Most of New York Is Losing Money. Here’s How Gotham Plays It.

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How Did Joanne Wilson Get Into the Cannabis Industry?

Jake: Hello, everyone. Welcome to another episode of Cannabis Marketing. Today, we have Joanne Wilson from Gotham. And we have a lot to cover today. We're gonna be focusing on New York, specifically, and the… the great and not-so-great things about New York. All of the states have their own peculiar journeys. You know, we've been… you've been in the space for a while. At MediaJel, we've been in the space since 2018, and we've watched States mature and come online and go through similar cycles, although they do vary a little bit. But first off, I want to give you a chance to introduce yourself, and the very first question that I always like to ask, because everyone… well, almost everyone's career started outside of cannabis, how… what were the circumstances that led you To find yourself in the cannabis space.

Joanne: Stupidity.

Jake: I joked that I got tricked into the cannabis face. Although, you know, there's two sides to it. There's a lot of great things about it, and I'm still here, so obviously I don't totally hate it. Yeah. It's been a lot of fun, as well as it's been frustrating at times.

Joanne: It's very, very frustrating. But yeah, I mean, it's, it's certainly a learning experience.

Jake: It is, indeed.

Joanne: Yeah.

Jake: Well, maybe we could talk a little bit about sort of, you know, your background, and I do have some specific questions for you, but just sort of the high overview of… You know, what your background is, and then how that transition happened into the cannabis space.

Joanne: Sure. So you want me to talk about my background?

Jake: Sorry, yeah, I just, yeah, I'll let you sort of give a summary, and then we can kind of dig in on things.

Joanne: Okay, great. Yeah, I mean, I have had multiple careers, but on many ways, if you look at what I'm doing in the cannabis industry, I'd say that all the dots connected. I started out my career as a buyer at Macy's, and became a buyer very quickly, but I was also there at a time when retail changed. There was, changes in the market, from companies going public to becoming private, Gap had… was exploding, Campo came into the markets, and so, you know, I knew enough to be dangerous to look around, even though I moved very quickly through the, corporate ladder. I am… I hate corporate. I'm pretty much unhireable. And, and two is, is that, you know, all the stock that they were taking off the publicly traded markets in order to, re… calibrate the company, there was nobody in the buying offices that were getting any of that stock. And so. I was like, that makes no sense, like, why am I doing this then? And so, I left, and I went into the opposite side, which is manufacturing, and I grew a company from, I don't know, about… a million and a half dollars to $15 million in about 2 years. Learned, really, how to sell and manufacture products. There was a couple things in between there, but that was the main thrust of what I did. And then, I left that industry, and, I was home as a mom for a couple years, really loved it, but, I was losing the plot. You know, one day being at a playdate with my kids, and listening to ridiculous conversations, and I literally thought to myself, oh my god, if I had a gun, I'd kill all these people and myself. And so that night, I said to my husband, I was like, you know what, I gotta go back to work. But I want to go back in a way that I own my life, and I can be, at a place where our children are number one, right? That I'm present in their lives. And so, that was the beginning of the tech boom in New York City. And so, I went and spoke with, Jason Calicanis, who was bringing around a little rag of 10 pieces of paper that he had stapled together, and, I said, you know what, I'll join you, but I'll do it freelance, and I'll build your business. And sure enough. Very quickly, we became a, a real magazine, bound, sold at, newsstands. We also built a conference business, we also build an online zine, and, you know, the entire tech community blew up, and a lot of people just dipped. There's a longer conversation to Silicon Valley Reporter, but that's the gist. And so, I went home again. We had success in our family. We moved from the suburbs. our time in purgatory back to the city, and, you know, I was at home, I got involved with the school, and, I started blogging as it was a new platform, and I was thinking, oh, well, this is a great way for me to remain connected to the technology community. Who knows what I'll do next? But I'll own it. I won't be working for anyone, I won't be the number two. I'm done with helping men build their businesses, and let's see what happens. And fast forward, I started hearing from a lot of female entrepreneurs. And I decided that I would invest in these women, and I made it a decision to make my thesis about investing in women and black and brown founders. Not that I don't have some men who are white in my portfolio, but, you know, I started really leaning in there, and during that time, I built a conference called the Women's Entrepreneur Festival, and I made over 140 investments over a decade. Still talk to most of those… a lot of those people today. Some were great, some weren't, but I really was early to the angel investing game, and so I could be a generalist, because every business was starting to change with back-end technology, and so I was able to invest in anything from CPG to, direct-to-consumer marketplaces to even vending machines. So it was really an incredible experience, and… and then I sort of looked around the landscape, and I felt that. Y Combinator killed the angel in business. That when I was getting into these businesses that were valued at somewhere between $3 and $5 million, it was fine to find product market fit at that valuation, but to find product market fit at a $20 million valuation, and the founder's only giving away a million dollars of that round, to me, is not how I'm ever going to have a return on my investment. And so, that was one of the multiple reasons I walked away from that, and I was trying to figure out what comes next. And during this time, my husband and I also built a variety of apartment buildings in New York. We actually built the first carbon-neutral building in New York, which is kind of mind-blowing, considering how many real estate people are in this city. You know, it was important to us to build something where people would stay and live, and we're not making a scar on the environment. And I, was looking around the landscape, and something I always wanted to do was open a, concept store. It was actually something I wanted to do back in college. It was part of my conversation with people. And, and so as I was, you know, keeping Google Docs and making, you know, pulling in photos and making notes to myself, and then COVID happened, and I was like, wow. A friend of mine called me and told me he was going on in the cannabis industry, and I was like, wow, that's really interesting. And I, pursued a lawyer for 6 days, because in the tech industry, if anyone's listening knows, like, I could get an answer within a couple hours. And so finally, the lawyer called me back, I think by, like, the seventh day, and he's like, who are you, and why do you keep calling me? And I was like, I just want to understand this business. And we had this long conversation, he invited me to a party the next day, it was 420. And I thought, oh my god, this, like, checks all my boxes. It's early stage, to say the least, it's nascent, it's a store, and I love weed. Like, how… what could be wrong?

