Franwell Archives - Green Market Report

Anne-Marie FischerAnne-Marie FischerOctober 29, 2018
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3min15890

As everyone who owns a cannabis retail store knows, compliance is key to running a successful legal cannabis business, and tech companies have seriously stepped up to make compliance a seamless process.

Metrc, is a well-known seed-to-sale traceability platform that helps cannabis companies manage their inventory and the movement of cannabis products through the supply chain. Operating in Colorado, Oregon, Alaska, Maryland, Michigan, Ohio, Massachusetts, Montana, Nevada and Louisiana, and Washington, D.C., Metrc helps fulfill state reporting requirements and has become known as the “de facto track-and-trace system” for government entities that regulate the legal cannabis markets.

Metrc announced its first outside round of funding in the form of $50 million from Tiger Global Management and Casa Verde Ventures, the 3-year-old, cannabis-focused venture firm co-founded by notorious cannabis enthusiast and investor Snoop Dogg, but managed largely by Goldman Sachs and Nomura Securities alum Karan Wadhera.

The partnership between Tiger Global Management and Casa Verde Ventures, where each entity “shares deal flow quite regularly”, funded Point of Sale software company GreenBits, which is designed to integrate into seed-to-sale systems like Metrc.

Metrc was formerly part of Franwell, focusing on cold chain management and fresh foods, which helped gain the supply chain management knowledge and expertise needed to transition into seed-to-sale traceability for cannabis.

Metrc CEO Jeff Wells says that the over 100-employee company plans to “look to expand our regulatory focus,” with the $50 million investment, including potential expansion into “other regulated markets and products that need the type of tools that Metrc has created.”

“Compliance is the backbone of the cannabis industry. If a license holder isn’t compliant, their business will cease to exist,” said Karan Wadhera.

 


Debra BorchardtDebra BorchardtOctober 31, 2017
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16min14980

Washington State’s marijuana program is a hot mess and the state only has itself to blame. The state monitors its legalized marijuana program by tracking the marijuana from seed to sale. Every single plant is tagged from its point of conception to its final use and sale through a sophisticated software program. The program is used by every license holder and covers thousands of transactions daily.

One of the reasons for such an onerous tracking system is that marijuana is still federally illegal. States have been allowed to operate marijuana programs that have been legalized at a state level so long as they abide by guidelines listed in a document from the Department of Justice called the Cole Memorandum. The goal of the memo was to make sure legal marijuana did not make its way into the black market or in the hands of children.

The state is changing vendors and the transition has gone very badly forcing businesses to manually keep track of the marijuana plants until the new vendor can take over. The problem is that anti-marijuana forces could point to this debacle as vindication that legalized marijuana is a bad idea because it can’t be properly monitored.

 BioTrackTHC was contracted in 2013 to monitor the program with its seed-to-sale tracking, and by all accounts, it seemed to be working just fine. Then the state decided to open the program up to a public bid to see if there might be a better vendor for a better price. This isn’t such a bad idea because states should always try to see if they can save their taxpayers money and always seek to improve programs. However, the execution went horribly wrong.

In June the state selected Franwell’s METRC system to replace BioTrackTHC. However, when Franwell came to the table to begin the negotiations of planning the program takeover, talks quickly broke down. On June 9, Franwell walked away from the contract and never spoke publicly about it. One inside source said that basically, the state wanted more than they were willing to pay for from Franwell. Then the state tried to throw Franwell and the cannabis businesses under the bus by saying that Franwell wanted to charge too much money for RFID tags that the businesses didn’t want. Thereby deflecting attention away from its poorly managed transition.

Another theory from a blog PA Marijuana Medical Watch suggested that the state made demands on Franwell that weren’t in the original Request For Proposal (RFP) causing them to walk away. This blogger believes the state decided to pick MJ Freeway’s Leaf Data Systems, a seed-to-sale software company because it is getting advice from the advocacy groups National Cannabis Industry Association and Marijuana Policy Project, both investors in MJ Freeway.

