Episode 26

Multi-State Operators

On this episode of the Higher Enlightenment Podcast, our host Adam Kolbach interviews Cory Waggoner, CEO of Higher Yields, Sherri and Madison Marzario owners of Tumbleweed Dispensaries, and Brian Ruden, founder and CEO of Starbuds. They discuss the ins and outs of being multi-state operators (MSOs), from what its like going from mom and pop to multi-store operations, to what the hardest part of being an MSO is. The guests reflect on their first dispensaries, and much more.

SPEAKERS

Madison Marzario, Sherri Marzario, Cory Waggoner, Brian Ruden, Adam Kulbach

 

Adam Kulbach  00:08

Hello and welcome to the higher enlightenment podcast brought to you by higher yields cannabis consulting your seed to sale business solutions to buy my name is Adam part of the creative team here at higher yields. And today’s episode is number 27 Being an MSO, or multi state operator with special guests for you, Wagner, Sherry and Madison, Mars Aereo and Brian rude. So let’s get on with the show. We’ll start by having everybody introduce themselves. Let’s start with you, Cory.

 

Cory Waggoner  00:47

Thanks, Adam. Corey Wagner, I’m the CEO here at higher yields consulting.

 

Sherri Marzario  00:52

Hey, Corey, nice to meet you. Nice to meet you.

 

Adam Kulbach  00:54

Okay, thanks for being here. And Sherry, could you tell us a little bit about yourself and what you do?

 

Sherri Marzario  01:01

Sure, she’s very mercurial and we on Tumbleweed dispensary, Colorado and also have MIPS we on Canna punch and highly edible. Some other concentrate companies wildfire, we just acquired RMR out in Steamboat and now taking our brands to Michigan.

 

Adam Kulbach  01:23

Okay, thanks, Madison, could you introduce yourself?

 

Madison Marzario  01:28

Yes, I am Madison Mars, Aereo. Sherry’s daughter. I do all of their operations, so CEO of all the Tumbleweed locations and their manufacturing and cultivation facilities. And then my sister Montana, and I started two brands, wildfire concentrates and care division, which we just recently recently launched in Michigan, in addition to Colorado.

 

Adam Kulbach  01:53

Okay, thanks, Brian. Can you tell us a little bit about yourself and what do you do?

 

Brian Ruden  01:59

I’m Brian Rutan. I’m the founder and the CEO of Starbucks. Retail dispensaries, we have locations in multiple states, and now international as well. And then in addition to Starbucks, I created some product brands as well, most famously caviar, but also Star Bar edibles and munchies gummies.

 

Adam Kulbach  02:21

Okay, thanks for being here. And let’s get on with the first question. Tell us about your experience with your first store. Brian,

 

Sherri Marzario  02:31

do you want to start with Alan? Yeah. So

 

Brian Ruden  02:34

in Colorado, we have to go back to 2009. And medical marijuana was the things don’t stores and grows really just were kind of in their infancy here. And I started out with a cultivation. But then 2010, Colorado really came into its own with its really first set of regulations. And one of the rules was vertical integration, meaning you couldn’t just own a grow or just on a store, you had to have both. And so a lot of people who were in my shoes who either had just a cultivation or just to grow wound up forming partnerships, and I partnered with a group in Colorado Springs that had a dispensary called the tree of wellness. And that’s how I got my start in the business. So started out as a cultivator became vertically integrated in 2010, when that was required, and we had a little medical shop, and that that was my foray into the business.

 

Adam Kulbach  03:41

Okay, thanks, Madison and Sherry, how about your experience with your first store? Sure, so

 

Sherri Marzario  03:49

I moved out to Colorado, actually, my daughter is a ski racer. And so that kind of got us out. She went to a ski school and through my husband, Mark Smith, who’s our CEO, we were out looking at some real estate for something else. That someone his his college roommate actually called and said, Hey, would you be interested? We’ve got a gentleman who owns Canna ponchos, Daniel Griffin, who has a grow and some maps, and he’s looking for a partner to help him operate them. He’d like to expand and grow. And Daniel actually holds badge, one in the state of Colorado, which is interesting. And so we got together with him and he said he wanted to grow his operation but was looking more for operators so he could continue with his formulations. Were on his MIPS, and this was in 2016. And we said that what a great opportunity. So we teamed up and we opened up our first dispensary in parachute, which was a struggle in itself because As the city is small and they had a prohibition for marijuana, so poor mark, and I went to many, many meetings and with protesters, they even had rotten tomatoes with them not exaggerating. And it was, if we could have s corpse inside the city hall, that would have been great. But that’s where we opened up our first dispensary as a group Green Cross Colorado. And that was an Paracha thing town of 500. Right on the i 70. Corridor.

