Today, Alameda County’s Garden of Eden dispensary is a model of efficiency, according to its chief financial officer, Shareef El-Sissi. The California dispensary welcomes some 1,400 patients daily, El-Sissi estimates, to its 1,000-square-foot space, which makes it one of the busiest dispensaries in the country—as well as one of the smallest and most technologically friendly, he adds. That’s a lot of people in a little area, and Garden of Eden was not always as adept at handling them as it is now.

“Trying to serve 1,200 customers or 1,400 customers in a day—that broke the shop,” and resulted in long customer wait times, El-Sissi says. To make matters worse, a 2016 review of the dispensary by the Alameda County newspaper, the East Bay Times, described it this way: “Garden of Eden sits beneath a huge billboard in a run-down, one-story, cinder-block retail shop, with little to attract shoppers beyond copious street parking. … The retail area is small, with two cash registers. There are no clones, edibles, extracts, or trappings. The only splurges are the [HD] flat-screen menus, displaying a truly miraculous marijuana lineup.”

El-Sissi admits that this is a “100-percent” accurate description of the dispensary at the time, adding that it was “just a beige [building], as simple as can be.” Back then, the dispensary’s menu kept patients coming in for the time being, but Garden of Eden knew that wouldn’t last. To stay competitive, the company, which launched in 2003, had to reinvent itself with its customer in mind.

At first, Garden of Eden was reluctant to make sweeping changes. As El-Sissi explains, the Garden of Eden team didn’t want to upgrade the space—neither technologically nor aesthetically—because it had been difficult to operate the dispensary in Alameda County. The dispensary—along with all dispensaries in the county—was only allowed to sell flower for many years, which limited its ability to become profitable. In addition to that hurdle, “We had been raided by the DEA,” El-Sissi says. “We had been [audited] by the IRS—you know, all these occurrences that kind of limited our desire to invest a ton of money into a shop where we didn’t know if we were going to be open the next day or the next year, and we had a bureaucracy in Alameda County that made it really tough for us to build a new building.”

However, in 2015, the dispensary team began conceptualizing the major re-design that patients enjoy today. “We basically have been clawing and fighting uphill for a long time,” El-Sissi explains. By this time, regulations that had slowed the dispensary’s growth—such as one that restricted dispensaries from having more than 20 pounds of flower on site at one time—began to ease or be eliminated.

As “the times kind of shifted, we were able to dedicate the attention that the shop really deserved,” El-Sissi says.

Garden of Eden contracted multidisciplinary design firm Sand Studios for its redesign, which was completed and unveiled in September 2018. This time, when the East Bay Times wrote about the dispensary, its tune had changed: “Smiling greeters at a check-in desk, soft lighting and creams displayed behind glass make the Garden of Eden more like a spa than a marijuana dispensary.”

According to El-Sissi, “We literally didn’t spare any expense to build the Garden of Eden—to build that world-class experience that our customers had deserved for a long time here. That’s something that we had envisioned for a long time.”

Paradise: Rebuilt

Garden of Eden and Sand Studios worked for six months to refine the redesign plans, El-Sissi says. Construction took an additional eight months. “The end product is really beautiful, really efficient,” El-Sissi says. “We’re able to serve a lot of customers.”

Today, the building’s exterior is wrapped in ivy and “is very easy on the eyes,” El-Sissi says. “The front door is a piece of art,” he adds, mixing metal and glass to make a bold impression on customers as they enter the dispensary.

Inside the store, “we went from a two-room layout to a single room,” El-Sissi says. “Now, when you walk into the front door of the dispensary, there’s one continuous space that patients can go in—and we kind of broke down the barrier between intake and retail [for medical products].”

The dispensary’s gray concrete floor blends well with the bronze-glazed glass displays. “There’s all these different design elements that kind of pop out at you,” El-Sissi says. “For the most part, the first time people walk in, they are really taken aback. You see people looking up, down, left and right, or looking at the lighting.”

The color, lighting and decor choices were purposeful: “People want to go to beautiful spaces,” El-Sissi explains. “So we wanted to attract people on the outside, but we also wanted people to feel good on the inside. The lighting selections, the color of the floor, the color of the glass, the countertops, all of those elements of design to make you feel good.” Flat-screen TVs positioned throughout the space rotate among 12 channels that show information or menus. “We’ve used tech to enhance the experience,” he says.

What’s more, El-Sissi adds, “We owe it to our employees to feel really good. I wanted them to want to come to work and … be in a room filled with oxygen being produced by plants.” As such, greenery fills the space via a large live wall across the room from the check-in counter.

