Left you hanging in Part One of Franchising Marijuana ... because I hear that when ingesting cannabis it is best to take small bites! A few legal bites here ...
I left off observing that "The legal issues surrounding the marijuana industry are hyper-complex and challenging for all concerned ... even for franchise attorneys." And, when we overlay legal and business issues particular to franchising on any marijuana-related business, the complexity-calculus grows.
First, in this post, the general areas of concern confronting pot-trepreneurs (making no distinction between medical and recreational cannabis) and potential franchise systems:
- Marijuana is illegal under Federal Law - 21 USC Secs. 801-971 (Controlled Substances Act)
- It is illegal in most states and still a criminal offense (not decriminalized)
- Even in states where it is legal concerns abound about prosecution under federal law
- Due to federal illegality, a host of business issues arise:
- Banking restrictions - banks fear depositing the money and authorizing credit-card merchant accounts
- Cash only business - what to do with all that cash?
- Inability to obtain insurance
- Taxation penalties or limitations - no deductions for business expenses
- No ability to secure a federally-registered trademark
- Application of Food, Drug and Cosmetics Act
- Possible asset-forfeiture lawsuits against landlords
- Ethical concerns for attorneys counseling clients involved in "illegal" activities and potential loss of attorney-client privilege
Part Three will take a few more bites.
But if you want to read more now, I recommend an article written by my franchise-lawyer colleague, Elliot Ginsburg, Medical Marijuana Franchising: A Half-baked or Fully Baked Plan?, that appeared in the American Bar Association's Forum on Franchising's The Franchise Lawyer (Summer 2012).
Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. Jim is a co-author of “Starting a Franchise System: Practical Considerations, Planning and Development” and author of How to Buy a Franchise.
Visit www.fddlawyer.com or www.ohiofranchiselawyer.com for more information or contact Jim directly at 614.975.9876 or firstname.lastname@example.org