New Hampshire Officials Consider State-Led ‘Franchise Model’ For Marijuana Legalization That Would Allow Privately Owned Stores

September 19, 2023 · marijuanamoment.net

During the second meeting of a New Hampshire commission tasked with preparing legislation to legalize marijuana through a novel system of state-run stores, members on Monday considered an alternative proposal that would instead establish a franchise model for cannabis sales.

“The model that we are looking to put into place, that we feel would be feasible, is that the Liquor Commission would be the franchisor and the franchisee would be the retailer,” Joseph Mollica, chairman of the New Hampshire Liquor Commission, told the panel.

The scheme would allow the state to handle administration and marketing of adult-use marijuana while leaving responsibility for retail operations to private owners, Mollica explained. He likened the model to what’s in place at nationwide chains like McDonalds and Dunkin Donuts.

“There’d be a certain look and feel,” he said. “We would oversee and organize that look and feel as well as all the safety aspects of selling the product.”

Retail operators would need to submit 15 percent of gross monthly sales to the state under the proposal.

Mollica said the agency had already informed Gov. Chris Sununu (R) of the plan and “that we’re going to testify on it today,” although he noted that “the New Hampshire Liquor Commission does not take a position on this, and we’re here as a resource for the committee.”

Mollica was testifying before the so-called “Commission to Study with the Purpose of Proposing Legislation, State-Controlled Sale of Cannabis and Cannabis Products,” which has until December 1 to evaluate potential approaches to cannabis regulation and draft an adult-use legalization bill to be considered by lawmakers next year.

The 17-member body includes five lawmakers from the House, five from the Senate, a governor’s designee and professionals representing banking, health, law enforcement and civil rights interests. The governor signed a bill to create the commission last month, after bipartisan and bicameral lawmakers reached an agreement to enact the incremental reform in a June conference committee.

In addition to studying the feasibility of a state-run cannabis model generally, the group is also tasked with looking at the possibility of drafting legislation that:

  1.  Allows the state to control distribution and access
  2. Keeps marijuana away from kids and out of schools
  3. Controls the marketing and messaging of the sale of marijuana
  4. Prohibits “marijuana miles” or the over-saturation of marijuana retail establishments
  5. Empowers municipalities to choose to limit or prohibit marijuana retail establishments
  6. Reduces instances of multi-drug use
  7. Does not impose an additional tax so as to remain competitive

During the panel’s first meeting earlier this month, members received a side-by-side paper comparing two state-run legalization bills that have moved through the legislature, which could theoretically be used as legislative models to build on as the commission carries out its work. Sen. Daryl Abbas (R), who has sponsored state-run legalization legislation in the past, was named chairman, and pro-legalization Sen. Becky Whitley (D) was appointed as clerk. At Monday’s second meeting, however, Whitley ceded the clerk role to Sen. Timothy Lang (R).

The body’s next meeting is scheduled for October 5, at which officials from the state Department of Health and Human Services as well as the attorney general’s office are expected to speak on the franchise proposal and how it might impact the state’s existing medical marijuana program as well as state liability under federal prohibition.

Observers and advocates in New Hampshire described Monday’s unveiling of the franchise model as a major shift from the existing plan of selling marijuana exclusively through state-run stores, which Sununu has publicly said would be the only model he could support.

“It’s a significant development that state-run stores are no longer front and center,” Matt Simon, the director of public and government relations at medical marijuana provider GraniteLeaf Cannabis, told Marijuana Moment. “The franchise model that was presented today is different than anything we’ve heard previously, and it is something we look forward to discussing further.”

(Disclosure: Simon supports Marijuana Moment’s work through a monthly Patreon pledge.)

Under the newly introduced plan, marijuana growers and processors would be private entities, licensed by the state. They would be able to self-distribute to retailers, although all products would first need to be screened for contaminants and potency by a third-party testing laboratory.

The state, meanwhile, would be responsible for enforcement, marketing and other administrative duties.

Members of the commission spent nearly two hours talking through the possible regulatory scheme with Mollica on Monday, asking questions about how the system would work. One common question was how the franchise system would comport with federal law, where marijuana remains illegal.

Mollica seemed to think the franchise system would further insulate New Hampshire from liability if the federal government decides to enforce prohibition. He said the state attorney general would not, for example, need to defend private retail employees through the franchise model if they were indicted on federal charges.

While no state has attempted to legalize cannabis through a state-run system, many believe such an approach would open officials to significant legal liability or put state laws themselves at risk of being found preempted by federal law in a court. Karen O’Keefe, director of state policies at the Marijuana Policy Project, emphasized to Marijuana Moment that “selling cannabis is a federal crime,” and that a state-run industry would mean a New Hampshire agency openly committing “dozens of federal felonies each day,” referencing an op-ed she wrote in May for the Concord Monitor.

O’Keefe said she hadn’t yet reviewed the franchise proposal, but explained that “legally, the primary question is if the state and its workers are the ones committing federal crimes (selling and/or distributing cannabis) or if the state is just removing its penalties.”

“The word ‘franchise’ suggests the stores would be at the supervision and direction of the state,” she added, “not that they’re a private business simply regulated by the state. There could be significant vulnerability there, and the details of how this model operates would be key to how vulnerable it is.”

Asked by one commission member, Bedford Police Chief John Bryfonski, what the costs of administering the program might be, Mollica replied that the question was premature. The answer, he suggested, would depend on what legislation the commission ultimately arrives at by its December deadline.

“When the legislation comes into play, then we can put the costs into play,” Mollica said. “Our purpose is to be here today to explain a model that’s very unique—and would be unique to the state of New Hampshire— and that, as business people, we feel would be profitable and safe for the state.”

Though Sununu has expressed hesitancy about marijuana legalization, in May he came out in favor of reform through a government-operated model. While he concluded that legalization is “inevitable,” he said a state-run system would be the best way to address his concerns about health and safety.

The legislation that formed the commission initially only required members to study the idea for state-run stores, but lawmakers amended the bill before final passage to include a mandate for the body to take its findings and draft an actual state-run legalization measure that legislators can consider when they reconvene in January.

House Commerce and Consumer Affairs Committee Chairman John Hunt (R), a member of the commission, worked extensively on marijuana reform issues this year, including attempting to reach a compromise on legislation to enact legalization this year through a multi-tiered system that would include state-controlled shops, dual licensing for existing medical cannabis dispensaries and businesses privately licensed to individuals by state agencies.

Hunt’s panel reached an impasse on the complex legislation, which was being considered following Sununu’s surprise announcement that he backs state-run legalization and after the Senate defeated a more conventional, House-passed legalization bill from the chamber’s bipartisan leadership.

Meanwhile, the underlying legislation that the governor signed into law with the legalization study commission provisions would also remove an existing requirement that pain patients try opioid-based treatments first before receiving a medical cannabis recommendation for their condition.

It also includes provisions to clarify that the state’s hemp law is not intended to authorize the sale of hemp-derived intoxicating products, such as delta-8 THC.

In May, the House separately defeated a different marijuana legalization amendment that was being proposed as part of a Medicaid expansion bill.

Also, the Senate moved to table another piece of legislation that month that would have allowed patients and designated caregivers to cultivate up to three mature plants, three immature plants and 12 seedlings for personal therapeutic use.

After the Senate rejected reform bills in 2022, the House included legalization language as an amendment to separate criminal justice-related legislation—but that was also struck down in the opposite chamber. (Full Story)

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