 

Adam Kulbach  05:32

Okay, what is it like becoming a multi store operation from mom and pop store roots?

 

Sherri Marzario  05:39

When we had just the one store, I was like, wow, this is great. We kind of had employees from our neighboring competitor. And I thought, maybe the struggle won’t be so hard. Then we started getting more stores coming on board, Mark was very aggressive about growing the company. And it’s certainly took on a life of itself, everything from the compliance to the staffing to all of the rules, it was very, very different. And I think difficult. I don’t know about you, Brian. But

 

Brian Ruden  06:16

yeah, I also found it incredibly difficult. So from going from one store to two to three is exponentially more difficult, because you’re spreading yourself very thin. And in the early days, my main business partner and I were very active, so I was bartending, I was checking the door, I was ordering wholesale and things like that. And so then you have to be able to train other people and trust them to do those tasks. And, you know, I like in expansion to a lot of, we’re going to take one step backwards to take two steps forward, because you wind up having to bring on more staff and more people that you’re, you can’t fully utilize at least right away, because there’s a learning curve. And maybe your company’s not big enough to really use them, but you bring them in, you take a step backwards, because now you’re running in a smaller margin. But then eventually, they become valuable assets. And you can take two steps forward because you’ve got the team. So that’s kind of what it felt like for us as we just kept taking one step backwards, two steps forward, over the course of expanding and then you’re going from single store to multi store was difficult, and then going from single state to multi state was probably even more difficult than that.

 

Adam Kulbach  07:41

Okay, thanks, Cory. What are the common themes that you see in MSOs? Looking to scale their operations?

 

Cory Waggoner  07:51

What kind of like Sherry, Brian said, I think having the process and procedure in place is kind of the hardest part. And then the human element of it, for sure, you know, being able to trust people and find good people. And, you know, I think part of that comes from having a scalable system. And scaling in one state, like they mentioned is one thing. And it’s, it’s very difficult, but then taking that and moving into another state where regulations may be totally different, or maybe just a little bit different, can definitely kind of alter that that business model. So we see a lot of people really struggling to be able to, to scale their operations and scale effectively, there’s a lot of really great products that we’ve seen, tried to take their products to new states. And they just failed to doing so because they weren’t able to put kinds of quality assurance measures in place. So it either tarnish the brand, or they didn’t do a good enough job of kind of helping and supporting the marketing and sales portion of it actually get those products on to on the shelf. So while product will do really well in one state, it’ll completely fail in another state.

 

Adam Kulbach  08:51

So Brian, before we got on, you were saying that during COVID-19, you’ve had a great deal of business growth. Can you tell us a little bit more about that?

 

Brian Ruden  09:02

Yeah, I mean, in Colorado, which is my primary market, you know, our state, deemed cannabis shops, as well as certain other businesses as being essential and so we weren’t shut down like restaurants. And I think people were more stressed, they’re home more, they had less avenues to spend their disposable income. For a while. We weren’t going to restaurants we weren’t traveling. And I think people came to the cannabis shops and spent more and more people came and what I was saying earlier is the trend and I think it’s because more and more dispensaries opened over time. We saw ourselves from you know, the early days of recreational 2014 at an all time high and then taper off and level out in was actually even declined. Adding a little bit in 2019. But then when COVID hit, and we were able to stay open, sales started going up and up and up, and it’s still really high. So, yeah, we saw it, we saw a boom in the industry during COVID.

 

Madison Marzario  10:18

Yeah, we absolutely did, as well. And I think to Brian’s point, people have this extra money and nowhere else to spend it. So we’re also seeing a lot of first timers that are coming in and entering the dispensaries and wondering, you know, what is different and what’s going to make their daily life different, like starting to consume marijuana, and people are now starting to, you know, ease off of the whole stigma of cannabis is bad. So I think we’ve actually gained a very large following of new consumers during the time of COVID, which are now reoccurring customers that aren’t afraid to have cannabis and you know, switch out of beer for a joint.

 

Adam Kulbach  10:59

Well, it sounds like a great business to be in in the last year or so. So what challenges arise as an MSO, that smaller operations may underestimate when thinking about expanding,

 

Sherri Marzario  11:13

I think that a smaller operator, and we have learned this, with our 2016 Opening of parachute, they don’t really see a lot of enforcement, they don’t see the mid doesn’t make regular visits to a one shop owner. As much as once you start to grow. They kind of like to latch on to your wagon, so to speak, and continually come around. And I think that they underestimate compliance, which is something that we have put all of our focuses and energies on. And you know, obviously Brian with higher yield consulting, his team has helped us out quite a bit and continue to help us out. But we I just when we first started, the employees at parachute used to say, Oh, hey, don’t worry about the MVD, we’ve never seen them. Even though they’re just down the street, though they never come around. Because I didn’t know I wasn’t really aware of all of the all of the components that went around for a shop because nobody really comes around and teaches you like these enforcement agencies, they don’t stop by and say, hey, you know what, I’m going to hold your hand, we’re going to teach you how to open, we’re going to show you what you can and you cannot do, and nine times out of 10 they’re honest mistakes just because of the lack of training or skill. But I do believe that I think that a smaller operator who’s in the middle of nowhere that’s never had a visit, they have no idea of what they’re doing wrong. So you kind of learn that when you open up more stores, you’re like, oh boy,

