lemonis: tonight, we're going to california. more than just scenic, sunny, and trend-setting, the golden state is also the greenest. man: we're ending prohibition and we're mainstreaming pot. damian: there's blue dream, gorilla glue, sour banana, green crack. lemonis: why do i think green crack is more potent than sour banana? medical marijuana has been legal here for years. but now, the game changer -- proposition 64. woman: marijuana is now legal in california. lemonis: soon, any adult will be able to buy weed. did the vote passing increase the odds of you becoming a billionaire some day?

adrian: absolutely. lemonis: my name is marcus lemonis. on my show, "the profit," i invest my own money in all kinds of companies... everything's going to change. everything. ...and help turn their fortunes around. marijuana isn't my thing. i've never even considered investing. is the business easy for you? andrea: hell no. there's nothing easy about this industry at all. lemonis: but the market here could reach $6 billion, and that's impossible to ignore. adam: we have this opportunity to create once-in-a-lifetime, multi-generational wealth. lemonis: the risks are huge. you're in a room filled with what the federal government considers illegal. jeanette: that's what makes it more exciting. lemonis: but so are the returns. what's the end goal for you? dan: selling my company for $120 million. lemonis: i'm here to take you on a journey and show you where the profit is in pot. ♪

♪ i'm here in desert hot springs, california. now, many of you have probably never even heard of it. it's the forgotten son, the neighbor, to palm springs, where the golf courses are big, the night life is big, but not around here. what you'll see are plenty of signs that say "sorry, we're closed." back in 2001, the town went bankrupt, and came close again in 2014. tired of money troubles, people here took a chance. desert hot springs became the first place in southern california to allow industrial-scale indoor pot farming. a once-dying town is dying no more thanks to recreational pot and people like adrian sedland. adrian, nice to meet you! adrian: likewise. lemonis: is this your business?

adrian: yes, it is. welcome to canndescent. lemonis: i mean, you're literally in the middle of the desert. adrian: there's no better place to grow cannabis. lemonis: i've never smoked pot. in fact, i'd never even seen pot. adrian: come on in. lemonis: i walked into canndescent and suddenly found myself surrounded by it. very fragrant. adrian: yes. lemonis: how much inventory is in this room right now? adrian: we want to get to 65 pounds of dried flower. lemonis: per harvest? adrian: per harvest, and we harvest the room every 10 days. lemonis: 65 pounds... adrian: of finished flower. lemonis: uh-huh. so, $195,000. adrian: you got it. so, we're pulling down a room every 10 days. it runs at $600,000 a month. it's not a bad business. lemonis: it's not a bad business? it's a great business. armed with a harvard mba, adrian is part of the new money behind california's exploding marijuana industry, which is still considered criminal under federal law. are you the first drug dealer to ever graduate from harvard?

adrian: no. there's plenty of them in biotech. go talk to the guys in amgen and pfizer. they're dealing stuff -- percocet, all that highly addictive xanax. that stuff will mess up your life. this won't. lemonis: in desert hot springs, they seem to agree and have issued permits for more than 3 million square feet of construction to more than 30 growers. good for business, but i wondered if the town's reputation would be hurt. are you originally from this town? scott: born and raised. lemonis: scott matas is the mayor of desert hot springs, a self-described conservative. scott: i was a "no" on marijuana use in our community in 2007. lemonis: what happened? scott: the economy went bad. we needed to find another revenue. lemonis: when they put it to a vote, more than 70% of the residents here said "yes" to growing recreational pot. mayor matas doesn't smoke, but the side effects of weed are saving his town. job creation?

scott: job creation -- it's taxation... lemonis: think about this. it costs $15 million a year to run desert hot springs. the town could eventually collect $50 million a year from pot taxes alone. goodbye, budget crisis. hello, cash flow. and what has happened to the prices of the land out there? scott: well, let me give you an example. the city bought a piece of property in 1980 for $5,000, one acre. we just went into contract to sell that for $378,000. adrian: we have two buildings. we call them brad and chad. lemonis: okay. adrian: they're named after the guys who built them in the 120-degree heat. lemonis: if you grow pot outdoors, you get two harvests a year. but indoors, a high-tech climate-controlled environment can triple that. adrian says canndescent will soon be selling about $75 million worth of weed annually. photographer: that's gorgeous. nice, nice. your smile's great. go for it.

lemonis: with a slick advertising campaign, he's pitching his pot as a luxury brand. woman #2: with us, you and the flower will always come first. we are canndescent. adrian: call us the courvoisier of cannabis, or mayors of cannabis. we're going after that high-end adult use. lemonis: well, that's just packaging. look. packaging is one thing, but price is another. adrian charges hundreds more per pound than the market rate. to me, that's a very risky strategy. you said to me you can get $3,000 a pound. adrian: correct. lemonis: how do you actually differentiate your product to get an extra $1,000? is it the packaging? adrian: packaging is one piece. the quality of our weed, the quality of our cannabis... lemonis: what is "quality of our weed"? you've got to give me more than just "quality of our weed." adrian: okay. smell the nose. you'd recognize that our nose doesn't have any chemical burn. you'd recognize that the cure on our product is perfect, that when you break it, it has a perfect snap, which means it's going to be a perfect smoke. lemonis: is there quality control? adrian: there's huge quality control.

