The Economics of Marijuana Dispensary Security: $35 Per Camera Per Month

Business is certainly buzzing at Security Grade Protective Services in Denver these days as company principals Derek Porter and David Beckett continue to be high on the future for its niche market focused on securing cannabis dispensaries and cultivation facilities with electronic security. And boy, what a market.

To date, two-year-old Security Grade Protective Services has performed installations in about 100 dispensaries and cultivation centers. The cannabis industry is unique because many banks refuse to finance these endeavors, forcing the proprietors to deal strictly in cash with customers and vendors. It means Security Grade is earning solid “green” for protecting the “green” with its fully integrated CCTV video surveillance systems, which include off-site storage backup tied into real-time notification intrusion and access control systems.

The installations themselves range from an average $10,000 for a 16-camera job up to $300,000 larger scale systems in cultivation centers. For remote data recording and backup, the company earns a healthy $35 per camera, leaning heavily on two key partners—IC Realtime for the high-end megapixel cameras and Rapid Response Monitoring as its central station facility. The niche has even led to adding armed and unarmed guard services as well as investigative and background check services to its portfolio, which today is nationwide.

From Consultants to Installers

Derek Porter, CEO of Security Grade, and David Beckett, vice president, first started the company in December 2012 purely as a consulting business. The idea was to advise the newly legalized cannabis industry in Colorado on security matters.

“In December of 2012, we got our first cannabis client,” recalls Beckett, who started out doing home automation installations for ADT. “It was for a simple risk and vulnerability assessment for a client in Boulder, Colo. It took just a few days, and I was very much initially alien to the whole cannabis industry. Once we started doing a lot more homework and research, we realized the potential there and the immense need for security. Through time, we started offering more services within that niche and it has really helped to catapult the business.”

To date, Security Grade has done about 100 cannabis-related installations, with about half in dispensaries and half in cultivation centers.

“There are definitely more dispensaries than cultivation centers out there,” says Beckett, noting that some states require five shops for every one cultivation center. In Colorado, where recreational marijuana is legal, Beckett says there are more licensed dispensaries than there are Starbucks.

“So you kind of get an idea of the mass amount of possible stores,” he notes.

In dispensaries, the typical installation is between 16 and 32 cameras, depending on how many rooms, integrated with access control and intrusion with a four-hour battery backup. Security Grade Protective gets about $10,000 on average for those systems. These facilities tend to be about 1,300 square feet.

There are multiple areas that need to be monitored, including the front counter, the doors, the cut-up areas where the pot is prepared and packaged, and the safe. Remember that many banks will not extend credit to cannabis industry so it is a cash business.

“Every facility has a safe. Normally there are two safes — one full of product and one full of cash. Cut-up areas have a higher camera count. But you're normally looking at least at two to three cameras per room. So depending on the size of the rooms and location it starts to get higher than that,” says Beckett. Typically facilities have offsite video backup of the DVR to protect against a criminal stealing the onsite DVR.

“You have to pick the right provider,” he adds. “IC Realtime is one of the great partners that we worked with.”

Massive Cultivation Center Security Gets Elaborate

The extent of the security can be characterized by a project Security Grade is currently working on at a large cultivation center and marijuana-infused product (MIP) lab in East St. Louis, Ill. That facility is going to be providing the cannabis for the entire southern part of the state, according to Beckett. A MIP is where extractions are done to create the oils and shatters (concentrates) for the industry. Individual seedlings have RFID tags placed on them to track the plant from infancy to maturity. The system tracks how tall it grows and how many buds it produces from beginning to end.

While cameras are not honed in on individual plants themselves, Security Grade is working closely with IC Realtime to bring some new ideas to the industry to help regulate rooms and enhance the security layers, he says.

Derek Porter (right), CEO, and David Beckett, vice president, say there is a lot of “riff raff” in the cannabis industry, and in the security industry too.”We have been able to get through that just operating legitimately and treating our clients like royalty,” says Porter.

The large Illinois facility is well over 100,000 square feet with 151 cameras. Though not revealed specifically on this project, the cost to secure a facility like this can run as high as $300,000 for the initial installation, according to Beckett.

“We designed this whole camera layout to cover every aspect,” says Beckett. “There's really no blind spot. We have motorized PTZs on the outside that detect motion. As soon as you get on the property the camera is actually following you without actually any human interaction. You get inside and a front image is taken using a height-strip camera that's tells how tall you are for the authorities. There is also facial recognition and a retinal scan. You're getting covered from all angles.”

And that is just to get in. Major cultivation centers like this are selling lots of marijuana to individual dispensaries, which have to pay in cash. So obviously, cameras are aimed at both the cash safe and the product safe.

Fire is also a concern … you wouldn’t want the facility to go “up in smoke,” and we are not talking about Cheech & Chong here. In general, the fire department has the ability to control and open the doors although every facility is different based on fire detection and codes.

