Is This The “Golden Ticket” For Social Equity Entrepreneurs?

Access to capital and lack of business know-how are blocking many social equity entrepreneurs from entering and succeeding in the cannabis industry.

Many inexperienced entrepreneurs are being lured to the new era of cannabis in search of lucrative opportunities. State governments, private companies, and non-profits are working hard to provide grants or low-interest loans to give social equity entrepreneurs a fair shot. However, throwing money at an inexperienced entrepreneur is a recipe for disaster without extensive business support. That is why access to capital through state and private funding coupled with a franchise model may be the “golden ticket” to give someone the leg up they need to compete.

A franchise is a hand-holding model that will teach someone how to operate every aspect of a business and leverage the skill sets they bring to the table. Franchisees can stay or go once the contract ends and replicate their experience learned elsewhere. A franchise offers an infrastructure and system with access to its branding portfolio, SOPS, accounting system, legal and compliance team, retail tech stack, resources, buying power, product procurement, marketing, and ongoing support. It’s almost like an on-the-job MBA. 

Generally, banks are skittish in doing business with the cannabis industry. A franchise offers established financial and operational policies needed to access capital and the experience to operate a highly regulated and capital-intensive business.

Leaders In Cannabis Franchising

Far & Dotter and Unity Rd have proven dispensary operations and are among the first cannabis companies to offer franchising opportunities through their parent companies, Curio Wellness and Item 9 Labs. 

Far & Dotter recently signed its first two franchisees for operations in Missouri and New Jersey and announced they would like to partner with NY entrepreneurs as that market kicks into gear. 

They also boast a 30 million dollar private fund and are looking to invest in women, minorities, and disabled veterans who will ultimately achieve 100% ownership. The funding would cover securing real estate, store build-out, licensing fees, opening inventory, and startup operations.

The general investment to open a dispensary is between $1M – 2Million. According to this article, a Far & Dotter franchisee would need about $40,000 to open the business, with the remainder provided through the investment fund. 

As expected, Far & Dotter claims to have a robust vetting process to ensure mutual synergies.

Item 9 Labs, the parent company of the Unity Rd franchise, is a vertically integrated cannabis dispensary franchisor, cultivator, and manufacturer. They have franchisees operating in various states and recently purchased Canada’s largest cannabis franchisor, Sessions Cannabis, with 43 stores throughout the Province of Ontario. The acquisition positions them as an international cannabis retail franchiser and a North American publicly traded company. 

They have vertically integrated operations in Arizona and plan to expand the model to other states as part of the franchise ecosystem. It’s a unique advantage allowing them to supply their franchisees with consistent, high-quality products by completely controlling the supply chain.

According to the Unity Rd website, a liquid capital requirement of $1M, a net worth requirement of $1M, a royalty of 5% of gross revenue, and an Ad fee structure of 2% are some of the terms associated with the franchise agreement. Unity Rd does not offer in-house funding at this time.

As quoted in Yahoo, an NJ franchisee had this to say about partnering with Unity Rd: “I know how to run a retail business, but the cannabis space is complex. I needed a direct route to alleviate barriers to entry and set myself up for success while confidently making decisions.”

As companies like Far & Dotter and Unity Rd establish themselves nationally and internationally, franchisees will benefit from their brand awareness as interstate commerce rolls out or they expand out of state.

The cannabis industry is attracting an unusual amount of new entrepreneurs because of the industry’s predicted growth and opportunities. 

A franchise coupled with access to capital may be the “golden ticket” that provides social equity entrepreneurs with a valuable opportunity they might not otherwise have had. Why would an inexperienced entrepreneur enter a highly regulated and complex industry and do it any other way?