Jake: Right, yeah.

Joanne: The next thing I knew, you know, I was working on a brand and trying to figure it out, and you know, here we are, fast forward, with 4 stores and a group of really great people that work with us.

Why Is Cannabis Retail Technology Still Behind?

Jake: That's a fantastic story, yeah. It's, my background is… I've come out of building technology products, that's what I had done for many years, and… When I met the investors and founders of what is now MediaJel. They were… they were trying to launch a product, like an app, to market. And I have a background… I came out of Verizon, I worked early in the, sort of, the app content days, and so I said, well, I can help you go to market with that. And… when I started trying to figure that out, I realized there was no way to do advertising for cannabis. Like, use billboards and magazines, and that was it. And I was like, well, I think there's actually a bigger problem to solve here, which is the industry needs a marketing platform. And so we started… We kind of pivoted the thesis of the business, and our thesis was that we were going to provide modern digital advertising tools and access to mainstream advertising inventory to the cannabis space. That proved, like everything cannabis, to be much more difficult than I had originally.

Joanne: And we thought it was fun.

Jake: to be, and take much longer. And I won't get into that too much, but we accomplished our goals, which comprise of building our own platform to manage attribution and… all of that, and then going and spending a lot of time with publishers and SSPs to get to a point where we could run our ads on CNN or the Weather Channel. And we kind of went through that journey over a couple years and got ourselves to a place where we could do that. We had other issues, which is that nobody knew what programmatic advertising was in the cannabis space. Again, I mean, to their credit, it just was never available, so, like, why would you learn about it?

Joanne: Exactly, and it's a very different cast of characters in this industry.

Jake: It is. And it's a very wide spectrum of people, from all different kinds of backgrounds. I would say between then and now. at least from our perspective as a marketing provider, it's gotten much easier for us. There's a lot of more sophisticated marketing and technology management that exists inside of the organizations that we work with today, so that's great. And it's… but it is… We're still, in the cannabis space. just behind in so many aspects, right? In terms of, like, the tools that are available are getting better, and that's one of the things we strive to solve, but that's just one piece. Like, okay, now we can deliver and measure digital advertising, but you've got all the POS issues, we still have… MSOs we work with that in specific states, they can't even connect their POS to their econ platform correctly, because there's, like, a state mandate for MJ Freeway, for example, and that doesn't talk to Dutchie properly, or whatever. So, there's so many seemingly table-stake things that… that when you're working in the normal technology industry, that you just take for granted. You're like, oh, of course you can do these things.

Joanne: Right, of course, they can be open platforms. I mean, when we first began, because we're such a different type of store, which is really a concept store with cannabis as a backdrop, we use Shopify for all of our, can adjacent products, so bong, pipe. fragrances, candles, streetwear, all of it, right? Like a normal store. And then everything else is in Dutchie. And so I was like, no big deal, I'm sure they're open platforms, let's just build a pipeline so that one customer can come in the store, buy it with their credit card, be it tagged, go into the right location so we're taxing appropriately. I mean, how hard could that be? Ends up? It's really frickin' hard, and we still haven't been able to do it.

Jake: Yeah, yeah, you almost need to, like, print out the order, and take it, and put it in a fax machine, and then scan it over into.

Joanne: But I do think we're close to it, because once… This is rolled back. A different schedule, and eventually, through that, will become federally legal, even though it will be And I'm sure you and I would… Bet on the same side. It's gonna be an utter shitshow.

Jake: Yeah.

Joanne: We'll probably be able to use American Express.

Jake: Legally.

Joanne: That will be game-changing for the industry. I mean, just in terms of the cost of insurance, banks, not being able to use credit cards, all of that is going to make a major impact on the industry.

Jake: Yeah, I mean, it's, you know, it's it's not even like having one hand tied behind your back, it's like having all of your limbs tied, right? Because you've got 280E, you can't write things off, which impacts our business, right? We are providing marketing services and media buying, and the fact that It's getting a little better for medical now, but the fact that you can't write those off as a business is,

Joanne: Yes.

Why Did Joanne Choose Building Stores Over Investing?

Jake: Alright. So, you are a serial investor and entrepreneur, but on the investment side, you've backed over 140 companies. You made a decision to go… entrepreneur versus investor. Can we talk through that a little bit? Sure. What the thought process was there, and how you came to that conclusion?

