The Future of Franchises in the Marijuana Industry


Kelly Weimert

November 6th, 2017

Policy


If you’ve had your eye on the marijuana industry for any amount of time in the past few years, then it should be pretty clear that it’s an industry that’s bursting with financial opportunity. In fact, Colorado made $1 billion from marijuana alone in under nine months so far this year, and the year’s not even over yet.

The cannabis industry’s boom means more marijuana companies, more jobs, more money, and more opportunities for investors and entrepreneurs to capitalize on the industry’s success. And among the most prominent opportunities being explored by many, is the potential to invest in a marijuana franchise.

What is a Franchise?

In a nutshell, a franchise is a company that the original owners have sold the rights to so that additional businesses can be made using the same name and model with the goal of multiplying a financial return considerably.

For example, when McDonald’s began, it was nothing more than a single restaurant. But these days, of course, it’s a massive global franchise. No matter what McDonald’s you go to in this country, you’ll find the same menu, prices, and flavors because that’s essentially what a franchise is.

Once a company becomes franchised, the company’s business logo, name, and model can be adopted by third-party owners, called franchisees. And, as should be obvious from the McDonald’s example, it can be an extremely lucrative way to do business. But how that way of doing business applies to the complicated world of cannabis companies is another story.

Are Marijuana Companies Likely to be Franchised?

Like many things about the cannabis industry, the future of marijuana franchises is uncertain. Because the drug is still not legal on a federal level, a canna-business generally isn’t permitted to expand into different states. And because most franchises garner the bulk of their success from having a national market, a marijuana company’s inability to tap that national market makes things more difficult than if one is trying to franchise, say, a burger joint.

However, even though it’s currently a lot more difficult for a cannabis company to turn into a successful franchise that certainly doesn’t mean it’s impossible. A lot of brands in the industry are still pushing forward down the franchise road in an effort to reap its benefits down the line.

What Comes Before a Franchise?

While national marijuana franchises aren’t feasible at present, marijuana retail chains are.

Native Roots is a marijuana retailer in Colorado that currently has 16 locations statewide—the largest dispensary chain in the United States—and it’s seeing quite a bit of early success.

According to Josh Ginsberg, the CEO of Native Roots, the company’s success can be attributed to a relatively simple business model:

“If you’re in Aspen, in Longmont, in Trinidad—it doesn’t matter. You know what you’re going to get. We’re going for the Starbucks model, and it’s not because we want to be a behemoth. It’s because you get a vanilla latte and it tastes the same every time. … When there’s consistency—when you know you’re getting the same thing every time—that’s why you go there, and that what we want with marijuana.”

But Native Roots’ expansive early success doesn’t change the fact that cannabis companies still largely aren’t permitted to expand into other states where the drug is illegal.

What’s the Outlook for National Canna-Business Expansion?

Canna-businesses and entrepreneurs need to be creative and optimistic with pretty much every aspect of running a marijuana business due to complicated regulations, so it should come as no shock that many are taking that approach for the future of franchises as well.

Despite the legal complications, the push to create national marijuana brands is strong. For instance, MedMen, a cannabis investment firm in Los Angeles, recently purchased New York-based Bloomfield Industries—one of five organizations that is registered and licensed to operate a medical marijuana business in the state. And this isn’t the first time the firm made moves to signify a future national takeover.

In 2015, MedMen bought and subsequently remodeled an existing medical marijuana dispensary in Hollywood to adhere to the company’s distinct brand image—what MedMen’s CEO, Adam Bierman, calls “the Chardonnay mom.” In other words, folks who are curious about cannabis as an alternative to a glass of wine after work.

The company plans to infuse that brand into its aforementioned recent Bloomfield Industries acquisition, as well, in an effort to continue its nationwide expansion.

Bottom Line

Like most everything in the cannabis industry, the drug’s mixed legality and accessibility make franchising difficult, but not impossible. Due to that fact that marijuana businesses aren’t currently permitted to expand into other states, the prospect of a nationwide marijuana franchise isn’t yet viable. However, there’s no question that the cannabis movement is gaining steam—both recreationally and medicinally—and with that comes a substantial amount of optimism from entrepreneurs and investors who are planning for a franchise future even though it’s not quite here yet.

Kelly Weimert

About Kelly Weimert

Kelly is a full-time freelance writer based in Austin, TX. A happy hybrid of geek and hippie, when she's not nestled into her couch crankin' out crafty prose with her miscreant Chihuahua, you can find her frolicking outside to keep her sanity in check.


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