HOW TO OPEN A HEMP STORE
By Marc EmeryRead this article online here.
I originally wrote this in August 1995 after I had been in cannabis retail activism only 16 months. It was first printed in Cannabis Canada #3, Fall 1995. At that time I had not yet had legal trouble. Since then, I have been arrested 22 times in 8 of 10 Canadian provinces for pot offences and jailed 17 of those times; raided 6 times (having over $1,000,000 in store assets seized); and today face a US extradition request to face life in prison for being the world’s most outspoken cannabis activist. Within a year of the original article being published in 1995, more than 60 hemp stores in Canada and over 25 in the USA opened using this article as the basis for each new store – including Dom Kramer’s Toronto Hemp Company profiled in this issue. It was the most popular article we ever published, and possibly our most effective too. I have updated it where necessary but it required very little additional information.WHY A HEMP STORE?
The marijuana and hemp industry, more accurately called the cannabis industry, is experiencing tremendous expansion worldwide. More and more people all over the globe are using cannabis for recreational, spiritual, industrial, nutritional and medicinal purposes, and each year more money is spent on research and development. According to the United Nations in 2004, there are 164 million people worldwide who ingest cannabis for its consciousness expanding abilities. Hundreds of thousands more are working with cannabis hemp in an industrial context, providing millions of people with fabrics, oils, paper, housing, plastics, fuel and medicine.
The demand for marijuana and hemp products is tremendous, yet many communities do not have a cannabis culture retail outlet or hemp store. There probably isn’t one in your neighborhood! Opening a cannabis shop is the single most effective way to promote the decriminalization of cannabis, and you will be dealing with a receptive and growing market. This article explains how you can open a complete cannabis culture store with only $15,000. I have based these recommendations upon my 30 years as a successful retail storeowner and manager, and my experiences as proprietor of HempBC (1994-1998) and the BCMP Bookshop (2001-2006), now called Marc Emery’s Cannabis Culture Headquarters (2007) in downtown Vancouver, BC.The Retail Store
A retail outlet is the physical manifestation of the movement’s claim that “cannabis hemp can save the planet”. Do not open a marijuana-only “head” shop, as it is passé. Don’t contemplate an industrial hemp-only store either, as you will not make enough money to survive. Consider only a complete cannabis store, catering to all aspects of cannabis hemp sativa. (Food, fuel, fiber, fun!) The objective of the retail store should be to demonstrate and display every virtuous aspect of cannabis, while also funneling the money from the cannabis community back into further production within the hemp and marijuana-accessory market. The retail store is the front line of the cannabis liberation movement, so it should be welcoming, friendly, neat and tidy. Polite but uncompromised. You don’t sell actual buds, just everything else related to it. The store should be appealing to young and old and everyone in between. Everyone who walks out should know more about cannabis than when they came in, and they should definitely be carrying products they have just purchased! It’s likely they will, as one in ten adults is a cannabis user and many more are interested in hemp for industrial and ecological/environmental reasons. You are opening a cannabis culture shop that will profitably and sustainably highlight all aspects of our community and movement without any additional investment. LOCATION & RENOVATIONS
You will need a space on a main street in your community, approximately 500-800 square feet. It’s preferable if you can find a location with reasonable foot traffic, but as long as you are within two or three blocks of a main pedestrian area, that’s okay. If you develop your little shop into a “Marijuana Mecca” for the stoner community, they will come! You need a population base of at least 30,000 people within 20 minutes of your business to be viable, so consider areas where there is no great hemp store and carve your niche there.The Ground Floor
Your store should be on the ground floor of any building. Second floor locations are a definite disadvantage, and I do not recommend them. They’re a pain in the ass for your customers and delivery people to get to, and are very vulnerable to competition. There are no walk-by visitors wandering into your store and only the determined will trek to higher levels. Also, second story locations in virtually all of North America get unbearably hot in summer! If you decide to go for a second story location nevertheless, the rent should be no more than a quarter of the price of the same space on the main floor below where you are looking – it always costs a lot more to be in a very good location. Make sure that if you’re on a second floor, you will be able to put a (colorful, bright, attractive) sandwich board on the sidewalk to draw customers upstairs. Paying higher rent may be worth doing where walk-by traffic is good, but if you are a cool enough hemp store, your core market will discover you in any location – second floor, or even underground (in the basement of a commercial building – usually with stairs leading down from the sidewalk). It’s good to be on main roads with buses, subways, trains, or other public transportation and parking nearby, and definitely near pedestrian routes. If you are not in a location with these attributes, you will need to give out promotional materials (like “20% Off Everything!” coupons) to students walking off campus or downtown, in order to draw people to your new store.Renovating
