The Compliance Checklist That Could Save Your Cannabis Retail License
Compliance tips to follow from the get-go
In November, Verda attended a Cova Software seminar, where aspiring cannabis connoisseurs gathered for a crash course on the industry, the ins and outs of cannabis retail, and the do’s and don’ts when it comes to compliance, reporting and ultimately, best practices for preserving your retail license.
Preserving your cannabis retail license may just be the most important thing to do once you start planning or opening your shop for business. In some regions, earning a retail cannabis license is just as likely as winning the lottery, so going the extra mile to make sure that you’re doing everything the right way isn’t just worth the time and potential extra investment, but it’s going to equip your dispensary with exactly what you need to be successful in the long-run.
Let’s start this discussion off with a story.
In 2017, Colorado’s ‘Sweet Leaf Dispensary’ grew to have 8 locations, 350 employees and $80 million in annual sales with plans to expand. An undercover shopper asked an employee if they could purchase 3 ounces of marijuana when legally, an individual is only allowed to purchase up to one ounce per day. The employee stated the maximum they could sell to one person per day was an ounce but then began insinuating that if they were to bring their ounce to their car and come back in after a couple of minutes, that they could buy another ounce, and again for the third ounce they had sought out to buy that day.
RED FLAG — Totally illegal. Totally unacceptable.
That same undercover shopper went to another one of Sweet Leaf’s Dispensaries and presented the exact same scenario; seeking 3 ounces when the most they can legally buy in one day was one. To his surprise, or maybe lack-of after the first dispensary he shopped at, the employee advised the shopper that he could do the exact same thing that was advised to him at the first location.
On December 14, 2017, authorities coordinated a raid on all 8 locations and suspended each location’s operating license. After nearly a year of appeals and legal fees, the dispensary chain had to sell all 26 licenses in their possession, pay $2 million in taxes and fines and destroy all remaining inventory from the stores. On top of this, the operators of Sweet Leaf were banned from owning and investing in Colorado cannabis companies for the next 15 years, plus the principals ended up behind bars as of December 2018. This was a slip up in employee morale and compliance to state law, and it not only landed the employees jobless but also put the operators behind bars.
Take this story with a grain of salt. The lesson that Sweet Leaf quickly learned back in 2017 could be something that gives incentive toward licensed dispensaries out there; if your store or your employees are not operating as per the law, there are huge, life-changing repercussions that you could be facing.
If we want to strive toward making the legal market more convenient and competitive against the illicit market, we have to be compliant.
Major Compliance Issues in the Cannabis Industry
To date, there are 6 main compliance issues that cannabis businesses struggle with, but they can all be solved by having the proper business partners and integrations from the get-go.
- Customer Verification: Your employees need to check ID before purchases. Age authorization is a huge issue and it’ll continue to be an ongoing effort to ensure that youth cannot buy marijuana if they’re underage.
- Customer Purchasing Limits: You or POS should calculate the equivalent gram value of the products your customer wants to purchase versus what the daily limit is for your region (for example, in Ontario, there is a 30g/day limit).
- Poor Inventory Management: Streamlined inventory management is really helpful for this. Some POS systems provide real-time tracking of your inventory, which you can use for accurate inventory reports, and for displaying on your online storefront (if applicable). Keep in mind, your inventory is always going to be off, so what do you do then?
Well, the short answer is that the government has a tolerance of how much you can be off.. 2–3% might be ok, but the written adjustment has to be clear… If you’re off by too much, 10%, for example, something bad is happening. Another tip for this is to ensure the quantities of products that come into your shop are weighed to double-check that you’re receiving the weight that you have on your inventory report. Reporting any adjustments from the product you receive could save you when it comes time to report.
- Failure to report and pay taxes: This could be another automatic feature of your POS. Applying the proper tax to patient groups, and having this match your tax records is important.
