How to Open a Dispensary

[ {Full Transcript}

hi everyone welcome to our webinar about how to open a dispensary i'm gary cohn the ceo of cova and with me is guillermo bravo the ceo of foot traffic we're pretty excited to share this content with you and hope you get a lot out of it as you think about opening uh canvas dispensary guillermo you want to talk about what we're going to what we're going to do and how we're going to do it today yeah so what we'll do is we'll we'll first cover the um how to open a dispensary from the eyes on the on the technology side and then we'll transition to you know as you're ready to open a dispensary what you actually need to do to be successful so before we get started i'd like to let everyone know that there is a q a portion of the webinar if you have any questions throughout the webinar we'll be we will be pausing to address those questions just please use the q a function within zoom rather than the chat function we will pause during the presentation and we'll address those questions we do have moderators that will be you know moderating the different comments in the q a function oh that's great well let's go ahead and get started just a little bit about cova we were built specifically for the cannabis industry and we operate in most of the legal markets in the us and all of canada we've we've grown pretty fast and i think part of our growth has been a lot of educational sharing with potential dispensary owners so we do seminars around the continent and just try to deliver best practices and things for you to think about which is what this is going to be about today um a lot like foot traffic we've we've really captured a lot of the main brands across the us so through all that experience we've been able to to learn from our clients and and that's all been put back into this presentation that you'll see today well what we'll cover are a lot of the top challenges that you have when opening a dispensary and this presentation is primarily about retail cannabis operations so we really won't look a lot at vertically integrated operations we'll we'll really talk about the retail part of the business today and the depth will be pretty high level um i think each one of these areas that we'll talk about could go hours and hours but we don't have that so we'll we'll give you things to think about and consider as you're opening a dispensary well what's unique about our industry and opening a cannabis dispensary is that there's unique challenges that we have that other retailers don't have to highlight a few of them it's the cost and complexity of compliance and you will hear about compliance in every single jurisdiction in north america unfortunately um every state and every province is unique so where even though it's federally legal across canada you still have to deal with each individual province set of rules and guidelines that they have for how you can operate a store and what the individual laws are and restrictions for most of you you're probably familiar with taxation and the challenges we have in this industry with 280e and that limitation of what you can actually deduct as a business expense if you're not familiar with it i suggest you study 280e and as you're going into business work with a real accountant that understands um how that works and what you can and can't do as a cannabis operation in the us as we all know there's a lack of banking services and that's both as your business operates and as well as how you conduct transactions in your store and then lastly in certain markets you have black market or gray market competitors so in a survey of about a year ago these were the top challenges that you need to think about you need to get a license and no matter where we are there's a process for you to to qualify to operate a dispensary so unlike almost any other business the background checks the requirements on the location that you have the um the set of partners you have and where the capital comes from to start your business is all scrutinized at varying levels based on the state or the municipality and you know i talked about compliance before i really can't stress enough how important this is because unlike any other business if you make a mistake you probably aren't going to lose your license or lose your business in the cannabis industry if you're not really adhering to all the things on the slide and understand them [Music] there's there's a considerable amount of risk so each one of these things kind of tie back to point of sale because you need systems that kind of keep you between the lines that do the things necessary to meet those guidelines and i'm always asked like why don't we need to or why can't i just get convenience store restaurant small retailer software to run my store and all of these elements on this sheet are the reasons why so it's it is kind of funky and it's something that you need to consider as you're going into your business and as most of you know you really do need a business plan because throughout the process of opening a store you're going to need to go to a local jurisdiction and explain what your your plans are who you are how you're gonna in a lot of cases benefit the community that you're in why your location or facility meets the standards or codes that they have and they're going to want to know how are you paying for this because it's the cannabis industry there's an added layer of scrutiny on just about everything we do which usually means more time and more cost so having a good plan laid out definitely smooth the way to getting those licenses and permits that you need well like with any business there's several key elements that drive the business plan financially it's that business capital um how are you going to have operating capital to buy inventory and pay your staff and then what's your projected revenue so we'll talk about these going back to um kind of what we know in the industry are the the key needs that operators have there's two different sets of lines on here there's vertically integrated retailers and where you see the bigger dark blue line it's because they're growing cannabis and they're selling cannabis there's certain places like washington where you can't do both but there's other markets like colorado where you can and then california has probably 15 different license types and depending on where you are in the supply chain you have a different set of costs in this example what we're showing is a lot higher expenditure or cost on real estate and renovations because if you have a grow and you have a retail store that grow is gonna take a lot more money to get up and running you know we did a survey across the us and tried to figure out what the capital required was to get into a dispensary and these are these are kind of averaged across the us um those costs can be anywhere from 55 to hundred thousand dollars and these are the big buckets that you need to consider a lot of times people don't realize that on in almost every jurisdiction you need to invest in security and surveillance there's a