Cannabis retailers turn to design to transform spaces – and perceptions

The basics:

• New Jersey cannabis dispensaries are repurposing diverse spaces such as restaurants, banks and even funeral homes and are putting a greater focus on retail design.
• The shift from clinical-looking environments to more comfortable spaces aims to make customers feel at ease.
• Challenges remain for the industry, including municipal approval delays, real estate issues and financial strains for prospective business owners.

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As more independently owned and operated cannabis dispensaries open, retail design is evolving. From incorporating natural materials like rich woods and stone and bright colors in lieu of neutrals to creating establishments in alternative spaces, designers are working to improve perceptions of the plant.

In New Jersey, where the stock of real estate is limited when it comes to legalized cannabis ventures, dispensary owners are reimagining everything from former fast-food joints to shuttered nursery schools to one-time banks as storefronts for selling medicinal and adult-use products.

When the first dispensaries opened in New Jersey, most were run by multistate operators who transplanted their layouts from existing stores in legalized markets, like Colorado and California.

As a result, the cannabis retail scene in the Garden State became reminiscent of Apple stores, with open-floor plans, spacious displays and natural light.

Now, New Jersey is home to 80-plus dispensaries spanning 18 counties, many of them locally owned shops where it’s all about creating a relaxing, home-like atmosphere meant to make customers feel more comfortable.

Research has shown that consumers who feel at ease are more open to new products and experiences, make additional purchases and simply spend more time in a store, which can be a huge plus for a movement that’s trying to upend stereotypes and greater longevity in an emerging industry.

These decidedly non-clinical looking storefronts are also becoming more than just places to buy cannabis.

For example, Union Chill in Lambertville sells arts, crafts and other goods from local vendors alongside a curated selection of cannabis products, while Pure Blossom in Pennington offers sustainable beauty lifestyle and holistic wellbeing items as well as a custom lifestyle goods line.

Operators also want their spaces to reflect the culture, identity and values of the industry and community.

That’s very much the case at Molly Ann Farms in Haledon, where the family-run dispensary’s tagline is “open for happy.”

Gabriella Wilday, who co-founded and co-owns the business with her brother, Gian Lombardi, said, “We truly believe that when our employees walk through the door, this should be their happy place. And when our consumers leave the dispensary that they should feel happy and we hope that because they’re happy everyone they interact with will kind of feel that, it’ll resonate with them and it’ll spread.”

Before Molly Ann Farms opened in September 2023, “happy” wasn’t a word tossed around often at the Belmont Avenue space, which previously served as the De Luccia-Lozito Funeral Home for the last 30 years.

“You wouldn’t believe how many people have come in here and said, ‘Oh my gosh, the last time I was here was for my grandfather’s viewing,’” she said. “And I always say, ‘We have happy spirits here. They’re all looking over us.’”

Named after the brook that runs alongside the property, Molly Ann Farms aims to provide customers with a convenient location to shop for cannabis, offering ample on-site parking, an exterior pick-up window for pre-orders and a 2,200-square-foot sales floor – one of the largest of any dispensary in New Jersey – carrying a wide range of high-quality products at fair prices.

Additionally, Molly Ann Farms provides a high level of customer engagement to ensure that everyone from cannabis novices to more experienced users will find their perfect product.

Despite having entrepreneurial backgrounds, neither Wilday nor Lombardi have been in retail before, so setting up a brick-and-mortar location was a new experience.

Wilday said, “We wanted it to feel like a very comfortable place where people felt safe to come in and just kind of feel nurtured. I think that we’re bigger than just cannabis. This notion of common ground, bringing people together and walking out of here saying, ‘Wow, I had something in common with someone I never would’ve thought would have a similar interest that I do.’ That’s really powerful on so many levels.’”

“But I think when people hear that you’re opening a dispensary, they kind of imagine a seedy smoke shop – kind of like a hole-in-the-wall place that’s all dark and everybody is consuming onsite,” she said. “Unfortunately, I think that’s the stigma.

“That’s why we wanted to do something that was really classy and somewhere where people felt comfortable no matter what walk of life they came from and just providing a really comforting environment.”