“Emery’s Renovation Law” states that all renovations will cost you double plus ten percent of whatever you had estimated in the first place. Renovations are scary things because the process of repair reveals further areas that require work. You can accurately predict rent, inventory, phone lines and taxes, but renovation is a great, big, black hole! You have to be realistic about how much renovation your proposed location needs, as you can probably afford very little for the work. Serious changes should be contemplated only when you have a decent cash flow or are starting out with a much higher budget. To keep the renovation cost low, you or your friends should do most of the initial work like gutting the interior of old junk, patching and painting the walls, and polishing the floor (or laying new tiles, linoleum, carpet, if required). Build or buy used shelves, glass display cabinets, and furnishings. Your store must be clean, pleasant, and reasonably sharp looking on opening day; it can still be a work in progress as long as every day sees new improvement. Cleanliness is the top priority at first, then neatness and tidiness. Fancy is the least important; that comes months or years later when you can afford superfluous improvements. It is essential to keep your renovation investment very low – most of your money should go to stock for resale. You must hold the line on expenditures that do not bring in immediately sellable inventory. When I started Hemp BC at 324 West Hastings on July 7, 1994, we dropped a curtain so only a clean 300-square-foot section of the 1,200-square-foot space was open to the public, then pumped out sales of pipes, bongs and books. As we developed cash flow each month we would add 10 feet more of retail space until the store was fully utilized the following February. The key thing is to sell, sell, sell. You’ve got to have fast-moving merchandise in order to buy more stuff to sell. Especially in the beginning of a business it’s all about cash flow.A Good Sign
Spend $1,000 on a good sign. A small overhanging neon sign at ninety degrees to a flat paint-on-wood sign would be desirable. You’ll need to order it weeks in advance. There are neon green cannabis leaf signs with the OPEN in orange neon available for $500, and that glowing in your window might be all you need. When it gets down to it, this green leaf and OPEN sign clearly indicates the relevant subject matter without words, and you won’t have to change your neon sign if you ever decide to change the name of your store. By the way, everyone will call your place “The Hemp Store” no matter what you name it for the first while.Working While You Wait
After you have signed a one or two year lease for your location and paid the first and last months’ rent, decide on what your opening day inventory will be, where you will be getting it, then place your order. While you are waiting for your inventory to arrive you should be working at breakneck speed to get your location operational. It should take no longer than fourteen days to go from possession of the location to having a presentable store. Don’t worry if it’s not completely finished by opening day, as you will always be making improvements. Once the front end of your store is mostly finished and decorated and you have at least $6,000 retail worth of merchandise, open your doors. Work on improvements while you are talking and selling to your customers. There will be lulls at first because your phone lines may not be activated yet and the word-of-mouth hasn’t spread around, but you need as much money as you can get so seize upon any chances to make a sale even while your store is a work in progress.7 Days a Week, Every Week
You should be open seven days a week, 11:00 am to 6:30 pm in winter, and 10:00 am to 7:00 pm in warmer weather – but don’t close until 9:00 pm on Friday and Saturdays because stores typically get more late-hour business on weekends. When your store is just starting off, many of your customers may remark that “it’s a nice store, but you need more stock” – just tell them that more is coming, so when they return and find it’s true, they’ll be impressed that the store is developing with the money they spent there.The Competition
What if there is already a hemp store in your community? Whether you open in that area depends on whether they are doing a good job. If yes, consider opening in another community where there is not yet a marijuana and hemp store. If no, determine whether the community can sustain two competing locations.GOVERNMENTNumbers