lemonis: does that mean that you throw a lot away? adrian: what's that? lemonis: you throw a lot away? adrian: absolutely. lemonis: and he's dropped the usual stoner labels you see in dispensaries. canndescent comes in just five varieties, named for the feelings or moods they're supposed to create. adrian: we've moved to a brand architecture where it's just "calm," "cruise," "create," "connect," and "charge." it's making it accessible. it's giving people analogies in their life. your purchase becomes a reflection of who you are. when cannabis starts doing that, it's not about being sexy. it's about being relatable. and that's where cannabis is going. lemonis: i give adrian a lot of credit for simplifying the approach to marketing the product from a naming standpoint. i think the name is interesting. i thought the packaging was fantastic. and to simplify things like "calm," "create, "charge" -- those are words that, i guess, yoga enthusiasts can relate to. it has a whole foods-esque packaging to it.

the future seems promising in desert hot springs, but don't forget the feds could still shut it all down. if the current administration decides to change its perspective and enforce the laws that they say this is illegal, what happens to the town? scott: if we were to allow them to build all that out there and then the federal government comes in and says, "you can't do this," this would kill a small city. lemonis: adrian and his investors, well, they don't seem worried. he's raised nearly $15 million in just 18 months. adrian: we pay our taxes. we're good corporate citizens. we conform to california law. lemonis: yeah. and you're employing people. adrian: and guess what. i'm going to be employing 280 people within 18 months. lemonis: it surprised me, the level of sophistication that is being put in here, the amount of money that's being invested, and the steps in the process. i'm a process guy. but i'm not fooled by sexy packaging and sexy marketing. and maybe not to him, but to most people, marijuana may be a commodity for now.

and so, price will matter. margin will matter. whole foods, you know you're getting a superior product. is the product really superior here? i don't know. coming up, a house call. four wheels, two guys, and one huge order of pot. and you could eat this whole bag? megan: yeah, i could eat that whole bag. lemonis: and not even be fazed? megan: not even be fazed. lemonis: but first, don't try this at home. i mean, if somebody drank this, they'd be... cindy: oh, unh-unh. lemonis: unh-unh. cindy: you don't even want to take a finger.

you know what's not awesome? gig-speed internet. when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party.

♪ lemonis: my trip to the california desert was eye-opening, and it helped me get my head around just how big the pot industry was becoming. but not everyone is ready for the big time. and that's what brought me here to a quiet neighborhood in orange county, not a marijuana plant in sight. [ knock on door ] leani: hi! lemonis: hi. leani: i'm leani. lemonis: i'm marcus. leani: nice to meet you. cindy: hi, marcus. lemonis: nice to meet you. cindy: i'm cindy. lemonis: i'm excited to see what you guys are working on. cindy: we are so happy to have you here. we're very excited. leani: cindy pinzon and leani posad are best friends. they think they've cooked up the next big thing in edible pot with their company, treat yourself. cindy: we make healthy edibles that happen to have cannabis in them. lemonis: vegan, gluten-free tarts -- very california.

okay. so, can i open this? cindy: yeah! definitely. lemonis: okay. all right. so, it's literally a little pop tart. cindy: yeah. hi, there. would you like to try a strawberry rose? they're vegan and gluten-free. lemonis: hoping to attract first-time users, they've kept their tarts low in thc and cbd, the two main ingredients in pot. cindy: for the minis, it's 10 milligrams cbd, 10 milligrams of thc. lemonis: it doesn't get any more startup than this. they do everything -- packaging, deliveries, and all the baking out of this very tiny kitchen. cindy: so, we've already pre-measured... lemonis: it's time to channel my inner chef. the cops aren't going to show up, are they? leani: hopefully not. lemonis: okay, good. cindy: i can't guarantee it, but... leani: yeah. lemonis: oh, that's good. they start with a mixture of coconut oil and cannabis extract. a little goes a long way, seriously. you didn't put a lot in there, 'cause it's so clear. leani: mm-hmm. cindy: it's very concentrated. lemonis: i mean, if somebody drank this, they'd be...