Garden of Eden’s changes weren’t strictly aesthetic, though.

With a check-in process performed entirely on iPhones, Garden of Eden’s patients can quickly obtain their medicine without hassle, El-Sissi says. Before transitioning to the smartphone system in 2017, Garden of Eden captured required patient information, such as names, purchases and dates of visits, by hand.

“As we got busier and busier, we needed to make those systems quicker, so we moved into scanning driver’s licenses and capturing people’s pictures so they didn’t have to bring in their recommendation or their ID because we had that information stored in the system,” El-Sissi says.

Garden of Eden, in its tech-friendly fashion, has also “designed our own inventory system that enables us to count the entirety of our inventory every day,” El-Sissi says. “We’ve been able to count a ton of money—and a ton of our inventory value—in a very short period of time.”

Its inventory system works a little like this: Using software called Treez, employees can “cycle-count” inventory and sort it by product and location, says El-Sissi. “Counting inventory daily allows management to reduce shrinkage and hold employees accountable for the inventory they came in contact with,” he says.

These are merely a few examples of how Garden of Eden has evolved to become a forward-thinking and in-demand dispensary.

In addition to its modern-day check-in system and its inventory tracking method, Garden of Eden has also prioritized its digital presence. “If you take a look at our digital footprint—whether it’s social media or on our website—you’ll see we really care about our representation of our business digitally as much as we do physically,” El-Sissi says.

On the company’s website, prospective patients can take a 360-degree, virtual tour of the space before ever entering the building. “We’ve also started a pick-up program that if you preorder online, you don’t have to wait when you come in,” El-Sissi says. “We’re trying to improve the efficiency of the store so customers don’t have to have a waiting experience. … The more preorders that we [can] get, the quicker and shorter the wait times are. That’s very important for us.”

Whether they order online or come into the store to browse, El-Sissi says that Garden of Eden’s patients do have preferred products. According to him, the store’s most popular products include the Honeycomb Farm brand of flower, and vaporizers account for roughly 20 percent of total sales. When it comes to flower, “We don’t buy flower in huge lots,” says El-Sissi. Instead, “We buy small amounts and we keep the flowers for [short] stints and keep [the menu] constantly rotating.” At any given time, Garden of Eden has about 24 cultivars on its menu, El-Sissi says, including some “classics” the dispensary always keeps in stock. But, as he explains, “The best cultivators tend to keep their offering relevant to the times as newer, more exclusive genetics command higher prices. When we find a cultivator who works well [with] the classics, we find shelf space for them.”

Paradise: Expansion

Garden of Eden has evolved quickly, but the dispensary is far from finished. “We’re really turning toward becoming the Apple store, where you sell your products and they are super high quality and they are well designed, well packaged, well thought out—and that’s the bulk of our business. That’s something we’ve been working toward.”

It has also been working toward opening as many as four additional dispensaries. “By the end of this year, we’ll have one in Union City, Calif.,” El-Sissi says, describing it as a “campus” that will have its own indoor cultivation facility, distribution and retail “in a city where there’s no other cannabis businesses open today,” he says. “That [Union City location] is going to become Garden of Eden’s hub and kind of the headquarters of our entire business.” Additional locations are also planned for outside Fremont, Calif.; Ukiah, Calif.; and in Mendocino County, Calif.

“We’re going to continue to seek licenses for retail and … continue to extend our retail footprint,” El-Sissi says. “We already have enough infrastructure for us to do cultivation—outside cultivation and indoor cultivation—that we really could be growing into that [footprint].”

El-Sissi anticipates these new locations and operations will grow quickly—just as its original location did—without much marketing. “I think word of mouth goes a long way, especially when you’re in an area [where] you may be the only game in town,” he says. “It doesn’t take a ton of spend to have really wide-reaching impact when you’re selling quality product,” and, of course, enjoying Garden of Eden’s new design aesthetic.

Jillian Kramer is a Cleveland, Ohio-based freelance writer.

The Federal Bank Secrecy Act (the “BSA”) prohibits national financial and banking institutions from accepting money generated from the sale of illegal narcotics, including cannabis. Nevertheless, the Financial Crimes Enforcement Network (FinCEN) issued guidelines in 2014 for banks to conduct business with cannabis companies without violating federal regulations.

Presently, banks that wish to conduct business with cannabis companies face a lot of regulation and uncertainty. Cannabis businesses looking to secure banking services must understand that banks are required to comply with anti-money laundering laws, which require national banks and credit unions to file Suspicious Activity Reports (“SARs”) with FinCEN if they suspect any of their account holders are engaged in or trying to cover up illegal activity.