One day must be spent getting all the necessary government numbers. You will need to get, in this order: Business Number (in Canada); Sales Tax number (this is a state or provincial office); United Parcel Service customs broker (if you will be importing goods from outside your country); and a Business License (City Government).Zoning
If you are not advised of any special exemptions (“variances”), then your store must conform to the local by-laws governing fire and safety. This means having an emergency exit, licensed electrical work, and a licensed professional for any structural changes or major renovations. You must conform to zoning regulations, as you will be inspected by both the Fire and Health and Safety Departments; the individual in city government will give you some slack if you can have the essential repairs done with the promise to have the rest completed by a certain time. They don’t want to hassle you but their job is to make sure the place is up to the current safety code. You essentially have to do this if the place was suffering prior to your taking over the location. If you think a location is going to cost more than $3,000 to renovate, consider other options! Vancouver City health inspectors required my old Cannabis Café to have metal emergency exit steps built out the back door, a bill of $15,000! The total cost of the Cannabis Café renovations exceeded $300,000 in the space of eight months, so beware of opening any restaurant or café unless you are taking over an existing location that’s fully equipped and up to code.MONEY
You can pull off your hemp store with total capital of $15,000, although $20,000 would be better. (It’s great if you have more, but don’t squander it.) With only $15,000 to float your store, no more than $5,000 can be allotted for the premises and start up equipment. This should be divided so approximately $2,500 goes to paying the first and last months’ rent, and $2,500 goes to supplies like paint, lighting, shelves, cashbox (don’t bother getting a cash register until you open) and materials to make display cases. That’s not much but it can be done if you get qualified friends to pitch in.
Hire a professional in key areas of electricity and signage. Open the doors with whatever stock you have as soon as your location is presentable to the public. If your store shingle isn’t ready by opening day, don’t let it delay you – hang a temporary (clean-looking) sign with your store name and phone number. More product will arrive, signs will get done, phone and computer installed, but most of this can be accomplished (including pricing and labeling) while you sell to anyone who comes in on the very first days.
Fire and theft insurance may be hard to find, though a lot depends on your store’s name. I found that any business with the words marijuana or cannabis in it has a hard time getting insured. “Mary Jane’s Hot Box” – not difficult to insure. “Marijuana and Cannabis Castle” – very difficult to insure.Reinvest
At first you may not have much, but the $10,000 reserved for inventory is enough to get a good store going. Your $10,000 cost in product will bring about $22,000 in retail value. In this bare bones scenario you need to live like a monk or a Spartan, because the store cannot realistically pay you, or employees, anything for the first while – it is unwise to draw any income from the store for at least two months. Every penny should be plowed into more stock, new display cabinets, or improvements in the business. Reinvest! Get rid of any unnecessary personal expenses. All available time and money must be invested in product to sell. Period. That’s the only way to produce increasingly improving cash flow. Don’t buy anything unless it can be resold at a profit and reasonably quickly. Don’t buy anything on a whim – buy it only because it will sell! Neon signs and new cash registers should be put off until the money is clearly available. Wait until you are showing minimum daily sales of $250 before beginning to make cosmetic improvements that don’t produce revenue in and of themselves. Banking
Banks can be uncertain as to whether they want you as a client. You should have all your paperwork complete – lease, vendor’s permits, Business Numbers, incorporation documents, trade name registration – when you go to open a bank account in the store name. Ideally you want to get a business checking account, but bear in mind it may take time to clear all the bank’s business checking accounts hurdles. (Open a personal checking account as an interim measure.) Have your bank give you VISA, MasterCard, and Interac merchant privileges so sales paid by debit and credit cards go right into your bank account. There are companies, such as Moneris, that specialize in credit card transactions through banks, so contact them.INVENTORY