Whatever the reason, Franwell walked away from a lucrative contract with the state of Washington in nine days. The state then chose MJ Freeway, which has had its own share of troubles this past year. The company has suffered hack attacks, alleged security breaches (which the company denies) and systems failures. It desperately needed a win this year. However, by winning the contract, it was also put in the position of trying to take over a multi-million dollar system with over 1,700 participants in a matter of months. No easy task for any software company. MJ Freeway issued a video response regarding the situation and trying to address market concerns.

MJ Freeway insisted that its software problems were resolved in a matter of hours and that customers were back online quickly. They also point out in the video that the task they are taking on is very complicated and takes more time than what the state had allotted.

It’s a huge program with thousands of transactions every day and hundreds of businesses involved,” said Jeff Gonring, Director of Market and Communications for BioTrack. “This is not a simple transfer of data.”

MJ Freeway was set to take over from BioTrackTHC on October 31 but now isn’t expected to take over until January 2018. The state’s Liquor and Cannabis Board has come up with a contingency plan for November 1. It’s message to the businesses, “You must keep a record of all required activity associated with your business. If you have a third-party, commercial software provider consider contacting them to review your coverage. Some software systems may capture traceability transactions for later reporting which may minimize your manual reporting requirements.” In other words, sharpen those pencils for your spreadsheets. Not only do these businesses have onerous rules and regulations they have to abide by, they now have to manually track this information and then two months later transfer it to a new program.

“The whole situation is still pretty dynamic between the Washington State Liquor and Cannabis Board, many of traceability platforms active in the state and other marijuana licensees, new information seems to be coming through on an almost hourly basis,” said Mindon Win Special Operations Coordinator at BotanicaSeattle. “The marijuana industry here in Washington is banding together to come up with solutions that keep us in compliance and able to continue doing business.”

So, what about BioTrackTHC in all of this mess? The company was set to terminate its contract on October 31, but in early October the state began talking to BioTrackTHC to extend the contract. “Events occurred that brought up a potential security concern,” said Jeff Gonring, Director of Market and Communications for BioTrack. “We need resolution on that security concern before entering into an extension.” Gonring is referring to an email that was sent to Washington licensees last month from someone claiming to have sensitive data that seems to be proven as accurate.

We are concerned about the breach. We are currently in a co-mingled state and we need assurances from the LCB that it has been remedied. We can’t expose our system to that,” said Gonring. “There is enough smoke to give us concern there is fire.” BioTrackTHC is so concerned the company issued a public letter to the Washington State LCB. At this stage, BioTrach THC hasn’t officially agreed to the extension, nor has it declined.

The security breach that Gonring believes happened is outlined in the public letter. He noted that BioTrack began a data dump in August to MJ Freeway in order to assist in the transfer of vendors. Then in September, the licensees received emails saying that a hacker had gotten sensitive data from the Washington dispensaries and wanted to sell it. The data seemed to be real and the emails weren’t seen as an idle threat. BioTrack seems to suggest that the timing is not a coincidence.

In the meantime, the state has sent out spreadsheets to business owners.  The opportunity for human error is enormous. There are almost 20,000 pounds of marijuana that are produced each month in the state that must be tracked and traced. There were 3.8 million pounds of extracts produced in August in the state that must be accounted for and the state logged $1.3 million in sales for the fiscal year 2017.

The business owners seem to be the one group left out of this equation. They are at the mercy of the state and its mismanagement of the tracking system. “I don’t want to speak for everyone but we hope people recognize that marijuana businesses are invested in compliance with the state and it’s in everyone’s best interest to demonstrate our ability to run a regulated and monitored cannabis market under these circumstances,” said Win. 

It gives anti-marijuana forces fuel for their fire to claim that legalized marijuana can’t be properly monitored. They will argue that over the next two months, marijuana can end up on the black market because it can’t be properly tracked and traced. They could be right.

Washington State’s debacle could hurt the legalization efforts if this proves to be true, especially ahead of the holiday season which is when sales rise. The entire situation could have been either avoided by remaining with a program that worked without any hiccups or at least giving a vendor enough tie to properly prepare for a transfer of services. In the end, the problem must be owned by the state for creating this self-inflicted wound.



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