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5 Steps for Dispensary Owners Thinking of Partnering With a Franchisor or Licensor

Franchising or licensing are two options for the majority of dispensary owners who lack the resources to grow beyond one location.

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If you own a dispensary generating less than $2 million or even $3 million in revenue, what you have is a job -- you open the store each day, manage operations and close up at the end of the night. You’re not making enough money to afford a full management team and also cover overhead and compliance expenses. You don’t have the capacity to take the needed steps for sufficient growth or the funds to build a highly-skilled team to attain those goals.

Bob Riha, Jr. | Getty Images

This is the harsh reality many dispensary owner-operators. How do I know, you may ask? Because there are only a handful of dispensaries that have more than one location.

So, what do you do? It depends what your goals and needs are. There are a small number of companies that offer franchise and licensing options to independent dispensary and grow operators; partnering with either could be the most effective vehicle to help you meet your desired outcome.

Here’s what you need to do if you’re interested in either route:

1. Know what you’re investing in.

As a licensee, you are allowed to use another business’s brand name, logo and trademark or patented technology. As a franchisee, you are allowed the same use of the intellectual property in addition to a proven business model and ongoing guidance and support in all areas of the business.

The main differences between the two are control, level of support from the corporate office and access to proven systems, operations and relationships. Compared to franchisors, licensors usually offer far less training and ongoing support, little supervision and a less restrictive agreement. Licensors also typically don’t have oversight over how the licensee’s business is operated, limiting their ability to set their licensees up for success.

If you’re barely making a profit and could benefit from industry veterans guiding you on best practices, you might want to partner with a franchisor to gain a complete team of industry professionals who know the industry inside and out and are available to support you. If you think you have a solid business model but the branding just isn’t there, consider partnering with a licensor to expand your footprint.

Related: Survey Finds Dispensary Staff Are Well Trained for Sales but Not for Medical Advice

2. Qualify their expertise and partner traits.

After reaching out to a franchisor or licensor, the “mutual investigation” process begins. They want to know who you are and to determine if you’re qualified to continue down the pipeline. They will be looking at your goals as a business owner and ensuring you meet their financial requirements. Meanwhile, you should take a look at the executive team and make sure they have the proven track record in cannabis, as well as in franchising or licensing. Take a good look at their pre-cannabis career to see what other insights you can gather.

Related: Rapper Chris Webby Explains How Cannabis Fits Into the Routine of a Successful Entrepreneur

3. Attend a discovery day.

To take this shared investigation phase a step further, franchisors offer a “Discovery Day” to qualified individuals who are interested in joining their franchise. This is an in-person meeting, often at the company headquarters or one of the brand’s locations, and is intended for both parties to better gauge whether or not the partnership is a good fit. It’s a good opportunity for you to ask questions, visit a store and get to know the key team members who would be working with you.

Related: Marketers Are Overcoming Unique Challenges to Build Campaigns for the Nascent Cannabis Industry

4. Do your due diligence.

Dig around online to see what others are saying about the company and the executive team. Look at Yelp, Google, social media, cannabis trade publications and local media for insights on how the company is portrayed as well as customer interactions with the brand. Further, stop by a location, unannounced, to get a natural feel for the customer experience. If possible, talk with customers to see how long they’ve been shopping there, why they like it, etc. Ask employees about how they’ve liked working there, how long they’ve worked there, etc.

If available, spend time with their team in and outside the office or store to make sure they are a good fit as a partner. A few things to think about:Are you confident in their ability to lead the business? Do you get along with them?

5. Read everything they send you and follow directions.

Franchisors will send you a Franchise Disclosure Document (FDD) and, forewarning: it’s long, but absolutely necessary read. The FDD details everything you need to know about the franchise -- it’s history, executive team’s business experience, potential earnings, any litigation, fees, franchisee’s obligations, territory and more. You’re investing in their brand; this document will help ensure it’s the right move.

Further, if a franchisor or licensor provides directions on specific people to contact or steps to take, do it. One of the key functions as a franchisee is following the proven systems outlined by the franchisor. With this, it’s imperative to show that you have the ability to follow their process.

You’ve worked hard to get your business to where it is today. Take a moment to think about what’s next for the brand and if you have the necessary resources and team members to get there. It’s okay to seek help. The industry is still nascent but there are a handful of veterans who can boast that they have spent a decade in legal cannabis. Investing in the future of your business can open new doors and help you avoid ones you shouldn't open in the first place. Ultimately, the investment cost could be minimal compared to the growth potential that’s in-store.