heightened worry that someone's going to break into your store and try to get the cash because we are a cash business or try to get the product so as you're submitting plans you need to think about what am i going to invest in in that type of element of my cost so we just looked at capital costs that's the stuff that is your upfront investment but then you have ongoing costs and as you can see your biggest costs in light blue if you're a retailer are your cost of goods or your inventory and your staffing and a lot like any retail business those are going to be your big ones then you've got rent you've got advertising you know you can see that giant variants and utilities between a vertically integrated and a retail store in a retail store you don't use that much power but in a grow or a manufacturing you're using a lot of juice so that's the difference there and again we looked at um kind of a an average size dispensary you know we found at cova that um almost 65 of our stores have three use three workstations where they have three point of sale terminals is a good way to think about it so we built this model and looked at the cost based on that average store in places like oklahoma where you might have a tiny store in a tiny little part of town or even a crossroad you don't need this much staffing and you don't need this much expenditure and then again in a place like [Music] illinois where they have unlimited licenses almost every dispensable anywhere from six to thirteen point of sale terminals or workstations where they're processing sales and to mend that it's a much much bigger scale so across the u.s it varies greatly based on the market size isn't medical or wreck or both and the estimate of your traffic well this you know in case you didn't know you can't just go get a bank loan to start your dispensary you could get a bank loan to start a toy store or a gas station but unfortunately at this time without the safe banking act being passed we we just don't have the ability to just go to a bank and get a loan most dispensaries across the u.s are self-funded so i've met people who've rolled over their retirement or an inheritance or life savings or whatever um and i think for you know one of the things i tell almost everyone is the us is about 85 percent small business operators or mom and pop dispensaries and 15 enterprise canada is about 70 enterprise and 30 small business operator so the funding view and the situation in canada is different than the us but what i'm kind of showing here is pretty much how the u.s dispensaries have been funded so you can see families and friends i think going into partnership with people who have industry knowledge is is a pretty common way to go i'm here in missouri right now where we just did something in kansas city two days ago st louis last night and meeting all these new operators part of their application process involved pulling in someone who had industry knowledge so a lot of local people here um you know applied for licenses and part of their license was bringing in someone who knows the business and so that's pretty common someone has the money someone has the know-how cannabis investment groups are pretty common as well where a group of it could be high net worth people but they could just be a bunch of people who want to go into the industry and pool their resources and and invest in entrepreneurs who they they feel are a good bet to go into business and then lastly are capital brokers who really are hooking up high net worth people to either someone who has a license which gets them pretty far down the path in a place like missouri or they're looking for entrepreneurs who are pretty clever you know this next slide i thought a lot about because you know you can do your financials on you know worst case realistic case best case and i thought i'd give you some advice here think about the type of market that you're looking to put your dispensary in if it's a new market what are the advantages you have compared to everyone else when you start building your revenue projections are you going to be the first one to market or do you come from another state and in the place that you're now starting to open your business you you have an edge because you you do know the market in the industry and how it works the other thing is are you all lined up with um suppliers so that could be a huge competitive advantage and something to consider when you're building your business case if you're in an existing market um what what are those advantages you have there um is do you have a prime location is there something you're doing that's unique or better or different than everyone else in the market and if so you should identify that and that is going to help you build your revenues faster and again how well of a relationship of relationships do you have with your supply chain and when you do your financials um i know it's really hard to do to be objective because it's just like everyone who starts something the thing you're starting you think is the prettiest baby and it's your thing and it's going to be the best of anybody's but you do need to try to be realistic about all of the inputs that go into this growth of your new business so try to be realistic also be worst case so you need both of those what happens if and the number one thing that screws with our industry is timing so remember how i said this is a cannabis industry there's extra scrutiny and it kind of slows things down everywhere you go so permits construction licensing all those steps to get open usually don't happen as the best case would would suggest um supply constraints you know we've had markets right now in illinois they have next to no supply and canada had a supply shortage so you want to put that into your projection with what if you can't get product and then um what if you've got six competitors going in within three miles of you and can you do it faster or what if they're faster more nimble etc the last thing is don't drink your own kool-aid so don't make a best case plan because then you're gonna do all of your business planning based on that you're gonna hire too many people too fast you're going to spend too much money on marketing too fast so try to get back to that realistic that's where you'll raise your money and and i think investors will appreciate that real quickly there's so many considerations about location you know usually in the u.s you need to be a thousand feet from a school a daycare a park and stuff like that you you got to know what the rules are don't ever secure any real estate without knowing in advance what your local municipality is dictating and also find out if is your municipality even going to opt in to having retail cannabis places like michigan city by city you can you can opt in or opt out and the worst thing is to secure some real estate and find that you can't even open a retail store in that city and you can see all that other stuff um depending on where you're at you know signage is huge you're a retailer you need to think about signage the more the better