Many of the major national banks take the position that following the FinCEN guidelines would constitute an open violation of the Bank Secrecy Act, which is why they consistently refused to open their coffers to cannabis clients.

However, even given these setbacks, there are still steps you can take to legitimize your business with banking services. Here are three tips to help get you started when searching for and approaching banks.

1. Focus on Local Banks and Credit Unions

Many local, community and credit union banks are willing to deal with cannabis participants; however, it is important to approach those banks with caution and tact. Ask questions, such as: What are the bank’s compliance standards and requirements? What type of reporting does the bank require from clients? What type of cannabis businesses does the bank have as clients? What banking services are offered and what are restrictions/limitations? What are the bank’s expectations?

2. Be Prepared for Due Diligence Inquiries

The best approach with banks is transparency, honesty and collateral. The more a bank understands your cannabis business, structure and operation, the easier it will be for it to comply with FinCEN guidelines. As such, it is important to understand that banks are wary of doing business with cannabis companies having short or non-existent operating histories, limited financial information and uncertain license statuses. Expect a diligent and thorough investigation by the bank into the ownership and management team, the company’s business affairs, financials and regulatory compliance history. Establish personal relationships with key bank personnel who will be responsible for overseeing your banking needs. Be prepared for multiple rejections before finding a suitable banking partner.

3. Be Prepared to Pay More

Banks will require prospective clients to bear the cost of their due-diligence inquiry and investigation into the affairs of the cannabis businesses. Additionally, because cannabis accounts require more monitoring, reporting and special attention than other business accounts, set aside extra funds to pay a monthly premium for banking services. This premium will depend on the amount of work the bank has to do in order to confirm compliance and meet its own reporting and compliance requirements. The more organized and transparent the cannabis client is, the easier it will be for the bank to do its job, and thus the fees may not be as high.

Gene Markin is a partner with law firm Stark & Stark based in Princeton, N.J.

With the easing of global marijuana regulations and the ratcheting-up of competition, industry leaders everywhere are scrambling to fortify their businesses’ market positions by creating full-service organizations through the acquisition of synergistic products, licenses, locations and expertise. Yes, 2019 is shaping up to be even bigger for cannabis stocks, which raises broad questions: How ready are most companies in the cannabis industry, really? Should every cannabis company be looking to go public? And what does going public truly entail?

Going public is a costly, complicated process that requires a large team of managers, lawyers, accountants, investment bankers and consultants. The entire proposition is fraught with risk, and too many companies are going public without proper planning and justification, says Hadley Ford, CEO and director of iAnthus Capital Holdings, Inc., which owns and operates licensed cannabis cultivation, processing and dispensary facilities throughout the U.S. He describes the process as a potential train wreck.

“You have to have a reason and strategy for doing it,” Ford says. “It’s much harder to be a public company than a private company. If you screw up, you will be forgotten.”

In this article—Part I of a two-part series—cannabis industry experts tell Cannabis Dispensary the key the reasons to go public and offer a 7-point checklist of considerations before making a final decision.

The No. 1 reason to go public? Access to capital.

The reason iAnthus went public in the first place was because no other way to get money existed. “A year ago, I couldn’t get a lender to pay attention,” Ford says. According to iAnthus, the company became the first multi-state operator in the U.S. to go public and raise money in Canada—a feat many thought too tough to tackle and now widely copied.

Going public helps cannabis companies manage their overall cost of capital—the mixture of returns needed to persuade an investor to make an investment. To investors, the cost of capital represents the opportunity cost of making a specific investment. If an investment fails to get a return that exceeds the cost of capital, investors will take their money elsewhere. So, if a cannabis company can run its business or even expand operations at lower cost of capital than competitors, that is a “differentiator,” Ford says.

“The access to capital has been critical to fuel our rapid global growth,” says Cam Battley, chief corporate officer for Edmonton, Alberta, Canada-based Aurora Cannabis, now a fully integrated cannabis company.

This past fall, Aurora closed a debt deal worth as much as CA$250 million with the Bank of Montreal, a landmark for Canada’s marijuana industry. The new debt facility will be made up of a CA$150-million term loan and a CA$50-million revolving credit facility, both of which mature in 2021. Under the accord, Aurora has the option to upsize the facility to CA$250 million.

