From mom-and-pop businesses to global chains, everybody in the retail industry understands the importance of a well-chosen location, CBD retail store is not an exception for this case as well.
Although legal restrictions, license accessibility, as well as demands will vary by location, cannabis and hemp retailers looking for a great spot should consider:
- Understanding both local and regional trends is essential.
- Finding underdeveloped places requires creative thinking, especially for smaller players.
- Consider the advantages and disadvantages of purchasing versus leasing.
- Identify potential markets before local politicians begin creating ordinances and get involved as soon as possible.
Consider the Local, As Well As the Regional
Michael Lord, CEO of Colorado cannabis company LivWell Enlightenment Healthcare, which handles 22 dispensaries from across the state, urges prospective cannabis shop operators to become intimately local to the area where they wish to open.
According to Lord, “Google Earth doesn’t articulate a real image of boots on the ground.” “I believe that many individuals are sitting at (stores) in areas they have never seen, putting places (based on) what seems good on a map.”
“It varies from location to location in a neighborhood.” And, at the close of the day, I believe that businesses must have their fingers on the pulses of a community in which it operates.”
Steph Goodman, CEO of Brick – And – mortar Group, a Michigan cannabis brokerage firm, suggests conducting a regional market survey in the surrounding communities.
“You might think you’ve found a great location, and the city will only grant two licenses, but right next door, it’s infinite (licenses),” she explained. “Knowing stuff like that can help you estimate future sales.” This entails completing your homework.
Take the form Tacy, CEO of Franny’s Farmacy has eight franchises in four states, said, “Know your market – population, demography, legislation, etc.”
“We chose to delay the construction of Franny’s Farmacy CBD Dispensaries in areas that do not allow tobacco hemp flowers because it is a top-selling product, revenue generator, as well as driver to brick-and-mortar locations.”
Creating Your Specialty
Elev8 Cannabis CEO and Founder Seun Adedeji, who started with a single dispensary in Oregon while expanding to Massachusetts, feel that launching in smaller areas might benefit smaller, less-capitalized enterprises.
Elev8’s Massachusetts development was concentrated on border communities close To new Hampshire, New York, and Vermont, where real estate is less expensive than in larger cities.
“The beauty is that, because of licensing constraints, each of those little municipalities is only issuing two recreational licenses,” Adedeji explained. “As a result, your worth continues to rise.”
Smaller towns may appeal, but Adedeji’s border technique can also be used within cities.
Urban Greens Cannabis Co, one small Canadian shop that debuted in the aggressive Toronto marketplace in October, has chosen space in the city’s uptown district.
It may not be a hot address compared to the city’s city center; however, Chief Legal Advisor Farrell Miller said that the location satisfies demand in an underdeveloped area near two suburbs that have chosen to prohibit cannabis retailers from operating. Urban Green’s second facility is already in Picton, Ontario, a tiny town with fewer cannabis store license applicants than more prominent places like Toronto or Ottawa.
“Wineries and tourism are becoming very popular in this town,” Miller remarked. “We’ll see cannabis harmonizing with those things in the future.”
Is It Better to Buy or Lease?
Elev8’s Adedeji was burned when his first Oregon store’s landlord refused to extend the lease, forcing him to locate a new location. Consequently, Adedeji is just a firm believer in retailers purchasing rather than leasing real estate.
“For anyone wanting to lease, have a 10-year rental with the possibility of an extra 10-year lease,” he advised.
The federal ban on marijuana, according to Michigan real estate broker Goodman, contributes to landlords’ reluctance to lease to cannabis firms.
“On the purchasing side, we’re seeing more private finance, and they’ll rent back to the operator,” Goodman said.
Buying and then completing a leaseback arrangement can benefit well-capitalized players. According to LivWell’s Lord, the company believes in properties and then leases them to investors who hire them back to a dispensary user.
He explained, “This allows us to execute but use the capital for expanding the network instead of having it tied events in the reallocation itself.”
Tacy at Franny’s Farmacy, on the other hand, prefers leasing.
She advised, “Keep your capital and then use your money in this way.” “With COVID’s commercial real estate climate, landlords are more eager to negotiate leases now.” I strongly recommend a three to five-year lease with the option to renew.
“Even though hemp is now legally legal, financing, advertisement, credit card processing, and locating a decent retail space are all different. COVID has demonstrated that cannabis is not only recession-proof but also pandemic-proof.”
Get Ahead of The Game
According to Goodman, small companies may gain a competitive edge by identifying new markets before regulators begin issuing licenses and then contacting local officials early on.
“In that case, I’d suggest starting work with the city while they write any rules and then working with them to have the ordinance created for what you’re doing,” she said.
“We’ve seen a lot of them work out.” Local businesses are popular with them, but it’s a longer game. It could take six to twelve months to complete.”
Spending quality time engaging with the surrounding area is also something Goodman advocates.
“We’ve worked in a lot of areas where people are frightened of cannabis businesses,” she added. “But it’s different after people get to know you, and there’s a person associated with the company that chooses to come in.”