Now to the opening day inventory. You should have at least $10,000 to spend entirely on products bought wholesale. As to opening inventory, I recommend that you spend $2,000 on hemp products, $1,000 on books, magazines and videos relating to marijuana, and about $7,000 on smoking devices, vaporizers, Bubblebags, and paraphernalia. $10,000 worth of goods wholesale will retail for about $20,000-$22,000. To cover the overhead and replenish the inventory sold you need monthly sales of $5,000. If your monthly rent is $1,250, and utilities and other non-inventory expenses add an extra $1,250, that’s $2,500 in overhead costs – not including employees, which you cannot afford at first. No expansion or additional inventory is possible until sales get up to $7,000 monthly, and you will be successful once you exceed $10,000 in sales in one month. Your target is to achieve $15,000 in monthly sales by your sixth month. How To Get Wholesale
You need stock for your store: pipes, bongs, books, rolling papers, grinders – all the stuff that sells. Where should you get it? There are several good wholesale companies I highly recommend. Kustom Kulture (Winnipeg, Manitoba), BOB Headquarters (Brandon, Manitoba), HBI (Vancouver, BC), Fresh Headies (Vancouver, BC), Green Harvest (Vancouver, BC), and Quick Distribution (Oakland, California) can all be found in the Cannabis Culture classifieds (page 108 in this issue). All wholesale businesses have a catalog, so ask for it. You will need to pay for orders with cash up front until you have a proven track record with suppliers. US stores can order from Canada with no difficulties, and vice-versa. There will be a brokerage fee for a company (likely United Parcel Service/UPS) to do the paperwork, but if you use the postal system, there are no brokerage fees to pay.Save Time, Send Money
If you have to pay up-front send your money orders for material by overnight Federal Express. Any good wholesale company handling a broad range of goods will get your order in transit (likely by UPS or post office) within 48 hours, and certainly no later than 72.Be Very Tight With Money
You must always be extremely thrifty at the beginning because everyone who sells wholesale will want cash up front from you. Payment via credit cards, couriered money orders, and direct bank deposits are best because of speed, so your goods will be shipped within 24 hours of payment. Cash on delivery, or C.O.D., is common for new stores, but make sure you have money set aside for when the products arrive. Eventually your business may be deemed trustworthy to get a $500-$1,000 credit limit (or the average value of your last three C.O.D. orders), which means you pay that invoice by check or money order within the period allowed by the wholesaler (typically seven, 14 or 30 days). This allows you to receive goods with a grace period for payment and will be a tremendous help for your store, especially at month two or three. Good wholesale references are useful when you apply for net terms with other suppliers. Not paying on time has heavy consequences. Credit limits are arbitrary and can easily be scaled back, but falling more than 30 or 60 days behind will see credit revoked and – gulp – collection agencies assigned your debt. This is very bad: if you do not pay, you’ll show up as a deadbeat at your local credit bureau, which means future difficulties such as reduced merchant credit card privileges and possible refusal of some banking privileges. Backorders
When dealing with any supplier, insist they are clear about having your desired items in stock and available immediately for shipment. Have them call you when backordered items are in stock, but pay only for what is going to be shipped out immediately. You don’t want your money being held out there for stuff that will be in stock “soon”. Use that money to buy something sellable from your wholesaler that’s in stock “now”! Potential Sales & Seasonal Highs
Depending on your store’s location and particular circumstances, you should reach a daily sales average of $200 by day ten, $350 by day fifty, and $500-$1,000 a day by the end of your first year – these are minimum targets. The best months for retail sales are August, September, December, February, and March. The worst months are May, June, and July, when university students leave their campus (the biggest single drop in business for
most places). THE POLICE
Responsible behavior on your part encourages both good sales and good public relations. Hopefully the community likes you, because police base their actions on whether they will receive community support or not. Be a good spokesperson in the media, as media exposure can discourage (or sometimes incite) police attention. Problems can be minimized or eliminated by taking appropriate measures. Make sure you follow all municipal by-laws and send your sales tax remittances, government paperwork, and fees in on time. Discourage loitering from the get-go, as it creates a negative public image. Try to be transparent in all of your activities, as a veil of secrecy or too much of an “underground” feel at your store will make neighbors and police think you’re doing something “shady”. Be polite to police at all times, especially when a beat cop comes in to check out the new place. Have a copy of your license (and your rights!) prepared in case of any questioning or confrontation.