The deal marked a seismic shift in how big banks view the cannabis industry in Canada. Traditionally, for cannabis companies in growth mode, the only way to raise money was to issue more stock or extend convertible debentures—long-term debt that can be converted into stock after a set period. The option of taking out a traditional loan just wasn’t available.

“All that is evident in a significant change in attitudes with respect to the cannabis industry,” Battley says of the Bank of Montreal deal. “Institutions are now more comfortable with the cannabis industry. A brand-new global industry is being created in real time.”

And that industry is hitting public markets in diverse ways. While Aurora opted for an initial public offering, California-based FLRish (doing business as Harborside) went public in Canada through a reverse takeover (RTO). With RTOs, a private company typically trades shares with a public “shell” company in exchange for the shell's stock, essentially transforming the acquirer into a public company.

Here, Lineage Grow Co. acquired all issued and outstanding Harborside securities. In return, Harborside received newly issued Lineage shares valued at CA$200 million. The result was a vertically integrated cannabis company now known as Harborside Inc.

Andy Berman, CEO of FLRish, says FLRish emerged owning most of the outstanding shares, controlling five of the seven board seats and retaining their executive team. Lineage also came with three stores and two grows, one indoor and one outdoor, so it rounded out Harborside’s vertically integrated portfolio of assets and supported its strategic growth plans, compared to just an empty “shell.”

The company recognized that if it wanted to grow, it needed to raise money. Investors coming into the cannabis industry want to know that a company has a “going-public strategy,” Berman says.

“We wanted to attract high-caliber, high-quality investors,” Berman says.

As Harborside learned, going public provides an opportunity to raise capital fast by reaching a wider distribution of investors. A new report titled, “Going Public in Canada,” from the MGO/Ello National Cannabis Alliance, lists six reasons to raise capital:

• expand existing operations,
• introduce new product lines,
• enter new markets or states,
• invest in research and development,
• pay down debts and improve financial performance, and
• mergers and acquisitions (M&A).

The final bullet point was key in iAnthus’ going-public strategy. Going public gave iAnthus the opportunity to acquire other license holders who lacked the capital to continue operations and were looking for an exit, including MPX Bioceuticals, which iAnthus acquired in an all-stock transaction this past fall in what was at the time the largest public cannabis transaction in the U.S.

Two other reasons to go public exist, but are not identified in the MGO/Ello National Cannabis Alliance report: talent acquisition and brand awareness. “You can issue options to your employees, so they can share in the wealth creation,” Ford says. “It becomes a tool to attract top talent.”

Scott Greiper, president and founder of Viridian Capital Advisors, a data-driven strategic and financial advisory firm dedicated to the cannabis industry, adds, “Everyone is trying to build their brand and differentiate.”

So, you think you’re ready to go public now? Review this 7-item checklist to be sure:

CHECKLIST ITEM #1: Build operational and managerial strength

Cannabis companies need sophisticated operations, sound finances and a veteran management team to be taken seriously by capital markets.

“In this industry, we’re looking for experience,” says Greiper. “The CEOs of [our] clients don’t come from cannabis. They come from tech; they come from food, ag tech, healthcare, with demonstrable track records of building business and scaling those businesses.”

CHECKLIST ITEM #2: Get comfortable with being public (in every sense of the word)

Being public requires frequent and transparent communication about the company’s performance. Company management and leadership must understand what that means and the time commitment involved.

“I spent a career doing this, and even I was caught surprised,” Ford says. “I love getting on the road and telling our story, but it’s a lot of work. Half a typical day is consumed with ‘public stuff,’ such as calls with investors and the media.”

“It’s not your company anymore,” Ford adds. It’s owned by shareholders. “That’s a very hard concept for an entrepreneur to accept.”

CHECKLIST ITEM #3: Gird for volatility

Canada’s legalization of adult-use marijuana generated an enormous amount of excitement for the sector, bidding up share prices. But the stocks crashed just weeks later, with short-sellers raking in almost half a billion dollars in profits in just two days alone. (Short-selling is “when an investor borrows shares and immediately sells them, hoping he or she can scoop them up later at a lower price, return them to the lender and pocket the difference,” according to MarketWatch.)

“At the moment, there is a large concentration of short-selling in the sector,” Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, noted in an October 2018 report.

This should not be surprising. Cannabis is a small-cap stock, which means it is more growth-oriented and there is more upside for investors. Also, significantly more volatility (a wide range of price fluctuations and large trading volumes) exists. Consider that from 1997 through 2012, the Russell 2000 small-cap index returned 8.6 percent on an annualized basis, compared with 4.8 percent for the S&P 500 stock index. But over that same period, the Russell 2000 had about one-third higher volatility.

