannabis industry in Oceanside, including pushing the change from medical-only to recreational cannabis regulations and switching to storefront dispensaries.

Staff and owners of MedLeaf, Oceanside’s only dispensary, fear they will go out of business if they are not selected for a storefront dispensary license. The city currently only allows delivery-only dispensaries. Courtesy photo
MedLeaf owners and staff fear Oceanside’s only marijuana dispensary will go out of business if they are not selected for a  new storefront license. Courtesy photo

Despite playing by the rules, delivery-only cannabis dispensaries are no longer feasible in today’s market, according to Karen Hannawi.

“Delivery is not sustainable without storefronts,” Karen Hannawi said.

Staff’s recommendations include limiting the number of storefront dispensaries to only two and selecting applicants through a lottery system. Before entering the lottery system, applicants must achieve a passing score for meeting the minimum evaluation criteria – to be established by staff.

According to Nicandro, staff recommendations won’t give preferential treatment to existing facilities, currently only MedLeaf, to make it fair for other applicants. 

When the City implemented cannabis facility licensing for the types listed above, there was no indication that obtaining such licenses would provide an upper hand for existing businesses to achieve a Type 10 license in the future,” said Darlene Nicandro, the city’s development services director. “It may be that Type 10 applicants would have applied for the other types of licenses upon knowing that a preference would be given to existing license holders.”

According to Nicandro, staff developed these recommendations after conducting their own research, using best practices based on other communities. The city previously hired HdL Companies as a consultant on cannabis policies but terminated its agreement with the group in July. It has since begun a search for a new cannabis consultant.

The MedLeaf owners fear that if they go through the lottery system and are not selected, they will compete with storefronts, ultimately driving them out of business.

The owners pointed out that council members had included finding ways to give preference to MedLeaf in their April direction to staff.

“We’re not asking to be the only dispensary… we’re asking our city and other local business owners to acknowledge that we are community members too,” said Karen Hannawi.

The Hannawis also said they don’t want problems with the city – they want to remain in good standing and play a helpful role as Oceanside navigates the legal cannabis industry.

“We want to help the city make good decisions,” said George Hannawi. “We’re a team here – we all care about Oceanside. We believe in Oceanside.” 

Regarding the second delivery-only cannabis permit, city staff previously indicated a license application for the other slot was still pending in April, and that second slot remains empty. 

“We have not yet opened the application process for the other delivery dispensary license,” said Nicandro via email. “At the Nov. 1 City Council meeting, staff recommends opening the application process for the next round of Type 9 non-storefront delivery only, cultivation, manufacturing, distribution, testing lab and Type 10 licenses at the same time.”