Choosing a place to put up your cannabis business is not as simple as it seems. In this episode, Anthony Frischknecht provides a guide on knowing and understanding the location regulations. He shares what he does when looking into a place for your business, checking not only the locality but the states around as well. Letting us in on the possible worst-case scenarios, Anthony shows the importance of finding the right attorneys as well as keeping yourself in the know of these regulations. After all, regulations are part of the business. You either grow and adapt or fall out.
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Regulations In The Cannabis Business
I appreciate you joining me. Our topic is going to be the regulation’s first location. I want to talk to you about where you’re thinking of placing your cannabis business. It’s easy to say, “I live in Arizona in Sedona, so that’s where I’m going to start my cannabis business.” I would highly recommend you do a little bit of investigating before you open up or try to open up in that area. Basing your business in a relatively friendly area has its advantages and disadvantages. You want to know, first of all, locally your city how favorable they are to you or businesses like yours. This is a pretty important step that a majority of the new business owners make as they’re trying to start their business.
People say, “We know it’s legal. There’s stuff happening here.” We can open up our pot shop or extraction facility in the city. What I try to do when looking into different businesses is look at not only my locality but around my states and states around me and see what’s favorable. You can probably save a lot of time by talking to some attorneys that specialize in those states. One of my other shows where I talk about finding that attorney and there are enough attorneys now in the majority of these states also that have started in some of the earlier states like California and Colorado.
These guys have deployed attorneys into the newer states to help run. A lot of the times, you can find some firms that are already following regulations and making sure they’re staying up on top. As it’s changing quickly, it’s still challenging unless you have somebody dedicated to the regulations part of the system. Finding that person can take some time, but usually you’d be able to find them online, finding them at some of these events that are going on, that’s always a good place too. See who’s in the know and who knows what’s happening because these guys can make or break your business. If you miss out on a deadline of any kind, they can cause you a lot of heartaches, a lot of pain and sometimes cause you to lose your business depending on how bad the regulations are.
There was a time back in 2010 when we were starting to regulate Colorado. Back when I started on the commercial side of cannabis, growing in retail, we didn’t have a bunch of regulations. We had a handful of them. They were pretty easy to follow. I learned a lot of this going through the building stages of regulation and working with the city and state to build these systems. You don’t have that luxury as much anymore. A lot of these states are taking the info from the most regulated states and they’re putting their own twist on it and adding here and taking some stuff out here. That’s how they’re expanding their regulations quickly.Regulations are a part of the business. You either grow and adapt or you fall out. Click To Tweet
We had a regulation coming into a place where they had said, “This is June of 2010.” I said, “Mr. Cannabis Owner, if you want to grow your cannabis and sell it, you’ve got to sell the majority through a retail store location. You have to do so or have something set up and structured in place to do so by July of 2010 so we’re talking 60 days.” At that point, my business partner and I had been creating a 7,500-square-foot warehouse grow facility. We had all our money invested. We’re like, “How are we going to start a dispensary?” We had no idea. There were thousands of people that were put in this position of basically they said, “If you don’t have this done by July 31st, which is 60 days, you’re out of business.”
My business partner and I were like, “What are we going to do? We’ve got to find somebody to give us some money.” That forced our hand. We’re like, “Let’s see who else has a dispensary out there?” My business partner and I were talking and we started throwing out, casting out our lines and looking for anybody that we could partner up with. It was a stressful time for us because we didn’t want to lose everything we had. We also had risked so much to this point. It doesn’t matter what we got to do, but we’ve got to figure something out.
We ended up talking to some individuals over the next month. We talked to 3 or 4 individuals. The end of June came and we’re like, “These are our partners.” We partnered up with a couple that was married. We decided, “These are our business partners. I can say that I knew probably 3 or 4 people that were directly affected by this regulation. One of them ended up saying, “I’m going to grow anyway. I don’t care what they say. I’m going to do what I want to do.” That’s not the case with the laws nowadays. If they don’t shut you down right away, they’ll end up finding you and they could potentially put you in jail for breaking the law.