Joanne: I mean, I've built so many businesses in my life, and… I mean, I've been an entrepreneur since I came out of the womb, and so I just think that I was done with investing, you know, valuations, investors, many who I was… so disappointed in, in regards to their engagement with the founder. At the end of the day, I'm extremely founder-friendly, and many of the investors were not. And I just, you know, for the amount that I owned in a lot of these businesses, which was basically 1%, which was my thesis, and seeing other investors around the table not pulling their weight whatsoever that I was doing when they owned 10% of the business. I just, like, I couldn't do it anymore. I was just like, I just can't. So, you know, I don't think I gave it a lot of thought. I don't think that anything in my career I gave a lot of thought to doing. I just sort of dove in first, and then I figure it out later. And so, you know, I've always wanted to build my own business, or have my own store, and it just ended up… you know, as my son said when I started this, he's like, you know, you should really do a store. Like, if you don't think of it more like a pet project. You know, then maybe it will just be, like, fun. But I don't really think I have that kind of mentality. You know, as my husband says, like, I always have two feet on the gas. And so, It's become a lot larger than I ever thought it would be.

Jake: Yeah. And you said you're at 4 stores now?

Joanne: We have 4 stores now, soon to be half… Fingers crossed 5, and, you know, we're trying to figure out where the 6 will be.

Jake: And you're in… when… how… has it been 5 years?

Joanne: No, it is… well, it's been 5 years building, but it's been… this May will be our 4th year anniversary, which will be the opening of our first store on Bowery.

Should You Open a Dispensary in New York Right Now?

Jake: Okay, great. Now, hard to summarize, but for… there's new licenses going out, right? Which we can talk about that. But, let's say someone has a new license, or is about to purchase one, or go through the process, and they're all… Bright-eyed and bushy-tailed, and super excited about the… open field of saw blades we're about to run into. What would you say to that person?

Joanne: Don't do it.

Jake: Okay, and…

Joanne: I mean, don't do it, because if you look at the numbers in New York, the best dispensaries, the top 200 dispensaries, were first to market. And some have multiple stores, some don't, doesn't make any difference. But… I think that giving out licenses is giving you a license to fail. And there's no money for you. Don't ever think that there is any money to, as an investor, to put into a dispensary. People that are investing want to put money into brands that can be nationwide brands. That's where you're going to make a money as an investor. So I think that was a false narrative that was sold to a lot of entrepreneurs, particularly those who received the first licenses who had been previously incarcerated people, and then you're on your own. There's no money from the state, there's no money from the banks, there's no money from private equity, and so here you have this license. And… No one is making money, and so you're giving you a license to lose all your friends, family, and your own money. And so, I think that we should personally stop giving out licenses unless Nassau County chooses to open, but even though there's tons in the pipeline, and let the market set itself before you start giving out new licenses again. Otherwise, it's just going to be a dog-eat-dog world out there.

Jake: Yeah, and… We've seen that play out in so many markets. When you have too many licenses. You just can't, it's difficult to operate, even if you're trying to run a good operation. I mean, I've been saying with California, there's been a lot of closures and consolidations, which I think is healthy for the market. The tree needed to be pruned.

Joanne: Totally agree.

Jake: Too many people that were just, like, their only lever to pull was just discounts, and that drags the entire market down, and it makes it impossible to operate a real business.

Joanne: 100%, and that's what they need to do here. There's plenty of people, that are on COD lists, and many of them could be on COD lists just because the vendor didn't charge them appropriately, and they're fighting it, or they're waiting for a new You know, so that's not a good… that's not exactly a 100% thing either, but… people need… it's like entrepreneurs that hold on. You know, they hold on, they're gonna get money from someone else, or, you know, this is gonna be the year. And after a while, you just have to say, you know what? It's not working. Let's walk away and try something else. And I think that in the world of cannabis. We need to allow, those who are not surviving to close. And those that are surviving to continue to operate, and maybe there will be some roll-ups, whatever it may be, and then once the market has sort of… righted itself, it will be time, maybe, to give out new licenses. But I feel that, you know, they've given out, whatever, 750 licenses, the entire state isn't open, and so, we're already seeing people go out of business. And so, why are we continuing to give out licenses when we're seeing stores close?

Where Is Cannabis Investment Money Going?

Jake: Yeah, and I will say the roll-up action is definitely in full swing right now with some of the people that happen to have some capital, or… Enough. brand equity to go and pick up the assets that they want that do have value, which, again, I think is, is healthy for the market. And I would just, you know, there's not only is there no money now from investors, there hasn't been money, really, since, like, 2020, maybe?

Joanne: Yeah, the first money came out of California, like, at the beginning of the whoop-whoop, when, you know, it passed, the prop in… at the voting box. That was the only time there was real money, and people were actually making cash. Now, nobody's making cash.

Jake: But you still have institutional investment that is pretty much effectively locked out for all… not locked up and not participating. You had the first wave of money that came out of Canada, the second wave of SPACs and stuff, but all of those dollars are either locked up or upside down, right? So you have a cohort of early wave investors that Largely, that did not work out well for them, or they're frozen. And then there's just a complete trough until some sort of legislation changes and markets stabilize. At least that's what… that's what we found, too, because we were going to go out and do a round in 2022 for, like, next phase, and it was ultimately a distraction for me. I wasted a lot of time talking to investors that didn't really have money.

Joanne: But wanted to talk to you.

Jake: You want to talk to me, yeah.

Joanne: Yes, which is really unfortunate, because, you know, then you say, oh my god, I haven't been spending any time on my business the last 3 months. I'm out talking to all these people, and there's never going to be any money. And so, you know, that's a horrible position to put yourself in. But I think what's going to be the most interesting in this industry is all the MSOs that are publicly traded on the Canadian stock market. There's, I think, 2 right now on the, New York stock market, and none of them are making money. They've already pulled all their money out on their original IPO, and so what happens to them? Most of them are not that interesting in terms of their brands or their products. It is what it is. It's really for the masses. And my belief is that eventually, many of them will implode and will be bought from private equity companies for 20 cents on the dollar.

