Rising High: Exclusive talk with Dazed Cannabis

In this edition of “Rising High,” The Fly conducted an exclusive interview with Rich Rainone, co-founder of Dazed Cannabis, a Black and Veteran-owned premium lifestyle cannabis brand. Here are some highlights:

RETAIL SALES: Dazed Cannabis is a brand all about creating a premium, nostalgic cannabis experience and building an authentic community. The company first opened a dispensary in Holyoke, Massachusetts in August 2021, followed by one of the first legal flagship locations in the heart of Union Square, New York in 2023 and the first ever dispensary in Monson, Massachusetts in 2024. “We organically grew the brand through embedding ourselves in the community,” Rainone said. “We listened to our staff and our budtenders as we quite often hire locally, and we evolved the brand from there. It was a lot of trial and error but in the end, it’s a grassroots brand.”

Any brand that is successful always starts with people in the neighborhood and grows from there, he said. “We take constructive criticism very well and we take every opinion into consideration from employees to customers. We’re always innovating and looking for exciting concepts in the space and ways we can develop and elevate while making them our own,” the co-founder said. “The biggest thing is listening to feedback.”

As competition continues to accelerate within the cannabis industry, Dazed looks to take more of a tunnel vision approach, he said. “We’re not necessarily worried about what other people are doing,” Rainone said. “Everybody is so worried about all the unlicensed shops and that has never really been a concern of ours. We came into this market as the fifth store in New York City, knowing that there are technically 2,000 unlicensed shops before us. That’s something we knew was going to happen. For us, it’s just focusing on always staying cutting-edge, always continuing to learn and continuing to visit other shops in other states.”

He added Dazed will visit different markets to pick up new concepts and ideas to get creative.  “It’s getting out there and seeing a little something different and then making your own spin on it,” the co-founder said.  “That is how we stay cutting-edge.”

The company also looks to set itself apart through serving safe and premium cannabis products in a setting that is bridging the gap between cannabis, entertainment, art, and music, he said. “We try to have more fun in our store,” Rainone said. “Our budtenders and our staff are much more friendly, we have music playing and at a couple of our stores we have disco balls hanging. You walk in, look around and see everybody is happy and this is the way cannabis was meant to be. That is what sets us apart from the other stores, good customer service and a friendly atmosphere.”

MARKETS: The company currently operates locations in Massachusetts and New York and originally began in Massachusetts as it was the first state to go recreational on the East Coast, the co-founder said. “One of our partners is from New York, so when the New York market opened, he applied for a license there and that was our second store,” he said. “Then we went back to Massachusetts for our third. Now we’re trying to fill in the middle, we are trying to go to Connecticut next, as well as adding another store in New York and another store in Massachusetts.”

Rainone said Dazed aims to ensure the company has good operational control of each location without losing the integrity of each store. “We would never open up a fourth store before we have a good grasp on our third,” he said. “We are to the point now where we feel as though we have the three stores secured and our procedures are really down pat, so now we are looking for the fourth.”

When asked about the challenges the New York market has faced, the co-founder noted many people have had their frustrations. “New York has gotten itself into a little bit of trouble, because they are trying to please everybody,” he said. “I don’t think it comes from a bad place, they are just trying to make everybody happy and it’s gotten them in muddy waters. They help out one group and when they are helping out one group, they are hurting another group. This has been a little bit of a snowball effect.”

Looking at the illicit competition in the market, Rainone emphasized Dazed went into the market well aware of the black market. “We are waiting on the state to do what they’re supposed to do, but for us it is what it is,” he said. “If something happens and they shut them down, great. If not, great. We’re okay with it either way.”

