Cannabis IS Coming, New York!

Yay for everything.   Now let’s see if the new administration can get the hospitality industry the relief we have been pleading for since Day 1 and going on 10 months now.  Yo Dearly Elected! We need money.  We need to have the flexibility in how we use it and we need it stat, asap and lickety-fucking split.

Is there any logical reason that we should not have a bailout coming imminently? JB and the D’s are in total control for crying out loud.  Isn’t this the best case scenario for the industry? Shouldn’t we expect JB to propose a big pandemic relief package with direct help for the industry included, and then shouldn’t Speaker P. and Chuck E. Brooklyn ram it through Congress?  Let Mitch and the  Sideparts hoot an’ holler but they don’t have the votes anymore so what’s the hold up already?  It’s day 2 and you have had months to figure this out and it’s winter and we ain’t got no time to waste.

So, it’s time again for all of us that are part of the associations, coalitions and interest groups that represent the industry to raise our voices one last time and get in the face of our Senators and Reps to let them know the urgency of the situation and that PPP with no indoor dining does not solve anything and that they have a disaster on their hands that needs their immediate attention.  More money for the industry now!

And Andrew Yang, if you are gonna pose as the foodie candidate, you might want to get an industry consultant to advise you about the NYC food scene before you reveal yourself to be even more of an NYC impostor. Did you learn nothing from Da Mayor’s pizza fork fiasco?

Timeline Update:

Let’s revisit our timeline to try to predict when we will start back on the path to fully-operational.

The Fauch says we need 70-90% of the population to get vaccinated before we can start claiming herd immunity.  So, here is my back of the C-Fold math:

We have 300 plus million people in this country who can get vaccinated.  JB says 100 million vaccinated in first 100 days.  That’s May 1st and we are over 100 million short before we can start the herd immunity conversation.  Add another 3 months to get 100 million more and we are in August. So, safe to say 4th quarter 2021 before we really start seeing things normalize.

In the meantime, how and when will restaurants open in NYC? Let’s stick with May 1st as the point of limited return.  I think we can expect indoor dining at 25-50% in May and staying that way through September.  Then, I would anticipate 100% occupancy occurring from mid-September to January.  That’s another 8-11 months before we are fully reopen and it is by no means a sure thing.

We have to revisit our past projections and adjust for the new ones.  Take a look at your rent situation and think about talking to Landy again.  Now that you should have PPP coming, it’s a good time to negotiate.  Also, start thinking about the next thing you are going to open.Put a plan together, start raising money and scouting locations.  There are lots of good deals out there as commercial real estate in NYC is just crumbling.

PX3 Update by Joey Regs

As most of you know by now, PPP 2.0 is now on line and open!  Some small local and community banks opened up last week, with the bigger banks beginning this past Tuesday.  So far, so good, I have to say.  This rollout is a whole lot smoother than that of its predecessor. It is certainly not without its challenges, however.  Below are some items of note:

• The SBA seems to be doing a lot more diligence on the front end of the process than they had been doing originally.  As a result, we are seeing more questions, and in some instances, even rejections than we saw last time.  And it’s a bit slower going initially.
• We have seen a handful of applications get “barred from submission” this time around.  This just did not happen at all in round 1.  After some digging, we uncovered some useful nuggets of information here.  First of all:  if your application has been “barred from submission,” you MUST ensure that your bank is following up with the SBA directly, requesting a “release of hold on borrower”  or requesting an “Appeal.”  Your bank making this request forces the SBA to either reinstate your standing in their system OR at the very least requires them to provide more information to you about what the hold-up actually is. Why might your application be “barred from submission?”  Good question.  One of the answers is, because you have recently filed your forgiveness application [from PPP 1] and its currently under review.  How’s that for some dumb shit?  Not terribly surprising, but dumb nonetheless.
• Chase was the most popular bank of our clients in Round 1.  Thankfully, they really got their shit together for Round 2.  Of course we don’t have approvals for everyone yet, but the  application process alone was night and day from Round 1.  Thanks, Chase.
• If you use Capital One Bank, please keep an eye on your emails!  Capital One is contacting customers independently about the PPP application – as opposed to the more popular online portal that other banks have employed.  There is a button to press, which should result in you getting that email, but once you press it, it’s gone.  So pay attention here.
• As we alluded to above, pending applications for forgiveness [for Round 1] have proven to cause problems with future PPP applications.  If you have not yet applied for forgiveness for Round 1, you’re likely better off waiting until after you apply for PPP Round 2.  The system appears to be very easily confused.
• As was true in Round 1, the smaller, local community banks appear to be the way to go.  Does that mean you won’t get approved if you applied through a bigger bank?  Not at all.  But from a sheer communications standpoint alone, the smaller banks have been terrific and have really been able to grant peace of mind for us and our clients.  Again, this is not a knock on big bank customer service at all – it’s just the fact that with a smaller amount of clients to manage, they are able to provide a greater level of customer service, which I appreciate.  And with less applicants in the queue ahead of you, we’re finding response time on applications to be much quicker as well. 

If you haven’t applied for Round 2 yet, you better get going.  If you want our help, if would be our pleasure.  Hit us up at [email protected]

Cannabis IS Coming…For Real This Time.

