Written by Katelin Edwards and  Elisa Cruz.

It’s not news to members of the cannabis industry that compliance is key. But between a global pandemic, the economic downturn associated with it, paying federal, state, and local taxes without federal tax deductions or tax credits, and conducting general business operations…where should cannabis retailers focus their cannabis compliance efforts to avoid the pitfalls of license infractions and ultimately maintain a successful retail establishment?

Here at Simplifya, a number of our team members have worked with licensed cannabis operators across the entire supply chain. We asked two of our team members who, prior to working at Simplifya, worked in a retail capacity for well-known, vertically-integrated, multi-state cannabis operators, about what they believe are key compliance tips all cannabis retailers should know when operating. Below are the Top 5 tips that, if followed and implemented, will surely help your retail business stay both compliant and efficient.

Retailer Compliance Tip 1: Invest in Robust Employee Training

Budtenders bear some of the heaviest compliance burdens and liability potential in the cannabis industry. In addition, budtenders are the most public-facing touchpoint of your brand and your business. Failing to properly train staff and set expectations may create legal, financial, and reputational issues for your business in the long run.

Consider the risk of “looping,” which is the act of dispensing additional product to a consumer who has already hit their daily legal cannabis purchase limit. Additionally, poorly trained budtenders may act unprofessionally and/or give incorrect information about cannabis products, which can result in poor customer experiences. Even worse, dispensing the wrong product can lead to consumers having adverse health reactions, which could potentially lead to a lawsuit and/or disciplinary action against your business.

Unfortunately, many retail facilities also regularly deal with a high employee turnover rate and frequent short staffing, making adequate training difficult. However, taking the time to properly implement a rigorous training system can pay off with a team of highly engaged, compliant, and professional budtenders. It may even lead to less staff turnover; the cost to keep a current team member is a fraction of the cost to hire, train, and onboard a new employee.

If you don’t have an employee training program in place, begin by creating a competency test for budtenders, management, and other staff. Do not allow anyone to perform reception, budtender, or managerial duties until they pass the test.

Second, and just as important –  hold your employees accountable! Require budtenders and managers to read and sign a statement that they understand the regulatory requirements as they relate to their job. Document each and every disciplinary action, including sit-downs and verbal warnings. Lastly, maintain all training, testing records, and disciplinary records in employee files to keep a paper trail of your business’s training and compliance practices.

Retailer Compliance Tip 2: Monitor all Public Health Factors

In the best of times, licensed cannabis businesses have to navigate a maze of local and state-level regulations, including health regulations in order to maintain a legal operation.  And, in case you haven’t heard, there’s a pandemic going around, which adds the X factor of ever-changing emergency health orders and bulletins to keep up with. In addition, regulators can and do perform unannounced inspections (by the way, we cover inspections in Compliance Tip 5, so stay tuned!). Now, more than ever, it is especially important to implement a proactive approach to compliance as it relates to both sanitation and public health.

First, review your sanitation policies to make sure they’re in compliance with local and state health regulations, and update any procedures as needed. It’s also important to confirm that employees follow all sanitation guidelines while they are on duty. Also, maintain a regular cleaning schedule for your facility. Consider hiring a third party cleaning service, if your business has not done so already. Always store all chemicals in an area separate from cannabis inventory and employee areas. Secondly, maintain a daily routine for inspecting refrigerators and freezers where edible cannabis products are stored. Regularly monitor temperatures and check for water leaks or mechanical issues. Also, test the calibration of your fridge/freezer thermometers regularly. Keep dedicated logs for routine cleaning and maintenance. Last but not least, immediately shut down operations if there is ever a sewage or hot water shut down. These are imminent health hazards and can result in disciplinary action for your company.

So, how can you be proactive on the COVID-19 compliance front? For starters, stay up-to-date with all COVID-19 related local and state-level emergency orders, supplemental orders, and bulletins. Modify your company SOPs as needed to accommodate all current COVID-19 requirements and recommendations. Regularly check the CDC website for businesses and workplaces. Most importantly, ensure all management staff are enforcing current rules and internal policies.