Jake: Which is actually the second cycle of that, because a lot of them have already gone through receivership, and the original dollars got wiped out.

Joanne: Exactly. And, you know, New York has done a great job, I will say, in terms of fending off MSOs in some respect, but I also think MSOs are looking at the marketplace and saying, I don't want to get in there yet.

How Does Gotham Build a Cannabis Lifestyle Brand?

Jake: Yeah. Alright, so let me try to get back on top. I could talk to you all day, I know we have a limited amount of time, so…

Joanne: Okay, goodbye.

Jake: Let's see here, let's talk a little bit about your stores, because you said that they are concept stores, and I think, you know, there's… we've had a lot of… Guests on this podcast from different, different parts of the industry, you know, I had a conversation with Dennis O'Malley, who was, in California, And, you know, one of the things he said as, like, the sort of number one takeaway was about merchandising as the way to be successful. And that was a broad statement in the sense of, like, what is a customer faced with when they come into your store? What is their journey through your store in that experience? I had a conversation, and I forget the name, but she had a dispensary in Maryland that was very, very heavily customer-focused. Like, they know everyone's names, and they were not discount, you know, they were a more expensive option, and so… I've seen a bit of a recurring theme with people that have seen success, like, maintainable success, and we've also talked a lot about the discount wars, and that is obviously just… it's a terrible way to run a business.

Joanne: Terrible way to run it. Sounds like you have…

Jake: you have a formula that is working for you and for your customers in a market where most people, the vast majority of companies, are not making money. Let's talk a little bit about how you approach that and what's working for you.

Joanne: Sure. You know, we're building a lifestyle brand, right? That's very different than just opening up a cannabis store. And so, when you think about Gotham. Are… we call them can of sores that are behind the counters, and they are… insanely well-educated in all the products that are in the store. I mean, someone I met last night told me that they came in with their husband, she had breast cancer, and, you know, one of our canno stores spent 25 minutes with her, helping her think about every single product and what have you not. And of course, she became a customer for life. Everyone knows the people's names, they know the dogs, they know the customers, they're all regulars in the store. And that, I think, is so insanely important to build community and to build trust. Because in a world that is living on our phones, that experience is important. I mean, I've had people stop me in the store that come from far away to come to our stores because of the experience, and that's pretty lovely. So when I look at the way that we've merchandise our stores, the events we've done in our stores, the galleries that we have in our stores. You know, we're at a new… time period where we're saying to ourselves, okay, what… what makes sense going forward that we can build this brand? And I've always been a big believer from day one, we need to figure out how to make money outside of our four walls. And unfortunately, the laws make it very, very different. difficult, but, you know, we have a show that, we launch every other week called High Am High. We're on YouTube. We're building two more shows. We also have a conference that we put on yesterday. It's called High Rise. We're partners with Cultivated, which is a newsletter in the industry. And, we're starting to look at the way that we have our own private label in our store in terms of merchandising, so you can think of us as, like, Colette meets Supreme, and that's really, to me, what Gotham is, giving to our customer. And so you might not be able to buy, some of the higher item products, but you want to have a piece of Gotham, and so, you know, you can buy a super cool t-shirt that we've made that's Gotham branded, but three months from now, when you come back, it's going to be gone, it's never coming back again. And so, that's one of the things that we're doing as we continue to build, because you could be living in Ohio and love our shows and want to have a piece of the brand, you know, and we can ship it to you. We also have a private label line, which is… candles, soaps, CD lotions, balms, that kind of stuff. The scents are amazing, and so, you know, we're starting to really build that line out and talking to some major retailers that want to carry it. So, you know. that's how I entered this, and I also entered it that way because my feeling was, after spending lots of time in California and looking at dispensaries, I was like, I don't want to be in these dispensaries. we have to change the narrative around cannabis. I can go into a liquor store with my family, and anyone can, and have cheese and crackers and wine. You should be able to do this in cannabis stores, in a way that you feel that it's representing you, and it's somewhere you feel comfortable in, versus, like, you coming in, and there's, like, neon, and, you know, it's like, you know, a weed store, and we need to break that narrative, because this narrative that's been foisted on all of us since the Nixon years is completely built on a set of lies, and the reality is, is that because of that, thank you, right-wing Republicans, is that it's really affected the people in this country, because they have not spent time in the medical space doing research on this plant and all of the things it could do to help us, versus opioids. And so, I feel that we've come full circle, and we're getting out of that, but our store represents that next generation.

Jake: Yeah, okay, I have, like, 10 things I want to say now. I'll try to remember them. First off. On, on the retail side, You've been in the industry, so you'll remember this, but, you know, Apple didn't used to have its own retail stores. No, it did not. And then they decided to start having retail stores, and there were people in the media that were just totally scorned with that idea.

Joanne: Of course.

Jake: This is… this is stupid.

Joanne: Always the naysayers.

Jake: There's always naysayers. That's probably one of the single greatest things that Apple has done. I mean, they do so many things right, but… That retail experience that they created is…

Joanne: And they don't have open platforms.

Jake: That's also because they don't have open platforms, but, you know, you walk by the Apple store in any major city, and it looks like they're having a release party 24 hours a day. It's just full of people, right?

