Are you considering franchising your CBD brand? In this article, we’ll take you through the benefits and challenges that come hand-in-hand with CBD advertising, as well as enlighten you regarding the best CBD franchise opportunities (and what you should consider before signing any contacts!
With the cannabidiol (CBD) industry growing exponentially alongside consumer demand, more and more franchises, businesses, and start-ups are trying their hand in the world of cannabis-based wellness. In such a fast-paced industry, it’s easy to lose your footing or be unsure where your business stands in the big picture of the industry. As the largest online CBD platform in Europe, we’re here to help you and your CBD business, whether you’re considering becoming a franchise or simply want to know more about the most prominent players in the game. Before you start your CBD franchise, however, we’ll take you through the basics in this article, such as:
- Who is buying CBD, and how this can positively affect market prospects, alongside the reasons why many adults in the UK are beginning to use CBD for wellness.
- We will then discuss some problems within the larger CBD industry, such as lack of consumer understanding, misinformation, and often unclear legality across countries and state borders.
- We will go on to examine CBD franchises as a whole: what they are, how they may impact the industry, and the benefits of joining one for yourself.
- After this, we will take a deep dive into the current best franchise opportunities and discuss the individual companies offering franchising opportunities for your CBD business.
- Finally, we will guide you through what to consider before your franchise journey begins, including the ins and outs of industry research, the risks and rewards of franchising, as well as provide some expectations around what a franchisor should provide you with before you open for business.
Who’s Buying CBD?
One widely-reported issue many customers have when navigating the CBD industry is the sheer amount of choice they encounter. From CBD gummies and oils to more niche wellness products like CBD tampons and lubricants, there is a cannabis-based business opportunity to appeal to any group you can think of. From construction workers suffering from back pain to desk jockeys living with arthritis, and even retirees experiencing the everyday health problems that come free with the sunset years, CBD appeals to every adult demographic.
Knowing your target audience is vital for building your own internal brand awareness, particularly when you are considering expanding your business into a franchise. In fact, many cite the overwhelming amount of options available to CBD consumers as a strength – if you know how to use it correctly. Providing a first-class, personalised experience and connecting with your customer base is the key to standing out in an industry that is constantly growing (and expected to reach $20 billion in sales by 2024).
One 2020 survey into the CBD industry concluded that, while it was a rapidly-growing market with many product options, customers overall did not feel supported through their respective journeys. The survey (conducted in the UK) had this to say about the people who buy CBD, with many surprising findings, such as:
- 85% of the respondents had used CBD in the past year (further indicating 7.8 million people had used CBD in the UK alone.)
- Only 41% of people understand the difference between CBD and recreational cannabis, while 53% believe there’s a lack of dependable information about CBD products.
- Well-educated customers are more likely to participate in repeat purchases.
- The majority (42%) used CBD for pain relief, with close runner-ups being relief from insomnia and anxiety or stress symptoms (21% and 19% of respondents, respectively.)
In a world where 28 million adults suffer from some type of chronic pain (and that’s just in the UK), it’s clear to see that the CBD industry’s growth won’t pause anytime soon.
Problems Within the Industry
Despite this seemingly infinite potential for growth, there are still some issues and challenges within the CBD industry. While CBD itself is known for its non-intoxicating qualities, as a cannabis-derived product it carries the stigma of an illegal substance with a bad reputation- at least, for a somewhat significant portion of the general population. As such, many within the industry compare their reputation to those who sell e-cigarettes or tobacco. The industry is highly restricted but poorly regulated, and paid advertisements that could normally make or break a business (such as those online via Facebook and Google) are impossible to attain in the current climate.
This is without mentioning the issues presented from a consumer’s point of view, such as:
- Murky legality from place to place (and even state-to-state in the US)
While everyone knows of CBD, few know what CBD is, and most are still learning about what the cannabis compound can truly do. With one-third of consumers comparing CBD to recreational cannabis (according to one 2019 survey by Morning Consult), businesses are still plagued by questions like ‘is CBD legal?’