cindy: oh, unh-unh. lemonis: unh-unh. cindy: you don't even want to take a finger. lemonis: next, we add maple syrup, chia seeds, almond extract... smells good. cindy: mm-hmm. lemonis: ...and flour. speed it up? leani: do you do a lot of baking? lemonis: i do. a little secret nobody knows. but my baking doesn't have any of, uh... cindy: right. leani: not yet, anyway. lemonis: each tart costs about $1.27 to make. they wholesale them for twice that amount. not too bad. cindy: the medicated version has a one-to-one ratio of cbd to thc. lemonis: cindy used to be an actress. leani was a police dispatcher. avoiding pot was part of her job. leani: it was a very educated decision for me to actually try it for the first time. i had, for many years, had a very strong stance against it. i was one of those people who would roll my eyes when people would say cannabis is good for you. that was my reaction. lemonis: right, yeah. sure it is. now, it's a labor of love. and i mean labor.

cindy: and then we head over and we start rolling. lemonis: it takes them an hour to make just 30 tarts. and at that rate, there's no way for them to compete in california's booming edibles market. and that's not the only obstacle. i love the vegan, gluten-free, soy-free, refined-sugar-free. i love this idea. i love the name. i love the logo. so you have me on this side of the package. cindy: yes. lemonis: but on the other side, i see a problem. "great for menstrual cramps, relaxation and inflammation." cindy: yes. lemonis: why did you choose to alienate men from the product? cindy: we just wanted to make something that was female-friendly. lemonis: female-friendly, or totally female-directed? cindy: female-friendly. lemonis: by the way, every product in the world should be female-friendly since more than half of the people that buy things are females. leani: yes. lemonis: so, let's start with that. but i feel like with some of the vernacular, is almost like saying if you are a man, put it down.

cindy: mm-hmm. lemonis: i love the enthusiasm that the ladies have in trying to craft something where they think there's a hole in the market. there's clearly a void. i worry about small entrepreneurs like this in california who think this green rush is going to solve all of their problems. if they're wrong and they miscalculate, what's the backup plan? woman #3: is it gluten-free? cindy: mm-hmm. woman #3: they're all gluten-free? lemonis: they have their work cut out for them. edibles and concentrates make up a third of the market, and there are hundreds of products on the shelves. competition is fierce. so to see just what the ladies are up against, i headed to one of the largest makers of marijuana edibles in the country, kiva confections. they're headquartered in oakland. think willy wonka for weed. chocolate everywhere, bars, blueberries, espresso beans.

how long have you been in business? kristi: since 2010. lemonis: kristi knoblich runs this edibles empire. kristi: that's our tangerine dark-chocolate bar. currently, we offer products to about 960 dispensaries throughout the state. lemonis: 85 employees crank out over 1,000 pounds of pot-infused chocolate a day. it would take cindy and leani eight months to make that many tarts. and all that takes a ton of this. i want to be like santa claus. kristi: yeah, these are about 40 pounds. lemonis: i may not get pot, but i can't ignore the numbers. kiva's already a multi-million-dollar company. and next year, once recreational sales begin, they're expecting their revenue to double... cindy: we have cherry almond, which is the other flavor that has a higher... lemonis: ...a giant compared to treat yourself. you know, it's clear that you guys have a great idea.

you are passionate about what you do. it's still small, right? cindy: yes. leani: mm-hmm. lemonis: are you too late to the party? cindy: we don't think so. there are bigger companies, but they're not creating the products we're creating. lemonis: what is your ultimate goal in this whole process? cindy: oh, man. like, big dreams? like, sky's the limit? lemonis: big dreams, the biggest you can come up with. cindy: we want to be a global brand. we want to be everywhere. lemonis: i think these bakers could make some serious dough. let's do the math. nearly 8 million people voted to legalize recreational pot in california. let's suppose a third of them buy edibles. that's a potential market of more than 2.6 million customers. if just 1% of them bought one treat yourself tart every week for a year... you would do $3,461,000 in business. leani: yep. that's exciting. lemonis: y'all better get... leani: yeah! cindy: awesome, right? that's good, right? lemonis: their first step? start selling.

today's a big day. cindy and leani are pitching their product to one of l.a.'s top dispensaries. and i'm going to drop in. what could go wrong? josh: these are going to be a little bit of a struggle... lemonis: plenty. that's coming up. but first -- kid in a candy store? not quite, but i was impressed. do i call that a pot store or marijuana store? adam: you can call it whatever you want. i call it the future. lemonis: wow, this place is cool!

♪ lemonis: in california, there may be no easier place to buy weed than los angeles. with more than 1,000 pot dispensaries, the city of angels has a devilish side. i came here because after seeing how marijuana is grown and turned into edible treats, i wanted to know more about how it's bought and sold. i've never been in a pot store, ever. and i'm honestly a little nervous.