- Incomplete recording and security of transactions: This type of report has a strict deadline at a specific date/time and not much flexibility beyond that. Having a POS with one-click reporting gives you the ability to generate required reports in one click and allows you to submit to your regulatory authority just like that.
- Failure to follow labeling and product safety laws: Having compliant receipts is another compliance risk that is important to keep in mind when it comes to your shop. On the receipt, showing the purchase limit and quantity in the transaction, as well as expiration dates, lab tests, ingredients, etc. The receipt documents the whole seed-to-sale process and ensures total transparency for the purchase. Everyone needs a receipt.
It’s 2020. Let your technology help you with important reporting and deadlines. We recommend that you acquire a POS that helps you with compliance from top to bottom.
Compliant Business Practices Lead Toward Success
Hammer compliance as the main component to the business for your staff: All of your staff, no matter what position they may have in your business, need to understand that compliance is something everyone is responsible for. Just like Sweet Leaf, one slip up from anyone in the company could be all that needs to happen to lose your license or everything. Because of the nature of the industry, all eyes are on you.
Basic retail operating knowledge can prove extremely useful: More often than not, people who come into the industry to open a licensed marijuana dispensary have never been retailers before — and with a business like this, retail experience definitely helps. Would you allocate 30% of your shelving space for an item that only earns maybe 5% of your sales? It’s things like this that can make a big difference when it comes to being a retailer.
Hire the right staff: How well your store performs builds up to how your staff interact with your customers. Can they offer suggestions based on the individual, their needs, and what products you have, or are available on the market? Genuine help goes a long way and customers will come back if an employee gives them unique shopping expertise.
Differentiate your store: Does your dispensary look like the average run-of-the-mill dispensary? Or have you gone out of your way to make it unique to you and your brand? Do your customers feel welcomed, warm, and willing to buy? Do you accommodate the people who are willing to wait in your lines? There’s bound to be competition, so if you don’t find a way to set yourself up for the long haul and differentiate yourself from the many other shops that will be opening in the coming years, you could find yourself closing your doors.
Foolproof your books: With regulations differing from province-province and state-state, every region is required to adhere to federal demands for reporting. If your dispensary is not able to provide the proper degree of reporting to your government, and therefore there is inadequate reporting to the state and your dispensary’s license could be at stake.
Make sure you’re backed by the right people: This is an added cost to doing business in the cannabis industry, but having the right people at your fingertips for any scenario you come across could be exactly what you need and money well spent.
Even if you’re capable of DIY-ing much of this work, having professionals at your whim managing your books and lawyers looking over your shoulder could save you time and help you avoid issues in the future.
Reach out in your community: Meet major players in your community like the Chief of Police, the Fire Chief, and Ministers at local churches. It’s important, especially in the cannabis industry to have your community on your side.
Participate in local events where appropriate and make a point to educate your community about the lengths of security you go through to operate and how the main objection, aside from just keeping the business running, is to ultimately take money out of the hands of criminals and the illicit market and put them back into the local economy and toward community initiatives from the tax revenues earned.
You want to be presenting yourself in the best manner to support your community. You’re aiming to educate the citizens and make cannabis a safer topic overall. By creating the right persona around yourself, your presence in the community, and your business, you will be lessening potential legal concerns that arise in other areas, and replacing the worry with the incentive to run the best business you can for the sake of your community and the cannabis industry as a whole.
Some companies open shop without compliance being at the top of their mind, when really, compliance is what is going to keep your business afloat for longer than a couple of months. If you don’t abide by the rules of your region, then you could end up in the same situation that Sweet Leaf got into. Job-less, license-less and behind bars.
We’d like to say thank you again to Cova Software for the incredible and informative seminar they held.
Verda was built to be compliant and partners with companies that share the same interests. Want to be part of the momentum in the cannabis industry? Exciting changes are being made to regulations every single day all through North America. Contact us and we can get you set up on our directory! Even better, if online ordering or home delivery is allowed in your region, let us know and we can get you set up for success!