In keeping with the dispensary’s name, the siblings went for a rustic décor, with different textures and natural woods, Wilday said.

Inspired by dispensaries they visited in Colorado and California while gaining more insight about running a cannabis business, Wilday said, “We decided to use a lot of found objects instead of the kind of sleek furnishings you typically see in any retail store.”

“Around the perimeter of the sales floor, we have a lot of curios to display our products – which were either found on the curb the night before garbage day or on Facebook marketplace,” she said. “It’s the same with all the tables. And the shelves were from our father’s basement. It was a great way to repurpose things and give them a function other than collecting dust.”

Wilday noted there are still parts of the building that are vacant but “potentially could be used at some point in the future should we decide to vertically integrate.”

“It’s a pretty big space and we tried to be as economical as possible in terms of which walls we kept and which walls we moved. And I think that in the end, it really worked out nicely,” she said. “It’s been a labor of love putting it all together and I love that we’ve repurposed things and brought them back to life. And I just think it’s really kind of the eclectic vibe. It really works and I love being here. It doesn’t feel like work.”

What really sets Molly Ann Farms apart from the pack is that it doesn’t have self-service kiosks for in-store ordering. “Instead, we have what we consider to be really educated and qualified true budtenders – not cashiers. We’re talking to the customers that walk in, getting to know them and understanding why they’re here,” she said.

“We feel like so many people are intimidated when they walk into a dispensary because they’re forced to choose on a kiosk what they want to buy. And for those that aren’t really that familiar or looking for something to manage pain or to increase their appetite or to sleep, whatever it may be, they don’t have the information that they need to be able to select the right product,” Wilday explained.

Ensuring that their staff was ready to man the counters was “a huge investment” that “took a tremendous amount of training” on culture, regulations and products.

Besides encouraging customers to feel more at ease, the model also aims to disrupt, Wilday said.

“Really thinking about the attrition level and the industry, we asked, ‘What can we do to make sure the people that we’re hiring we are helping them grow and develop a career path, whatever that may be?’ As an employer, your responsibility to them is to help them grow and provide them with a career path and opportunities for them to earn not only a living wage, but advance in the industry,” she said.

“We want to train them to lead. They’re going to be so well trained that everyone’s going to want to hire them, but we want to treat them to stay,” Wilday added.

‘Retail 101’

When it comes to design, form should always follow function, according to Art Hance, president and CEO of Hance Construction Inc., a Franklin Township-based firm that provides turnkey construction management and general contracting services to the industrial, commercial and cannabis markets.

“Everybody is trying to create this amazing experience and spend a ton of money. These people are churning through the process with the designers, and going through all this, and then they get down to the point and can’t believe what creating that experience costs,” he said.

“Are there people that are going to be seeking an experience? Yeah, I guess there will be people looking for that experiential dispensary, but I think for the most part, it’s like a liquor store. People want to get in, get out and get home,” he said.

“You can adopt many, many different types of spaces to cannabis sales. I think that the primary thing for a licensee to consider is location. And at that point, I think that the building becomes somewhat secondary,” said Hance.

“I think that you’ve got to have a location that has a combination of attributes that makes it easy for people to buy your product. And it doesn’t matter what you’re selling. I mean, this is retail 101. You make it easy for people to get in, get served and get out, and you’ll be successful. I mean, assuming that you’ve got decent product and fair pricing, but people will pay more for convenience,” Hance said.

For instance, multistate operator Nova Farms opened its flagship New Jersey location in May 2023 at a former Arby’s on busy Mantua Pike in Woodbury and has since begun using the drive-thru window to fill cannabis orders.

After Phoenix Pre-School closed its facilities along Plainfield’s most heavily trafficked road, South Avenue, when its owners retired, Queen City Dispensary jumped at the location, opening in September 2023.

Hance – whose project portfolio includes transforming the shuttered Phillipsburg National Bank & Trust in Phillipsburg into The Apothecarium Dispensary – said, “I love bank buildings because they’re designed to serve the public in a secure manner and they’re designed for high traffic, fast turnaround in a secure environment, and that’s exactly what you need.”