In Canada, you can sell marijuana seeds in your store – as over 75 Canadian hemp stores do – but it’s a small risk (mail-order to the US from Canada has been halted almost completely). Seed selling in the US is a huge risk outside of San Francisco Bay area compassion clubs, so get a barrel of bulk hemp seeds instead, which will look interesting and sell like a food item.
Don’t permit marijuana smoking in your store while it’s open; after hours, with the doors locked and the curtains drawn, is okay. Definitely do not store any illegal drugs on the premises other than a small personal stash (under one ounce). It’s wise to avoid displaying bongs or smoking items in your front window, as there are often laws against such “promotion of paraphernalia” in storefronts. You don’t need hassles over such a small detail, so just keep the bongs inside the store and put all of your books, clothes, and rolling papers out front. Your place should otherwise be as uncompromised as possible! Many stores have signs saying “products are for tobacco use only” or “we don’t encourage the use of marijuana”, but that is hypocritical considering it’s a cannabis hemp store.
Note: Pennsylvania and Idaho have actually made selling bongs for pot use a criminal offence; Chong Bongs were prosecuted out of Pittsburg and Tommy spent nine months in jail, and Chris Hill of Chills Pipes had all his property seized and spent a year in jail for his pipe distribution business based out of Florida! No doubt these are risky times, but remember: without struggle, no good can be achieved.Busted
Bongs, pipes, smoking paraphernalia – “any instruments of illicit drug use” – are actually still illegal in the US (Sec. 863) and Canada (Sec. 462.2) and carry a fine up to $100,000 and/or up to six months in jail. The “Hemp Store Revolution” this article set off in 1995 did not get rid of this law – it merely put The Man on the defensive for a while. But every year, five to ten stores in Canada get charged under section 462.2 (illicit drug paraphernalia) of the Canadian Criminal Code, and over 150 stores across the USA get charged for handling illegal drug paraphernalia. Busts and raids are challenging, no doubt – customers think cops are watching your store, and sometimes you lose a lot of inventory. Of course, you will continue onward, restock, and adapt. Try not to have too much money or inventory in-store, because if you’re raided you can lose it all (I’ve lost over $1,000,000 in seized materials over six raids). If you’re busted you may be released without many problems, but criminal charges often come with restrictive bail conditions like not going to your store, or not selling pipes and bongs (or, in my current situation, not selling seeds). Charges
mean adversity. ADVERTISINGFree Publicity
The stoner community will quickly notice your appearance, and the novelty value (and huge potential audience) will make news in your community. Never underestimate the power of good word-of-mouth. The amazing variety of products and information related to cannabis hemp will make you popular with tourists, smokers and environmentalists alike. Media will come for the scoop on the new store in their community, and may take your information to be a contact for marijuana news stories.Promotion & Coupons
One of the most effective ways to get new customers to your store is to hand out an exciting pamphlet or brochure about your store at events or even major pedestrian intersections. Discount coupons are excellent tools to draw in new customers from your immediate area. Rock concerts, reggae nights, pubs, speakeasies, university entrances, downtown streets: at any of these places you can give out information about your store or a coupon offering that must be used that day, week or month. With this method, you can quickly measure how effective each area you promote at is by how many coupons are returned.The Internet
Once you are selling product in your store, develop a presence on the internet. Start a basic website for your store that encourages tourists, visitors and locals to check you out, with bright pictures of cool products and the unique aspects of your store. Show your hours and phone number. You can sell products by mail through a website but at first this may not be very profitable or convenient. PayPal and internet credit card companies do not allow their services to be used for “illegal drug paraphernalia” so that’s difficult to get jump-started and can’t realistically be counted on for income. Your energy and promotion should be directed to getting your market into your store. Open a MySpace.com page or make a video of your hemp shop and upload it on YouTube.com. Be sure to harness the power of the internet to promote your hemp and marijuana store!
From Cannabis Canada #3, Fall 1995
This article was updated and republished in Cannabis Culture #65
. Get a copy before that issue is sold out too!