The rush to put down dispensary roots three years ago has led to about 2,000 dispensaries doing business in Oklahoma.
It was a modern-day land run as many sought to stake a claim in the booming industry with just one small storefront, staffed by the owner and a couple of employees. But now, as the industry matures and entrepreneurs find their niche in the market, and the state ramps up enforcement efforts on ownership laws, a fight is emerging over market share as companies attempt to expand their footprint into multiple stores across multiple markets.
One business, Apothecary Farms had two grand openings last week alone.
The vertically integrated cultivation, processing and retail business launched storefronts in Moore and Oklahoma City’s Automobile Alley, bringing its number of dispensaries in the state to five after starting with other locations in Tulsa, OKC and Durant.
“We’ve always had a plan of getting four or five or six dispensaries open in the larger markets in Oklahoma,” said Marketing Director Brent McDonald.
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As a manufacturer, Apothecary Farms already had products in hundreds of dispensaries across the state, but oversaturation of the market caused prices to drop below feasible levels, he said.
“It almost became a necessity to pop up more stores as we were more focused on making our exit from the wholesale market due to this market saturation,” said McDonald.
Risks and rewards
Apothecary Farms was an established brand in Colorado before its first stores opened in Oklahoma, so they already had a framework for expansion. The introduction of a new, highly profitable industry also brought entrepreneurs who are learning on the fly.
State law prevents majority ownership by individuals outside of Oklahoma. While Apothecary Farms was started in Colorado, it complies with this law because one of the company’s founders is an Oklahoma resident.
Juan Hernandez, owner of 405 Budz, cashed out his retirement savings and took out a small loan to open his first dispensary. He was about to run out of money when he finally was able to open the doors to his first store in Midwest City.
“I probably started the store with minimal inventory like two quarter-pounds, 12 pre-rolls, like five brownies; and then I kind of just restocked on inventory as stuff got sold and that’s kind of how everything started,” he said.
Six months later, he felt comfortable enough to expand the business. Now, 405 Budz has locations open in south Oklahoma City and Stillwater, with its storefront in Midwest City undergoing renovations.
But there hasn’t been growth without loss for Hernandez as the company tried to find its footing. A storefront in downtown Oklahoma City had to close; Hernandez cited poor foot traffic in an industrial area as the reason.
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Hernandez, a 27-year-old former T-Mobile store employee, said he used his experiences working in retail to inform his expansion plans.
“I kind of just based it off what T-Mobile was doing, where they were opening stores,” he said, noting that the cell carrier’s locations in south OKC and Midwest City got a lot of business.
“And Stillwater, since it’s a college town, we can attract college kids that show up every year, and then the football games, plus the locals that are there also,” Hernandez said.
A repeatable idea
In multi-site retail, efficiency is important. Find any successful franchise and it probably looks nearly identical to its sister stores. More likely than not, it has the same design and products. Consider Walmart, McDonalds, or even local brands like OnCue and Braum’s — there may be slight variations, but store layouts, products and even building designs are remarkably uniform.
The importance of brand recognition is true for medical marijuana retail, too.
“One thing you’ll notice about going into every single one of our dispensaries is the aesthetic is that exactly the same. We have this brick wall feel, this old school apothecary-like feel to our brand,” said McDonald. “It’s plug and play. We want to make sure that every single one of our stores is consistent and congruent, and has very similar menu offerings, the exact same products.”
Hernandez said he has tried to work with the same vendors since he opened.
“I know as we grew they would grow, and it would be beneficial to each other, too,” he said.
Fire Leaf Dispensary was the first in Oklahoma to open its doors. From the outset, the owners wanted to have two to four storefronts. Just three years later, the company has eight dispensaries stretching from Guthrie to Norman.
“Once you master opening up a store and understanding what the patients need and want, that was something they felt like would be easy to duplicate,” said Allison Griffith, Fire Leaf’s director of marketing. “And it was really hard to in the beginning, because a lot of landlords were very reluctant to rent to dispensaries.”
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Not every dispensary is successful, though. Industry insiders say there is too much product and too many retail options for the current market to be sustainable. McDonald said he’s seen concentrate prices fall and dispensaries forced to make hard decisions about whether to remain open.
As more close, however, successful businesses have a chance to acquire equipment, property and employees to launch their next location.
“It’s the survival of the fittest right now,” McDonald said.
Beyond the economic factor, potential legislative changes and beefed-up enforcement of existing industry rules and regulations could shutter some stores. The state recently required a signed disclosure
confirming or denying the existence of any foreign financial interests in the medical marijuana business
stating businesses were not majority owned by parties outside the state. The Oklahoma Medical Marijuana Authority said eight dispensaries have surrendered licenses when the state filed a foreign financial attestation case against them.
There are multiple proposed bills that could significantly affect the marijuana industry, should any of them make it into law this year. The Oklahoma Medical Marijuana Authority might become a stand-alone agency, moving out from under the Oklahoma State Department of Health’s umbrella. Another proposed change to marijuana marketing could result in edibles being required to come in the shape of a marijuana leaf.
One proposal would outlaw all out-of-state industry ownership, which would drastically shake up the retail industry.
Staff writer Dale Denwalt covers Oklahoma’s economy and business news for The Oklahoman. Have a story idea for Dale? He can be reached at ddenwalt@oklahoman.com or on Twitter at @denwalt. Support Dale’s work and that of other Oklahoman journalists by purchasing a digital subscription today at subscribe.oklahoman.com.