man #2: why? lemonis: i don't know if i want anybody to see me going in. look, i don't judge people for using marijuana. that's a personal preference. but at the end of this journey, what i want to decide is do i want my money in here, and more importantly, is it a good investment for other people? is there really an investment opportunity here, or is it all a big risk? i chose a dispensary on santa monica boulevard, a place called medmen. how are you? adam: good morning. lemonis: i'm marcus. adam: adam. lemonis: nice to meet you. adam: welcome to medmen west hollywood. lemonis: adam bierman is medmen's co-founder and c.e.o. do i call that a pot store or marijuana store? adam: you can call it whatever you want. i call it the future. lemonis: wow, this place is cool! it was definitely not what i expected. medmen was open, airy, and modern -- nothing seedy about it. adam: there's no bars on the windows. there's no guy with a gun at the front. you're walking in, we're open to the community. lemonis: i like the design. there were ipads everywhere loaded with information

right next to gizmos that let you see and smell before you buy. adam: this allows the consumer to actually see it through a magnifying glass, to smell it through a little door that slides open there. lemonis: this door right here? adam: yeah. so, you would actually stick your nose in there. lemonis: i caught a whiff of madmen's strategy -- more style, less stigma. was it just window dressing, or would it entice customers to actually pay more? have you ever been in a cannabis store before? crystal: i have, but not one as nice as this. lemonis: what do you think of it? crystal: it's amazing. yeah, it's really cool. lemonis: crystal jane says she started using medical marijuana three years ago. crystal: this is my dog, by the way. lemonis: oh, hey, dog! how are you? would you expect the pricing in here to be higher or lower based on the environment? crystal: based on the environment, i would say this is, like, a very high-class kind of joint. lemonis: so, how much do you normally buy? just to get a comparison. crystal: yeah. maybe --

i think that the term is called, like, an eighth. lemonis: an eighth, okay. what would you normally pay for an eighth? crystal: like, 40 bucks. lemonis: $40, okay. how much is an eighth here, on average? $65. crystal: okay. so it's nicer. lemonis: yeah. crystal: higher quality. lemonis: i guess that window dressing works. adam: so, this renovation was completed about nine months ago. in those nine months, we have doubled our average customer count on a daily basis. up to 180 people a day are walking through this store right now. lemonis: the medmen formula is adding up. bierman says those 180 customers spend an average of $85 each per visit, meaning this one store pulls in more than $15,000 each day. how many locations do you have? adam: so, there's five in southern california, four in new york. lemonis: they look just like this? adam: so, they all will, ultimately, look like this. lemonis: but there's more to madmen than just a pretty face. it has its own capital fund. they've already raised $60 million from investors,

and they're looking for more. adam: think of us as the four seasons. lemonis: okay. adam: and imagine if the four seasons had a private equity arm that also bought hotels. lemonis: and then converted them? adam: and then signed a management contract with the four seasons to run them. so, our private equity firm will, essentially, go out and buy something like this... lemonis: okay. adam: ...and then turn around and sign a management contract with our management company. lemonis: who would've thought a pot company would be that complex? this is the new world of cannabis in california. so if i get a license, i should call you? adam: you should. lemonis: when it comes to its bottom line, medmen have another big idea -- cut out the middleman. how are you? i'm marcus. damian: marcus, i'm damian solomon. nice to meet you. lemonis: nice to meet you. what do you do here? damian: i'm the director of cultivation for medmen. lemonis: dispensaries usually pay from $1,500 to $3,000 a pound to outside suppliers. but medmen can grow its own for under $1,000 a pound.

do i need to get dressed like you? damian: yes. you have stuff here ready for you. and it's just part of our quality assurance and quality control. lemonis: yeah, yeah, yeah. damian: these are the different strains. so, you can see there's a strain sour banana, green crack, tangie dream, euthanasia. lemonis: yeah, that one's probably pretty mild. it's a balancing act cultivating strains and catering to customers. how do you measure demand? damian: being tied to retail dispensaries, we're able to then get that data very quickly. we're able to analyze the metrics that we get from the retail side for the point of sale. lemonis: is it that sophisticated? damian: it's getting that sophisticated, yes. i'm going to get the feedback from the consumer that says, "i really want this taste. i really want this flavor." and therefore, we have to then change our production cycles to meet the market needs. this is just like any other business. lemonis: i had one final question for adam. if pot is so lucrative, why isn't the big money investing? how many traditional private equity firms

would love to be in this space, but can't stomach the repercussions of getting in this space? adam: most of them. lemonis: and why is that? adam: because their hands are tied, because they're running legacy funds that have vice clauses in their fund that disallow them from doing it. lemonis: because pot is still illegal under federal law, big pharma, tobacco, and other giants -- they're sitting on the sidelines... for now. adam: you don't have many people competing. it's the most inefficient market of our lifetime. lemonis: because people see the risk of the federal government not really allowing it, and wondering if they're going to flip flop. adam: i welcome the perception of that risk because it allows me to run as far and as fast as i can. lemonis: i thought adam was a very smart guy, very sophisticated. he understands his business. i would've never imagined that the retailing of marijuana would ever be this slick, this well-merchandised, and this lucrative. prior to going into the store, i would've never contemplated investing in this concept.