This, in combination with scepticism about what CBD’s effects and real benefits are, and is compounded by numerous studies and investigations alleging that much of the CBD oil currently on the market suffers from inaccurate labelling (with some even containing illegal levels of THC).
With over 3,000 CBD companies vying for consumer loyalty and attention in the market today, it can be hard for the average consumer to know who to trust.
About CBD Franchises
Two of the largest CBD stores, Your CBD Store and CBD American Shaman, both launched in 2018 and have since spread to 550 and 319-plus units, respectively. More franchises are launching every year, and CBD is considered one of the fastest-growing wellness product categories on the market.
It’s not hard to see why: franchising can lead smaller, independent businesses to reach more exclusive markets and provide a tried-and-tested business plan. Being part of a larger, pre-established CBD company can, paradoxically, help you stand out in a market of thousands of independent businesses.
What is franchising?
A franchise typically consists of a larger company (the franchisor) willing to license their business trademarks and practices to a smaller business (the franchisee), effectively allowing the smaller business to take on the more recognisable identity of the franchisor and benefit from their pre-existing brand awareness.
The recognisable branding, a pre-existing reputation for customer care alongside other advantages of franchising can help your business get ahead of the competition by reducing the risks constantly faced by start-ups.
In the UK (and many other countries), banks are more likely to lend to franchised businesses, as you will inherit a stellar background in terms of sustainable growth and profit, as well as the potential to expand in the future.
The benefits of being part of a larger CBD franchise go beyond simply acquiring a loan: people are more likely to purchase from a company they recognise, eliminating common issues surrounding brand recognition and awareness, providing smaller businesses with a reliable customer base from the outset.
Can CBD franchises solve industry problems?
Over 3,000 companies are all attempting to do the same thing within CBD’s market potential: create brand loyalty, and set themselves apart from the crowd. Many will use loyalty programs, referral benefits, special offers and sales, email marketing, as well as education to broaden their customer base.
Some may see the extra challenges presented by the lack of any ability to advertise via traditional online channels as an obstacle. However, many have found success by bending the rules: by sharing a carefully branded passion for CBD and positive product reviews, brands don’t have to spend a penny.
CBD laws differ from place to place
Franchises can help your business navigate the tricky legal waters surrounding CBD. While the general rule of thumb for the US and EU is that your CBD products should contain less than 0.5% THC, more specific laws exist on a country-by-country (and even state-by-state) basis, controlling everything from the THC content of your products to the types of CBD you can legally sell.
With the sheer weight of the legal challenges provided by the laws around CBD, it’s easy for an independent business to sell their products illegally without even realising it, leading to serious financial consequences (or worse- total shutdowns). However, CBD franchises can help by shedding light on how to sell CBD legally wherever your business is physically operating, guiding you through the legal minefield with their expert industry knowledge and experience.
Curing misinformation, one drop of CBD at a time
As we previously mentioned, customers’ general lack of knowledge combined with the spreading of misinformation by poorly-regulated companies can lead to a reluctance to give CBD a second glance.
However, franchises provide a unique opportunity to build consumer confidence en-masse. By incorporating the image of trusted experts into your franchise branding strategy and building this over time (for instance, by publicising your products’ Certificate of Third-Party Lab Analysis), you can go one step beyond what many customers might find online from more independent brands.
Not only this, but often the unique training provided by franchises can ensure (and usually require) your employees are well-equipped to answer customer questions and guide them through every step of their journey – from educating consumers on the truth about CBD to helping them select the best CBD product for their individual needs. Creating a knowledge base within your business for customers to then build a relationship with is part-and-parcel of what can make a CBD franchise successful within the wider industry.
Your CBD Franchise Should Be Dual-Purpose
Franchises are not just there to help you sell CBD products. They’re places to educate customers and encourage loyalty to that store (and the franchise on a broader level). It’s simple- by educating your customers on what CBD can genuinely do for them, you are more likely to see repeat purchases, even if the customer decides to switch from buying CBD oil to trying out CBD bath bombs in the future.
Following this train of thought, franchisees don’t need a large number of customers to make money: they can financially thrive by converting uneducated customers into well-informed loyalists. As a by-product of this, a well-executed franchise can expect to enjoy excellent word of mouth, accompanied by a consistent stream of newcomers and retained customers over time as the industry grows and stigma against cannabis-derived products declines.