SCHEDULING: The Associated Press recently reported the Drug Enforcement Administration will move to reclassify marijuana as a less dangerous drug. The DEA’s proposal would recognize the medical uses of cannabis and acknowledge it has less potential for abuse than some of the nation’s most dangerous drugs. When asked about the potential impact of rescheduling, the co-founder said there is the good and then the unknown. “The biggest way we are hoping it is going to impact the industry in a positive way is 280E is going to go away,” he said. “Essentially 280E does not allow cannabis companies to get taxed the same way as a regular company. With 280E, we essentially get taxed the same way as Al Capone or Pablo Escobar. The IRS says we don’t care how you make your money, but if you’re making it where it is federally illegal, then you don’t get any deductions.”

Due to 280E, cannabis companies are unable to get any write-offs, other than cost of goods sold, Rainone said. “280E going away gives us an opportunity to write off things that a typical company would write off like rent, payroll, marketing and all these tremendously high expenses,” he said. “From that aspect, it is terrific.”

There is a little bit of a gray area if cannabis is rescheduled, the co-founder said, as the DEA manual states a pharmacist is needed to dispense any drugs under Schedule III.  “I think they have to do a little bit of restructuring or amendments to that,” he said. “Rescheduling also gives Big Pharma the right to research cannabis as a medicine and potentially create it as well. A lot of the conspiracy theorists don’t really want Big Pharma in our space, and this is the first step to allowing them. From that aspect, nobody is too thrilled.”

However, Rainone stressed that the 280E removal will be significant. “Everyone thinks there is so much money in cannabis, but when you can’t write anything off, there’s not a lot of money left at the end,” he said. “280E is a big win and Big Pharma is a big loss for us. But in the end, anytime you go from a Schedule I to a Schedule III, it’s a step in the right direction. We’re just hoping that ultimately it should be more than rescheduled, it should be decriminalized.”

SAFER BANKING: In September, a U.S. Senate committee voted to advance The Secure and Fair Enforcement Regulation Banking Act bill, which seeks to ensure that all businesses, including cannabis businesses, have access to deposit accounts, insurance and other financial services. “The SAFER Banking Act is extremely needed,” the co-founder said. “Again because we are federally illegal, we are not allowed to have partnerships with anyone who is federally insured. All of these banks that businesses typically bank with, we are not allowed to bank with those kinds of banks. And in addition to that, we’re also not allowed to use the same vendors and software that traditional companies like pharmacies or supermarkets use. We must use privately-owned vendors.”

He noted the company’s debit terminals were recently mysteriously turned off for about a 24-hour period. “We literally lost half of Wednesday and half of Thursday, where anyone who came in, it was cash only,” Rainone said. “Well because it was cash only, we ran out of money in our ATMs. Anyone who came in, unless they had cash on them, was not staying in our store. On Wednesday and Thursday, we lost about 25% of sales because our debit terminals were turned off.”

He said terminals were turned off for many players in the industry because a business was flagged by Visa (V) or Mastercard (MA) for allowing that processor to partner with cannabis stores. “If SAFER Banking passed, that would never be an issue,” the co-founder said. “That would be huge in addition to all the bonuses like being able to bank. We are happy with our banking situation now, but a lot of other cannabis companies are paying high fees, don’t get access to any kind of capital and can’t apply for a mortgage in a lot of situations. There are a lot of hurdles there, so the SAFER Banking Act needs to pass.”

PRODUCT CATEGORIES: According to research firms within the space, flower still holds the biggest share of sales of any cannabis product category, followed by vape. “Flower is technically two categories, because it is flower where you get it from a jar and it is also pre-rolls,” Rainone said. “If you combine those two it’s a huge category, but I think that flower is always going to be here to stay. The culture of cannabis, the hobby of cannabis is flower, it’s not vapes.”

People vape or use edibles because it is easy, discrete and quick, he said, but flower is at the center of cannabis enthusiasm. “It’s opening up that jar, smelling it, seeing it, looking at the various crystals on it and all the fun stuff,” the co-founder said. “Flower will always be here to stay and will always lead the charge as far as the category.”

When asked about other product categories that could rise in prominence, Rainone pointed to the beverage segment. “Drinks have come and gone,” he said. “They were really popular when we got into the industry and then they faded out amid bad news articles and people saying they wouldn’t last. Now they totally have done a 180 and come back. A lot of that has to do with people getting used to it, but with the uprising in cannabis lounges and parties, where you can’t smoke but you can consume via drinking, it’s just become more and more popular. The drink industry is really set to explode again in the next two years.”

CHALLENGES: When asked about the largest hurdles facing the cannabis space, the co-founder noted that federal legalization creates fear for smaller business owners. “If it goes federally legal, what happens to us?,” he said. “If it’s federally legal, you can cross state lines with it. Now the big grower out in California or big tobacco in North Carolina is going to have a 900,000 acre farm and they are going to put the guy who spent his life savings and raised all the money from his friends and family to have a 20,000 square foot grow out of business.”

Dazed is not pushing for federal legalization but rather decriminalization, Rainone said, adding he thinks most of the industry is as well. “You don’t want cannabis on Amazon and you don’t want it sold everywhere,” he said. “Everybody that built the industry has spent a lot of time, energy and effort doing what they have done. If it becomes federally legal without real rules to protect the people who built this space, it could wipe us out in a one to two year period. All you have to do is add a category on Amazon and half the businesses would go under almost immediately.”

OPPORTUNITIES: As the cannabis sector develops, the co-founder said Dazed continues to be excited about the retail landscape. “Every other category of retail seems to be closing down,” he said. “You read reports of pharmacies and retailers closing stores and malls are closing. The only ones going into these locations are cannabis stores. We have literally revitalized a lot of these cities including in New York and Massachusetts.”

Rainone noted on his New York City block alone, there are six commercial spaces and Dazed occupies one of only two occupied spaces. “Our industry has revitalized a lot of these cities,” he said. “For us, we are in the retail game and part of us questions should we be in the retail game with everyone going under. But you realize that cannabis is a hobby and people like to walk into the cannabis store. You see them smiling and talking about it and for us, a hobby will always last. Cannabis is a hobby first and I think that having a retail store overall is exciting.”

CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Acreage (ACRHF), Atai Life Sciences (ATAI), Aurora Cannabis (ACB), Ayr Wellness (AYRWF), Avant Brands (AVTBF), BZAM (BZAMF), Cannabist Company (CBSTF), Cannara Biotech (LOVFF), Canopy Growth (CGC), Chicago Atlantic (REFI), Clearmind (CMND), Clever Leaves (CLVR), Compass Pathways (CMPS), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), Curaleaf (CURLF), CURE Pharmaceutical (CURR), CV Sciences (CVSI), Cybin (CYBN), Delta 9 (DLTNF), Entourage Health (ETRGF), Enveric (ENVB), Fire & Flower (FFLWF), Flora Growth (FLGC), Trees Corporation (CANN), Goodness Growth (GDNSF), Greenlane (GNLN), Green Thumb (GTBIF), GrowGeneration (GRWG), Hemp (HEMP), Heritage Cannabis (HERTF), High Tide (HITI), IM Cannabis (IMCC), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), InterCure (INCR), Lotus Ventures (LTTSF), Lowell Farms (LOWLF), Lucy Scientific Discovery (LSDI), MediPharm (MEDIF), MedMen (MMNFF), MindMed (MNMD), NewLake Capital (NLCP), Numinus (NUMIF), Organigram (OGI), Optimi Health (OPTHF), Planet 13 (PLNHF), Red White & Bloom (RWBYF), Relmada Therapeutics (RLMD), Reunion Neuroscience (REUN), Revitalist (RVLWF), RIV Capital (CNPOF), RYAH Group (RYAHF), Safe Harbor Financial (SHFS), SNDL (SNDL), Sproutly (SRUTF), Skye Biosciences (SKYE), Stem Holdings (STMH), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Tryp Therapeutics (TRYPF), Verano (VRNOF), Village Farms (VFF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).