but after seeing the frozen goods, the beverages, the consumerables, this is a real business -- a real business with a real retail footprint. you may not like it morally, but you definitely have to pay attention to it. up next, chasing their dream one edible at a time. if this doesn't work, you've lost the money and you have no income. cindy: right.

we have one to two fires a day and when you respond together and you put your lives on the line, you do have to surround yourself with experts. and for us the expert in gas and electric is pg&e. we run about 2,500/2,800 fire calls a year and on almost every one of those calls pg&e is responding to that call as well. and so when we show up to a fire and pg&e shows up with us it makes a tremendous team during a moment of crisis. i rely on them, the firefighters in this department rely on them, and so we have to practice safety everyday. utilizing pg&e's talent and expertise in that area trains our firefighters on the gas or electric aspect of a fire and when we have an emergency situation we are going to be much more skilled and prepared to mitigate that emergency for all concerned. the things we do every single day that puts ourselves in harm's way, and to have a partner that is so skilled at what they do is indispensable, and i couldn't ask for a better partner. ♪

-best friends cindy pinzon and leani posad are working around the clock. the duo behind treat yourself is preparing to pitch their marijuana-infused tart. the hustle is real. and so is the risk. how much have you put in? cindy: around $15,000. lemonis: it's pretty much everything you guys have. leani: everything we have, yeah. cindy: yeah, yeah. lemonis: if this doesn't work, you've lost the money and you have no income. cindy: right. lemonis: well, you better get to work. cindy: yeah. and then, i did pack some unmedicated in case they want to try. leani: that's a good idea. cindy: should we bring that? yeah, okay. lemonis: they're leaving their tiny home kitchen for the big city, hoping to sell their tarts to medmen, the popular dispensary chain in los angeles. they're barely breaking even. they need this. who's excited? leani: we're excited! lemonis: i'm no pot expert, but i know a good pitch.

so i caught up with them outside the store in west hollywood for one last pep talk. what i wanted to do is just come for moral support, because i understand the stakes that you guys have and how enthusiastic you guys are. do you feel prepared? leani: yeah. cindy: yes. lemonis: what did you change about your presentation from before you met me to now? cindy: the main thing is to really hone in on letting them know one of our main goals is to increase their margins on our products. lemonis: all right. leani: all right! lemonis: kick ass. let's go. leani: thank you. lemonis: high five. cindy and leani are meeting with medmen's head buyer. cindy: hi! josh: hey, how's it going? i'm josh. cindy: so nice to meet you. leani: leani. josh: nice to meet you. you guys want to come back, and we'll... cindy: yeah! lemonis: it's a big deal just to be here. josh is flooded with as many as 40 pitches every day, but only 3% of those products make it to medmen's shelves. the way you kick off this pitch? give him a sample. no pot, of course. he's on the clock. josh: it's delicious. cindy: thank you.

josh: you could've blindfolded me. i would've thought this was, like, some kind of regular pop tart. lemonis: so far, so good. cindy: one of our main goals for you guys is to create larger margins for you compared to... lemonis: margins, packaging, product quality -- i like what i'm hearing. but i saw this one coming. cindy: on our packaging, we wrote that are products are good for menstrual cramps. josh: sure. cindy: i'm sure you read that. is that going to make some male consumers shy away from it? josh: yes. no men are going for that. you might be able to find more delicate words. cindy: and honestly, part of it was a shock factor. it's because we, at the time, felt so underrepresented. lemonis: okay. i know i said i was just here to listen, but i have to step in. that's part of your sales pitch, that it was a shock factor? cindy: i mean, it's real! i don't know. lemonis: it could be on there, just not the first one. i'm not convinced he's buying what they're selling. josh: what are the -- what's, like, the next steps look like? like, when do you think you're going to maybe have a few more employees?

cindy: i would say in the next four weeks. josh: okay. cindy: yeah. josh: i mean, you know, it's hard for me to say off the top -- like, i know setting this on my counter downstairs, it will draw attention. cindy: yeah. josh: but that's not enough anymore, you know what i mean? so i kind of have to just dig a little bit deeper. cindy: yeah, definitely. lemonis: for now, it's wait and see. but in my mind, they missed some opportunities. i never heard you say, "we're already prepared. we know about the regulations, and we can scale." you didn't really -- objection, response, objection, response. cindy: okay. lemonis: whether this is the cannabis industry or the cookie business, it shouldn't matter. the business has to... they need to keep their eyes on the prize -- the $3.4 million that treat yourself could generate in a year. that's the possibility if you do an average job and you can produce. cindy: right. lemonis: you need to keep that number in your mind, okay? cindy: okay. leani: i like it, yes. lemonis: deal? cindy: yeah, deal. lemonis: okay. i'll see you guys. good luck.