Security Grade Protective is installing halon systems in some of the areas prone to accumulate butane gas from the plants, which makes the risk of explosion higher. According to Becket, some there is a growing trend among fire authorities to mandate sophisticated “lab-oriented detection systems” in facilities.

The video and fire systems are tied into the intrusion system with as much real-time notification as possible.

“We're getting the owners involved and we're getting the armed guards involved with real-time text notifications. If the alarm goes off, they're getting a text. Or if the temperature of the room gets above 90 degrees putting the plants in danger, the system sends a text. It's a lot of technology,” says Beckett.

$35/Month Per Camera Off-Site Data Fees

The real “high” from this niche is the remote monitoring and video storage.

“We are using the best in the industry, Rapid Response Monitoring,” says Beckett.

Security Grade Protective charges $35 per camera per month for dispensaries. Large cultivation centers are charged less per camera.

“Data and Internet are not free and everyone is charging for that data package right now. We explain to our customers to imagine using their cell phone to run 150 YouTube videos all day, every day. Imagine what your data bill is going to be. Then they kind of have an understanding of why the data is not free,” notes Beckett.

“It's an amazing project,” he says. It was previously a cellular fiber optics hub center. So you can imagine what kind of a wiring nightmare that was inside this building when it was purchased. The owners completely gutted it and had it up and running in just two-and-a-half months. I did the walk through with the state police inspector for marijuana there, and he said out of all the 21 facilities that he's seen, it is by far the best security system, and all the measures that we've taken, and knowing the cycle of the plants, etc. The inspector is going to model that system to let other security companies know how it should be done.”

The project’s cameras are all IC Realtime. Beckett has wanted to use the line for a long time.

“I met them at CEDIA Expo 2012. I absolutely loved the way they interacted with the customers at the booth, and they seemed like they had good products. I worked for another company at the time and brought forth IC Realtime, but the owner told me it was too expensive.

“Now that I own my own company, we're expanding, learning and trying to get the best products on the market. We went to ISC West in Las Vegas in the springtime and met with IC Realtime. They had what we were looking for from the standpoint of regulation, IR range, lens capabilities with 20-foot ranges, fisheye 360-degree cameras, and motorized PTZs that are easily controllable through a smartphone,” he says.

He continues, “With their technology and the relationship we have built with them, I don't see why I would use anybody else. I've actually eliminated my other manufacturers from my bidding software because I'm not going to use anybody else. I have a 10-year warranty, the best in the business. The products are made in America. They're everything a security company wants, especially one that stands behind America … we want that.”

Porter says the company has no regrets chasing the cannabis industry, which represents about half of Security Grade Protective’s total revenues today.

“It's been really amazing. This is something we were not thinking was going to be so good,” says Porter. “We realize at the end of the day it was all about supply and demand. We have competition out there. But they are not full service like we are. A lot of the cannabis clientele have been burned; there's a lot of riff raff in cannabis. There's a lot of riffraff in this industry when it comes to ancillary businesses. And we have been able to get through that just operating legitimately and treating our clients like royalty. We are unapologetic advocates of the cannabis industry.”

Security Regulations Vary Widely

The need for security in the industry is driven by strict regulations. Each state has its own rules that are written, but they're generally the same. Dispensaries are required to have a certain number of cameras for egress and ingress, get visual images and conduct facial recognition on people coming in and out of the building. The regs stipulate CCTV camera surveillance and even how many frames per second they must be, along with how many days the storage has to be accessible. According to Porter, the only comparable industry is the casino business. The camera standards range from state to state.

“Here in Colorado, they have really weak standards, in my opinion,” says Beckett.

The statewide mandate is for analog V1 resolution and at least 15 frames per second.

“You're not looking at a good, high-quality standard there,” he adds. But in the city of Aurora, Colo., the mandate is higher. That city requires a 1.3-megapixel camera, and instead of the 40 days of recording time it mandates 60 days. On top of that, the city of Aurora mandates offsite capture and recording of video in case something happens to on-site DVR, such as flood, fire or theft. In Illinois, the law is even more strict, requiring 90 days of recording time with 1.3-megapixel cameras minimum. At that point, hard drive space starts to become an issue, along with bandwidth. The end result from all these varying degrees of regulations means that Security Grade Protective has become adept at offering good/better/best solutions for clients.

Surprisingly, there aren’t additional restrictive licensing requirements for working in the industry. Just as any security provider would have to do no matter what industry he serves, Security Grade is licensed for installation and monitoring in the states in which it works, and also holds licenses, insurance and bonds for its armed and unarmed guard service. In Colorado, the cannabis industry is overseen by the state Marijuana Enforcement Division, which does not require special mandates for security companies.

This story originally appeared on November 26, 2015 on CE Pro.