Wilday, who lives in Bergen County, where the majority of municipalities do not allow cannabis-related businesses, spent several months searching for locations in Passaic County to set up shop.

As part of that process, Wilday said she spent time attending borough council meetings in different towns so she could “kind of understand the tone and how truly cannabis friendly they were.”

“It was pretty interesting. There’s some municipalities that opted in and then when they zoned for use, it’s on like, a protected EPA watershed. So, it was kind of they like opted in almost for the optics, not the logistics,” she said.

“After probably two to three months of council meetings in Haledon, it felt right. During that time, I was also exploring real estate in all of these different towns,” Wilday said.  “There was a ton of research that went into real estate and securing real estate. And what it came down to was cold calling and knocking on doors. That was how we found our location.”

Following Hurricane Ida in September 2022, Wilday and Lombardi caught the property’s owner cleaning up after the brook flooded and approached him.

“So, it was kind of like the right time, he was very open to selling and, remarkably, open to a purchase contract that was contingent upon state licensure,” she said. “He owns another funeral home in Lincoln Park and I think he was at a point in time where he felt like one was enough,” she said.

Given the limited options for real estate in New Jersey, Wilday said it makes it even more crucial to build a relationship with the community.

“I feel if the municipality has faith in your understanding of the regulations, your commitment to the regulations and your genuine meant interest in being part of a community,” she said. “And I don’t just mean residing here. I mean, being involved and really caring and looking at is not just your business, but all the other businesses and how they have a potential to grow and thrive with a cannabis dispensary in a downtown area.”

“My brother and I read the regulations probably a hundred times and we could rattle off section numbers and the rules in our sleep,” she said. “I think that because we could do that, the municipality and the council trusted that we would operate in a very clean, compliant way, but we would also do it with a lot of integrity.”

‘Needle in a haystack’

Despite nearly 70% of voters backing the legalization of marijuana in a 2020 referendum, about 400 of the 565 municipalities in New Jersey have opted out of allowing cannabis sales.

Joshua Bauchner, chair of Roseland-based Mandelbaum Barrett PC’s Cannabis & Psychedelics Practice Group, said, “Then, when you factor in where they’ve zoned for cannabis and whether it is on an appropriate commercial thoroughfare, if there are any schools, houses of worship or other adjacent properties that might impact that location and whether there’s even any space available…you really are looking for a needle in a haystack and it’s a tremendous, tremendous challenge.”

However, it may soon become somewhat less daunting for cannabusinesses to find a home, he said. “I think a lot of the towns are in a ‘wait-and-see’ mode before they want to opt in. I think as they see the tax revenue that their neighbors are generating from cannabis, they’ll do so,” Bauchner said.

After initially opting out of allowing cannabis sales, Wharton reversed course in June 2023 and lifted the restrictions, paving the way for Ascend Wellness Holdings Inc. to relocate its retail operations to a former CapitalOne bank on Route 15.

Currently located at 395 Bloomfield Ave. in Montclair, the Massachusetts-headquartered MSO told Wharton officials it wanted to leave Essex County because the area was “oversaturated” and believed the new Morris County location would help hit an underserved market.

Along with community engagement, local job creation and other outreach efforts, Ascend representatives said Wharton would stand to see about $460,000 in revenue through the excise tax based on the average New Jersey dispensary run rate of $23 million annually.

Bauchner remarked, “There’s a lot to be said for the tax revenue and I think that’s going to invite a lot more townships to participate. But look, it’s a messy process – you’re dealing with the social equity component, a lot of politics and a brand-new regulatory scheme. Even though Democrats control the [Legislature] and the governor’s mansion, there’s still a lot of dissonance among them politically.”

Getting burned

Holdups in the municipal approval process and issues with real estate remain the biggest reason why conditional license holders request application extensions, according to the New Jersey Cannabis Regulatory Commission. After that, funding is cited as the main cause for delays, the CRC said.

For Hance, cannabis clients represent less and less of his business these days.

