How Tough Is It To Buy Or Start A Cannabis Franchise?
Franchising in the U.S & Canadian markets generated over $474 billion last year. Tt’s not surprising that entrepreneurs & business minded people in cannabis industry are attracted to the fast growth marijuana franchising can provide.
Launching a cannabis franchise is not as easy as starting a McDonald’s franchise, because of the nature of the products, which is highly regulated under federal, State & Provincial laws. These laws create barriers for cannabis, CBD & hemp producers, sellers & other businesses. The federal government involvement in interstate commerce, which they can regulate under the commerce law.
According to federal statute 26 U.S. Code 280E, businesses that deal in schedule I and II substances cannot receive tax deductions or credits for any money they pay or incur during their operations—like shipping, rent, mortgage or employee expenses. That means that entrepreneurs can’t recoup operational costs.
For a franchisor, revenue generated by taking a percentage of its franchisees’ sale sales—the royalty fee—cannot have any deductions applied to it.
Cannabis is a relative mystery to many people and can elicit mixed reactions and that’s is either because of negative association or bad experiences or lack of exposure. Reaching potential customers is an ongoing process, and not necessarily a rapid one, which means limited customer appeal in the short term and that alone is creating bug challenges for marijuana franchise companies.
Investors appeal is another issue at the current moment and limited interest in investing in cannabis franchise is something that will resolve itself over time.