Exclusive Interview with Quality Roots Founder and CEO Aric Klar
Quality Roots is a Michigan cannabis operator run by three brothers and their father. CEO Aric Klar spoke with New Cannabis Ventures about opening during the pandemic, expanding in the Michigan market and building a branded experience. The audio of the entire conversation is available at the end of this written summary.
It Runs in the Family
Klar’s parents owned one of the largest, independent pharmacy operations in Michigan while he was growing up. He learned about patient management, team management and supply chain while helping to grow the business in a regulated industry. In 2014, he helped his parents exit the pharmacy portfolio through a deal with Walgreens.
In addition to his work with that family business, Klar started an independent toy store (Toyology Toys) that has retail locations in Michigan and a distribution platform that serves thousands of other stores across the country. The company focuses on trends-based products, which translates well to the rapidly changing cannabis industry.
At Quality Roots, Klar is joined on the leadership team by his brothers Jonathan and Michael and his father Mark. The Schostak family, which has years of operational experience, is an operational partner in Quality Roots. Klar also highlighted Quality Roots team member Nicole Essa, who has strong experience in restaurant management and supply chain.
Quality Roots takes a family approach to its entire team. The company prides itself on giving its team members the tools they need to be successful. Having a trusted team is essential to success, according to Klar.
Quality Roots’ first operational dispensary is located in Battle Creek, Michigan. The company has a number of other licenses in the state, but it is waiting for those cities to make the transition to adult-use, according to Klar. He expects the company will be able to take those licenses online sometime this year.
In addition to the company’s current licenses, Quality Roots is invested in participating in the state’s competitive RFP process.
Other Markets of Interest
While Quality Roots is currently focused on building operational success in Michigan, it is assessing other markets with the hope to eventually become an MSO. Klar is interested in watching the Ohio market, which could expand the company’s footprint close to home. And, he sees potential opportunity in the California market. Growth into other markets will be a matter of the right opportunities at the right time.
Vendor Relationships and Branded Experience
Klar’s past experience in understand supply chain and shelf space has helped Quality Roots build strong vendor relationships to offer its consumers a wide variety of products. The company offers its vendors a variety of tools, such as content and merchandising, to strengthen those relationships.
Quality Roots has strong partnerships with brands like Sozo Health, Pleasantree and Redbud Roots. Recently, it has also begun working with Cresco Labs, as the MSO works to expand in the Michigan market. It also sells products from Apothecare, the only certified organic cultivation facility in the state, according to Klar.
The company is focused on building a branded experience for consumers, and a big part of that is education. Klar is confident in his team’s ability to provide a strong educational platform and experience that keeps consumers coming back.
Opening and Delivering During the Pandemic
Quality Roots was initially set to open on March 12 in Battle Creek, but the pandemic necessitated a delay. The company’s team took that extra time to perfect its processes and prepare for curbside service. Now, Quality Roots is doing three times the business that it had anticipated. As the company continues to operate through the pandemic, it is looking to perfect its approach to ensure smooth openings for its second and third stores, when possible.
In addition to launching curbside service, Quality Roots is taking a unique approach to delivery. The team considered the other operators, both medical and recreational, in the Battle Creek area and found that most didn’t have delivery platforms that extended more than a 20 to 30-mile radius. So, Quality Roots spent the time to build out a delivery platform that reaches between 150 and 165 miles. While a risk, this move has paid off for the company, according to Klar.
Funding and Growth Plans
Quality Roots currently has a small cap table, with the Klar and Schostak families funding the company up to this point. But, considering the company’s pipeline and performance, it is considering a capital raise. Ideal investors would be interested in an active partnership, according to Klar.
Although just a single-state operator, Quality Roots is already seeing a number of different M&A opportunities, whether from companies looking to expand brand presence or gain a license position in the Michigan market. While keeping an eye on opportunities, Quality Roots is working to perfect its portfolio, according to Klar.
2020 Success and Outlook
In its first month of recreational sales, Quality Roots did approximately $350,000 in top-line revenue. In its second month, the company is approaching $525,000 in top-line revenue, and Klar expects to see the growth trend continue.
The company is examining different ways to continue driving revenue. For example, the dispensary is selling products to complement the cannabis experience. In addition to items like rolling papers and grinders, Quality Roots is starting to offer items like speakers. Klar is leveraging his experience in understanding trends to serve as a driver for Quality Roots’ bottom line and to build a scalable approach that can be taken to more locations.
More stores are going to continue coming online in the Michigan market, which Klar anticipates could result in a dip in business. But, he is confident that Quality Roots is creating the cannabis retail experience that will draw consumers back again and again.
To learn more, visit the Quality Roots website. Listen to the entire interview: