Planet 13 Holdings has a key advantage over its rivals

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Planet 13 Holdings (OTC: PLNH.F) is a cannabis dispensary company that plans to expand its presence significantly in the coming years, and has already established itself as a major brand in the Las Vegas market. In this fool live Video clip, recorded on December 9, Fool.com contributors Matt Frankel, Jason Hall and Marc Rapport explain why Planet 13 has a big advantage as it grows.

Matt Frankel: father-foal [a listener] says on Planet 13, “Do you think it’s a real advantage to have the hypermarket?” I would also like to have your point of view on this subject. You two. “I would consider it a handicap to have such a large location with high overhead and reinvestment requirements. When you can sell a ton of jar in small stores instead” – his word is not mine – “but they are widely distributed.” We say cannabis on this show.

But I would say I think the hypermarket could be a handicap except for two things. Firstly, it is a tourist attraction depending on where it is located. It’s in Las Vegas, it’s very close to the Strip. People are not going to get in a cab and go to a little neighborhood store to buy marijuana in Las Vegas. They’ll just buy from whoever sells it on the street. It is a tourist attraction, one; Second, it gives them a bit of space to actually manufacture their product. In fact, they manufacture their products in the establishment. In this way, it also serves as a warehouse / production facility in addition to a dispensary.

Jason Hall: It’s not an industry where you can necessarily centralize your growth and distribution. If you grow in California, you don’t want to ship to Florida across states where it’s illegal, do you?

Matt Frankel: To the right.

Jason Hall: There are federal restrictions. These operations must be decentralized.

Marc Report: Yeah, that’s a real problem, don’t be flippant. I have a son-in-law who’s a police officer, in a state where it’s not legal, and he’s in a big college town. He only had to confiscate small amounts. He does not send them to jail, but he had to explain that it is not legal here, there is a misunderstanding. I think that, and the familiarity with a large setup like this, would add a lot to that familiarity factor.

Jason Hall: Yeah.

Marc Report: One thing about this planet 13, I don’t think they would be as affected as my big favorite, Innovative industrial properties (NYSE: IIPR), if and when it’s legalized at the federal level because they already do retail and their business model doesn’t seem to focus on providing buildings and capital to producers and distributors. They do it themselves. Am I right, Matt?

Matt Frankel: It is as if their model was to have a hypermarket and then a network of small stores around them. But in every state where it is legalized.

Jason Hall: Very true.

Matt Frankel: Jason just mentioned, you can’t even transport it through a state where it’s illegal. It gives them a production facility and then they can have a neighborhood store network, but those hypermarkets add value to the business, I think.

Jason Hall: I promise you there are millions of people, millions of Americans who would never go to their local dispensary. But they’ll absolutely see a planet 13 and it’s also big, and the lights are bright, and it’s well lit inside and it’s well exposed, and they look at their spouse and say, “Let’s go check it out.” I’m telling you that it normalizes things, and it makes them a lot more comfortable. I think there is a lot of value in what they do.

Marc Report: Yeah, is their business model moving forward in Florida? Do you know, Matt?

Matt Frankel: Well they have the unlimited license in Florida. But they really want to look at those neighborhood markets. I mean, they want a hypermarket. Like I said, in any city that could support a professional sports team and in Florida there are quite a few. You have Miami, Orlando, Tampa, you have Jacksonville. They would theoretically set up hypermarkets in these regions. Then, smaller stores scattered across the state in markets that aren’t as big for people who know the brand from their super centers, but want a local place to go. Like Jason said, people wouldn’t just go to the XYZ clinic. But they will do it at Planet 13 because it makes it an experience. Once the brand is created, it’s a name they’ll recognize.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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