MEDICAL POT DISPENSARIES GROWING AT A FAST CLIP

When Andy Cookston and his wife opened Denver's first
medical-marijuana dispensary three years ago, they hung no sign
outside their door.

They did no advertising; patients were drawn exclusively by word of
mouth. They were unsure whether the state would even allow them to
include their dispensary's full name -- Cannabis Medical Technology
- -- on their business license because of its pot-tinged terminology.

Such modesty is no longer a concern.

"Now that the door's been cracked open," said Cookston, who also owns
a graphics company, "people are rushing it."

Colorado's medical-marijuana industry -- just in its infancy -- is
already in the throes of a dramatic change.

As tens of thousands of patients applied for medical-marijuana cards
in the past six months, dozens of new dispensaries opened. The number
of dispensaries -- in essence, shops where approved patients legally
buy marijuana -- is likely more than 200 in Colorado, though no
official tally exists.

And, even as new mom-and-pop dispensaries continue to open weekly,
the money flooding into the industry has also attracted the interest
of big players with big checkbooks. A 5,000- square-foot dispensary
- -- billed as the largest in Denver -- recently opened just north of
Invesco Field. Two powerhouse dispensaries from California are
opening outposts in LoDo.

Offshoot Businesses Abound

Meanwhile, small-time dispensary owners have resorted to ever more
adventurous business models to create a niche in a suddenly crowded
marketplace. There are delivery-only dispensaries and dispensaries
with hair stylists on site and one dispensary that claims to be the
country's only medical-marijuana restaurant.

And this doesn't include the offshoot businesses that dispensary
owners say have arisen around the cannabis industry -- including not
just the paraphernalia and growing supply shops but also insurers,
electricians, security firms, ventilation contractors, real estate
agents and lawyers. One local bail bonds company took out an ad in
the alternative magazine Westword's 64-page special medical-marijuana
insert, offering a discount to people charged with marijuana-related crimes.

Commercial real estate for dispensaries now leases at a premium,
several dispensary owners said. Warehouse space for marijuana-growing
operations is even tighter.

"The average guy starting a storefront now, you definitely better
have some legitimate business skills compared to what it used to be,"
Cookston said. "It's definitely getting harder."

Despite the harsher competition, dispensary owners remain a diverse
set. Many, like Cookston, are patients themselves and longtime
advocates of using marijuana for medical purposes.

Because dispensary owners remain largely cut off from traditional
financing like bank loans, they must scrounge together all the money
necessary to open their shops -- in most cases anywhere from $20,000
to $50,000 -- on their own.

For Steve Horowitz, who used to sell promotional magnets to Realtors
until the housing bust, that meant skipping the mortgage payment on
his space for three months in order to come up with the cash to start
a dispensary. Horowitz's creation -- the Ganja Gourmet, which serves
marijuana-infused pizza, lasagna, hummus and desserts -- opened last
week on South Broadway in Denver.

"I'm lucky I didn't run out of money before I opened this," he said.

Posting Ads for Investors

Pierre Werner -- a Nevada transplant who moved to Boulder earlier
this year in search of a friendlier climate for medical-marijuana
distribution after receiving three felony convictions on
marijuana-related charges in his home state -- opened his Dr. Reefer
dispensary on University Hill after posting ads to Craigslist seeking
investors.

"I think everybody is throwing every last dollar and maxing out their
credit cards and getting every kind of loan they can," Werner said of
new dispensary owners.

Well, perhaps not everybody. In LoDo, at least two new dispensaries
have the backing of major players from California's booming
medical-marijuana industry. The Farmacy, at 14th and Market streets,
is a branch of a dispensary chain with three shops in the Los Angeles
area. Local Product, at 15th and Larimer streets, has the backing of
Harborside Management Associates, a for-profit offshoot of the
Harborside Health Center in Oakland, one of California's largest
dispensaries with about $20 million in annual sales.

"It's David Versus Goliath"

Representatives from the two dispensaries did not respond to
inquiries, but the Californians' entrance into Colorado has a number
of local dispensary owners concerned.

"It's David versus Goliath," said Jason Irwin, the 27-year-old owner
of Highland Health dispensary in Denver. "They didn't strong-arm
their way in, but they have a blank checkbook."

In response, Irwin said, he plans to expand his business. The
dispensary just completed the first harvest at its own growing
operation in southern Colorado. Irwin said he hopes to build an even
bigger growing operation soon, all to be overseen by his mother.

"When I was in high school, she used to flush my weed down the
toilet," he said, marveling at her shift in attitude. "She was not
cool with it."

Cannabis Medical's Cookston said the current growth will only help
boost dispensaries' legitimacy, making them all the more entrenched
in the community.

"It's all coming," he said. "It's like the sunrise. It's getting
brighter and brighter."