🌭 Dispensaries Are Not Restaurants

There is a major misconception - reinforced, over time, by various companies in the space - that cannabis retailers are extremely similar to restaurants. Why reinvent technology, some ask, when restaurant tech will translate directly to cannabis?

The problem is: dispensaries are not restaurants. Not even close.

As a retailer, it’s important to get this right, because your tech stack (POS, eCommerce) can limit your long-term options, and, worse, send you down a path of ever-growing transaction fees that limit your revenue growth.

1️⃣ Dispensaries Are Not Restaurants, Reason 1: Chains vs. Independent

Restaurant tech is intentionally built for one-off operations, because indie restaurants represent the largest opportunity set.

Independent restaurant operations require less sophisticated technology, and:

1. It’s okay that nothing is automated, because the work is contained to one location (and often, one person - the owner)

2. It’s okay that software is a ‘closed loop’ (where you rely on one company for everything - think Toast), because you don’t need too many third party systems / services

3. It’s okay that data analytics and reporting are mediocre, because mom and pop stores see fewer sales and leverage market-level data far less frequently

4. It’s okay that the interface is a simple ‘location —> menu’ flow, because there’s only one location

Cannabis retail, on the other hand, is more concentrated toward multi-location operators, both single-state or multi-state. All of the above points are necessary and vital for most cannabis operators.

2️⃣ Dispensaries Are Not Restaurants, Reason 2: Unique Products

Let’s talk products.

Your local restaurant has a menu - burgers, fries, chimichangas, whatever - that they curate themselves. They receive raw ingredients, then cook delicious, unique meals - that’s the product they offer.

“Unique” is the key term here. They do not share these items with other stores; in fact, these items are their primary differentiator. Because all of their items are unique to them, they are required to build eCommerce ‘product cards’ for each and every meal - which is not a terrible hassle, because it’s mostly a one-time set up (most restaurant menus don’t change that frequently).

Cannabis is a whole other ballgame - most stores in most markets have significant overlap in their product offering with other retailers. They buy prepackaged goods wholesale from vendors - then compete on price, shopping experience, convenience, etc. The items sell quickly and the menu changes all the time. The inventory is 3-5x the size of the average restaurant.

3️⃣ Dispensaries Are Not Restaurants, Reason 3: Closed Loop Tech Is Bad

Restaurant tech, in general, tries to put restauranteurs in a box. Sometimes the tech is actually touted that way - a “restaurant in a box.” This means a one-stop-shop for everything: POS, eCommerce, loyalty, etc.

For an independent restaurant operator, this sounds amazing. One vendor to manage for everything, one website to visit, no fuss, no muss. Also, no chance of outgrowing current services, because one restaurant does not require significant infrastructure to facilitate scale.

Now, translate that to cannabis - a “dispensary in a box” may sound appealing to less sophisticated markets, but enterprise retailers quickly realize what is happening: a closed loop limits your growth by cutting off technological options.

Closed Loop systems reduce retailer choice, and handcuff operators to one company for the long haul. In reality, a POS may fall out of favor, or an operator may just outgrow it. Same for other services.

Don’t limit yourself.

4️⃣ Dispensaries Are Not Restaurants, Reason 4: Fees

Let’s dig in to a touchy subject - transaction fees.

Closed-loop companies usually raise a lot of money, and are sold as a ready-made solution. They are usually low-cost, which should feel weird given their valuation. They usually include some type of marketing component to ‘bring in orders’ (for a vivid example of all of this, think DoorDash).

Use your noggin for a second:

1. Big valuation

2. Low- or no-cost offering

3. They control your tech and top-of-funnel traffic

Where do you think they’ll turn, eventually, to find revenue to support their ridiculous valuation?

Welp, they’ll turn to you. That low- or no-cost offering starts innocently charging a percentage of each order; maybe 5% to start. No big deal. Then 10%. Still okay.

When you reach a 30% take, the game plan becomes clear: the model is intended to scale the tech company, not the restaurant. Grow at all costs, including gouging their own customers.

For the restaurants, there is nowhere to turn, because they handcuffed themselves early. They relied entirely on the Closed Loop for business, and they are at the mercy of a tech company that is trying to justify why they’re worth so much money.

It gets uglier from there.

📚 tl: dr

• Dispensaries are not restaurants

• ‘Restaurant tech’ was built for independent operators, because that’s the meat and potatoes of the restaurant space (not true in cannabis retail)

• Restaurants have unique product offerings that require manual eCommerce work; cannabis retail shares products across stores and must be automated

• Buying in to a Closed Loop offering is handcuffing your business; and eventually, you’ll feel the pain from transaction fees

• It is Tuesday