I knew a guy that went back underground. After a couple of years, he ended up getting tangled up with the wrong people and getting indicted on some serious charges. I knew two other people that didn’t find a partnership, lost their life savings, her family’s life savings and everything that they had invested. I knew another couple of guys that were able to find partnerships and able to start stores. The majority of people fell out right away and they can make business-altering regulations on you quick. If you’re not up to date with what’s going on and you don’t have the people backing you to find that stuff out for you or at least make you aware that this is going on, it will level your business overnight.
You want to make sure you know what’s happening in your ecosystem. Look for states and cities that are favorable to your business and want to work with the business owners creating tax revenue. If you get that far, do you want to try and at least review the application if they have one if they don’t have one? You like the area and the favorable laws that there proposing, you have to get ahead of that and either create your own application or take an application from another state and model it after that so that you can be first in. That makes a big difference.
The good part of this story was I was able to move forward unlike many other people. When they started talking regulations, I remember specifically the news was talking about the city and the city is like, “We’re making these regulations and we will guarantee that 30% of all applicants will fall out even before the application process. They do this type of stuff to see who’s serious as well about taking out the unserious people, the people that aren’t serious about doing it the right way.
At the time, it seems like, “How could you do this to me? You’re taking my livelihood.” I didn’t notice the positive side of this until getting through it. It’s a gauntlet. They’re trying to weed out the bad actors. That’s part of this, which helps strengthen the cannabis community. It was hard feeling that way as we saw friends and other people that we knew in the industry failing because of these regulations. Ultimately, in the end, it was a part of the business and you either grew or adapted to that or you fell out. You either got up and tried something different or you folded up your tent and you went home. That’s one thing that can happen too is you’re going to learn from, if you are in this position, hopefully, you take your mistakes and you capitalize on a new opportunity because we are at the beginning of legalization still.
If you weren’t able to succeed in your home state or your home city, the good news is there are plenty of other cities and states that are doing this. I did a live Facebook on my business page. I talked about some of the fastest-growing states that are working on. The fastest-growing now is Oklahoma. People are expanding there quickly. It reminds me of what happened here in Colorado and people said, “I’m moving to Colorado because Colorado is legal and I can grow. People were coming from California to Colorado because they had regulations. Regulations are a good thing even though they’re painful. These are maturing markets and that means the opportunities are there. I encourage you to dig into your regulations and understand them before you invest a large amount of money in an area, a population where you could easily get shut down or forced out.Take your mistakes and capitalize on a new opportunity. Click To Tweet
With being able to help on the regulation sides, I’ve got a company that I met here at San Jose. There was a cannabis event in San Jose. They had some pretty cool regulation platform that they were building. I’m going to bring them on as soon as I can get in touch with them. I’m going to bring them on and talk about this. Open up some stuff for our audience out there and hopefully provide you guys the real-time system. These guys I talked with have a real-time system that deals with regulations. As soon as I get that connection, I will get their shows in here so you can review it. It seems to be a pretty cutting-edge technology from what I can see back in the day.
If I had something like this or program like this, it would have helped immensely. Also, it would have saved me a ton of money on attorneys because I had to have a lot of people figuring this stuff out as I was trying to run my business. That’s probably one of the single biggest problems of keeping up as well. I’m supposed to be running a business too. How am I supposed to keep up with that and run the business at the same time? In some instances, this is where partners are helpful. This company is going to provide a lot of help with that. I’m going to have them on.
I’ll share their name with you on the podcast once I get them, but that is my little connection with regulations versus locations. Keep that in mind. If you want to get some more information on that, I’ve got the book that I published in April of 2019 called From Black Market to the Man: Ten Steps to Becoming a Multimillionaire in the Legal Cannabis Industry. You can go ahead and review that if you like, on BlackMarketBook.com and that will give you little more details on regulations versus location. I appreciate you joining me. I look forward to talking to you next time.