What to do About the Catch-22: Needing Cannabis Experience to Get Into the Industry
We just started getting the statistics about the application process out in Missouri, which legalized medical marijuana. A bunch of the applicants are already getting rejected because they just didn't do the application right, because the requirements are very specific. Just the sheer fact that they thought, “Oh, they'll just tell us if they want something different” when that's not even a possibility of this process, cost these people their licenses.
Also, they put in upwards of $30k, $60k, even over $100,000 in application fees that are not refundable because they didn't have someone who has done this before help them. They lost all their money. Let’s talk about some of the common pitfalls with the application process.
People think that because they’ve run successful businesses in the past, they’ll be successful now, or they think that because they have a ton of money, they're going to get the license, or because they have great political connections, they’re going to get it.
Basically, it’s overconfidence out of pure ignorance. If someone is talking about something that they've never done before as if they're an expert, that gets everyone in a bunch of hot water. Experience is probably the most important thing that you need when applying for any kind of cannabis license.
There was this analogy that came up off the cuff in one of the High Class Academy trainings about the application process and how important experience is. It was the analogy of a restaurant. These people that are going into this process with the mindset “I've created and started many successful businesses in the past. I have a bunch of money in the bank”, they all have these preconceived notions of “I know what I'm doing, so it's fine”.
Then they're going around trying to raise a ton of money, getting all their friends and family in. Their connections think “well, he's a businessman. Of course he’ll do well, yes, here's $2.5 million”. Millions are dumped on people that have never done this before. It seems fine to them for some reason. In the cannabis world, common sense is thrown out the window and newcomers think “I have a ton of money and I have experience or this guy’s got experience so I’ll throw all my money at him” and think it's okay because they all just want in.
Try changing it up and instead of saying that they're going to open up a dispensary, say they're going to open up a restaurant. Now, someone comes up to you and says “I need $500,000 to invest in opening my new restaurant, and it's gonna be the best restaurant. It's only going to have the highest quality food, we're going to have the best servers and the best cooks. It’s going to be the best.”
If somebody says this to me, I’m going to ask some very simple business 101 questions. Have you ever run a restaurant before? No. Okay, have you ever worked in the food industry? No. Okay, have you ever been to a restaurant? No, I've never even seen one in person, and actually I've never even eaten food. I'm not a big fan. It's not my thing.
Would you give this person half a million dollars to open up a restaurant?!
That's what's happening all the time. People think they can just do it, and what's happening is two things. One - sometimes these people do get awarded licenses. Then they wind up crashing and burning after they spent all this money because they thought it's just cannabis. It can't be that hard. Two - then you have the other half who think they don't need outside help because they've been so successful before.
When the Board is picking licensees, they want someone with experience because they want to make sure that whoever is doing this doesn't fail and doesn't wind up getting the state in trouble with the feds. So yes, experience is so monumentally important for all kinds of reasons in the application process and for the success of the business.
Any question you want to know - like do you need to have experience to do this - just replace the word cannabis with restaurant or any other kind of business. Experience is key, you’ve got to know what you're doing.
To play devil’s advocate, first timers like myself managed to do it without any experience, so what's the differentiator? How did I get it done where other people fail?
Simple - you partner with someone that does know. When I first started growing, I was horrible and growing just wasn't my thing, But I learned how to grow and I got a few harvests under my belt just so I could know the process. I knew I wanted to be in the industry in some form, I just didn’t know what that form was.
Then when the opportunity came to actually fill out an application and submit a license, that’s when I told myself I've run successful businesses in the past. I've got the money and I got friends with money, and they'll all invest in me if I want to do it. The difference is I knew I didn't know enough. I knew that if I had to run the grow on my own and I had to run the manufacturing facilities on my own, I wouldn't be able to do it because there's things I don't know. I'd always have to hire out and hope that someone knows best.
So I partnered up with someone with that experience, this way they had a vested interest in me and in the company being successful. That's why I think it's super important to just partner with someone with experience if you don't have any, and leverage that experience in the beginning.
It’s kind of like when someone wants to open up their own McDonald's or some type of franchise. When I went to jump into the franchise business years ago, I looked into opening up a Pinkberry. I just love that business model. It's so amazing. There's a small storefront, so low rent and you have one person that works there that could be a complete dumb-dumb. So you need one minimum wage worker, the start up cost is the build out plus three yogurt machines that I think were three or six grand each and then just some toppings. Everyone even makes their treats themselves. This is amazing! One person at minimum wage and your electric bill is your overhead. I was like Man, I want in on this business.
I wanted to open up one in Puerto Rico because they don't exist and it's summer all year round. It was perfect. So I hit them up and they told me I had to put in $120,000 to start the franchise, then after that I’d have to put in a couple more hundred. I had a couple of people that were going to go in on this but then Pinkberry wanted to know our franchise experience.
I told them I don't have any franchise experience. I had opened up multiple stores of the same brand on my own, but I had never done franchises before. Pinkberry would’ve been my first one. They said sorry, we don't work with anyone that's never owned a franchise. I started asking around and I found out that's a common thing.
To get into the good franchises, you have to have franchise experience. They don't just let anyone in that wants it or has the money, and that makes sense. They want to make sure someone really knows how to follow the rules, they know how to do things the right way, and they know that they're honest. They're people that know what they're doing and are gonna be successful because they've done it before.
The cannabis industry is the exact same way, the Board and employers are looking for people with experience. They don't want anyone that doesn't have experience, you’ve got to have credit to get credit. This is a Catch 22, and unfortunately the only way in is to partner with someone that has the experience.
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Cheers!
.: Adam
CEO