leani: thank you. cindy: thank you so much. lemonis: i left the women from treat yourself and headed up to berkeley... for a glimpse at the future of pot, if only i could find it. andrea: hi! lemonis: hi. i'm marcus. andrea: andrea unsworth. lemonis: how are you? andrea: welcome. i'm well. lemonis: nice to meet you. customers don't have to worry about coming here. this is a delivery service called stashtwist. it brings medicinal and soon, maybe recreational, pot right to your door as easy as ordering a pizza. woman #4: your order. thank you. man #3: awesome. thank you so much. lemonis: and the menu is vast. andrea: concentrates of all variety, from tinctures to dabs of shatter, rosin, hash -- kind of keep it old-school. lemonis: yeah. andrea: pre-rolls are a big one as well. lemonis: what's a pre-roll? is that also known as a joint? andrea: yes. lemonis: okay. we'll just call it a joint. pre-roll's like some mba word. it's a joint. let's just call it a joint. andrea unsworth has an mba

and used to be an analyst at moody's, the big credit-rating agency. she feels strongly that her presence as a woman is essential in an industry that's dominated by men. and how hard is it being a woman in this business? andrea: i'd say -- i'd say it's an advantage here to be a woman, honestly. lemonis: you do? why? andrea: yeah. andrea: i think it's just a natural -- you know, we're healers. you go to mom when you're sick. lemonis: i agree with that. andrea: so, we've got an order here going out to megan. she's got our flour. she's actually got a really good mix here. lemonis: $135. andrea: oh, yeah. lemonis: what's the average-size order? andrea: $150, i'd say, is. lemonis: and so, what do you do on your website to try to drive that average sale? do you think about the size of their cart? andrea: our photos have to be on point. that's a big deal. lemonis: so, what's your answer? what do you do to grow the average size of the cart? andrea: a lot of advertising, so our newsletter's huge. lemonis: you know i'm going to press you. andrea: i know. i know you're looking for something very specific. lemonis: no, i'm looking to see if you're doing it. so, do you have suggestive selling in your checkout cart? andrea: we are -- we're working on that, 'cause we need some tech help. lemonis: so there's clearly room for improvement online. but now, i wanted to find out how the delivery side worked.

andrea: okay. i believe matt is going to take you. matt's getting ready over here. lemonis: you're going to take me on a delivery? matt: i guess so. lemonis: are you excited? matt: yeah. lemonis: all right, let's do it! andrea: all right! lemonis: i never thought i'd end up delivering pot, but i wanted to find out who's on the other end of that order, so i joined matt for a 10-mile ride north of berkeley. how many runs do you make a day? matt: oh, anywhere between 5 and 20. lemonis: wow! matt: yeah. lemonis: she got a lot in that box. matt: yep. she usually has big orders. lemonis: how many times a month do you come to this delivery? matt: like, twice a week, i'd say. lemonis: twice a week? matt: yeah. megan: hi, matt! matt: hi! megan: how are you? matt: how's it going? lemonis: how are you? i'm marcus. megan: hi, marcus. it's a pleasure to meet you. lemonis: nice to meet you. matt: here you go. megan: thank you so much. lemonis: why do you choose delivery as opposed to going to a dispensary? megan: i choose it for convenience. i'm a parent. i can't always go to a dispensary. if a kid's with me, that's impossible.

lemonis: right. megan: i also like the fact that it's discreet if it needs to be. lemonis: megan dooley fisher told me she uses cannabis to treat the pain she suffers from her auto-immune disease. and she uses a lot. how long will this last you? megan: okay. well, i'm probably a far heavier user than almost anybody out there. lemonis: okay. megan: this is 250 milligrams. i could eat this right now and go on with my day. you would never know anything. lemonis: 250 milligrams? megan: i'll eat that whole bag. lemonis: okay. so, i've never used. how much could i have? megan: i would say that you wouldn't even have one of these. you would have to start with a 2.5 milligram. lemonis: and you could eat this whole bag? megan: yeah, i could eat that whole bag. lemonis: and not even be fazed? megan: not even be fazed. lemonis: megan spends a ton of money on her orders, but how much does andrea unsworth make on those deliveries? it's $135. for this discussion, we'll say it's got a 60% margin. andrea: okay. lemonis: so we'll call it $75. andrea: yeah. lemonis: what are the expenses that you have to pay for out of the $75? andrea: right. lemonis: let's start with what it costs to deliver.

andrea: so, let's say average -- around 20 bucks an hour is the average wage for folks in the industry. lemonis: if andrea's margin is 60% or about 75 bucks on this order and she aims for 15 deliveries a day, she grosses about $1,125. after she pays her driver $160, she clears $965. that's almost 7 grand for a 7-day-a-week business. that's not bad. andrea: yeah. lemonis: and if the rent's $2,000 a month... andrea: yeah. lemonis: ...you're doing okay. andrea: doing okay. lemonis: i haven't been able to get my head around the repercussions of putting money in an industry that still isn't federally legal. andrea had a poise about her and a confidence about her and a knowledge about her that i would invest in her in any business. but not this one. up next, the desert town goes boom. you paid $1 million an acre. dan: yes. lemonis: is that a lot for this? dan: that's way over. that's a lot. lemonis: are you just not good at real estate?