Best CBD Franchise Opportunities
Just as the CBD market is diverse, so are the opportunities to join a pre-existing franchise. Before making any long-term commitments or impulsive partnerships, it’s essential you consider all your options, and how well their goals align with yours as an independent business. Here are five of the most well-known and recognisable CBD franchises you may wish to consider:
Your CBD Store makes it their goal to create informed consumers who demand high-quality products and brand transparency, pushing the industry to new heights. They deal in both local and national partnerships throughout the United States, providing their franchisees with hemp products that are:
- 100% Natural
- Naturally high in cannabinoids and terpenes
- Independent lab-tested
- Certified organic
The CBD American Shaman franchise model is simple to set up, and affordable for most businesses. Many of their franchisees started as small businesses and have since gone on to become multi-store enterprises. Their goals include moving CBD out of stereotypical vape stores and into the wellness mainstream, so that buying a bottle of CBD oil will eventually be no different than investing in any other health supplement.
Their products stand out by being:
- Non-GMO (and free of heavy metals)
- 100% gluten-free
Purely Natural CBD has years of experience developing CBD products designed for nationwide retail shelves. Their in-store concepts help small business owners and entrepreneurs highlight their store’s individual potential while growing from exposure to Purely Natural CBD’s business experience. Their mission is to provide the best products and educational information. Their franchise system includes:
- Access to brands and products manufactured and sourced in the United States
- In-store retail processing backup
- Education, training, and access to clinical research from a team of industry experts
- Support when it comes to marketing and community building, as well as handling inventory and orders.
Milagro CBD Oil’s goals include researching and creating innovative CBD products to change the lives of people around the world. As such, they are established in 12 countries, and allow for national and international shipments. With European-grown hemp free from heavy metals, toxins, and grown by ecological farmers, Milagro has quickly become a force to be reckoned with. In addition, their program is fairly unique, in that:
- It doesn’t matter where you live- as their franchise is global, so are their franchisees.
- Business and marketing coaching is built into their program, meaning you don’t need years of previous experience before opening your store if you’re new to the CBD game.
- They have multiple levels of franchisee with different price points, the cheapest being ‘Home Seller’ (€2,000 investment required) and more expensive options such as ‘Wholesaler’ (€10-20,000) or ‘Store Front’ (€50,000).
While not technically a franchise, Alphagreen is a UK-based online marketplace for CBD and other wellness products. Widely considered the leading global marketplace for CBD, associating your store’s brand with Alphagreen can be a great way to see many of the benefits that come with franchising without losing any of your individual brand. Consider:
- Unlike most franchises, signing up as a brand on Alphagreen does not entail any fixed costs- instead, the model is commission-based. Put simply: if you don’t make a profit, neither do they.
- Alphagreen’s interest is in more than your product- their knowledge of the industry and the importance of SEO is unparalleled. As such, they offer packages that can help you build your website independently, including help with advertising and e-commerce optimisation.
- Alphagreen is a fast-growing company, meaning that as they grow, your brand awareness will grow with them, simply from being listed on their marketplace.
What to Consider Before Franchising Your CBD Business
Okay, so if the CBD industry is really growing rapidly, surely opening your own franchise is a no-brainer, right? Well, as with any business venture, there are several questions you should ask yourself first:
- Are you committed and able to work long hours (including weekends and holidays), following strict business plans?
- Are you willing to surrender a portion of your business’s reputation to the larger franchise?
- Are you comfortable paying the franchisor a portion of your profits for the pleasure of being a part of their larger plan?
- How will you finance your CBD franchise- personal cash, or a loan? If you are trying to secure a loan, you must ensure you have the assets to back it up.
- Who will be on your team, and how will this change over time? While sticking with the same small team of your original business may seem tempting, you may also wish to enlist specific help, such as a franchise consultant, for their expert knowledge of the industry and help with vital parts of the process (such as site selection).
