Cannabis: the most unlikely new industry to hit franchising?

Cannabis: the most unlikely new industry to hit franchising?

Welcome to a new frontier. An entirely new industry has broken upon the franchise world

Emerging franchises are commonplace and every year some interesting new spins on existing industries enter the world of franchising. But what if there was a market in its infancy that represented over $11 billion dollars in the United States alone in 2018? What if that same market was projected to exceed $23 billion by 2022? What if that market was still in the raw, emerging Wild West of its lifecycle with no “household names,” rare and fragmented expertise, no consistency or industry standards, and had never heard of franchising? My friends, that day is now, and that industry is cannabis. 

As the nascent cannabis industry inches into the mainstream market, the collective ears of global entrepreneurs are perking up. The highly-regulated sector boasts alluring possibilities for those savvy enough to break into the business with intention, but the obstacles between getting started and reaching the goal are challenging, to say the least. The emerging markets of the United States and Canada, for example, have taken very different approaches and the opportunity varies largely from market to market – not only at the national level but state to state, county to county, and city to city. Some of the differences range from full legalization to completely illegal.  Navigation of this complex opportunity is difficult and even savvy investors need a sherpa to reach the top of the mountain. Cannabis, meet franchising. 

Cannabis + franchising = a perfect marriage

The barrier to entry into the cannabis market is perhaps the most substantial of any market – driven by the complexities of the laws and the ever-changing rules that vary from one market to the next. Compliance guidelines rival the weapons and oil industries and far surpass alcohol. Regulations vary not just at the border, but at every level within a region, all the way down to municipality. It’s a convoluted operation that many are trying to breach strategically.

The ability to franchise a cannabis dispensary could be the answer to making the industry more accessible in its entirety, from cultivation to retail (or seed to sale). Instead of having to navigate the complexities alone, ambitious entrepreneurs can take advantage of years of success running compliant and profitable businesses within the cannabis space.

Unlike most industries with many options to look to for franchising, the emerging cannabis industry is just opening its eyes to its own possibilities. Pioneering concepts will be few and far between – many will try but the lack of systems and programs built on years of experience and tried execution in the industry will stifle most. To put this into perspective, given the life-stage of regulated cannabis there are only a few industry veterans who can claim they have a decade of industry experience. And, while they know cannabis, they don’t know what it really takes to get an emerging franchise off the ground. With the right franchise team in place, those who have navigated these waters from day one will have an opportunity to help usher in new entrepreneurs, add proven processes and offer the guidance of a franchise system.

The benefits of franchising in cannabis don’t just extend to new entrepreneurs. The cannabis industry is primarily made up of small, independent mom-and-pop shops that don’t have the bandwidth to truly realize their business potential. For example, if you take the total revenue of dispensaries throughout all of Colorado, the average location makes around $2.5 million a year in revenue. If you’re only generating $2-3 million in revenue, you’re not making enough money to have a full management team and cover overhead and compliance expenses. What you have is a job ̶  you open the store, run operations and close up at the end of the day. Franchising allows existing cannabis owners to benefit from ongoing support across all areas of the business, the power of a group when it comes to marketing & national brand awareness and access to several resources that will help them focus on growing the business, rather than working in the business.

When executed properly with careful consideration of all key elements of the business, getting a slice of this massive pie will be enough to elevate any business portfolio and lead the way for a new era in franchising.

ABOUT THE AUTHOR

Justin Livingston is VP of franchise development of ONE Cannabis, a U.S.-based cannabis franchisor. A Certified Franchise Executive (CFE), prior to joining ONE Cannabis, Livingston was the Vice President of Global Development at Coyote Ugly Saloon for four years, developing the international franchise program as well as launching their franchise brand in new markets around the world. Livingston is also the founder of Franchise Transformations – a franchise consulting firm that specializes in all aspects of franchising, including helping create robust franchise programs from existing independent businesses. Justin can be reached at justin@ocginc.com.

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