Company: Elev8 | Location: Eugene, Oregon, with operations in MA | Sector: Retailer
When Seun Adedeji had to close Elev8, his first marijuana store in Eugene, Oregon, after about a year in business, he didn’t quit. Instead, he took the lessons learned from that first experience and started again. Those lessons included:
- Don’t do everything yourself.
- Pick underserved locations for your stores.
- Owning real estate is better than leasing.
In May, two years after Adedeji closed the first Elev8 storefront, he reopened the business in a more central location in Eugene. In October, Adedeji opened his first Massachusetts store in the town of Athol. He plans to open two more stores in Massachusetts in 2021, has submitted applications in Illinois and is considering a Michigan location.
“Don’t take shortcuts, because it comes back to bite you,” said Adedeji, who immigrated to Chicago from Lagos, Nigeria, when he was 3. “Opening my first shop, I had to bootstrap everything. I was just 23 when my first shop opened.”
Don’t be a ‘COE’
One of the shortcuts Adedeji took was not hiring enough help, a mistake he attributed partly to being undercapitalized and partly to underestimating the demands of the business. Adedeji managed the store, made purchasing decisions, oversaw inventory, hired employees, did the accounting and all the other backend work required of a retail store owner.
“I was the COE: chief of everything,” Adedeji said.
So when Elev8’s landlord told Adedeji he couldn’t renew his lease, the young entrepreneur didn’t have a team in place to look for a new location in time to stay open. Instead, he decided to close Elev8’s doors—but only temporarily.
Adedeji was able to eventually transfer his license and open the new Elev8 store in downtown Eugene. This time, he hired a payroll company, a chief financial officer and other personnel to handle needs such as human resources and accounting.
“Find your strength and find people to complement your weaknesses. You don’t need to know it all,” Adedeji said. “Once I was able to find the right people with the right expertise, it made everything better.”
Go where the competition isn’t
Adedeji’s first go-round with owning a retail store in Oregon’s oversaturated market taught him the importance of opening stores in locations with few competitors and inexpensive real estate.
While Adedeji worked on reopening his Eugene store, he also set his sights on Massachusetts, where towns in many rural parts of the state had capped the number of cannabis retail licenses at one or two. He studied the state for locations and eventually settled on Athol, a town in north-central Massachusetts about 10 miles from the New Hampshire border, which had allotted two licenses. Winning one of the two licenses in town and being one of a few retailers in the area “makes our license even more valuable,” he said.
Adedeji also has licenses and retail space secured in Orange and Williamstown, Massachusetts, each about 10 miles from the New Hampshire and New York state borders, respectively.
Not only are those retail locations in low-competition areas, they are in rural areas of the state where property prices are far less expensive than in the Boston metro area. He also expects to be able to attract customers from nearby New York and New Hampshire.
“We strategically picked those smaller towns in the border areas of those states,” Adedeji said.
Owning instead of leasing real estate has advantages
Adedeji’s previous experience of being forced to move by a landlord also taught him it’s better to own your building than to lease it. So when he wanted to break into Massachusetts, he took the profits from his first Eugene store and in 2018 bought property for the Athol store.
Owning his own real estate also made it easier to secure a loan to finance the Athol store’s launch. Adedeji was able to offer his property as collateral to secure a $1 million debt financing from Tilt Holdings, a Cambridge, Massachusetts-based cannabis company whose services include financing. The loan was issued at 8% annual interest and has a 10-year term.
“It gave me an asset when I needed more money,” Adedeji said of the property.
It also meant he wouldn’t have to pay rent on the space while waiting for his application to wind its way through the approval process, a scenario that can sometimes take years. Indeed, many aspiring marijuana entrepreneurs who submitted applications in Massachusetts went out of business before they could open their doors because monthly rental payments drained their capital reserves.
“If I didn’t own my property, I would have been screwed paying a landlord constantly. That’s what really affects people,” Adedeji said. “Your real estate can determine a lot about your success or your failure.”