A trip to Washington state to check out marijuana dispensaries convinced Kathryn Blackwell, CEO and co-founder of newcomer The Open Dør, the sector was in dire need of franchising.
“I just kind of Googled dispensaries near me, and realized that I had no clue what I was in for, how to pick which location. I drove by a few of them, and literally didn’t even slow down because I didn’t want to go in,” she said about the random assortment of head shops she saw.
Blackwell is the co-founder of what became Kahala Brands, which started with three juice bars in 1989. When she and her husband, Kevin Blackwell, sold out in 2014, Kahala had 14 quick-service restaurant brands and more than 3,000 locations in 23-plus countries. “I thought, this is a good opportunity to build brand recognition,” she said about the marijuana space.
Back home in Phoenix at an entrepreneur event, she met her future business partner, Bryan McLaren, whose firm Zoned Properties specializes in real estate development for the legal cannabis industry. When Blackwell suggested franchising a chain of dispensaries, “His eyes went wide open and said, ‘This is a phenomenal idea.’ He actually introduced me to Chelsea Mulligan, and she has spent the last eight/nine years in compliance” for marijuana firms. Mulligan is co-founder and chief operating officer of The Open Dør.
The Open Dør is starting its franchise effort in Arizona, targeting current marijuana license holders in the state. It does not have any corporate stores and as of late January had not sold any franchises, which will cost $585,000 to $1.2 million to open, on top of fees to get licensed.
“Real estate seems to be the biggest hurdle, just so it’s properly zoned, and is in the right part of the city to be licensed as a dispensary,” Blackwell said about the initial challenge.
Unity Rd is the first franchisor of marijuana dispensaries, and its experience illustrates the long and difficult road ahead. As of March 2020, Unity Rd had deals for 31 stores with 11 franchisees in seven states, but had zero stores open. Reached in late February 2021, COO Mike Weinberger told Franchise Times its first Unity Rd store is finally scheduled to open in May, in Boulder, Colorado. Meanwhile, its first attempt to become a publicly held company failed, and its second attempt, to merge with the publicly held Item 9 Labs, was still pending as he hoped for a closing in March.
“We’re the pioneers, for better or for worse,” said Weinberger, who like Blackwell has a background with Kahala; he led the sale of Maui Wowi to Kahala and then operated that chain for several years before starting Unity Rd, formerly called One Cannabis. “It’s been hard, it’s been very difficult over the past five years to get to the point where we are now.”
He welcomes others into the franchise cannabis space. “I like competition. I have no problem with it, and I think it’s actually really healthy…for people who are interested in cannabis franchising to have multiple options. There’s multiple options in every other avenue, from fitness to burgers,” he said. “I never wanted to be the only one. We’re doing this to bring local business ownership in cannabis to communities. We’re happy to pave that way for them.”
Blackwell acknowledges the difference is huge between the brands under the Kahala umbrella, including Cold Stone Creamery for instance, and The Open Dør. For starters: “Yes, ice cream is legal,” she acknowledged with a laugh, unlike marijuana at the federal level, yet franchising is also a highly regulated model.
“Coming from quick-service restaurants, multiply that by 10. It’s still so new, and growing so fast, and the people who are putting those regulations in place are doing the best they can in a new industry. But it is lots of hurdles and lots of challenges, and lots of objections from not only residents and businesses but even corporations,” she said.
“I think when we can elevate the industry, it will make it a lot smoother.”