“The volatility could be a real stressor on the business,” says John R. Downs, director of business development for The Arcview Group, a marijuana investment network based in San Francisco. “Executives can often find themselves spending more time managing the stock and worrying about the share price than actually running the business.”

Even without short-selling to worry about, a change of course for a business or an underwhelming earnings report can lead to sharp selloffs that could be devastating. “Pivots can be very painful for a public company,” Downs said. “There is so much more pressure. The stakes are much higher.”

On the other hand, he said, cannabis stocks have the characteristics of “sin stocks”—stocks that deal in tobacco, alcohol or other products deemed harmful, which tend to fare better during broader stock-market swoons.

In the end, the most recession-resistant company could be a privately held cannabis company, Downs said.

CHECKLIST ITEM #4: Button-up your corporate governance

As with every public company, all management decisions must be reviewed by a board of directors representing the interest of shareholders. And that board would have to create an audit committee, compensation committee and nominating committee, at the very least.

“The requirements to successfully go public can be overwhelming, including the time commitment from management and the length of time the process can take, particularly if certain items, such as audits of historical financial statements, are not already available,” says Scott Hammon, COO, MGO | ELLO National Cannabis Alliance. “The process can distract what are frequently smaller management teams from the operations of the core business.”

Many companies are also unprepared for the increased reporting and disclosure requirements post public offering, which can necessitate additional resources and changes in processes and governance procedures, Hammon says. “We normally recommend that companies start to operate like a public company before the go-public transaction is completed as that makes for a more streamlined transition,” he says.

“It’s much harder to be a public company than a private company. If you screw up, you will be forgotten.” Hadley Ford, CEO and director of iAnthus Capital Holdings, Inc.

CHECKLIST ITEM #5: Become an expert at navigating anti-cannabis tax laws

When a company goes public, it must be diligent and savvy about how it handles its tax obligations. For cannabis companies in the U.S., that means working harder to maximize deductions. Investors will put your tax accounting under a microscope.

Under 26 U.S. Code Section 280E, for example, any business engaging in the trafficking of a Schedule I or II controlled substance is prohibited from taking tax deductions or credits (except for the cost of goods sold (COGS)). In other words, cannabis companies must pay taxes on all their revenue without using otherwise legitimate business expenses to reduce their taxable income (again, excluding COGS deductions).

There are ways around 280E, however, and public companies must become artful about navigating those ways, like separating cannabis activities from the rest of the business’s activities to claim at least some federal deductions.

CHECKLIST ITEM #6: Disclose, disclose, disclose

In Canada, every public cannabis company must meet the quarterly and annual disclosure and reporting requirements per securities regulations.

Here’s a rundown of some of what’s required by National Instrument 51-102—the securities’ commissions’ “Continuous Disclosure Obligations”:

Comparative annual financial statements: Document(s) comparing the company’s performance with another business.

Management discussion and analysis (MD&A): Where the company’s management and executives analyze the company’s performance with qualitative and quantitative measures.

Interim financial report: Conveying the performance of a company before the end of normal full-year financial reporting cycles.

Material change report: Detailing a change in the business that could have a significant impact on the stock-market price.

Business acquisition report (BAR): Detailing a “significant” acquisition of a “business.” An acquisition is considered significant where the acquisition meets one of the following significance tests: investment, assets, or profit or loss. (If an acquisition qualifies as a reverse takeover, the company may not be required to file a BAR.)

Information circular: Information about a company’s annual meeting of shareholders. Each exchange and country has its own set of requirements and laws governing financial disclosures and reporting requirements, meaning companies typically can’t take a cookie-cutter approach to going public on different exchanges.

CHECKLIST ITEM #7: Get out the checkbook

Deciding whether to go public may come down to a simple question: Can you afford it?

Cannabis companies must pay accountants to pore over financial details; legal fees to lawyers to prepare contracts; marketers to get the word out to investors and the media; and tax advisers to help navigate tricky tax laws in multiple jurisdictions. There is also an underwriter’s commission, which can run anywhere from 5 percent to 7 percent of the offering.

“For any company, regardless of where it is in its life cycle, the decision to go public should always be made as part of its larger strategy,” Hammon says. “It’s less about going too soon, in terms of maturity, but whether the company has a clear understanding as to how going public helps it accomplish its strategy.”

The decision to go public, and when, may be the biggest you will make as an entrepreneur. But proceeding cautiously, with the right tools, will minimize risk and put you in the best position to prevail on the open market.

