San Jose cannabis dispensary opens in downtown

San Jose has opened its first ever retail storefront for cannabis in the heart of downtown.

For years the city had strict rules on where dispensaries could operate, relegating them to industrial areas. Last year the City Council revised regulations on where dispensaries rent space and allowing one operator to have more than one location.

Mark Ritchie, president of Ritchie Commercial and owner of a building two doors down, said Purple Lotus, at 66 W. Santa Clara St., has already brought a noticeable number of people to the street, including its staff.

“Our wonderful bagel lady at City Bagels is happy because their employees are regulars there,” he said. “Saby-Thai benefits, as will Fuji Sushi when it opens.”

Purple Lotus founder Matt Krishnamachari said the community welcomed him to the neighborhood with gifts of cookies and ice cream. In return, Purple Lotus joined the San Jose Downtown Association, participates in downtown events, offers discounts to service-industry employees and meals to families each Christmas.

“We’ve always been big supporters of the community,” Krishnamachari said. “That’s the secret to our success.”

Customer Lena Huynh appreciates having a conveniently located dispensary.

“You’re in the mecca of all the fun things that folks can do. All the food eateries are here,” she told San José Spotlight. “I like how everything is laid out, so I can see what I’m shopping for. I feel very safe.”

These shops provide a healthy source of revenue to the city. San Jose’s 16 cannabis dispensaries contributed $16.6 million to San Jose in fiscal year 2022-23, city spokesperson Kia Xiong told San José Spotlight. She said the city estimates about $16 million in revenue for this year and the 2024-25 fiscal year. 

Krishnamachari said the industry is highly regulated and it’s costly to comply. San Jose receives about $200,000 a month in taxes from Purple Lotus, Krishnamachari told San José Spotlight. He said about 30% of gross profits go toward taxes, registration and licensing fees. The business license for the city costs $140,000 and $40,000 to $50,000 to the state, he said.

Cannabis dispensaries are also required to have cameras and 24-hour security. City-issued badges cost $50 per year per employee, he added.

Krishnamachari said the city should reevaluate regulations and reduce taxes. He’d like his store hours extended from 10 p.m. to midnight to serve customers still out on the town. He chose to open downtown because he sees it reviving through events, bars and restaurants. This is the second location for the family-owned business. The first opened about 14 years ago with a personal investment of about $20,000, he said, in an office building next to the Regional Medical Center before moving to Commercial Street, where it serves about 1,100 customers a day.

But for many who operate legal dispensaries sustainability is tough.

Sean Kali-rai, founder of the Silicon Valley Cannabis Alliance, said there’s a 12% to 14% failure rate of cannabis dispensaries in San Jose and the majority are losing money.

“The profit isn’t there and the challenges are too great,” he told San José Spotlight. “San Jose is not business friendly in general and absolutely not business friendly to cannabis.”

Customer Evgenia “Z” Waite said she spends hundreds of dollars at Purple Lotus almost daily. She once visited the store three times in one day “because their joints were so good,” she said. Waite appreciates the store being near her home and its friendly staff who ask how she’s doing.

“The people are great. The environment’s great. They have deals,” she said. “Go on in and have a good time.”

Purple Lotus sells a wide selection of cannabis products including joints, vapes, edibles, flowers and topicals from brands such as Alien Labs, Cookies, Stiiizy and its own Blue Chip line.

Chief Sales Officer Paul Rivera credits Purple Lotus’ success with catering to its customers and providing safe, tested inventory, regulated by the city and state.

“When you go to a street dealer, you have no clue what the hell they’re using because there’s no regulation around it,” he said.

Purple Lotus is part of this community, Rivera said. It wants to help downtown thrive.

“This company was born and raised in San Jose,” he said. “We’re not venturing out to other cities to find other licenses. We’re doubling down on San Jose. We want to bring more access to San Jose residents.”

Contact Lorraine Gabbert at [email protected].