California launched its cannabis equity programs to ensure individuals and communities impacted by prohibition could participate in the legal marketplace. Yet narrative-driven assumptions have persistently questioned whether equity operators can survive the state’s rigorous regulatory environment. Until recently, public discussions lacked clear, empirical data on how these businesses maintain their licensing standing compared to non-equity retailers.
To separate operational facts from industry assumptions, Capitol Compliance Management conducted an extensive study analyzing 1,653 California storefront retail licenses. In this Executive Q&A, Kevin W. McCarty, Director of Licensing & Compliance at Capitol Compliance Management, breaks down the core findings of the report, clarifies the difference between license survival and financial health, and outlines practical compliance steps operators must take ahead of upcoming renewal deadlines.
Q: Your study analyzed 1,653 California storefront retail licenses. What was the central finding regarding the active rates of equity-labeled licenses compared to non-equity licenses?
Kevin W. McCarty: The main finding was that 81% of the licenses identified by DCC as equity licenses were active, compared with 76% of non-equity licenses, as of September 25, 2026. When we looked at older licenses by the year they were issued, the equity group also had a higher active share in each year from 2019 through 2022.
That gives us a solid reason to question the idea that equity retailers are less likely to stay licensed. It doesn’t answer every question about those businesses and their success, but it’s still a meaningful finding.
Though one distinction matters here: “without the label” doesn’t necessarily mean “not an equity business.” Some local equity participants don’t have that label in their state record.
Q: Many industry observers assume equity businesses face higher failure rates. Why was it crucial to analyze older licenses issued between 2019 and 2022 by cohort year, and what did that reveal?
Kevin W. McCarty: A license issued last year hasn’t had the same time in business as one issued in 2019. The equity-labeled licenses were younger on average, so comparing the overall percentages alone could give us a misleading picture.
We wanted to compare licenses on an “apples to apples” basis, i.e. licenses that had been around for roughly the same amount of time. In each year from 2019 through 2022, the equity group had a higher rate of remaining active. For 2019, about 79% of equity-labeled licenses were still active, compared with 66% of licenses not identified as equity.
The pattern didn’t hold in every newer year, but the differences remained very small. Both groups remained active at about the same rate. None of the records, old or new, support a blanket assumption that an equity license is more likely to fail.
Q: While an 81% active license rate is a strong indicator of regulatory compliance, you caution against equating an active license with overall business health. What operational realities does a public license record leave out?
Kevin W. McCarty: I’d be careful about calling it proof of compliance. An active license tells us the state lists that license as operational. It doesn’t tell us that every part of the operation is in order.
It also doesn’t tell us whether the business can make rent, meet payroll, pay its vendors, pay its taxes, or turn a profit. It doesn’t show whether the original equity owner is still in control or receiving the financial benefit.
A business can be under real financial pressure while its license remains active. Keeping a license is worth recognizing, but we shouldn’t ask the license record to tell us more than it can.
Q: More than half of all equity-labeled storefront licenses in California are concentrated in Los Angeles County. What does this geographic concentration tell us, and what questions does it leave unanswered?
Kevin W. McCarty: Part of the explanation is how cities make room for cannabis businesses. Local rules can make a big difference in how many operators have a chance to get licensed.
The City of Los Angeles uses spacing requirements and limits tied to particular areas, rather than one simple citywide permit cap. Other cities in LA County have their own rules. Long Beach, for example, approved eight additional equity dispensary opportunities, bringing its total to 40. That creates opportunities that may not exist in a city with a much smaller permit allowance.
So the concentration isn’t just a story about equity businesses. It also reflects the local markets they’re allowed to enter.
Our study didn’t measure how much each policy contributed to the county’s total. It also didn’t count people who tried to open but never got a license. Those are important next questions if we want to understand where equity programs are creating real access.
Q: When comparing state Department of Cannabis Control (DCC) records to local programs like Sacramento’s CORE, you noted significant discrepancies. Why is relying on a single list insufficient for understanding equity participation?
Kevin W. McCarty: These lists serve different purposes. CORE is a local program with its own benefits and requirements. The state’s equity label generally reflects a business going through a separate process for fee relief, such as a license fee waiver or a six-month fee deferral.
A business can be verified as an equity participant locally and simply not have applied for that state relief yet. So its absence from the state’s labeled list doesn’t necessarily mean there’s a mistake or a disagreement about whether it’s an equity business.
That helps explain why we found CORE participants without the state label, including delivery businesses. If we used the state label as our only measure, we would leave those participants out.
The takeaway is that we need to understand how someone gets onto a list before treating it as a full picture of equity participation. Being eligible for a benefit, applying for it and receiving it are different things.
Q: Your research indicates that roughly 57% of active storefront retail licenses face renewal deadlines between April and July 2027. What immediate compliance steps should operators take to prepare?
Kevin W. McCarty: Start with your actual deadlines and give yourself time to review the business. The 57% figure came from our September snapshot, so every operator should check their current license and permit records.
I would look closely at ownership and financial interests. Make sure all owners and financial interest holders have been properly disclosed and that the licensing records reflect the business as it exists today. An investment or ownership change shouldn’t still be sitting on someone’s list of things to update.
Check that the right insurance coverage is in place and current. Review your Cal/OSHA safety procedures, employee training and records, and make sure those practices are actually being followed.
Then check inventory records, written operating procedures and local permit conditions. Assign someone to each item and resolve gaps before the deadline gets close. Renewal preparation is a good opportunity to check the whole operation, rather than just complete a form and pay a fee.
The data from Capitol Compliance Management challenges longstanding industry assumptions by confirming that older equity-labeled storefront retailers maintain active licenses at higher rates than non-equity counterparts. However, staying licensed is only the first hurdle. As the market matures, operators must navigate complex ownership structures, local and state regulatory divergences, and looming renewal deadlines to remain viable.
Sustainable compliance requires proactive preparation, rigorous audit readiness, and accurate documentation. By relying on objective data rather than speculation, regulators, advocates, and business owners can better evaluate the true impact of equity initiatives and implement targeted operational support where operators need it most.
To learn more, visit https://www.ccmup.com/