Editor’s Note: Part II of this feature will delve into the options available for going public.

Miller Avenue shoots west out of downtown and ducks under the Ann Arbor Railroad tracks before winding into a scenic residential neighborhood that wraps snugly around a baseball field and the lush greens of West Park. Beneath the rail line, a colorful mural greets drivers and pedestrians: WELCOME TO WATER HILL.

The team at Bloom City Club, a medical cannabis dispensary located next to the railroad overpass, helped pay for the supplies to make that mural happen in 2016. Between local arts projects and community events, co-founder Allison Ireton and the dispensary staff stay involved with the cultural efforts of Ann Arbor’s Water Hill neighborhood.

“Anytime somebody in the neighborhood asks us to do something, we basically say, ‘yes,’” she says.

This is the fundamental promise of the business: to play an active role in uplifting the community. The way Bloom City Club sees it, this is how a low-key medical cannabis market is going to become a statewide industry: It all comes back to the importance of establishing local roots.

The shop itself is a neat 960 square feet of retail space, tucked in among tall, leafy trees. The building’s woodsy charm comes from a fresh face-lift on a mid-century auto garage. A blue, two-story house next door serves double-duty as a break room and office space.

“You won’t see any pot leaf symbols outside of the store, which is why Bloom City Club is often confused with a floral boutique,” co-owner Patrick Kinney says. He and Craig Terrell bought the company toward the end of 2017, as the state’s medical cannabis regulatory overhaul was settling into place. (In 2016, lawmakers enacted a sweeping set of retail regulations to bring dispensaries into a more structured licensing regime.) Ireton and the original all-female management team stayed on to shepherd the original, altruistic vision of Bloom City Club into a new era of Michigan medical cannabis.

“It’s really appealing from the outside,” Kinney says. “That kind of sets the stage—you know, that curb appeal—but once you're inside, people are really comfortable [and] at ease with the whole experience.”

Inside the remodeled space, patients are greeted with a warm sitting room draped in ocher tones. Nicely worn metal shelves and elegant wood tables display product samples and an array of non-cannabis wares: rolling papers, glass pipes, bottled water.

“We love brands like Tom’s of Maine and Whole Foods, so we wanted to [reflect those brands’ approach and] offer high-quality, organic, clean medicine,” Kinney says. “We wanted to create a space that felt accessible and safe to first time—or first-time-in-a-long-time—cannabis patients. Our goal was to normalize the cannabis buying experience, so that a customer didn’t feel like they were doing something illegal or controversial. To achieve that effect, we used tried-and-true customer service principles like the ones our manager brought with her from her experience [working] at the Ritz Carlton.”

Those principles include attire and tone: Budtenders at Bloom City Club blend dressy and casual attire, and the conversations in the shop echo the sort of rapport one might build with a concierge at a charming hotel in the city. The dispensary was born in Michigan’s gray market, with no real business model template to follow. The structure of what a dispensary could be was theirs to create. By taking cues from the hospitality industry, the business became just that—a brand that sought out an engaged clientele looking for reputable products and results—patients seeking a discreet vape product to combat insomnia or a topical that might ease the pain of arthritic wrists.

“Prior to it being a licensed provisioning center, it was one of the only women-owned dispensaries in Michigan, and when we acquired the business in late 2017 when the state licensing system was established, we continued to have a women-led management team,” Kinney says.

By attending to the shop with a bespoke, feminine touch, Bloom City Club’s community involvement and attentive customer service could be seen for what it is: a sense of altruism baked into a budding business.

Building the Club

Bloom City Club officially opened in January 2018, when a new slate of medical cannabis regulations went into effect in Michigan. Before that, the business’s history stretches back to 2015.

Ireton co-founded the business with Dori Edwards, who had been learning how to develop a retail enterprise in Michigan’s medical cannabis industry for a few years. Edwards previously owned and operated Ganja Mama’s Treecity Health Collective in Ann Arbor. “When Michigan legalized medical marijuana [in 2008], I took it upon myself to advocate for our civil right to have a choice for our own bodies,” she told a local newspaper in 2017, reflecting on the path that led her to open Bloom City Club in 2015, when she met Ireton.

While Edwards was leaning into the early days of medical cannabis in Michigan, Ireton was coming out of law school, landing work with a Detroit-based firm. She started her own legal practice in Ann Arbor in 2013 and met Edwards while working with Business Networking International. Her legal background complemented Edwards’ interest in progressive advocacy, and the two founded Bloom City Club to further express their own expertise in a new American business landscape.

