New laws allow recreational cannabis sales in more than 20 states, but it remains illegal under federal law, making starting a retail cannabis business complicated. This is Part 4 of a series, Spliff & Mortar.
Suppose you’ve owned a lot of retail businesses, and with recreational cannabis now legal in many states, you’re opening a new business in that space. For all those sales you’ll be ringing up, you’ll need a point-of-sale (POS) system. Maybe you’re thinking you’ll just use a popular POS solution you’ve used for other ventures, like Shopify or Square.
Think again.
Both Shopify and Square permit payments for CBD products, which are derived from hemp but lack the levels of THC that get users high. CBD products are legal under federal law. But when it comes to recreational marijuana, even in a state that’s legalized it, both companies ban using their software.
- Square’s website says it prohibits transactions for products with more than 0.3% THC, the federally legal threshold, along with “paraphernalia, bongs, [and] pipes.”
- Shopify—which is based in Canada, where cannabis is legal—permits selling cannabis only in Canada. But everywhere else, including the US, its website states it limits the sale to only “hemp or hemp-derived products” if they’re legal under local law and contain no more than 0.3% of THC.
But don’t despair, ganjapreneur. Dutchie, which is based in Oregon, is among a growing number of POS systems that not only welcome cannabis companies, but design software specifically for them. And because the legality and regulatory environment for cannabis is so complicated, a POS system designed for cannabis may be exactly what you need.
A potent solution: Massachusetts-based MariMed—which owns cannabis retail stores in Illinois, Maryland, and Massachusetts, and manages stores for other owners in Delaware and, soon, Ohio—uses Dutchie in all those stores.
Joe Khoury, MariMed’s director of business systems, said that Dutchie suits the uniquely complicated world of retail cannabis, managing payment alternatives to major credit-card companies, which shy away from cannabis; tracks cannabis products’ acquisition and sales in real time, as often is required by law; and calculates taxes that vary depending on state, municipality, and both the format and potency of the cannabis product.
“American operators’ POS has to have significant controls beyond what a lot of non-industry specific tools have, such as those potency calculations, specific and purposeful built integrations to the state system, and then more so the features to handle very convoluted tax environments,” Khoury told us.
High yield: Founded in 2017, Dutchie has raised $603 million in five funding rounds, with notable investors including Snoop Dogg and former Starbucks CEO Howard Schultz.
- Dutchie’s POS system is used by more than 6,000 retail and medical dispensaries.
- It processes more than $14 billion in cannabis sales annually.
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In 2022, the state of New York announced that Dutchie would be the exclusive technology and POS provider for the state’s 157 Conditional Adult-Use Retail Dispensary (CAURD) licensees, the first batch of licenses awarded to applicants who’d been convicted of a marijuana-related offense (or had an immediate family member who was).
Dutchie’s contract is with the state to set up the POS systems for those licensees at no cost.
New York is ensuring Dutchie can help implement its track-and-trace program (alternately called seed-to-sale), which monitors the lifespan of cannabis from when it’s grown to when it’s purchased by a consumer in real time.
“If you are a dispensary operator, you want to work with a cannabis technology company like Dutchie because we take care of all that track-and-trace compliance reporting for you,” Anne Forkutza, head of market expansion and industry relations at Dutchie, told us.
Weed to know basis: One thing Dutchie safeguards is selling an amount of cannabis that exceeds the legal limit, which is more complicated than it may sound.
For example, in New York, the legal per-sale limit is three ounces (85 grams) of cannabis “flower,” but along with that traditional product, the stores sell other formats like cannabis gummies and beverages.
“The equivalence piece is, ‘What if I buy like, an eighth of dried flower, but then I buy four beverages that have a THC percentage of 5%?’” said Forkutza.
It may sound like an SAT math problem meets Cheech & Chong, but if a cannabis retailer doesn’t have a handle on it, its next sale could be its last.
“What is that equivalent to in dried flower to make sure that you as the dispensary operator don’t accidentally sell over the legal limit?” Forkutza continued. “And if you do, your license could get taken away.”
Next time: Women-owned cannabis accessory brands that are getting noticed by the fashion press with stylish marijuana accouterments