man #4: so, this is our approach to making cannabis more approachable. lemonis: call it a sign of the times... greta: okay, a toast to desert hot springs and our future. lemonis: ...a dinner party unlike any i've ever seen. all you can eat, drink, and smoke. man #5: peer pressure? is that what it is? dan: yes. everybody's doing it. lemonis: enough high-grade pot for a grateful dead tour.

the men and women here are owners and operators of the huge indoor marijuana farms in desert hot springs. they say federal laws that criminalize pot are out of step with the times. greta: i'm a republican, and i've been a republican my whole life. this is not me being a radical. this is having my eyes open. lemonis: greta carter is building a 30,000-square-foot facility, hoping that washington stays out of her way. greta: we all know. the people know. they're smarter than what our politics are at right now. but we know that this is -- the time is coming. lemonis: the growers here face the threat of a crackdown. but it's not slowing them down. dan: my facility's going to be 170,000 square feet of indoor medical marijuana. lemonis: dan osbourne is the owner of clc brand labs. i met up with him at his grow-house. and how much money have you invested in the business so far? dan: about $6 million. lemonis: $6 million? dan: and this year, we're going to spend $10 million.

lemonis: spend an additional $10 million, so you'll have $16 million total invested? dan: yes. lemonis: included in his spending spree, $3.8 million for just 3.8 acres of land. you don't need a calculator for this one. you paid $1 million an acre. dan: yes. lemonis: is that a lot for this? dan: that's way over. that's a lot. that's a lot. lemonis: are you just not good at real estate, or...? dan: no, i'm good at investment. lemonis: that philosophy isn't new. sometimes you've got to spend money to make money. and you project that you'll do $22 million in 2018, then? dan: yes. lemonis: is there that much demand? dan: there is, especially when it becomes legal, recreational. there's going to be a lot of demand. it's going to shoot through the roof. lemonis: big money requires bright lights. at clc, sunglasses are required. dan: here's your safety sunglasses... lemonis: okay. dan: ...'cause the light is very intense in these rooms. lemonis: okay.

i feel like i'm ready to go, like, on a safari with you. dan: yeah, all day long. it's fun. lemonis: let's do it. for dan, cultivating pot is all about the tlc. dan: well, i'm more of a hands-on. you've got to feel the plant, look at it. you've got to water it by hand. it takes quite a bit of personal attention. lemonis: so, how much inventory is in here? dan: about $400,000 worth. lemonis: holy [bleep] wow. just another day at the office for dan's lead grower, jeanette. you realize you're in a room filled with what the federal government considers illegal? jeanette: yeah. and i think that's what makes it more exciting. lemonis: it does? jeanette: yes. lemonis: do you know, it's funny, people that don't know the industry like me... jeanette: mm-hmm. lemonis: ...i used to think that the marijuana was actually this. jeanette: you know, that's what everyone thinks, too. lemonis: i didn't know it was this. jeanette: yeah, the bud. dan: gently touch them, and then touch your fingers. lemonis: ooh, it's sappy. dan: yeah. lemonis: is that how you know? dan: uh-huh. that's good. and i'll show you what gives you this...

lemonis: ooh, strong! a pot user in high school, dan says he gave it up for nearly a decade. how come? dan: i was a minister for eight years, and i was raising kids. lemonis: you were a minister of a church? dan: mm-hmm. lemonis: do people from your church know you do this now? dan: no. no. lemonis: what do you think they'd say? dan: they would be really surprised, i think. lemonis: then it was my turn to be surprised. dan: i voted against recreational use. lemonis: you did? dan: yes. lemonis: you voted against prop 64? dan: right. lemonis: tell me more about that. dan: you know, i'm a dad and a grandpa, so we've got a responsibility. i don't want my grandkids or my kids, you know, just walking into a store and buying medical marijuana and getting high. then, we have our 45,000-square-foot building. lemonis: when his buildings are completed, dan expects to net at least $30 million a year. but his success is coming at a great personal cost. dan: my son-in-law won't even talk to me because i'm in this business. he's a pharmacist in utah. and he's so against this, so... lemonis: well, that makes for an interesting thanksgiving. dan: well, i don't see them during thanksgiving.

lemonis: because of this? dan: uh-huh, because of this. lemonis: and you have grandkids? dan: uh-huh. lemonis: and so you don't see your grandkids, either? dan: no, i can't see them, either. lemonis: he won't let you? dan: no. lemonis: how hard is that? dan: that's tough. but when their kids grow up and they find out that their grandpa is in the medical marijuana business, they'll like it. lemonis: oh, they're going to love you just the same. dan: yeah, absolutely. lemonis: do you ever think about stopping? dan: no, no. i'm going to ride this business out until i sell it. lemonis: what's the end goal for you? dan: selling my company for $120 million. lemonis: you've picked that number of $120 million? dan: yeah. lemonis: $120 million sounds like a low number if you get to $35 million in earnings. dan: well, i'm not a -- i'm not a greedy person. lemonis: coming up, the dangers of dealing illegal weed. were you ever scared for your life? zack: yeah. i mean, you can't not be scared for your life with a gun to the back of your head for 20 minutes as some guy searches your apartment.