Now, the company holds a legal provisioning center license.

Kinney and Terrell offered the business acumen, the third leg of the foundation required to build a long-lasting private enterprise in a marketplace that’s got nowhere to go but up.

The company locked down local and state licensing and brought the business model it had developed in the gray market into the burgeoning new landscape of medical cannabis in Michigan.

Listen First, Sell Second

“We cater to patients and customers who place a high value on knowing they are getting the best product for their condition, because someone spent a lot of time listening to them,” Kinney says.

This is important: The Bloom team learned early on that competition is the natural state of things in the cannabis market; patients and customers can go anywhere for products. But the relationship that a business builds with its patient base is the intangible bottom line that drives successful cannabis endeavors.

“One of the things that we absolutely do at Bloom is engage the customer in a conversation,” Ireton says. “You know, ‘What brings you in today? What have you tried before? What are you medicating for?’ We really get to learn a little bit about the patient and develop a rapport with them first.”

The hospitality-type approach to Bloom City Club’s patient engagement set it apart in the gray-market days, and it’s what it hopes will distinguish the business from others in the coming Michigan adult-use marketplace. Patients—and, eventually, customers of all stripes—come to licensed dispensaries with varying degrees of knowledge and experience with the plant. The key, from a retailer’s perspective, is to establish a baseline.

Mass media has left a lasting image of what “weed” is. Smoky, powerfully pungent. And that can be the case, indeed, when you’re enjoying a pre-roll with friends. But Ireton says that the budtender staff often meets with newer patients who’ve got that deer-in-headlights look, men and women overwhelmed by the sheer variety and customization of the cannabis experience in 2019.

“You know, people thought their only option was something that was going to really stink up the house and smell,” Ireton says. “When you tell people they can just take a capsule, they're like, ‘Oh, I had no idea that was something that you could do.’” She references the trial-and-error process that so many patients work through, experimenting with products in vain. In the absence of any clear-cut research for the interested medical cannabis patient, a lot of the education needs to be proactive and come from the dispensary staff.

Targeting potential patients through marketing is also key, and the business tailors much of its promotional efforts to women.

“Everyone knows a lot of buying decisions, specifically around medical issues, are generally made by the woman in the family,” Kinney says.

And Ireton follows up: “Women in their late 40s, early 50s, who shop here—they come in and they're like, ‘Oh my god, I had no idea that this is what the dispensary would be like.’ Everybody expects it to look more like somebody's basement or Cheech & Chong. … If a woman feels comfortable shopping in a location, generally men will as well; whereas, if you kind of target men, specifically, it's probably going to be not as women-friendly.”

That’s the calculation that Bloom has bet on, and so far, it’s been successful.

“A lot of guys shop at Bloom,” Ireton says, “because we have very knowledgeable, engaging sales staff, and they like to talk cannabis. But we don't turn off the Baby Boomer and the middle-aged Gen-X female population that definitely doesn't want to go into a store where there's some [staffer] who doesn't really know what they're talking about, just trying to sell joints.”

Connecting Community and Cannabis

With Ireton and Edwards and a growing team guiding Bloom City Club into a new frontier of medical cannabis, the business placed itself right in the middle of a real network phenomenon.

Ann Arbor, a college town of about 121,800, is a particularly progressive bastion in Michigan. The city, as such, was ripe for a medical cannabis business community in the year leading up to full-scale regulation.

In 2010, Edwards co-founded the Ann Arbor Cannabis Guild, which was created to foster collaboration among the early businesses in the city’s medical cannabis market, like Ganja Mama’s Treecity Health Collective. The early cannabis advocacy work that Edwards helped pioneer was a local foundation for the medical cannabis dispensaries now operating in Ann Arbor.

“That group engaged pretty heavily with the local government and other community leaders to normalize the whole business,” Kinney says, “so we weren’t viewed as outcasts.”

Ireton agrees, adding that a tenet of the guild’s community engagement comes in the form of fundraisers and partnerships—classic methods for integrating a common cause through various organizations. Bloom City Club has gone on to host fundraisers for Safe House, a local domestic violence shelter, which roots the business in that supportive space in the city. The company has also raised cash donations for Make-A-Wish Michigan (through a manager’s participation in the 100-mile Wish-A-Ride bicycle event) and the Magic Heart Foundation.

Even closer to home on Miller Avenue, the dispensary lends its name and financial support to sponsorships of local arts and music festivals and neighborhood art projects—like the Water Hill mural. These sorts of things Ireton calls “deep local sponsorships.”