 

Madison Marzario  12:54

I also think even in addition to the MA D or you know, the state agencies, the compliance and like just entering into these new municipalities is a problem in itself where you incur all these new problems that you didn’t experience and say, parachute or Carbondale. But then we move over to steamboat. And steamboat is like Brian was saying earlier, I mean, it’s still very old school, it’s everything is required to be vertically integrated, you need medical and recreational cultivation, processing and retail licenses. And I mean, with the space, you’re limited with space there. So you can only be in a certain area of steamboat, you can’t be downtown. But now all of a sudden, there’s no commercial real estate unless it’s downtown. But the city won’t approve that. But you still have to be operating with all those license types. But then you get to a place like Edwards Edwards was absolutely great. We move over to Eagle eagle has given us you know, a few challenges that we haven’t experienced in other places. So I think yeah, is going or the family going from one store and then thinking, wow, we really have this figured out and we can move on to the next location. You just experience it’s a brand new start, depending on which city you’re located in are moving into. Yeah. Challenge.

 

Adam Kulbach  14:19

Okay, we’ve already sort of hit on this but if you had a chance to go back and give yourself or your company A word of advice, what would it be?

 

Sherri Marzario  14:30

I can tell you right off the bat. I would have started out with a compliance company. I would have if I had somebody holding my hand and just getting me through metric and the Med and in license Yeah, missing signatures, back sticker labels everything i because those those small problems can compound and into a nightmare a year later if you’re not paying attention into that detail when you start out correctly. That’s the thing, one little thing. One Miss process validation one missed the sticker label or dose, and anything that somebody should guide you on, can really turn out to be a problem. So that going back, I should have done a little more research with a compliance company to help us get started.

 

Cory Waggoner  15:26

By itself would be double it, double the timeline, double the resources.

 

Brian Ruden  15:36

Yeah, if I could go back in time and give myself advice, I actually would have grown my company faster and taken on more locations earlier on, when the barriers to entry were less than they are today. And the price of poker was less. So dispensaries have become more valuable over time as the stigma has gone away as revenues have gone up as the industry has evolved. And so I think I would have there were a lot of opportunities I passed on. years ago for locations at the time, I thought there, they were too expensive. But I would, I would tell myself, just do it. Because in hindsight, they were would have been really great opportunities. I also would have probably brought on more talent at a higher caliber earlier on. And it wasn’t until I found some really high caliber people and and bit the bullet to bring them on that, that we really started expanding and in a much quicker fashion. So I think I would have just been more aggressive to be honest. Think back to 2010. You know, my big fear was the was this idea. You know, I’ve got a warehouse with over 1000 plants in it. And I’m looking at 99 years of federal prison if no one knew what was going to happen, was this going to be okay, it was not going to be okay. We were going to be thrown in jail for this. Nobody knew back then. And so it was scary. And so we were making decisions based on you know, where are we going to be in 90 days now, you could look years ahead. But now, but back then it was very short term thinking. Nobody knew whether this industry was going to last not last. So So yeah, if I could go back in time, I’d I would have just jumped in even harder and been more aggressive.

 

Madison Marzario  17:38

And I gave me goosebumps, Brian, it’s so crazy that that’s how you guys because I didn’t enter the cannabis industry as early as you were sherry. But yeah, the thought of something like that potentially happening and happening is so so so terrifying. Like, yeah, now we know that the outcome, what the outcome could potentially be. But yeah, living off of wondering, you know, what’s going to happen in the next 90 days? That’s terrifying. Oh,

 

Sherri Marzario  18:05

when you’re having read training, that’s probably something to lay awake at night?

 

Adam Kulbach  18:11

How has it been working with higher yields consulting through the expansion process?