♪ lemonis: in california, buying marijuana legally is almost as easy as grabbing a gallon of milk. man #6: have a good one. man #7: thank you. have a good one. man #6: cheers. lemonis: but there's another side -- a multi-billion-dollar underground that continues to thrive. hidden inside an l.a. warehouse, a sea of black-market pot carefully grown by a man we'll call zack. would you call yourself a drug dealer? zack: no. i wouldn't. lemonis: how come? zack: 'cause it's just weed. the word "drug dealer" makes you immediately think of, like,

a violent guy with guns selling cocaine... lemonis: yeah. zack: ...when this is more of just a friend who has weed and his friends want weed. i'm not, like, on a street corner selling it. lemonis: he doesn't need to. zack has a steady client base he's been cultivating for 12 years, from dispensaries to everyday people. would it surprise me to know the customers you have today? zack: yeah. lemonis: professionals? zack: yeah. lemonis: white collars? zack: yeah. lemonis: yoga moms, soccer moms, the whole deal? doctors, lawyers? zack: yeah. lemonis: part of the reason you're facing this way and not towards the camera is that you know that it's illegal. zack: yeah. lemonis: right? zack: yeah. lemonis: and now, proposition 64 might put him out of business. reporter: prop 64 has one-handedly legalized... lemonis: so when the law passed, that night, election night, you're watching the tv with the rest of the world, right? zack: yeah. lemonis: what's the first thing that goes through your mind? zack: well, i'm going to probably have to get a real job soon. lemonis: why? zack: 'cause you can see it just taking out

any kind of black-market stuff. the prices have already gone down drastically. lemonis: how many pounds can you produce out of your facility? zack: we do about 16 every two and half months. lemonis: 16 what? zack: pounds. lemonis: six crops, five crops a year? zack: about five crops a year. lemonis: okay, so 5 times 16 pounds is 80 pounds a year? zack: roughly. lemonis: and you're selling it for how much? zack: about $2,000 a pound-ish. lemonis: so, $160,000 in revenue? zack: gross revenue. lemonis: after expenses, he and a partner net about $60,000 a year each, tax-free. but there are other costs. have you ever been held up at gunpoint? zack: yeah. i had a home invasion. two guys came in with guns. lemonis: how much did they take? zack: they took about $3,000. lemonis: were you ever scared for your life? zack: yeah. i mean, you can't not be scared for your life with a gun to the back of your head for 20 minutes as some guy searches your apartment. lemonis: zack's future is a game of wait and see.

if taxes push the price of legal weed too high, his business might survive. you can undercut the retailers. zack: yeah. i can already come in 20% lower than the legal shop. lemonis: and so, we can call it whatever we want, but at the end of the day, you're a businessman. zack: exactly. lemonis: is that how you think about it? zack: i think about it like that, yeah. just making money. you're trying to just survive, honestly. lemonis: look, i don't like the fact that he's engaging in illegal activity. but what i understand is that he's trying to generate a living for himself in a state that's now legal. nice to meet you. zack: you, too, brother. lemonis: thank you. clearly a smart gentleman who understands risk and reward. and he knows where the lines are, what not to cross. but he's also smart enough to know that he needs to be thinking about where his next income stream's going to come from. it's a striking turn of events when legalized pot threatens to put a drug dealer out of business. but marijuana isn't like other industries. by 2021, it's projected to be worth more than $20 billion.

leani: thank you. good morning. lemonis: for some, it's already paying off. cindy: so, that's why we bring our non-medicated samples, so you can try it and... lemonis: remember cindy and leani? they scored with their sales pitch. josh: thank you, guys. cindy: you're welcome. josh: i think you guys are going to do really well here, and i look forward to seeing you guys in the other stores, too. cindy: awesome. lemonis: treat yourself tarts are now selling at madmen's newest store in santa anna. i came to california wary of a business with a criminal past. i'm leaving convinced its future is already here. i'm marcus lemonis. ♪

♪ lemonii'll take you deeppecial epiinto the mountainst," to the marijuana capital of america. you'll meet the pioneers. -this was the poorest county in the united states when we came here. lemonis: is the depression of this area the reason that cannabis came to be? yes. [ indistinct shouting ] the sheriff trying to bust the outlaws. how much organized crime is running through these hills? there's a lot of it. anywhere where they can grow and make money, they're going to come. the growers betting on the future of pot. alex: we've invested everything in this. your live savings, everything you have. this definitely could be a complete crash and burn. lemonis: it's all way up in northern california,