Anyone who follows us or engages with us in any way knows that we have spent the past five years or so positioning ourselves to be at the forefront of cannabis legalization in New York State.  It’s looking more and more like that day is finally poised to arrive soon.

As he has for the last two years, Governor Cuomo included a cannabis legalization plan in his budget proposal.  This is nothing new.  What is new, however, is the urgency, momentum and a slight power shift.  Historically, the Governor and State Legislators have locked horns on a few sticking points associated with their dueling proposals, and ultimately it was only stubbornness and politics that prevailed. 

This time, things will be different.  Here’s why:

• New York State NEEDS to find a way to generate more revenue for itself. This is no secret.  And there is literally no better way to do that than to legalize [and tax] a new commodity.  The governor’s office knows this, and so do our legislators.
• Creating a brand new industry also creates more jobs, more spending and ultimately boosts the economy at a time when there is more pressure to do that than at any other time in recent memory.  And you’re hearing this sentiment from both sides of the aisle in New York State, as well as from the Governor.
• New Jersey passed legalization by way of referendum back in November (and is currently working on legislation); Pennsylvania and Connecticut are advancing legalization talks as well. New York does not want to be last to this party for a number of reasons. 
• *This is the big one: Courtesy of the November election, NYS Democrats have secured a Supermajority, meaning that legislators not only have the votes to pass their own bill, regardless of what Cuomo says, but they can actually override a potential veto from him as well, should he consider even attempting to stand in the way.

The last point is even more important when you consider the context and personalities that we’re talking about here.  Remember, Cuomo is a control freak.  Historically, he has proven that he is only interested in Cannabis legalization so long as he gets the credit for making it happen, gets to control the new regulatory agency that is created, and gets to control the tax revenue stemming from it. 

Now, knowing that a procedural misstep or reluctance to negotiate in good faith could result in the legislature passing a legalization bill over his objections and essentially despite him, I believe he’ll be much more amenable to a true collaborative negotiation.  And on the flip side, it behooves the legislators to work with the Gov here, as the fastest way to get this program off the ground is to have an approvable plan in the budget proposal itself.  Teamwork makes the dream work!  Let’s go already.
 
The fact of the matter is, the [legislature’s] MRTA (Marijuana Regulation & Taxation Act) and the [Governor’s] CRTA (Cannabis Regulation & Taxation Act) are not terribly far apart, and never really have ever been.  Negotiations have just broken down along the way between the two sides over only a handful of major sticking points, and a few minor ones.  The major points of note include:
 
1) What the social equity program will look like;
2) Where the tax revenue goes;
3) Who gets to appoint the Director of  [and thus controls] the new Office of Cannabis Management;
 
What we’re hearing…
 
According to our sources in Albany, everyone (on the legislature’s side and the Governor’s office’s side) is committed to getting this done in 2021, and in doing so as expeditiously as possible.  Despite the fact that the budget doesn’t get approved until April 1, 2021, both sides are already negotiating and showing a willingness to compromise that we haven’t seen before at this stage.  This is a very positive sign. 
 
Additionally, Senator Krueger has already pre-filed a bill for proposed cannabis legalization, that is virtually identical to her last proposal (MRTA).  In so doing, she is sending a message to the Governor that the legislators are prepared to move forward with him or without him.  Thus the negotiating window, where Cuomo has the most leverage, would be between now and April 1.
 
As far as timelines are concerned, these things are always challenging to handicap.  However, our sources tell us that the State is prepared to really streamline things, if we can get both sides to agree on a proposal.  If that happens, this proposal is included in the Budget, and it gets approved on April 1, I’m hearing that the State would push to get applications live by the Summer or Fall of 2021.  And they would essentially be writing the code as they go.  Pretty wild idea, but I like it.  An aggressive rollout of this program is the only way that it really makes sense anyway.  And if the other legal jurisdictions are any indicators, there will be a constant evolution of the code and the rules here; so might as well just get something passed, so we can begin.
 
We’ll continue to keep you posted on all things Canna.

Dine and Dash by Maya Petrocelli, Chair, HL Litigation Group

Keep an eye on your invoices from third-party delivery companies!  In May of 2020, the City Council passed legislation preventing delivery services, such as Grubhub, Postmates, UberEats, and Doordash, from charging more than 20% of the purchase price in total fees.  Specifically, charges are capped at a maximum of 15% as a delivery fee and 5% for any other fees.  When you are reviewing your invoices, make sure that the 20% fee charge is calculated using the correct purchase price. 

The purchase price is the total price of the items contained in the online order that are listed on the menu.  It does not include sales tax, gratuities and any other fees. If your invoices show that the delivery company is incorrectly charging you 20% off the total invoice, inclusive of sales tax, and not the pre-tax total, or have questions about this law, please reach out to Maya Petrocelli at Helbraun Levey ([email protected]) to discuss your legal remedies.

R.I.P. –  Bluegrass legend Tony Rice, Charlie Pride, Dawn Wells and Sammy’s Roumanian. Nothing like a night of dancing to Dani Luv’s schtick as he croons tunes like “The Girl from Emphysema” while everyone drinks too much vodka and dances and schmears the schmaltz.  There is nowhere this happens but in a dingy LES restaurant in NYC.