Marijuana Business Magazine March 2020

Marijuana Business Magazine | March 2020 76 Franchises are defined by three components: • Requiring a fee to the franchisor. • A license to distribute goods or services or operate using the company’s trademark or commercial symbol. • Providing a marketing plan or significant assistance in operating the business. “You want to make sure your business is not deemed a franchise without you knowing it,” said Gerhards, who is based in Philadelphia. Attorney Jennifer Stallings Dewey of Detroit-based firm Dickinson Wright said finding a team of consultants is key to avoid becoming an accidental franchise. Attorneys should be familiar with legal issues surrounding franchising as well as the legal complexities of compliance as it relates to cannabis. An attorney’s main concern should be that clients are fully complying with all relevant laws while also accomplishing their business goals. “Sometimes a franchise business consultant can be helpful to assist with this type of transition,” Dewey said. “Try to find a consultant that has experience relevant to cannabis—or at least a similar industry.” Dewey also recommends starting in just one state to ensure the company remains in compliance. If a company does intend to franchise, simplifying the business to its most important elements will help avoid compliance issues. A business owner might have a successful company with one or two locations, but if the proprietor goes from selling a product or service to selling the operating model or brand, it becomes a franchise, and the firm will need to fit that mold. Often, Dewey said, you have to describe details of your business to potential franchisees, which can be difficult if the business is amorphous. “You have to be really careful about how you set things up and your compliance because cannabis has regulatory issues and so does franchising,” Dewey said. “Franchising is great, but if it’s not what you intended, you’re not going to be meeting all the legal requirements.” GROWTH VIA FRANCHISING Denver-based One Cannabis has been working on establishing its franchise business for the past four years. The company, which recently merged with Denver-based Cannabis One, will franchise its retail stores under the Unity Rd. brand. “We spent the last year trying to develop a brand that would resonate in a crowded space and tell the franchise story of cannabis meets local business ownership,” said One Cannabis Chief Operating Officer Mike Weinberger, who previously was CEO of Maui Wowi, a franchisor with more than 500 stores. One Cannabis has 15 franchise agreements in five states and is anticipating that the first Unity Rd. franchises will open during the first quarter of 2020 in Colorado or California and by the fourth quarter in Missouri. The franchise fee for a Unity Rd. store is $100,000 for a single unit or $250,000 for three units. Franchisees also pay a 5% royalty fee. Franchisees receive up to 90 days of education, ongoing support, store design and access to the supply chain. “We are a franchise system just like any other franchise system,” Weinberger said. Because the total investment to open a store is between $1 million and $2.5 million, One Cannabis requires franchisees to have liquidity of at least $1 million. Retail Franchising One Cannabis CEO Christian Hageseth, top left, and Chief Operating Officer Mike Weinberger, top right, have franchise agreements in five states. Courtesy Photos