What’s in business for the new year?
by Vanessa Denha Garmo
Every year there are trends in various industries with experts projecting outcomes or what to look out for in the coming year. Just like a particular industry, regions or communities have their own market shifts or approaches. The Chaldean community is no different.
“We have seen a lot of focus on the food, hospitality, wireless and Marihuana sectors,” said Martin Manna, president of the Chaldean American Chamber of Commerce. “Many are looking at franchising and we continue to see many developments, which has always been a significant part of the Chaldean community’s portfolio of business.”
Each business sector has people heavily vested and constantly researching what is next. “We have held events focused on the Marihuana discussion,” said Manna. “It is still very fluid with many unknowns but it is here and we will likely see recreational use approved in 2018. There is not only a lot of interest but tremendous investment already happening in this industry and we expect more of both this year.”
The Marihuana Business
While 2017 was the beginning of the licensing of medical marihuana facilities, 2018 is the start of the next phase. “The medical marihuana industry will be in the initial implementation phase of the Medical Marihuana Facilities licensing act,” said Lin Goetz, Dunaskiss Consulting and Development. “The initial emergency rules will be implemented for phase one while the legislature, licensing board, and local municipalities work towards the more finalized rules and clarification of existing facilities licensing act.”
Dunaskiss Consulting & Development focuses on finding government solutions for clients and will continue to work with the Medical Marihuana Facilities Licensing Board, Licensing & Regulatory Affairs, United States Congressional Representatives, State of Michigan legislators, business representatives, local governments, caregivers and patients to find real solutions in this area that will work for patients and communities.
Although also spelled Marijuana, the Medical Marihuana Licensing Facilities Act uses the spelling Marihuana.
There might also be an evolution of other related industries such as the education on the various medical marihuana products and which medical needs are served by particular products may be needed. “The State of Michigan will certainly have an interest in that training being accurate and updated,” she said. “In addition, the November ballot may include a voter initiative to legalize marihuana for recreational use. The voters would then decide if they are interested in expanding the medical Marihuana industry into a recreational option. If so, the State of Michigan would move towards making sure that product is safe for recreational use as they have done with alcohol providers.”
Those people interested in investing have been waiting for lawmakers to act. “The legislators and the board will move towards refining terminology, the intent behind legislation and rules, and will further refine the emergency rules into a more formalized, more finalized version,” said Goetz. “Laws on related ventures such as educational classes, further research, and product developments, will continue to evolve.”
The Licensing & Regulatory Affairs Division for the State of Michigan began its application process for State level licenses last month. The application only starts a very intensive investigation into a potential medical marihuana facility’s applicants. Confirmations from various municipalities will be requested, and that proposed sites comply with local ordinances. There will be extensive financial, as well as criminal background checks. Additional documentation from several of applicants will be required.
“All of those materials will be reviewed, and eventually a hearing with the Medical Marihuana Facilities Licensing Board for the applicant(s), facility, and business plan will be held,” said Goetz. “Given the interim actions which will need to take place, the first licenses will not likely be issued before mid to late spring. Once the facilities open, communities will adapt and grow in acceptance of the medical marihuana industry trying to provide a safer product to patients.”
She continued to explain that cameras and security for these businesses will help to secure neighboring properties as well as their own. Property values around these businesses will continue to rise. Neighboring communities who were previously anxious will begin to re-evaluate, and accept the industry. More and more communities will choose to opt into the industry as it provides safer medication to patients and contributes to the economic growth and safety of the areas in which they are located.
It will take a couple of years for the medical marihuana facilities industry to find the right balance of ensuring a safe supply to meet medical needs. The caregiver model of providing medical marihuana to patients may largely fall by the sidelines as patients have direct access to tested product, and caregivers gain financial security in facility settings.
Goetz also addressed the reality of those interested actually getting a license and staying in the business. In addition to the high capitalization requirements which the Licensing & Regulatory Affairs division for the State of Michigan is requiring (25% of which must be liquid), the Medical Marihuana Facilities Licensing Board will be completing an extensive financial background check including insolvencies, taxes, bankruptcies, litigations, among others. They will be investigating the sources for the capital to ensure the businesses are financed by legal means.
“There will also be an extensive criminal history check that looks at arrests, bond forfeitures, record expungements, delayed sentencings, charges, incarcerations, convictions, etc. The investigation will go farther in this area than mere released (formerly incarcerated) felons who have been successful in communities for more than past 10 years, felonies involving controlled substances in the past 10 years, and controlled substance misdemeanors in the past five years. Section 402(3) of the Medical Marihuana Facilities Licensing Act indicated the Board may consider the following,” she said. “Integrity, moral character and reputation; personal and business probity; financial ability and experience; and responsibility or means to operate or maintain a marihuana facility.”