Joanne: Yep.

Jake: And you have some number of… You know, when people are gonna open their dispensary. they come up with some sort of design decision. Are we gonna be, you know, super street style? Are we gonna be Apple store? And that's kind of, like, the spectrum that people go to, and they kind of pick somewhere in between. And there are people that have made beautiful retail locations that… that kind of look like an Apple store, right? They got the design part down physically. But they didn't get the sole part down to what the customer experience is and how you have to train your staff in the way that you need to have a consistent experience, which is a challenge to do. I mean, training people… Is difficult, right?

Joanne: Extremely difficult, particularly in this industry.

Jake: Yes. So, that is… that is fantastic. I think that a lot of people missed the actual… the moral of the story with the Apple store, and where they were going, so, Now, what was the other thing I was gonna say? Oh, the brand side. I've said this so many times, but you've already… you're already there. Like, in the end, in any nascent, emerging, maturing market. Brands win. Like, at the end of the day, the brand wins, right?

Joanne: Yeah, that's right. Always.

Jake: Always. And so… And a lot of people miss that, and they've also missed, or they've thought that because they're in cannabis, that the normal way that the world works is not going to apply to them. Right? They're like, okay, well, we don't have to do marketing this way because we have weed, and people will come because we have weed, right? And we don't need to do any worry about brand equity, which is a word that still a lot of people don't use or understand in the cannabis space. Right? And I do have a lot of sympathy for that, because so many of these operators are not… they don't have the luxury of thinking about brand equity. They're trying to figure out how they're gonna make payroll, and how they're gonna get people to… how they're gonna pay their… their, They're suppliers, right? So, I understand that, and especially if a single or multi… just a couple store operators, what they're dealing with, and the fact that they don't have any money. However, it doesn't change the way the world works. And so… the… and you know… Never.

Joanne: agents.

Jake: What's that?

Joanne: Nothing ever changes.

Jake: Yes.

Joanne: You know, I mean, one of the things I've said to, and I said last night at the conference is, Mark Pincus, who I've known since he was 21 years old, you know, in his latest book, he says something which I think is very true. Proven better new. Right? And I'm taking everything that I have learned that has been proven, and making it better, and making it new. And we're building a brand. And that is… Essential, so that people know the brand, and they know the name. And, that's the only way to build a business.

Why Should Dispensaries Keep Marketing to Existing Customers?

Jake: Yeah, we have, I feel like we're in kind of an adolescent phase with… because we work with many retailers, and… we're starting to get more traction. We did this in little bits and spurts over the years in terms of doing brand co-marketing campaigns with retailers. So cannabis is unique in the sense that, generally, a brand can't sell to a consumer directly.

Joanne: Right.

Jake: And so, that…

Joanne: Unless it's hemp-based… Unless he.

Jake: Okay, that's a whole different hour conversation that we could get into, but on the license side, this has created a weird wall where, again, the industry works differently than everywhere else, right? So, it's like, usually the brand is the one supporting a lot of the marketing dollars. And that brand is working in conjunction with a retailer, right? And so, what has been happening is the retailers have been basically doing all the marketing, because the brands can't really… it's challenging. You gotta drive into the store, the measurability is difficult, the systems are not connected. It's getting better now, we actually are running quite a few co-marketing campaigns now, because we've established the channels and we can measure this ad impression for your campaign touched this consumer, and then they made this purchase, and we can get at the SKU level, right? So now we can show what's happening all the way through. But we are at a phase now, especially on the retailer side, where… we… we're working on retention marketing, right? So, like, let's keep your customers engaged, and let's continue… because it's easier, generally, to continue to generate revenue from an established customer than it is to acquire new customers. Of course, you want to also acquire new customers, but… I've had some version of this conversation probably a hundred times now, which is, why are we serving ads to our existing customers, right? And so, the reality is, though, like. every brand that you know of that is successful continues to do this today, right? Like, McDonald's… everybody knows who McDonald's is. They're still running ads, right? And this is this sort of cognitive dissonance, where I'm like, what is it you think you know about marketing that every successful brand you're aware of doesn't know. Right. But we're getting there, but when… and bits and… fits and starts.

Joanne: Totally. I mean, I think it's very hard to build a singular brand as a product that is being sold to dispensaries. I think people are following dispensaries more than they're following brands. And so, as a dispensary, you need to build that customer, and we see… we have incredible data. We have an incredible team that we work with that… I mean… down to the SKU. And we see every day how many new customers come in our store, how many old customers come in our store, how much everyone spends, I mean, all of these things, and so it's important to continue to have that stickiness with our old customer, because they're the key to our business.

Jake: Yeah. Yeah, absolutely. And having that data allows you to… and it's sort of the answer to the question, which we've… which we've solved from a data perspective, is measuring incrementality and churn, right? Like, what do exposed versus unexposed audiences? look like from your regular customers. That's been very helpful to be able to show that, right? Like, okay, so here's what happens. Your average customer value goes up by 20% when you keep engaged via advertising. And we're just one part of the channel, right? We're like a digital channel.

Joanne: Right, well, in New York, they don't let you advertise. I'm not talking about Instagram or Facebook, but, like. Billboards, can't do it anymore. Taxi tops, can't do it anymore. Weed pasting, not supposed to do it anymore, right? All of those things that there was a short blip where they did, and it's just like, why? Why? Yeah. You know, and it makes no sense. I mean, I'm sure it's eventually going to change, everyone's very upset about it, but, you know, it's a challenge.