There are plenty of benefits to becoming part of a larger business, or franchising your own. Often, increased training of staff members means a better quality of care for your customers, while most prominent CBD brands will have an internal process for the vital minutiae of everything from marketing to the day-to-day running of the business. As part of a franchise, you can work for yourself, but not by yourself- you will still be the boss of your own CBD business, but with a set template to follow, which is often pre-proven by others within the franchise.
How to Start a CBD Franchise
- Conduct industry research into each franchise opportunity
By looking into the industry norms for what a CBD franchise should provide, you ensure you don’t fall into any traps with sub-par companies. Simply googling ‘cannabis franchise’ and clicking on the first website you see can land you on a fake franchisor website, or recommendations for partnerships with brands that simply aren’t franchising. A company that is legally qualified to offer franchise opportunities will always have a web page detailing their available franchise options. Likewise, they are obligated to provide you with a franchise disclosure agreement (FDD) before signing any contracts. This should describe any fees, investments, etc; that are required before you join their company.
Aside from making sure every opportunity you consider is legit, think about the broader implication for your business: do your long-term goals, moral values, and independent business insights align with those of the company you’re considering as a franchisor? Likewise, what benefits do they offer, and how do these compare to your other options?
If there are local CBD franchises near you, visit them. You may be able to gather information from the employees, managers, or store owners about what they love and dislike about their franchise. Remember that a franchise business model is not for everyone- it is best to make sure the level of structure and guidance franchising provides suits your working style.
Other things to consider about any potential franchisor (before you sign their franchise agreement) include:
- Their experience and demonstrable industry knowledge
- Start-up costs and how long it will take you to turn a profit
- The level of control and support they provide (especially legally)
- Whether you can reasonably meet their brand requirements
- Familiarise yourself with the constantly changing legal landscape of cannabis
In the CBD industry, the primary concern of most businesses is the ever-changing legal landscape surrounding cannabis, alongside customer education and ensuring your products come with the reassurance of third-party lab testing and a COA. By making yourself as familiar as possible with the rules, you can enter into any agreements with the franchisor with an educated, realistic outlook.
- Ensure you can fund your investment
Many small business owners won’t be able to fund a CBD franchise out of pocket. Likewise, depending on where you live, it can be hard (though not impossible) to find investors or attain loans for what many might consider a restricted substance. In the US, the cannabis industry is also more heavily taxed at a federal level, which is another risk to consider if you aren’t a natural at cost control. Consider:
- The initial and overall investment required
- Competition in your area
- Location costs
- Equipment costs
- Continuous costs
- Whether you will have to split profits with your chosen franchisor (and how this will affect your finances)
- Be aware of the possible risks and rewards
Cannabis (and CBD by extension) is a nascent industry, only legalised relatively recently, with ever-growing popularity across diverse demographics. This means that there is an opportunity for many brands and franchises to build their name and make a big splash in the industry. However, it also means that the industry’s future is yet to be foreseen. As a result, any investment in cannabis-derived wellness products may be seen as a ‘ground-floor’ opportunity, meaning you may stay on the floor if you’re not careful- or (if you make the right decisions) you can soar to the penthouse suite.
- Write a formal business plan
A formal business plan lets potential investors know you’re serious and can help you draft business pitches and raise funds for start-up and maintenance costs alike.
- Take care of the basics
Once the funds are procured and the franchise agreement signed, the real business begins. This includes:
- Deciding on a location
While the franchisor often provides location guidance, signage, custom fixtures, and other basics, the responsibility falls on you to hire contractors to build and prepare your space for the grand opening.
Likewise, if you are already an established CBD business, you may focus more on training than on hiring. While hiring is your responsibility as the franchisee, training falls to the franchisor.
Once the basics are all covered, you’re ready to open your franchise!
Verified by a health professional
Anastasiia Myronenko is a Medical Physicist actively practicing in one of the leading cancer centers in Kyiv, Ukraine. She received her master’s degree in Medical Physics at Karazin Kharkiv National University and completed Biological Physics internship at GSI Helmholtz Centre for Heavy Ion Research, Germany. Anastasiia Myronenko specializes in radiation therapy and is a fellow of Ukrainian Association of Medical Physicists.