On the board is Don Bailey, former Michigan State Police who is expected to look at other crimes and behaviors when evaluating a proposed medical marihuana facility license applicant. “In general conversation, the message has been fairly clear that the board wants to keep this industry safe, run with best practices, and legitimate,” she noted. “Applicants who enter and remain in the industry with need to be financially sound with a seriously thorough business plan, and the right focus on a quality, safe product for the patient. The board intends to thoroughly review applicants to ensure only legitimate applicants are able to enter or remain in the industry.”
In terms of medical Marihuana, patients should continue to work with doctors who are educated in the medical marihuana industry. With strong restrictions on advertising of medical Marihuana, patients may need to turn to resources such as Weedmaps – a web based service that gives provisioning center location information – to find the nearest provisioning center. Caregivers and other employees will also be able to find employment with medical marihuana facilities through web based vendors. Property values will continue to rise as buildings are improved and enhanced for the industry. Patients will be able to gain access to safe, tested medical marihuana chosen for their medical needs. “We want our State to ensure Michigan has the most respected and safest medical marihuana industry in the country.”
The Food Factor
Although trends seem to be popping up daily in the restaurant industry, Andrew Dickow, director of Greenwich Capital Group has his eye on three big ones.
• Preparation and Ingredient Transparency – Consumers have been demanding to know exactly what is in their food from large consumer packaged goods companies when they are making their buying decisions at the grocery store. Today, that same scrutiny has moved into the world of restaurants. Customers want to know how their food was prepared, where the food was sourced from, if it is Non-GMO and raised cruelty free, etc.
• Food Delivery – Convenience for consumers will always drive innovation and that is no different in the restaurant industry. This year will be the year that food delivery evolves into the main stream with more adoption by restaurants of delivery tools such as Uber Eats, GrubHub and Facebook restaurant delivery. The challenge for restauranteurs will be in how they manage the exorbitant cost of some of these tools.
• Smaller Footprint with a Personal Touch – Consumers are looking for an experience when they visit a restaurant. Many of the larger food chains such as Applebee’s, T.G.I. Fridays and others have been struggling in recent years as consumers are searching for more of a connection with the establishments they visit. Gastro pubs with seasonal menus, craft cocktails, and smaller venues will be the continued themes in 2018.
Like each year, 2018 brings with it its own challenges. “We are bracing for all of the aforementioned and increased competition from our competitors,” said Dickow who owns restaurants with his brother Randy Dickow. “Additionally, we need to continue to stay relevant by innovating and staying abreast of what is going on in the market. We need to stay at the forefront of different food trends such as biodynamic sourcing and new superfoods such as Matcha, Kombucha, Acai’, Kimchi and many more.”
This new year just might the year where many things that were believed to be trends will become norms. Consumers continue to evolve, and their expectations continue to increase. “In order to remain relevant restaurants will need to cater to higher expectations from consumers whether it be on sourcing, presentation, technology or anything else,” said Dickow. “In 2018 we will see which restaurants have embraced and prepared for change and those who have ignore it. In the restaurant industry, ignorance is never bliss.”
The food industry continues to evolve and becoming a place where startups have a chance not only to find a niche, but to compete. “Fifteen years ago, if a startup food company wanted to grow past a $1 Million in sales, it was an almost impossible task,” said Dickow. “They could not compete with the marketing dollars and grocery store slotting fees large companies were willing to pay. This doesn’t even include the pressure and challenges of getting into a regional or national distributor. Today and moving forward, the landscape has drastically changed primarily for one reason, social media.”
He made note of brands such as Kodiak Cakes, Dave’s Sweet Tooth, RXBAR, these are all small brands you can find in your local Kroger or Meijer. The relevance is because these brands and thousands of others across the country are going up against the titans of the industry and they are finding success.
On social media, new brands can generate identifiable content and distribute information ultimately branding themselves and their products to mass audiences that were once only reserved for traditional media. With social media, the cost is a fraction of the cost of traditional marketing channels, such as radio, print and TV.
