Wednesday, February 4, 2015

Franchising Marijuana - Part Two

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
While the federal government is "laying-off" prosecutions in most states that have legalized the wicked weed and state bar associations are revising ethical rules to give attorneys some representational-leeway, uncertainty remains. More can be said here ... but this is a blog ... and we are taking small bites.

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 or for more information or contact Jim directly at 614.975.9876 or


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