 

Madison Marzario  18:18

Well, I can Yeah, I can touch on this a little bit, especially with the support that we’ve had from H yc. Moving into Michigan. For manufacturing, we had, I mean, you think, again, that you have you understand all the compliance, you know, all the rules, you know how to use metric, you have the MVD, and then a similar regulatory Association over there, the MRA. But at the end of the day, it’s it’s starting from scratch once again. And I feel like once you’ve come to a certain level, or you have a large enough business, you forget about what seems like a small piece of the business. And then you get there and you’re like, oh shit, I thought metric was gonna be the exact same, I thought all the compliance rules are gonna be the same. I thought the label heavy metals testing was gonna be the same. I mean, I was calling hy C, we sent in our testing for our one gram carts, and they failed miserably. I didn’t know that there were two additional heavy metals that were out in Michigan, you know. So after contacting H YC, they were able to one help us better understand the testing procedures that are out in Michigan, which are completely different than what you have in Colorado, but to also helping us source and vet providers that could work with us closely and help us pass that testing with different hardware providers. So I think the compliance component of H YC, helping us transition into other states wouldn’t have been possible without them.

 

Sherri Marzario  19:55

I agree and also looking at when you’re getting ready to make an acquisition. Hey, Having an extra set of eyes reviewing metric before you take over and helping with metric cleanups from owners that it’s just an absolute mess and nightmare has been huge for us.

 

Madison Marzario  20:13

And that’s something that we’ve learned to now like moving forward, we don’t just

 

Sherri Marzario  20:17

assume that we don’t just assume all the inventory. Yeah, thanks you’re describing. Yeah, thanks

 

Madison Marzario  20:22

for sending over the report. Our lawyers say everything looks good. Now, we will absolutely take it a step further to have someone actually take a deep dive and all this reporting before we agree to any acquisitions, because at the end of the day, we’re the business owner operators, we don’t know, all of the tiny, tiny intricacies that we may think are mind minor. But like Brian was saying, you know, once you invest in that talent, you’re then able to go ahead and rely on those individuals to take complete responsibility of that. And that’s what we’ve done with HMRC for compliance.

 

Sherri Marzario  20:56

So you have time to grow your company, yeah, and make money and acquisitions. And yeah, you don’t have to have constantly have your face. And in the books,

 

Brian Ruden  21:07

I’ll jump into look. higher yields consulting is an awesome for. And when you’re looking to expand, you can either grow through acquisition, which is very expensive, or you can apply in new markets, emerging markets, for new licenses. And most new markets, most states now have a merit based application program that requires you to draft an application and demonstrate how are you going to follow the rules. But it’s so much more than that, because in order for a company like Starbucks, to move into a new market, like when we moved into Maryland, or Missouri or applying in Virginia, what you really got to do is find a local group that wants to be boots on the ground. And what they really need is some expertise to partner with. And so one of the things that Cory and his team has been really great at, is putting people together. So whether Cory find somebody in another state, or they reach out to him at h yc. And you know, and then he’ll call me and say, Hey, I found a group, or I have a group, they’re really great, they’re really qualified. They’ve, they want to make a run on a license, you know, but they need, they need a good partner. And I think it would be a good fit. And that’s really where not just their ability to write these applications and score really high and win licenses. But hy C’s ability to put people together and make those introductions has been invaluable. So to me, that’s been probably the single biggest benefit is being able to do that, because that’s the secret to success in these new markets. You find ambitious business people that want to be involved in the industry, you partner with an experienced group like Starbucks or tumbleweed, and, and the great minds come together. And that’s the dream team. And that’s what Corey and his group has been great at is putting us together.

 

Sherri Marzario  23:12

I agree. Well said. We could go on and on about all that stuff soon. Right? Yeah.

 

Adam Kulbach  23:22

Well, we’re just about out of time. So does anybody have any final thoughts or statements that you’d like to make?

 

Brian Ruden  23:29

I’ll throw it out there for the listeners, if you’re looking to get into the business. Starbucks now does license agreements and partnerships with people all over the country, you can either contact me directly or contact H yc. And they’ll put us together. But you know, if you’re looking to get into the business, in a new market, or different state, reach out, and that’s really the best way is to, you know, work with an experienced team.

 

Sherri Marzario  24:01

That’s good to know. Yeah, absolutely.

 

Adam Kulbach  24:05

Well, thanks, everyone, for being on the show today. Really appreciate it. Thank you very much.

 

Sherri Marzario  24:12

Thank you, Adam.

 

Madison Marzario  24:13

Thanks for having us. Cory, it was so great to finally meet you in person. You too, Brian. I’ve heard about you a lot, but I’ve never actually got

 

Adam Kulbach  24:29

we’d like to thank everybody for tuning in today and listening to our podcast. For information on how to follow the higher enlightenment podcast. Please be sure to check out the description below. You’ll receive all the latest and greatest podcasts news and announcements will also let you know when we release new episodes. If you’d like to be a guest on the higher enlightenment podcasts, or have ideas about upcoming episodes, please be sure to check out the description below. For more information decision about sponsorship or advertising on the higher enlightenment podcast, please call us at 844 High yield. That’s 844 H AI, why i e, LD or visit our website at higher yields consulting.com. Thanks. Have a great day and we’ll talk to you soon