Too Many Cannabis Shops, Too Small Profit: How To Play The Municipal Game In The Legal Weed Era

Too many dispensaries can be a bad thing.

That’s according to a panel of experts, who gathered for “Retail in the Garden State: The Municipal Control Effect” at the Benzinga Cannabis Market Spotlight on Monday (June 17) in New Brunswick, New Jersey.

Municipalities often see dollar signs whenever a new dispensary opens because tax revenue spikes. They start wondering: By greenlighting more dispensaries, can we can double and triple that extra income?

Nope.

“What ends up happening is, instead of growing the category, we end up splitting the baby,” according to LKP Impact Consulting CEO Laurie Parfitt.

In other words, oversaturation of the local marijuana market can burn businesses.

“We haven’t grown [the industry] to the level it needs to be in order to support all those dispensaries,” Parfitt said. Her panel of guests — iAnthus Holdings CEO Richie Proud, AYR Wellness Vice President Robert Vanisko, Joyleaf co-founder Jason Ackerman and Valley Wellness CEO Sarah Trent — agreed.

“We’ve seen towns with dispensaries on every corner, and a lot of those dispensaries are failing,” Parfitt told the New Brunswick Performance Center crowd. And the stakes are high: Crime typically goes down when you open a dispensary, data shows. Crime goes up when you close a dispensary, she adds.

Trent has some advice for new operators trying to enter the space: “Be a little more picky about a location.”

If you’re thinking about expanding, it might seem like it’s easier to get municipal approval in a town with “three, four or 10 dispensaries.”

“But is that going to be the best place for your business?” Trent asks. It’d be wise to show up at town council meetings, schmooze with the local planning board and set up shop where there are fewer or no dispensaries.

“That might take a little longer,” Trent says, but your business might be “better served.”

See Also: ‘A Huge Milestone’ — New Jersey Surpasses 100 Cannabis Dispensaries In Rapid Expansion

Zoning is a crucial discussion point for cannabis entrepreneurs, according to Proud.

It’ll be “a very interesting topic as we continue over time,” he adds. “We want to be local in areas that are thriving and where we’re wanted and welcomed. If we’re successful, municipalities are successful.”

For some dispensaries, it’s very “Field of Dreams,” Vanisko says. “If you build it, they will come.”

Once a dispensary opens, the legwork begins. “You have to engage the community and bring folks in,” Vanisko says. AYR Wellness has three stores in New Jersey (Union, Woodbridge and Eatontown), and “They are very much reflective of their communities,” he adds.

It’s not just about municipal licensing, he notes. It’s about building a relationship with the people who live in each community, as well.

“They need to know that you’re a person,” he says, as opposed to “a monolith that’s being dropped into their town to get everyone high.”

Joyleaf’s Ackerman notes that the work often goes hand-in-hand with education and quelling municipalities that have a “fear of cannabis.”

“People in politics tend to not understand business,” he says. “Making sure they’re educated on [cannabis] is important.”

Cannabis rescheduling seems to be right around the corner. Want to understand what this means for the future of the industry? Hear directly for top executives, investors and policymakers at the 19th Benzinga Cannabis Capital Conference, coming to Chicago this Oct. 8-9. Get your tickets now before prices surge by following this link.

Now Read: Can Cannabis ‘Bring Retail Back To Life’? Verano, Curaleaf, NewLake Capital Bet Big On Local New Jersey Market

Photo: Corynn Egreczky for Benzinga