Jake: I'll do digital in New York. Surprisingly, New Jersey is…

Joanne: You can do digital, but, you know, you can't do… Streets.

Jake: Yeah, you can't do streets. And the laws are so poorly written that they conflict with each other, like, one sentence to the next sentence. They're like… there's some states where it's like, you can't do geo-targeting, but then the next sentence is, you can only serve ads in specific areas. You're like, okay, well.

Joanne: That is geo-targeting. That is your.

Jake: Targeting, yeah.

Joanne: Exactly.

Jake: Which one, which one are we going with here?

Joanne: Well, I think a lot of this stuff is, you know, government is made to create Boundaries and, guardrails for our businesses. You know, they are creating the foundation from a legal perspective, for these businesses. But their knowledge of how we run businesses and what we need is a tremendous disconnect.

What Is the Labor Peace Agreement Fight in New York?

Jake: Yeah. Yeah, so let's, let's chat about that a little bit, legislation. I know you've had a bunch of direct, action and interaction with the New York, market. What are… let's, maybe you could summarize. I know that I would, you know, I kind of read a little bit about it, but I don't even understand what the peace term means in context to… what is that?

Joanne: Okay, so here's what happened. And, you know… I don't think, again, I thought this through in regards to the cost and what have you or not, but it doesn't make any difference. It's done now. When you were given a license in New York City. You could not get a license without signing a labor peace agreement. And the labor peace agreement was with one union. And I was like, I'm not signing that. And luckily, you don't get a license. And… My husband was like, maybe we should just walk away from this shit. But we didn't.

Jake: There's a… there's a flashing light going off over.

Joanne: Yeah, there's a red light here. Union, union, union, okay. And by the way, I am left, and I am liberal, and I… I think that there are places for unions, and certainly in our history, there was very important to have unions in order to hold Bad business people to the fire.

Jake: Yep.

Joanne: And… that's not what they're for today. Unfortunately. They're for money and power. Just like everything else. Which is really sad. But again, think about where unions started. So, here we are, labor peace agreement, and I'm like. this is bullshit. Well, it ends up… In the federal courts, federal jurisdiction, Forcing a employer To sign a labor peace agreement with only one union, It's against federal law. Because it doesn't give your employees A voice, or a choice.

Jake: Makes sense.

Joanne: Totally makes sense. Simple, basic. The employees, if they're unhappy, they can form a union. Or they can walk out the door. And so… I mean, in the… so, I sued the the Office of Cannabis Management, In a federal court. Making all of us sign a labor peace agreement. It has made its way through the system. And we are just waiting for, the judge to… finish his brief, but we have essentially won. I mean, it doesn't take a kid older than 3rd grade to read this documentation that You can't do this. I think there will be a lot of, Changes in other industries, for instance, in the hotel industry, you cannot put a shovel in the ground and get a permit to build a hotel without signing a labor peace agreement with one union. That might change.

Jake: Oh, so this is gonna have some knock-on effects.

Joanne: oh, this is gonna have some knockdown effects. I mean, that was not the… any of this had… I mean, that was not thought out. I was just like, I don't want to have a labor peace agreement. Because not only do they… are they aggressive, they come in your store, they don't follow any of the rules of the laws. We had, two times they did things that were against the law, and we won those cases, too. And so, you know, here we are, and there is, now, because of this, in the last go-round of signing off on the budgets in Albany, at the last moment, the union pushed through with all of their constituencies, although why the union was at this, I have no idea how that works, to say that, they will create a wage board To oversee the cannabis industry, run by the union. Needless to say, the cannabis industry is up in arms about this. Because… It will just make prices go higher. And the reality is, these are small businesses. We're not talking about thousands of people. You're talking about 4 people in the store, you know? Maybe 10. So, you know, it is… extremely heavy-handed, and that is not how… that makes no sense, right? Yeah. For the union, it's good, because they get money to keep them in business. And so, the word on the street is, and again, maybe by the time this airs, it will be… Done is that the governor will not sign these documents. And the… what will come is that when you get a license, you have the option To sign a labor peace agreement with a union. So, nobody will, because why would you want to, okay? And so, that is essentially what has occurred. And so, I'm really proud of that, because… it was… Hmm… heavy-handed political posturing from an outside organization taking prey on a brand new organization and company, and industry. And I can tell you, if they did this to Google, there would not be a Google that there is today.

Jake: Yeah. Fair enough. Well, that is… that is a very interesting story, and I'll… I'll pay attention to how that plays out, and it is interesting how some of these precedents have… you know. there's… I don't know if you saw… I think it was last week, the Supreme Court agreed to hear the home distilling case that an individual bought out of Texas, of like, if you look back at the history of this, this prohibition makes no sense at all in today's era. Zero.

Joanne: I mean, there's a lot of things that don't make sense, right? I'm not so sure the Electoral College makes any sense at this point, right? And so, I think that it's time that we take a look at a lot of these laws that are on the books and get rid of them, because they were They made sense when they made sense. Here's a perfect law. It's a funny law, actually. So, love the Waymos. Huge frickin' fan of Waymo. When I'm in LA, love it, right? So… I thought, well, why? Do we need a driver's seat? Why do we even need side mirrors in these cars? Why don't we have, like, great couches with seatbelts in here, right? Yeah. Sometime back in the 1920s, I think. There must have been someone killed themselves in one of those little road racers, right, that you would drive on the roads with. And a law was made in effect that nobody in California can drive a vehicle without a steering wheel and side mirrors.

