Pepperoni to pot: A Sonoma County pizza franchisee opening a cannabis dispensary
Having built a portfolio of Mountain Mike’s Pizza franchises in the North Bay, Sonoma County-based Chandi Hospitality Group is branching out to cannabis.
To do so, Sonu Chandi, president and CEO of the family-run enterprise, says the group will align with a company to operate a retail outlet with an established brand instead of starting completely from scratch.
It is not a franchise agreement, as with, say, a pizza company. That’s because California’s complex regulations governing the sale of recreational cannabis does not allow franchises. What is allowed is for businesses to operate as a “licensed retail network.”
It is under that arrangement that the Chandi group opened a cannabis dispensary in Ukiah in Mendocino County over Labor Day weekend, partnering with San Francisco-based Cookies, which, under this state-approved model, will expand further into Northern California.
“While each partner is expected to maintain Cookies’ brand standards and reflect positively on the brand, the partner is the license owner, licensed operator and is responsible for the control and management of the store,” said Kim Barron, director of marketing for Cookies.
Diversifying holdings
Chandi Hospitality Group started its foray into the North Bay food and beverage market in 2007 with a Mountain Mike’s Pizza restaurant in Rohnert Park. It now operates franchises in Sonoma, Napa, Marin, Mendocino and Humboldt counties.
At one time, it also operated Bollywood, Bibi’s Burgers, Stout Brothers, Mercato, and Beer Baron — all downtown Santa Rosa restaurants. The first three closed between 2018 and 2020.
“We do real estate and franchise developments. We have been doing this with Mountain Mike’s Pizza and attempted that with the downtown restaurants, but it was not the ideal time so we had challenges,” Chandi said.
“Through COVID, we continued to consolidate and to look at new opportunities that would be good; that would allow us to grow into the future.”
Even though pizzerias have some of the highest profit margins in the restaurant industry, sales of cannabis reach into the billions.
According to the California Department of Tax and Fee Administration, the state had more than $5.2 billion in taxable marijuana sales in 2021. This was a 17% increase from 2020. California legalized medicinal marijuana in 1996 and recreational use in 2016.
“We have been reviewing for the last several years how to diversify our business. We want to seek good opportunities to develop a stronger foundation for our business,” Chandi said.
He foresees the marijuana business growing dramatically especially if and when the Congress decides to relax current federal rules which declare cannabis to be an illegal substance.
“Because it isn’t legal at the federal level that is keeping some of the small players from getting involved,” Chandi said. “Small businesses like us can’t open multiple shops.”
The Ukiah location brings the number of Cookies retail locations to 52 in five countries, including a new location in Napa.
“Having a store in Mendocino County, which is in the Emerald Triangle, is a no-brainer for us. (It) is such a special place for the legacy of cannabis,” Barron said.
The Emerald Triangle, which got its name long before marijuana was legal, is the largest cannabis-growing area in the country. It includes Mendocino, Humboldt and Trinity counties.
Chandi Hospitality Group bought the 2.25-acre parcel in Ukiah in 2018, opening a Mountain Mike’s there that same year. The Cookies storefront is next door, operating out of a 2,500-square-foot space.
Fifteen employees will run the seven-day-a-week dispensary. Chandi said he plans to highlight local and small farmers in the region, with an emphasis on larger flower producers.
Among the differences between running pizza shops and dispensaries is the amount of security involved in selling pot. This has to do with the product being sold, age requirements for sales, and the amount of cash often involved.
Still, one thing Chandi insisted on is that debit cards could be used.
“We wanted from day one to make sure we could legally take cards,” he said. “We set this business up as professionally as possible so our team in there feels like they have all the tools they need.”