Having local and state licenses is a legitimizing force, a record that makes official Bloom’s place in Ann Arbor. As such, the opportunities to engage the local community are even greater. At the same time, the need to present a professional approach to cannabis became paramount.

“When the time came to operate in the licensed market, we found that traditional business models needed to be applied to achieve success,” Ireton says. “For example, it is a lot easier to educate an empathetic and skilled salesperson about the benefits of cannabis, than it is to train someone to be an empathetic listener who can connect with a patient.”

There are pros, of course, to working in a licensed and regulated cannabis retail space. The supply chain becomes more regimented, more sharply defined for businesses finding their place in a state like Michigan.

But there are growing pains, too. “The new regulated system gives us the protection we lacked in the past, but it has cut us off from some of the really good growers and processors that can’t afford or have chosen not to enter the licensed market,” Ireton says.

The mood in Michigan in 2019, however, is one of eager anticipation, of forward-thinking aspirations. The state is preparing its rules for the forthcoming adult-use market, even as it continues to issue medical cannabis licenses. Bloom, with its early-adopter status in Ann Arbor, is keeping its eyes fixed on the horizon.

“Being one of the first fully licensed provisioning centers in Michigan, we are very well positioned to grow in this new market,” Kinney says. “Obtaining that license early in the process has allowed us to remain open during this transitional period when many other provisioning centers were forced to close. This has been reassuring to our original customers as well as to a lot of new customers who have had to find a new place to shop as the businesses they used to frequent have been closed or have been open sporadically as they go through the licensing process.”

There were 13 medical cannabis dispensaries operating in Ann Arbor’s gray market, according to Ireton. At least nine licensed provisioning centers are open now, and the city has capped its retail licenses at 28.

Controlled Expansion

The next stop for many Michigan cannabis businesses is vertical integration, and the Bloom City Club team is already at work on plans. The company’s cultivation facility is in progress, and its processing center is up and running with six employees.

Kinney says he’s hoping to see Bloom City Club expand to an additional five stores by the end of the year.

To accomplish this and other goals, Bloom’s management team makes sure that all employees are on the same page. If communication with patients is one key to success, then internal communication is another.

“One thing we're very diligent about is holding [mandatory] weekly employee ‘huddles,’” Ireton says. “We use this time as a chance to share information about the industry, any new rules that the state may have issued, new products that we may have acquired since the last meeting, and quick refreshers on everything from salesmanship to merchandising.”

All budtenders at Bloom City Club get their start at the front desk. “This allows them the opportunity to get to know our regular customers, learn our point-of-sale system, familiarize themselves with our products, and integrate into the team without the pressure of having to answer potentially difficult sales questions,” she says.

Kinney compliments the benefits of the sales-team training: “[Patient] trust means everything to us.”

Bloom’s cannabis consultant—Julie Barron, a licensed medical counselor with Blue Sage Health Counseling—consults with medical patients. “Usually, [patients] have very dire diagnoses—terminal or close to being terminal diagnosis for cancer,” Ireton says. “[The cannabis consultant] speaks on a regular basis with medical practitioners at the University of Michigan who are willing to listen and are curious. And, believe me, it has changed so much in the past two years. Before, they wouldn’t talk to you. Now, they’re reaching out and asking for information [about medical cannabis research]. That’s been really nice.”

This is the ongoing game of settling into a regulated space in Michigan and in Ann Arbor. The expectations of medical cannabis businesses are quickly changing, especially in a state that has been familiar with cannabis sales, in a broad, quasi-legal sense for more than 10 years. Now, the script is evolving.

“We are still curious to see what the effects of all the competition are going to be,” Ireton says, pointing to the other provisioning centers that have been identified to open in Ann Arbor, as the state continues its slog through the formal licensing process. There are a lot of unknowns in Michigan these days. “We’re not the cheapest dispensary in town, and you know, for sure, every now and then we get a complaint about that, but we're also not the most expensive by far,” she continues. “We just try to provide as much value as we can.”

For example, based on Bloom’s menu, aggregated via Leafly, one gram of Durban Star is $18; a one-gram Cannalicious cartridge of OG Kush is $50.

“We’re cautiously optimistic that we’ll be able to compete,” she says. “When you look at the outside operators that are coming into the space, certainly it’s better to have local connections. I think people in Ann Arbor do care about doing business with locally owned businesses rather than the larger out-of-state operators. But we still don't know what that's going to look like yet.”

“We’re not resting on our laurels, by any means,” Kinney says.