and if you're a destination versus a walk-up dispensary what kind of parking can you get so all those things go into your your plan i put this stuff in about community outreach the smartest operators we've met in the us in canada they go and they meet the community way before they open and a great gary tip is the local police chief and the fire chief and the minister down the road they don't know all the laws and rules and regulations of being a cannabis retailer and for you to go tell them i'm gonna do all these things to make it safe to not let kids come in to vet my employees to secure the premises it reassures them and it makes your entry into opening your store a lot smoother and better well my last few slides are going to talk about what does your brand stand for and guillermo's going to go much deeper into this but what is it that you're trying to do you know granted it's it's a for-profit business so i get that but he's are you going to be a medical dispensary and the education and the selection of products to help people is your differentiator that's what you're about i think that it's really important to know what it is you stand for and then as you build your store staff your store you do all those things that relate to what you stand for in your brand who's your customer so there's tons of research you can do on segmentation by zip code of who are you going to try to draw again in your business plan you should know the neighborhood who's there and how what your brand stand for is going to pull that that group in i think from a customer journey this is another giant um exercise but as people interact with your store how do they find your store and i put the i put pos next to all that stuff because your pos can feed your online visibility it could feed um you know leafly and weed maps and and how people can learn about your store and as you keep moving down through those that checklist um there's technology that will help make all of that better and smoother i'm going to skip through store design and technology and all that and just basically say the estimate of time is usually about eight months from if you were oklahoma's the exception oklahoma you can usually get a um a license and a permit and all that stuff pretty quickly but in most parts of the country there's a there's an arduous process to get it so it's not the kind of thing you can just open in a month you you have to jump through some hoops so this is just a rough timeline on kind of what we've seen as an average across the country to from start to finish to go into business and with that um i think we're going to open it up for some questions and then um guillermo is going to pick up the how to do it the right way and market it all right if everyone could put their questions in the q a section i will go ahead and start answering those now let's see all right i'll give it a few minutes here so we can have some time okay here we go gary can you see those questions um oh yeah um how is hr and accounting usually handled especially for an ontario canadian type of company um good question the um so here's a weird fact probably 90 of our customers use quickbooks and we built cova in a way that exports all of the pos data all of your transactional data and cost accounting data into the format of quickbooks and even if you want to modify the um the manner with which you label things or organize your accounting that's kind of the norm i think the other probably i want to say 10 but i'm making that up for the enterprise customers um what we found in the last two years is that the move towards a real erp system is kind of kicked in for stores that have anywhere from five to ten or more locations so as they get to that size and scope of of needing more advanced reporting and analytics around inventory management and supply chain we've seen that erp necessity kick in i think from an hr standpoint usually i think we've got probably 40 of our clients integrate with some type of time card application that logs people in keeps track of of what they're doing and then on the back end of kova we've looked at productivity tied to all of those employees so we can actually do reports on productivity by the time they worked you know and realized this is retail your bud tenders are sales people so a lot of the hr and accounting winds up linking together from a reporting standpoint um jason was asking what are kova's pos costs in ontario or what is the breakdown of services well i think for um for all pos companies there's really three things to look for and ask what's the monthly subscription fee because most of them are sas based so it's a it's a software as a service so there's a monthly cost there's hardware and that hardware is you know for us it's tablet based so those could be fixed tablets or tablets where you walk around and help people browse and have an experience and educate through the tablet there's receipt printers depending on your jurisdiction label printers scanners um there's all kinds of hardware cash drawers and then lastly is installation and support so some companies charge for support just to call in and get help other companies don't there's companies that'll come on site like we do where we'll come and and do the training and help set things up and others don't it's self-service and you need to figure it out yourself so it's hard for me to give you a single price and i think the other the last component is how big is your store how how many users are you going to have how do you want to configure the flow of customers through your store and then you know you can compare quotes and what people can provide um i'll ask i'll answer a few more quick ones are all colorado licenses sold if so if so how much does it cost to purchase one from an owner um i'll let foot traffic answer that question so we'll come back to that you skipped over the design aspect could you share a tip to consider when designing the store well my number one tip for design is it does not have to be an apple store but it but again you don't want to have like the old video stores where you just have movie posters up and and it's just kind of skanky i think that um there's so much that can go into design when you know what your brand stands for and what you would like to you know what you want to convey in that retail experience so we've seen people build fantastic stores without very much money and do it in a way where people really enjoy going there so um again i think that your neighborhood what you're trying to accomplish can can lead to that design um i think i'd better turn it back over to guillermo now because i know he wants to do not he wants to do he's going to show you the the next part of the presentation sounds good gary thank you so much for all that information uh if you wouldn't mind uh share allow me to share my screen now uh we can go ahead and transition uh to the technology and marketing aspect of this so you'll want to stop sharing your screen on your side gary did you hear me there i believe you have to choose uh to unshare your screen perfect