Every emerging industry is expected to embrace franchising at some point. The cannabis industry doing this is not surprising. In 2019, after the Franchise Times selected ONE Cannabis as the top cannabis franchisor in the country, other commercial cannabis franchises began to make waves, attracting widespread interest and attention and gaining greater credibility at the same time.
Today, there are dozens of licensed cannabis franchise establishments in states where cannabis is legal. Each month, the Cannabis Intelligence trading database registers a higher number than the previous one. All thanks to the growing number of approved cannabis laws in North America.
The top three cannabis franchisors in this region are Dutch Love Cannabis with 27 stores, Cookies with 26 stores, and Inner Spirit Holdings with 39 stores. Others include Uncle Sam’s Cannabis, The Peak Dispensary, ELEV8 Cannabis LLC, Curio Wellness, and Eufloria LLC.
Cannabis Franchise Overview
The cannabis franchise system is similar to franchising in other industries. The main difference is that cannabis franchises may differ from state to state due to federal drug prohibition. In contrast, franchise laws for other industries are uniform across all state lines.
The various complexities of cannabis legislation are perhaps the biggest barrier to entry into the cannabis industry. Compliance rules and regulations in this sector are almost on par with those in the arms and oil sectors.
Franchising helps make a market more accessible to its customers. Cannabis dispensaries and stores, as well as the industry’s production niche, are easier to navigate once they’ve been franchised. Cannabis franchising opens the door to many opportunities that operators can benefit from. It provides new businesses with a way to learn from existing successful businesses.
Currently, the US cannabis industry consists mainly of independent stores that are not yet exploiting the full potential of their business.
Federal Laws and the Cannabis Cannabis Franchise franchisors and franchisees operate at the risk of being shut down by the federal government at any time. The Federal Trade Commission (FTC) is responsible for administering and regulating the federal franchise laws of the states.
Cannabis companies cannot register with the FTC. Therefore, trading in these franchises is a crime. However, some states have legalized the sale of cannabis and as such allow certain cannabis businesses to be franchised. Some of the requirements to become a franchisee include:
All three conditions must be met for a business to be franchised. At the state level, franchising laws are not uniform. Within a state, each municipality may have different franchising laws than neighboring municipalities. For this reason, some cannabis operators prefer certain states over others for franchising.
It is important to point out that not all legal states have cannabis franchise laws. Only 10 out of 36 do. For an industry already awash in rules, regulations and restrictions, it’s better than nothing.
Franchise businesses in the United States
Curio Wellness revealed last year that it would transition its retail operations under a new identity called Far & Dotter. This new name would be registered in different states, including Illinois, Virginia, Missouri, Ohio, Michigan, Massachusetts and New Jersey. Not all of these states have requirements for franchise registration. Florida is the only state where they should file a formal application to sell to franchises. CBD franchises are currently federally legal, but how long will their moat last if we see full federal legalization of cannabis.
Cannabiz Media’s Cannabiz Intelligence reports that Ontario, Alberta, California and Oklahoma have the most active and pending cannabis franchise licenses in North America. The ranking published on the site shows that Ontario is currently in the lead with 35 permits in total. Alberta is next with 23 and California with 18. Washington, Manitoba and Maryland have one each, putting them near the bottom of the list.
The merits of franchising in the cannabis industry
Franchisors and franchisees have a lot to gain in the long run. For example, franchisors would get an out-of-the-box solution to solve capital and labor related expansion issues. In other words, the franchisor can expand their brand without wasting too much time testing and trying different strategies. Through this process, debt is avoided.
The cannabis franchise would allow hundreds of businesses to broaden their horizons during this delicate period. This would help franchisors develop thick footprints in global cannabis markets before the federal government finally legalizes cannabis. When the country finally has legislation to fully decriminalize cannabis, these franchisors will more or less be the brand of choice for millions of consumers across the country.
Franchisees, on the other hand, have the opportunity to network with other cannabis businesses. The feeling of being alone would be eliminated. These businesses and their owners would receive support, advice, working solutions and even training from their franchisors. They would only pay a fixed amount to access their franchisor’s assets, such as their brand and registered systems. In fact, franchising helps take many risky decisions away from cannabis entrepreneurs. Therefore, more time can be spent solving more critical tasks.
The future of franchising in the cannabis industry in the United States, Canada, and indeed the world is bright and promising.
As soon as cannabis is decriminalized and totally decriminalized in the United States, it is inevitable that the concept of franchising will be more important than it is now.
Canada has the most franchises, but it probably won’t retain that rank once cannabis is legal in America.
The main challenge is to find a balance between federal and state cannabis and franchise laws to ensure that franchisors can continue to expand their impact in cannabis-legal states.
Note that franchising is not a cheap process. Franchisors charge royalties and marketing fees, which are high most of the time. And franchisees still have to pay other fees and taxes. At the end of the first month of franchise, there is a high probability that the business will break even. However, it is improving across the board.
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