Retailer Compliance Tip 3: Prevent Crime through Environmental Design

Denver dispensaries have suffered a recent uptick in robberies between 2019 and 2020, leaving Mile-High City cannabis retailers on edge, and exposing the vulnerabilities of a primarily cash-only industry. Most criminals “case” a target before committing a crime, and tend to pay attention to camera locations, and how the staff manages facility access controls and inventory, amongst other things. This is why it’s so important to take measures to secure your facility. At a minimum, keep all facilities and security procedures up-to-date with local and state security requirements. Perform regular security audits to identify and fix any potential gaps, and stay current with local police department bulletins and crime patterns. Additionally, develop and encourage a culture of security and compliance by training your staff to protect sensitive information and to report any suspicious activity.

Bonus Tip – In addition, consider incorporating Crime Prevention through Environmental Design, or CPTED. To put it bluntly (pun totally intended), CPTED means designing your facility and security practices so your business and surrounding neighborhood are difficult targets for criminals. Reach out to your Security Team or local law enforcement to request a CPTED audit for your licensed facility. Ensure all changes to your Security or Operating Plan are made in accordance with your local and state regulations and rules.

Retailer Compliance Tip 4: Anticipate Secret Shoppers and Have Vigorous ID-Checking Policies in Place

Local and state licensing authorities, in collaboration with law enforcement, are known in most states with a legal cannabis market to perform sting operations, using “secret shoppers” or undercover police officers in hopes of catching cannabis retailers taking part in underage sales or looping. Even if you may have never encountered “secret shoppers” or undercover police officers at your retail establishment, it’s always better to be prepared, just in case.

How can you be prepared, you ask? Well, first and foremost, employ earnest and responsible people who you know will abide by your company’s internal policies and procedures as well as applicable state and local rules and regulations regarding compliant cannabis sales. Second, and as mentioned above, train your employees thoroughly on these internal policies and government regulations. Re-train them as necessary. Quiz them on the spot if you need to! In order to effectively train your employees, you must have solid and understandable policies in place and a thorough training regimen, as described in our first compliance tip.

Vigorous and creative ID-checking solutions your company should be prepared for include:

• Utilizing an ID scanner, ID checking software, and an analytics system tied to your ID verification and/or POS system
• Having the latest ID checking guide on-hand as well as a UV counterfeit detector light
• Employing security guards or former club bouncers who have a lot of experience in ID checking, as necessary 
• Instructing employees to:
  • Check customer or patient’s ID multiple times throughout the sale.
  • Ask individuals who are wearing sunglasses to remove them so they can be positively identified in person and on camera.
  • Look at the “triangle” (eyes, nose, ears) as these features tend to stay the same.
  • Rub their fingers over the ID to see if there are any inconsistencies in texture.

Retailer Compliance Tip 5: Be Prepared for Regulatory Inspections – at the Drop of a Hat!

In most states and localities, licensing authorities have the jurisdiction to show up to inspect a licensed facility, completely unannounced. Therefore, it should go without saying that your retail location should operate in a constant state of compliance. It can be tempting to let something slide just once with one of your employees, especially if it’s small (drinking beverages in the sales area, wearing a sweatshirt over their employee badge so that it is not visible), but don’t let yourself allow non-compliance to slide. It might start as something small, but if a culture of non-compliance develops, one day it could be something serious and result in a license violation. Furthermore, although minor slip-ups may not immediately result in serious consequences, your business’s reputation in the eyes of investigators and regulators is very important. Investigators may not fine you for minor slip-ups, but neither are they going to consider you a local leader among the other cannabis retailers in your area.

This leads to the next point, which is to maintain a strong relationship with regulators and investigators. Establish a point of contact between regulators and your business. Ensure that the primary point of contact is someone responsible, trustworthy, and has both the authority and ability to address any questions a regulator may have. As the owner or manager, always make yourself available to regulators, if needed. Maintain strong communications with them so that they don’t merely view your business as just another licensed cannabis retailer, but as the standard in the industry.

Retail Cannabis Compliance and the Customer Experience

It goes without saying that you want to keep your business compliant for the sake of avoiding a license infraction or violation, but compliance is more than that. It also enhances the customer experience by allowing for an organized and professional environment. Customers entering a compliant retail facility will feel more at ease knowing that all transactions they take part in and the products they purchase are legal and legitimate.

In an industry as new and rapidly evolving as cannabis, ensuring customers feel safe and secure is vital to continued growth and acceptance. Committing to compliant operations and procedures can go a long way in establishing trust and long-term customer relationships. For cannabis retailers, who are often the public face of the industry, acting in good faith, preventing license violations, and building strong and efficient systems for avoiding simple errors are foundational strategies that can easily help to accomplish these straightforward objectives.