As the Marijuana Business Conference came to an end in Las Vegas last week, a new business structure was mooted for the cannabis industry. Franchising. Some industry players are considering starting cannabis dispensary chains that would be the McDonalds and Starbucks of the cannabis industry.
The idea of franchise businesses in the cannabis industry is appealing at several levels.
First, consumers in America have been trained to consume products from trusted brands. That is why McDonalds and Starbucks get more clients than independent burger or coffee shops. Franchises in the cannabis industry would tap into the brand loyalty already instilled in buyers.
Secondly, a cannabis franchiser would save many cannabis investors from making the expensive mistakes that the pioneers in the cannabis industry have made. The cannabis industry is quite young, so the collective pool of experience in running cannabis enterprises is relatively shallow.
Creating cannabis franchises would help those who have created tried and tested cannabis industry systems to share (for a fee) their experiences and roadmap to success. The franchisees would benefit by starting off with a business model that has a proven track record of success.
However, some hurdles may still stand in the way of franchising as a business model for the cannabis industry in the U.S.
First, the cannabis industry is fragmented. Each state has its own rules regulating the cannabis market. It may therefore be hard for one business model to succeed in different jurisdictions whose laws differ widely. Maybe this could explain why the franchise would be very expensive to acquire. Extensive work needs to be done to tweak the model so that it fits within the state and local regulations governing the cannabis industry in different areas.
Secondly, many jurisdictions restrict the number of cannabis dispensaries or retail outlets that can be opened within a given area. Some local regulations even put a cap on the number of cannabis business licenses that can be granted to a single entity. Such requirements are intended to foster competition and prevent one business from controlling the cannabis market. How would cannabis franchisers navigate such regulations?
Thirdly, federal laws currently restrict cannabis from crossing state lines. This can present a major operational challenge to a franchiser since he or she would need to set up a vertically integrated business (cultivation, manufacture and sale/distribution) in each state where it intends to acquire franchisees. What is the minimum number of franchise outlets that would be needed to justify the expense of setting up that integrated infrastructure?
The problems above can certainly be thought through and solutions found, but it isn’t something that can be fixed in a short time. However, the franchise idea is a good one and shows that the cannabis industry is here to stay.
Youngevity International, Inc. (NASDAQ: YGYI) and American Premium Water Corp. (OTC: HIPH) look forward to the passing of enabling cannabis laws at the federal level since that would be one of the factors that makes it easier for cannabis entrepreneurs to create nationwide franchises.
More from CannabisNewsWire
About CannabisNewsWire
CannabisNewsWire (CNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) CannabisNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, CNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. CNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. By cutting through the overload of information in today’s market, CNW brings its clients unparalleled visibility, recognition and brand awareness. CNW is where news, content and information converge.
To receive instant SMS alerts, text CANNABIS to 21000 (U.S. Mobile Phones Only)
For more information please visit https://www.cannabisnewswire.com
Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW, wherever published or re-published: http://CNW.fm/Disclaimer
CannabisNewsWire (CNW)
Denver, Colorado
www.cannabisnewswire.com
303.498.7722 Office
Editor@CannabisNewsWire.com
