Two Sides to Franchising Cannabis: Part 1
Twenty-three U.S. states allow some form of legal marijuana use, primarily for medicinal purposes, while four states and Washington, D.C. have legalized its use for recreational purposes. With this growing cohort of states, the legitimacy of the cannabis industry is also rising as entrepreneurs examine how franchising can help them grow this still-untamed industry.
To learn more about the trajectory of this business, I interviewed two business owners with different stakes in this business, one clearly motivated by the cause of legalization and the other driven by current and future profits.
Check back soon for the second interview.
Steve Gormley is partner at Encino, California-based Go Green Hydroponics, a retail and gardening supply store for private- and commercial-grade indoor cultivators. Go Green is owned by publicly-traded OSL Holdings, which also has ties to the consumer rewards and medical services worlds.
With more than 1,000 products from equipment and hardware to nutrients and chemicals, Gormley says the company is “almost on par with Tiffany’s with how much we sell per square foot.”
Supplying cultivators (not just marijuana) of many stripes, Gormley asserts that the hydroponics process is much more complicated than “pouring some nutrients and turning on a few lights.”
The company’s flagship store in Encino has been incredibly successful, and the company hopes to open at least two more stores within the next 18 to 36 months, ultimately seeking to create a brand as ubiquitous and familiar as Home Depot in the home improvement realm.
As more states loosen marijuana restrictions, Gormley sees significant growth for his company as “the overwhelming majority of medical marijuana and recreational outfits would source their product, technologies and services from companies like ours.”
He likened the company’s current situation to being involved in the liquor business three to five years before Prohibition was repealed. While he was careful to assert that Go Green is not in the marijuana business itself (cultivation supplies only), he wasn’t shy about his company’s support of the proliferation of medical marijuana and the “compassionate care movements around the country that are trying to help people get the medicine they need.”
Although laws could change, Gormley doesn’t feel there are significant threats on the horizon for his company beyond access to capital, adding that “Wall Street has spoken” in terms of the number of business networking events and the number of “MBAs mulling around” recent industry gatherings.
As his company looks to expand, he sees the franchise model as the key to speak to basic human nature that desires familiarity in branding.
“We’re pack animals, we’re primates,” he said. “We feel safe with what’s familiar, and over time we can trust it.”
Looking further ahead, he predicts significant advancement in pro-marijuana laws in the coming years, and an industry that could be north of $40 billion by 2020.