Dispensary 33’s West Loop Chicago location in November 2021. Credit: Dispensary 33 / Instagram

Miami-based Ayr Wellness continues its quest to become a major cannabis industry player with a recent $55M agreement to purchase two Chicago-based Dispensary 33 locations, the city’s only remaining independent cannabis operation.

“Our stated goal is to be the largest scale producer of high-quality cannabis in the U.S. and just deliver an excellent consumer experience,” AYR CEO and founder Jon Sandelman told Grown In about his latest acquisition.

In operation since 2018, Sandelman’s AYR has won notice as one of the most acquisitive companies in the industry. Since the start of 2021, Grown In the company has made dispensary and cultivation acquisitions in Arizona, Florida, Illinois, New Jersey, Ohio, and Pennsylvania.

The D33 acquisition brings the number of AYR-owned dispensaries to five in Illinois. State regulations limit owners to ten. 

“We aim to become a meaningful brand in that state,” he said of Illinois. “We need scale to have our brand resonate in the consumer’s mind. So far, Illinois has sold over $1.4 billion in legal pot in 2021, and with 110 dispensaries, that adds up to $13 million per location this year.

This week’s D33 purchase builds on AYR’s efforts to expand in Illinois, which started in August with the acquisition of two stores in Quincy, Illinois and with the company’s social equity partner, Land of Lincoln Dispensary LLC, which was selected for a dispensary license in Bloomington, Illinois, in the state’s June 29 lottery.

Dispensary 33 co-owner Bryan Zises, who shares ownership with his brother Zack and another partner, Paul Lee, told Grown In that D33 was not sold to the highest bidder but to the best ethical match.

AYR’s belief in “premium quality cannabis and premium quality employees” impressed Zises and his partners, he said.

The D33 deal provides the Zises brothers and Lee with $12 million of cash, $3 million of seller’s notes and $40 million of AYR stock. An additional earn-out is possible if certain Adjusted EBITDA performance is achieved through Q3 2022, according to a news release from the company.

“We had been approached by almost every company, if not every company, and did not ever find a group that really had a perspective and ethic, or business model, that made sense to us,” Bryan Zises said. “People matter to us, our employees matter to us, and the product matters to us. It’s hard to find that core, basic, fundamental value in corporate structures but we did for the first time.”

Zises added providing opportunities for growth were also part of his decision to sell the company. 

“There’s only so much flourishing you can do as a mom-and-pop shop,” Zises explained. “There’s only so much opportunity for growth in a small company like ours. So, when the opportunity arose, and a company comes at us with a value system and ethic that matches, and you’re presented with, not the highest offer we got but a good offer, no one’s going to complain.”

Last September, Sandelman told Grown In that talent and culture are part of what he looks for when he’s considering a purchase. Last week he told Grown In that he found D33 compatible in talent and philosophy.

“A big part of why we were attracted to D33 is the Zises brothers,” Sandelman said of the acquisition. “They were extremely good operators and AYR feels fortunate to have them as part of the team.”

Zises clarified there is no plan to stay on beyond a six to ten-month transition period, 

“I don’t know that we’re going to be staying with AYR,” he added. “I do know that we’re going to be staying and operating the business for the next six to ten months. Zachery and I are [not] and our third partner, Paul Lee, is not joining AYR. We’ll continue to manage the store and our leadership team will continue to be the team on the ground day-to-day to make sure things stay as smooth as possible.”

Zises expects AYR to keep the D33 name.

“They are a smart bunch, and I don’t see them tossing that away for some corporate concept that they’re going to impose upon us,” Zises said. “They don’t have operations or retail staff like we are, that’s why they’re buying us. I wouldn’t be surprised if they take the D33 name and extend it to other regions and other states. I think they understand we’ve done a pretty good job and it means something. But I’m not in charge. This is absolutely for their thinking.”

D33’s River North and Clark Street stores will remain in their current locations as far as Zises knows.

“It’s tough to move stores,” Zises added. “They have not shared any notion at all with me about changing locations, names or anything like that. They are buying what we’ve created,” he said. They are not undermining what we’ve created.”

While MSOs are growing fast, Zises said he’s 100 percent certain smaller operations can survive in the industry.

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Deborah Bayliss

Award-winning journalist with a career that started on Chicago’s South Side providing general news coverage. In addition to Illinois, coverage regions include Georgia and Louisiana where I provided city...