“I have a much higher ratio of cannabis clients that don’t pay, so we’ve really pulled way back from cannabis because of the poor financial climate,” he said. “Now, we ask for proof of funding, which is a commitment from a lender or an irrevocable letter of credit, because I’m not going to start building your project and hiring my subcontractors if I don’t know that you’re going to pay me. We also require that cannabis projects pay upfront.”

“The other thing that we’re seeing is that the construction community, as far as the trades, the subcontractors, electricians, plumbers and HVAC people in New Jersey, are now putting a premium on any cannabis work because they know that they’re probably not going to end up doing it because there’s not a good chance that the project will go ahead. They also know that there’s a good chance that they won’t be paid in full,” Hance said.

“The market is taking a beating. It’s a tough time out here for cannabis,” he said. “But, I mean, we’re going to have an excellent 2024 doing industrial and commercial work.”

Despite all the buzz about the nascent industry in New Jersey, Hance said he thinks the pace at which cultivation facilities and dispensaries are opening is on the slower side.

“Most people that I’ve run into are doing a cannabis pro forma using overly optimistic numbers from 2019 and 2020,” he said. “Then, the state dragged their feet in getting licenses out. So now, you have these people with licenses who are facing the reality of what it costs to build in a climate where interest rates have skyrocketed, particularly for cannabis.”

“And the venture capital market that drove cannabis investment is staying away because it’s gotten burned so much,” he said. “Last year, nine of the top 10 cannabis companies in the United States lost money. That’s a hard sell for somebody. That data point really impedes your ability to sell somebody on giving you money for a cannabis facility.”

A costly dream

Forecast to hit $2.4 billion in annual sales within the next three years, the Garden State’s legal marketplace may appear to have limitless potential, making it ripe for get-rich-quick thinking. However, the very nature of being involved with a product that is still illegal at the federal level and subject to an ever-shifting regulatory landscape can make it very difficult for aspiring cannaprenuers to pursue their dream.

Bauchner said he’s lost clients after having a frank discussion with them about just how expensive of an undertaking it’ll be.

“They’ve gone on to other firms as a result. But, I have also had clients come back and say, ‘You told me this and I didn’t believe you, so I went to another firm, the cost just kept going up and I didn’t get that kind of advice, so now I’m behind the eight ball because I spent $250,000 running around in circles…and I still don’t have a license,’” he said.

“I never thought it would be easy, but I certainly was a little surprised at how much, much harder it has been for folks to prevail,” said Bauchner, who added it is “a little bit easier” now to bring on a new client as opposed to a few years ago.

“Obviously, there’s a lot more experience at play where I can say give a better explanation and understanding of what to expect with hurdles related to the CRC, financing, municipalities,” he added.

“I think it’ll be a lot easier for people in time. Plus, I think a lot of folks are already selling. I mean, I get emails every day with folks who want to sell their license. So, there’s a whole other approach now, a whole other pathway, that people can take. And often times, that license comes with the location and the rest, and it’s just a matter of people having run out of capital. So, there’ll be a lot of different opportunities in a more mature market that’ll come to bear,” Bauchner said.

Of the 1,767 approvals issued by the New Jersey Cannabis Regulatory Commission as of January, 233 of those are conditional-to-annual conversions and 141 were renewals of annual licenses.

Meanwhile, the board has granted more than 1,300 conditional licenses, which means the applicant still needs to secure real estate or local approval before converting to an annual.

Bauchner said, “I would guesstimate that probably 80% to 90% of them are never going to open shop because there’s just not sufficient locations to house them.

“I tell them that if they’re fortunate enough to get the license, the location and all the rest that they should anticipate their startup costs for a turnkey dispensary will possibly hit the seven-digit mark,” he said.

While there’s currently limited financing opportunities in the space, Bauchner said the industry is starting to see more options for insurance, business banking and landlords willing to offer tenant improvement allowances.

He also said private equity funding and banks lending directly to the real estate, rather than the cannabis business owner, are becoming more common in the space.

“With 38 states now being legal from medicinal or adult use, I think most of the stigma has gone away,” he said. “And it’s just a matter of ironing out some of those hurdles, as with any kind of new undertaking.”