all right well now we're going to transition a little bit to the technology and marking aspect of opening dispensary i'll start with a little bit about foot traffic so we are a dispensary marketing agency based out of san francisco you know we've been in the business for going on four years now working in cannabis for about seven myself we're currently servicing 200 plus stores across 20 plus states you know at foot traffic you know our goal is to it's kind of says it in name uh our goal is to drive foot traffic to your store uh foot traffic to your store visitors to your website with the end goal of building your customer database and increasing revenue but to do that we need to have all the technology in place to to actually capture these customers and get them into our database so as far as the technology side here a list of some of the core technology hardware and softwares to consider when opening your dispensary so the first is the money atm and merchant account so depending on which state you're in you can actually accept you can potentially accept credit or debit cards depending on the legality of that a lot of dispensaries across the country deal in cash so you want to have an atm in place and have that highly visible and easily accessible for customers as they as they enter the store next is the crm and loyalty and rewards program in order for you to actually capture these customers and get them into your database you need to have a crm in place which is a which is a customer relationship management program and this is typically software so you want to have that in place before you open the store so any any customers that come into the store have the ability to join your dispensary and become a loyal customer networking having all the internet uh internet wi-fi and everything in place so that you can function as a business kiosks i see this a lot in the bay area and in seattle uh denver you know the dispensaries have kiosks in the store so customers have the ability to browse products before they go to a bud tender and in some dispensaries that want to convert those customers right away they'll actually enable an online menu within the kiosk so you can products pricing descriptions all within the kiosk order by placing your phone number in the kiosk and then skip the line and check out and you're out of the store so if you're a high volume store that's something highly to consider marketing software if if you're advertising investing in marketing you need a software platform to track the results to look at uh you know your advertising spending and what the roi of that rw roi of the advertising spend is so marketing software is crucial in tracking you know how successful you are doing online online menus so there's a lot of online menus available in the the marketplace in this is a core element of your online presence what good is what good is it to have a website if you don't have an online menu available for the customer to to browse products after all that's all they're looking for from our numbers from our numbers i mean looking at website traffic they really only go to the home page and they go to your menu page they want to browse products and then after that they want to look for deals so they want to get deals on different specials you know buy one get one free whatever it might be depending on the laws and regulations of your state the point of sale system so as gary mentioned this is a core core core part of your business this speaks to to everything uh this speaks to your online menu this speaks to your crm this speaks to your quickbooks your accounting everything so this is it's crucial that you have this component um before you open your store security systems part of the part of the regulatory process and getting approved for license is having a security system and plan in place whether it's technology or personnel you need to have that in place to get approved and not to mention you know gary mentioned uh the uniqueness of our industry and what we have to deal with with the cash only and people trying to uh you know to uh come in for products so just to be having a secure facility is crucial in the success of your business tv display menus just as the kiosk this is another way for you to display your products specials and really highlight what's available in the store so now we're going to go into the customer journey it all starts with awareness you know billboards in print aren't going away however now they're being overtaken by digital companies like leafly weed maps instagram facebook and the king google so you want to ensure that we have a presence across all these platforms so we can attract and generate interest from customers as you can see in these screenshots there's a there's a few examples of advertising when a customer is on their mobile phone and searching for a dispensary in their area from our numbers 72 of all customers that visit our clients websites are on mobile devices so it's crucial that you focus on reaching people where they are and that's in their pocket you want to reach customers in their pocket because it's you know it's an extension of themselves everyone has their mobile phones on them they use them i don't know what the average is but probably close to 500 times they pick up their cell phone on a daily basis so reach them where they are so when customers are looking for you know after they're aware of your business or they're looking for a cannabis store they're going to go on google google owns 93 of all search traffic in the united states consider that a monopoly they own everything so you need a presence there right next to that is siri so having voice search and being present when people ask siri where can i buy weed near me where is the best pot shop where is the nearest dispensary there's different terms that people use but you need to have a presence on siri in all voice search platforms like alexa google has its own so you need to have a presence across all voice search platforms the directory websites we maps and leafly they have their own presence depending on which state you're in weed maps primarily has high high saturation in california um not not as much across the rest of the country and leafly has heavy saturation in washington and then it you know kind of spreads throughout the united states as well but i want to re-emphasize that weed maps and leafly are nothing compared to google google is king and they own everything online as i said 93 of searches people go to google to search for a dispensary in san francisco if you're not in those top three results you're not getting the business and leafly and weed maps are getting their traffic from google as a result below these local results here so you want to really focus on google in any way that you can influence those results acquisition so people are going to they're going to look and see if you're a legitimate dispensary they're going to look at your your blog they're going to look at articles they're going to type in you know sunburst farm and they're going to look at what the ]