“These one-to-one marketing connections develop brand loyalty in a way that large consumer packaged goods companies like Nestle and General Mills are just beginning to figure out. They need to think small,” said Dickow. “They need to foster the relationship they have with their consumers, and that doesn’t just mean responding to their tweets. As the baby boomers move out and the millennials take over, there has been and will continue to be an openness to new brands and products that connect with everyone.”
Social media has been a significant driving force new brands wanting to get their messages out to the consumer. “People are getting smarter due to the abundance of information that is now at their fingertips with a click of a button,” said Dickow. “This has led to a significant change in consumer behavior, not just in trying to find healthier products, but also in wanting to know what is in the food they are eating.”
What worked a couple of decades ago is not as affective for large companies with shareholders due to social media platforms small companies are able to capitalize on. “They could bully out all the startups and new brands and pay to get their 7th flavor of frosted square pastries prime placement on the shelves, all while increasing prices, decreasing the package size and reducing the quality of the product,” Dickow said. “Eventually this caught up with these huge companies in the worst way. If you keep taking a little bit of real chocolate out of a brownie and replace it with a cheaper substitute people won’t notice initially. But if you keep doing it over time, they will. The small up and coming brands really began finding success shortly after 2006, because they could take advantage of the lack of quality products in the marketplace with their own branded products with clean ingredient labels and supported it with mission driven marketing plans that they were able to directly market to consumers with little to no advertising expenses.”
“The food industry continues to evolve, with the consumer being the ultimate victor. There are more, smaller branded packaged food companies on grocery shelves than any time in history,” said Dickow. “Their products sit side-by-side with some of the biggest brand names in the world.”
Most importantly the continuing threat these brands pose on the larger players has forced large companies to rethink their business models and go back to basics. “Large food companies are cleaning up their brands and their product offering to be able to compete with the new brands on a variety of fronts,” said Dickow. “Whether it is all natural, gluten free, Non-GMO or just an ingredient label where you can identify everything, small brands have forced large brands to evolve. Most importantly, it has given consumers a real choice, a healthier choice.”
Diving into Development
Those wanting to invest thousands, millions, or billions of dollars in real estate this year are, no doubt, looking for the next best opportunity. “First and foremost, as it relates to specific market growth, I expect a substantial uptick in real estate development in the City of Detroit,” Zaid D. Elia, founder & CEO, The Elia Group. “This has clearly been sparked by the most recent multi-billion-dollar investments of the Gilbert and Ilitch family. Their investments have sparked consumer confidence in market values and will drive developer investments in the City.”
While looking at trends, corporate growth continues to rise in the market place, both residential development and occupancy are expecting to hit all-time highs. Elia is specifically referencing the Downtown core, Midtown, Corktown, Jefferson Avenue area and areas surrounding the university and stadiums. “The insatiable appetite for various entertainment and experience driven businesses such as restaurants will ultimately line retail store fronts and drive retail rental rates,” he said. “This continued growth will drive real estate values and be a haven for investors seeking positive returns.”
As it relates to specific real estate market sectors, it is predicted that both the apartment and industrial sectors will continue to grow. “The apartment sector will be driven to new heights as both investor appetite for this type of product seems to grow year over year due to the stability of the income stream and ultimately the final tax bills being currently negotiated by Congress that will push consumers to rent apartments instead of owning a home,” he said. “The industrial sector has seen and will continue to see growth as both manufacturing, technology and warehousing facilities continue to expand.”
What could slow down in 2018 is the retail shopping center development. “Rents and shopping center values are at all-time high in this market; more B Sites are being developing and this will oversaturate the market as we experienced in 2008-2009,” said Elia. “Both land values and construction costs are extremely high, which is forcing developers to ask higher rental rates which will ultimately be borne by the retailers.”
What could threaten small retail shopping centers are quick-service restaurants that often lease space in small-retail centers. “They are facing increased competition, food, and labor costs,” noted Elia. “We will see various brands closing up shop as they will not be able to sustain the increased competition and operational costs and slow retail growth in this sector.”
However, predicted is an overall continued growth, “but I suspect growth will dip towards the end of 2018 as interest rates continue to rise,” he said. “The development community will certainly be following trends: interest rate fluctuation; construction costs; land costs; and lender activity in the marketplace. These factors will dictate growth in the marketplace.”
Regardless of the industry business owners are looking to invest in, it would behoove all to prepare for market downturns. “While market values continue to grow to all-time highs, real estate investors should pay down debt at a faster pace and deleverage total real estate assets,” said Elia. “This will allow for breathing room in the event the market takes a turn in the opposite direction as it most always does, especially considering higher borrowing costs.”