Because cannabis legalization is currently a patchwork of state-level regulatory regimes, every state’s cannabis market is unique. No one set of rules applies everywhere, and, in states with both medical and adult-use markets, the regulations are often different for each type of sale.

This situation can make life complicated for medical cannabis dispensaries looking to shift to adult-use shops. While adult-use opens access to an exponentially larger customer base, that opportunity comes with new laws, systems, compliance requirements, and other variables.

As some states move to legalize cannabis for all adults, cannabis businesses must navigate this transition. Based on my company’s experience helping customers in six states make the jump to adult-use and customers in three others convert to seed-to-sale tracking, below are key issues companies must address.

Comprehend the complexity

First, cannabis businesses must accept that their operations will increase in complexity at scale as adult-use customers flood their doors. Failing to understand that a drastically expanded customer base makes back-office operations more complicated is among the most common mistakes that we see our customers make.

Between medical and adult-use, rules can vary wildly. There can be different tax rates, check-in and data collection requirements, limits on transaction sizes and purchase frequencies, regulations governing record keeping and reporting, as well as other incongruities. In some states, cannabis retailers serving both medical patients and adult-use customers are required to have completely separate and designated inventory systems — even if the same products are sold to both groups.

To handle these complications, retailers often must create two entirely different sets of operating procedures. With any increase in complexity comes a greater likelihood of error. The new practices and systems must be clear to all employees and tightly executed. 

Check it twice

Second, cannabis businesses must develop a checklist for their state’s new rules well in advance of adult-use legalization. Because of the added complexities outlined above, stores planning to move into an adult-use market need to start laying the groundwork as early as possible. This involves working with their compliance team (or their customer success manager if they are a Green Bits customer) to develop a to-do list that reflects the new requirements.

The list should be divided into different areas of the business. It might include new check-in, verification, and data collection requirements, taxation tables and collection practices, inventory requirements, information reporting requirements, transaction limits, and budtender training.

A little foresight and organization will go a long way in preparing for the added challenges of an adult-use marketplace. By making a checklist of all of these changes before opening their doors to adult-use customers, retailers can save themselves from more work and aggravation down the road.

Inventory is everything

Third, if a retailer has had inventory problems while only serving the medical market, an increase in sales volume will only compound their issues. The transition to adult-use is an opportunity to evaluate any inventory glitches and develop a system that addresses them at their source.

One of the easiest quality controls to implement is a process to ensure proper inventory systems, coupled with a regular routine to make sure that inventory is accurate. For example, by ensuring that everything is barcoded, businesses can avoid the user error that comes with entering information manually.

Doing a full inventory count every week can be daunting for some retailers. Instead we recommend that stores break up their inventory into several manageable pieces, and then count at least one of those pieces each day. Using this strategy, store operators can minimize internal theft, ensure a proper count of their products every week, and solve problems quickly without inventory becoming an undue burden.

The transition from medical to adult-use is always challenging, especially as states work in parallel to create the regulatory structures to govern the new marketplace. Without preparation, it can be frustrating and overwhelming for cannabis retailers and potentially cause them regulatory problems and violations. By planning smartly and putting processes in place long before welcoming adult-use customers, the transition can be simpler and smoother for everyone involved — stores, employees, states, regulators, and customers.

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Image Source (AP Photo/Morgan Lee)