How to Open a Dispensary (Part 3)
I still pinch myself sometimes to make sure I’m not dreaming when I realize I opened a dispensary in California in 2019. It was a dream come true, so yeah, I do feel a huge sense of accomplishment. And, I really believe that if I can do it, you can too.
It just takes research, and some very strategic thinking and planning.
I’ve put all my best tips in the online class I developed with my business partner, Sarah. She has also opened a lot of dispensaries in California.
I’d say that we both have wildly different approaches -- she tackles it more with money, I tackle it more with guerrilla tactics, AKA hustling. We go into this a lot more in our class, but for right now, I want to talk about one more aspect of opening a dispensary and that is fostering a relationship with your landlord.
I have previously talked about how to research your potential new landlord, and also how to develop rapport. Today I want to talk about how to manage the relationship on an on-going basis.
You see, I have watched others in the industry go into the dispensary business as if they simply just need to sign a lease and then their relationship with the landlord is over. This is really short-sighted.
Like any business relationship, when you settle on a vendor, supplier, or whatever the needed role it is, you want the relationship to last. And further, you want it to weather any storms that come your way, and in the cannabis industry, there are a lot of storms.
You just don’t know when you are going to need to ask your landlord for a favor, or a letter of reference to your city, or if you can get a break on rent because it’s a pandemic, which your lease does not cover.
So, here are more tips:
- Even though the landlord is in the driver’s seat, ask yourself as you are negotiating, if the landlord is really someone that can go the distance with you.
- You will be in start-up mode when your business opens, and you will need your landlord to do all kinds of things for you. So, watch for any red flags such as lying or any kind deception. If you encounter it, know that it is likely not a one-off, singular event. It will be a pattern.
- You cannot afford to get into business with anyone who lies. It’s one thing for a landlord to misquote the landscaper’s fee, but it’s another thing for them to tell you parking is included in lease, but then tell you it costs extra.
- Ask yourself if they are treating you fairly.
- Yes, you are likely going to pay inflated rent because cannabis is risky, and the landlord can easily get someone else to rent his building if it’s in the right zone as per your city’s rules, but like lying, if you notice that the landlord keeps ratcheting up the rules, or treating you in a way that is unprofessional, make a note of it, and give yourself an exit option.
- Obviously you’re going to need to exit before you sign the lease, but if you have discussed most of the main deal terms such as price, deposit, etc., then approach some of the details and see how they respond.
- For example, many dispensaries sell living plants. Ask your landlord if this will be allowed. Many dispensaries also offer delivery. Tell your landlord you will need to do this too. These features of the cannabis dispensary business are part and parcel of the industry, and the landlord needs to know about them, and also approve them. If they start asking for more rent for these services, it’s a red flag. Would they ask a bakery to pay more rent if the baker offered delivery to restaurants? Would they ask a veterinarian for more rent if the vet had a Saturday dog adoption in the parking lot? If you are starting to get nickeled and dimed, it might be a good time to walk away, or begin negotiating somewhere else.
- If you haven't been saying thank you at the end of emails or phone calls, send a thank you card/email when you get through a certain point in your negotiation process. Keep it simple, and say something like, “I just wanted to thank you for taking a chance on me and my team. I am looking forward to getting my doors open, and being a model tenant.” It’s rare to receive a handwritten note in the mail these days, so it will be a very thoughtful thing for your landlord to receive. Plus, you might be calling for a favor the next time you reach out.
- A lot of the features of your dispensary will be in your business plan. You will share your plan with the landlord (although not the financials). We go into it in our course about what exactly to share, but make sure you have a record of sending your landlord the store’s features, such as selling live plants, or offering delivery service.
- A lot of people will tell you to have an attorney review your lease. Obviously neither Sarah nor I are attorneys, and I think she and I differ on this point. But in my case I didn’t use an attorney to review my lease. I have seen other leases in my personal and business life, plus my business partner on my dispensary project was well-versed in leases.
Again, what I think is critical, (and it’s kinda like dating), the negotiation of the price, and all the other deal terms are really going to be your window into how your landlord reacts and deals with conflict. Like meeting a new potential love-interest, you want to pay attention and see how they react and deal with challenges that come up. You can definitely sign an MOU, and draw out the process of the lease signing for a couple of months to see how the landlord handles themselves.
That’s all our tips for today. Sign up for our emails, and consider taking our online course. It’s 2-3 hours of instruction which you can do at your own pace, and it can save you thousands of dollars, and help get you on to our path of success. We’ve done it, and we’re here to share how you can do it too.
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