Jake: Yeah. Yeah, there's a lot of weird… California… I don't think it's even just California, I don't remember if it's federal or state, but that's… you know, Tesla doesn't have dealerships, and there's a reason for that. And the reason is, is that the law is that those dealership licenses are hereditary. And they have complete control over geographic areas. So, you can't open a dealership where there's already a family that owns a dealership license, and again, it's a very legacy, old sort of structure that.

Joanne: I would be called lobbyists.

What Helps Businesses Survive Hard Times?

Jake: Yeah. Been around for a long time. So, alright, let's talk about, I'll try to get… I keep going on tangents, because you have so many interesting stories. You have a wide portfolio, and some of those, investments include things like restaurants or retail-type businesses. And you have seen, you know, given the sheer number of businesses you've been involved with, there's just a bell curve of success and ups and downs. You've seen some of these retail or hospitality businesses go through struggles. Some of them don't make it, some of them do make it through. What have you seen that helped the survivors get through hard times?

Joanne: I mean, once you have product-market fit. Which is, obviously, the key to life.

Jake: Yeah.

Joanne: Right? In the business. is… It's really about… Smart structuring of your finances. And… managing your board. And your legal documents. And so, I think COVID screwed a lot of companies. You know, there was that COVID cocaine that went on during COVID, like, that everyone needed goodies for their house, and then everyone, you know, you know, went to rehab the second COVID was over. and other.

Jake: Yeah.

Joanne: fell down, but they had also taken out a tremendous amount of debt at ridiculous loans, right? So, I think that, the importance is the tenacity and the ability to manage through those issues to get to the other side. And a lot of them got caught in that storm, and their ships sunk, and some of them made it to the other side and were able to survive. And, you know, kudos to them. Every lesson is learning. Failure is feedback, but, you know, it's been an interesting ride watching all of these companies Where some of them you thought were… Doing great, and then the next week, they were done.

Jake: Yeah, cash flow. Cash flow is king. And, you know, you can have the greatest profit numbers in the world, but if we run out of cash, and the music stops, it's… it's real bad.

Joanne: I mean, I have had these conversations with multiple founders. One in particular, I'd be like, what do you got in the bank? yeah, well, we have, like, only, you know, 6 weeks payroll. I was like, you've got to cut people today. Get it down to 6 months, and then go out there and raise some money. But I can't. I was like, then you're gonna be out of business. You know, it's this… you gotta be… You gotta be a little ruthless.

Jake: Yeah, I had, she's retired now, but my… the chair of my board was a woman named Elizabeth DeMars, and she was previously the CMO at Bloomberg, and she worked there for a long time, and… And worked at Edgar, and was the CEO of CreditCards.com, and, you know, she, amazing human being, the warmest, most kind person, but also, she, you know, gave me comments a few times. She's like, look, in this situation, you just need to harden your heart, and this is what you need to do to execute, because that's… it's the best thing for the business.

Joanne: Exactly. I mean, listen, you know, we started way too many people. wrong cast of characters, but the reality is, those characters played really good parts at a point where I needed those parts. And then we moved on, and fired them, and brought in new. And, you know, I never hesitated, because I'd seen too many people, not… Fire quickly. And, you know, you hesitate, you… but, like. There was one day where it was a Thursday, and I looked at the numbers, and I knew that this is not sustainable, and, AI could change the executive team. It had nothing to do with people's capabilities. Zero. We took a look at the stores, and we looked at the top sellers, and we literally cut 40% of the company. And as painful as it was. And it took a couple months for everyone to feel good again. It was that, or we're done!

Jake: Yeah. Yeah, I have the… my, one of my original mentors when I started my first company, He gave me what he said was the best piece of business advice he had ever gotten, which was actually in the form of a question, and this is a somewhat… ruthless statement, but the question is, is do you know when the best time to fire someone is? And the answer is the very first time you think of it.

Joanne: A hundred…

Jake: you always… I would say, I would say always, I would say in my career, it's 95% true. There's been a couple times where I let someone ride longer than I should have, and things turned around, and it turned out to be a great situation. But at least 9 times out of 10, It… you always regret it.

Joanne: Exactly. If you're thinking about it. That's… you should be asking yourself why.

Jake: Well, and you do a disservice to the rest of your team, and that's something I learned early on, because there was someone I did not let go. And I lost 2 other people that were very valuable to the company, because they saw the, sort of, the dysfunction in that someone was not a fit for the organization, and that drove them away, right?

Joanne: Absolutely, and then when you get rid of the people, what's amazing is everyone else says, oh my god, thank God. It's like, why didn't someone say something? Yeah.

Jake: Yeah, but it is hard to do, especially, you know, especially with people that you like, and these are human beings, and you are affecting people's lives. Exactly.

Joanne: But it's not… it's business. That's all it is.

How Does One Brand Work Across Different New York Neighborhoods?

Jake: It is its business. All right, let me see if I have time for one last question that I did want to get to, that I think will be helpful. You have 4 locations, soon to be 5, New York, like many major cities, but in some ways more extreme, just because you're in Manhattan, or you're in New York proper, they're… these are very different places. You go 5 blocks, and you're essentially in a different culture. Right. So… you're managing stores effectively at very different cultural and demographic identities. How do you… Make your brand, like, resonate in these different pockets?

