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Find out how this musician-turned-entrepreneur went against the grain with his dispensary and unveiled the do's and don'ts of starting up in the marijuana industry.
8 min read
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The following is an extended excerpt of Javier Hasse’s book Start Your Own Cannabis Business. Buy it now from Amazon | Barnes & Noble | IndieBound
Brendan Hill is the drummer of the Grammy-winning jam band Blues Traveler. Over his life, he's had the fortune of sharing a stage with The Rolling Stones, winning a Platinum Record, starting The Spin Doctors (the band responsible for one of the 90's soundtracks, "Two Princess") and even smoking a joint with Marilyn Manson, the members of Metallica and Neil Young.
A few years ago, as if his life had not been interesting enough until that point, the famed musician decided to go on yet another adventure: opening a cannabis dispensary. Less than three years into this venture, his store is generating annual sales of more than $4 million.
So, what's the secret to setting up a successful store like Brendan's Paper & Leaf?
The story of how Brendan and his partner Steve decided to start Paper & Leaf is pretty long and extremely interesting. However, for practical purposes, we'll skip the initial planning phase and cut to the chase to talk about how these guys set up a successful shop with little outside help.
Related: 9 Business Ideas for People Looking to Cash in on the Marijuana Boom
Some things you need to know before moving on: Paper & Leaf is situated in the state of Washington, where recreational cannabis was legalized in 2013. Zooming in on the map, you'll notice the store is located on Bainbridge Island, a little isle with just 24,000 inhabitants.
You might wonder: how does one make millions off such a small population? Well, there are two keys to this. On the one hand, more than 70 percent of Bainbridge Island's population had voted in favor of legalization, so there was a clear interest in marijuana. On the other hand, Bainbridge Island becomes very crowded during the tourist season, and people can buy weed freely as long as they are at least 21 years old.
"Steve and I had very similar ideas of what we wanted from a cannabis store," Brendan says. "I am a musician, so I had been around cannabis for a long time; cannabis had been, for years, a part of my culture -- my creative process -- so I was very familiar with it. Steve also had an artistic background, so he was no stranger to cannabis."
Feeling in sync, the newfound friends decided to apply for a license. At the time, however, many jurisdictions in Washington were using a lottery system to determine who would qualify for a marijuana retail license.
When the numbers for Bainbridge Island were drawn, Brendan and Steve's businesses came out third. But, they did not lose their faith. "It looked like the location was going to be the deciding factor because there were so few locations in Bainbridge that were far away from parks, schools, nonprofit centers . . . . Fortunately, we had a lease on a property that was compliant."
Nonetheless, the partners had to spend the following seven or eight months waiting for the other lottery winners to find a location before the local regulatory agency decided on who would get the license in the end. Finally, on Christmas day, Brendan and Steve met with the lottery winner and arrived at an agreement: he would share his "Golden Ticket" and become a silent partner.
"And so, we got the green light to start building out," Brendan adds.
Related: Why Your Cannabis Business Is Failing, and How You Can Fix It
Since neither Steve nor Brendan had ever opened a store before, they kind of played it by ear, taking what they liked from other cannabis retailers and changing what they didn't. We'll share their story so that you can learn from their rights and wrongs and spare yourself from the hardest part of the learning curve.
"One of the hardest things was making sure we had all the security, cameras and safety equipment that were required. So, we came up with a checklist and got together with an architect to help us," Brendan reminisces. This reflection clearly illustrates the unique challenges of setting up any kind of cannabis business; even if you won't operate a storefront, you'll need (and even sometimes be required by law) to get specific things in place -- like a security system, as you'll probably operate mostly in cash.
One of the things that Brendan and Steve wanted to make differently was how product was displayed. "A lot of pre-recreational stores, medical dispensaries, had counters and a sales person behind it, and you were basically just handed a paper menu to pick cannabis from. Quite often, you'd get limited time with the salesperson or budtender and [would have] to pick quickly."
"We wanted to do something different; we wanted people to be able to come into our store and be able to have a discovery moment where they can walk around the shop, like in a bookstore or a wine boutique, and be able to actually see the product, a description of the strain and its properties -- THC levels and terpenes -- and get some sort of emotional connection -- a moment where you go, 'Wow, that is a really well trimmed, well taken care of bud.'"
We wanted to do something different; we wanted people to be able to come into our store, actually see the product and have an emotional connection.
Brendan and Steve had leased an empty warehouse, so the possibilities seemed infinite. "We decided to take advantage of this and create an open floor-plan. What was unique, in our minds, was that we'd created this kind of art gallery feel," Brendan says, walking us into another important tip you should take into account when setting up shop, especially if it's a retail operation: create a unique experience.
Related: How Will Businesses Handle Legalized Marijuana in the Workplace?
"People walked in, there was music playing . . . We had a turntable, which would play music from the 60's, 70's, 80's . . . music that would make you feel relaxed and that you could recognize," Brendan describes.
On the walls, customers would find little boxes similar to picture frames. Inside each one of them, behind a safety glass, were well-illuminated, beautiful buds.
"Growers had spent years and years, sometimes decades, perfecting the art of growing the cannabis plant, so they were very proud of their product," Brendan notes. "These guys were really paying attention to presentation and packaging now. Since we could not grow, because vertical integration is not allowed for Washington cannabis businesses, we were in a position where we'd had to choose the products we liked -- the best of the best."
Each grower had his or her own little display box on the walls of Paper & Leaf so they could all develop unique identities. In retrospect, this also seems like a pretty important factor in the dispensary's success: creating synergies with industry colleagues and providers generated incentives for everyone to constantly try to get better, ameliorating all of the products involved in the cycle.
"From the moment we opened our doors, we encouraged all the growers to up their game," Brendan remembers. "As customers became familiar with the diverse brands, they started coming into the store to check out what was new and started to choose strains from specific brands rather than just any strain that they heard of."
"This was a great step forward for us: realizing that, if you look at cannabis as not just something that will get you high but also as something that is like a sensory experience and [you] notice you can spend time with our budtenders and don't get rushed through the process, you feel like you are having an experience and discovering -- rather than just scoring weed."
As word of Paper & Leaf got out, an increasing number of growers started getting interested in selling their product there. It was like a virtuous circle where only the best growers would be admitted, making Paper & Leaf one of the best dispensaries in the state.
The next thing that Brendan and Steve realized was that a "special" store like theirs needed "special" employees. The thing about employees in the cannabis industry is that, due to the current tax code, a cannabis business can't deduct salaries from its taxes like any other business would. So, having several good employees is expensive.
"Steve and I came into the cannabis industry thinking we would make a large amount of money out of it, but after the first year, we realized that, when the tax man cometh, you have to pay, or else you won't be able to continue to operate. So, we had to lower our expectations. But, we weren't willing to cut down on labor costs: we were trying to make something different and change the stigma around marijuana, so we decided to keep all of our employees."
It's important to know how much money you have and spend it wisely, Brendan concludes. "We were smart about doing a lot of the construction and design ourselves, and so we had some money left to pay employees and reinvest in the business."
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