Joanne: Well, as I said, we have tremendous people that work in our stores, that have wonderful relationships with people that come in our doors. A, most importantly, they are the most important people, are the people behind our counters. That's number one. Number two is, we look at the data, and although we have created a high-touch high-end experience, and of course, our products are the same price as everyone else. We do have tremendous diversity in our brands. We make a… concerted effort to drive all around the state and find micro-brands that no one else does, and have diversity, by listening to what our customer is buying. And we also do something that I learned very early on in my Macy's days when they started popping up stores in Florida, is you can't buy a winter coat for a store in Florida when you're buying one for New York, and so you have to buy differently for every store. And so our buyers, in cannabis as well as merchandising, do look at what sells in certain stores that might not sell in others. And I think that's important to have the right mix that's in your store, that it's not just one thing, one thing. Only, and it goes across all stores.

Jake: Yeah, and do you adjust pricing at all by location?

Joanne: No.

Jake: No, it's the same in each other.

Joanne: Yeah, yeah, yeah, I mean… Price compression is certainly here, and will continue, and we always have things on sale, that are… we work with our vendors on, but, you know, that is not the majority of our business whatsoever. I don't think cannabis is that expensive. I think people come in, with the hope that they're gonna find something, and they're just interested in what the product is, not as much as the price. But remember. 70% of the business that is made and executed on in New York City is still illegal.

Jake: Yeah. Yeah, that is something.

Joanne: Something that has got to stop.

Jake: I don't… really under… I mean, I spent a fair amount of time in Manhattan, and I just… It's not in the book.

Joanne: bodegas anymore. It's not… it is in the bodegas, it's in some stores. That's not where it is. It's underground delivery businesses.

Jake: Yeah, well, which…

Joanne: Like, 10, 8, 10 million dollars a year in business.

Jake: And that predates legalization, right? So…

Joanne: Way, way, way, way. They called them legacy businesses. I call them illegal.

Jake: Yeah, like, there's, LA still has a lot of these. There's other terms, there's trap shops. But, I was amazed at just how brazenly, like, you know, just right on… 34th Avenue, on a corner, you're like, World of Weed. I don't… I think that's gone now. Is World of Weed gone? It is, okay. Yeah.

Joanne: Yeah, that was a big to-do at the beginning. Yeah, they're done.

Why Does Cannabis Education Still Matter?

Jake: Yeah, that's good. All right, I know we're over on time. I very much appreciate you being generous with your time. I have one last little PSA. I want to circle back to something you said earlier around, especially sort of the reefer madness and the indoctrination of our populace. And, you know, there's elderly people in my family that they still… some of them I've been able to… move them over a little bit. But, you know, you do… I do… there's people in my family that are… they've got… this many orange bottles from their pharmacy of a bunch of things. They're taking this, and then that to counteract that, and this and that, and I'm like, why don't you just try this edible for a couple days, and you can get rid of a whole bunch of those things. Now, it doesn't solve all… aches and pains. Canvas is not a panacea at all. But there are some… a wide range of things that can be ameliorated or entirely eliminated that people are living with that are currently just a huge bunch of prescriptions that people are taking with a lot of negative knock-on effects.

Joanne: I totally agree. I think this comes down to education. And, education, education, education. I think it's really, you know, for… I mean, a perfect example is… you've heard so many of these right-wing lunatics, who are in government that were… are so anti-cannabis, you know? It's gonna… it's a gateway drug, da-da-da-da-da, it's so bad, this and that and that and that. It's just like… You know what? let's get together, let's light up a fatty, and then let's have a conversation. So, you know, they haven't ever touched the drug. They have no idea what cannabis does for them, and there is not a person I know, and I would say majority of people would say that they have turned someone onto something for stress, for sleep, for pain, for sex, whatever it might be. That they're like, oh. oh, this is good, right? I don't need to take that other shit. I mean, I've had friends who have surgery, and they have said, can you send something? And I've had doctors who have said to them, oh, don't take cannabis. It's like, don't listen to your doctor, you know? I mean, you're gonna take this shit that's gonna, like, for pain, that you're gonna then have to get off of, that, like, knocks you out? Like, just take a gummy.

Jake: Yeah.

Joanne: You know? So I think that it is just lack of education, and lack of, not willing to give it a whirl. I mean, you have these people that drink multiple martinis a day, but are afraid to touch cannabis, and, you know, there's a saying, I think there was a huge study done years ago, actually John Cagia, who, is the head of Office of Cannabis.

Jake: I know, John, yeah.

Joanne: He was at our conference yesterday, and he quoted this about how there's a study done, and it was about alcohol, and it really came that the best way in regards to alcohol is to never use it.

Jake: Yeah. John's great. I haven't seen him in a few years, and hopefully we'll cut this from the podcast, but next time you talk to him, listen to the way he says the word global. It's just… it's perfect.

Joanne: And he has definitely this incredible, cadence in the way that he, says words. It's pretty awesome. It's very elegant.

Jake: Yeah, he's great to listen to. So, okay, well, we'll… we'll wrap it up now. Again, thank you for your time.

Joanne: Pleasure.

Jake: it's great to talk to someone who has such a good grasp on the way that the world works, and the way that cannabis can and should eventually work inside of it. I think everything you're doing is fantastic, and I don't need to wish you luck, because I think you'll do just fine.

Joanne: Let's hope so. Alright, thank you so much.

Jake: Thanks, everyone. Bye.

Joanne: Alright, take care. Bye.