Birmingham Cannabis retailer to open 8th Michigan store — and its first on the East Coast
Quality Roots Expands to New Jersey as it Shifts Focus to Management Services Organization.
As Birmingham-based marijuana operator Quality Roots prepares to open its eighth store in Michigan, the company is also expanding to New Jersey as part of a business shift to a management service organization.
Quality Roots’ Madison Heights dispensary will open at the end of the month, marking its third store in Oakland County. The retail outlet at the corner of John R Road and East 14 Mile Road is the result of an approximately $6 million investment, said Aric Klar, CEO of the family-run company.
The store is the culmination of a community benefits agreement with the city that will have Quality Roots spending $200,000 to replace the city’s "Welcome to Madison Heights" signage. Local municipalities are required under state law to allocate local cannabis licenses based on a competitive process, and many communities consider community benefits spending as part of the scoring process.
Quality Roots will eventually place a small processor and cultivator on the Madison Heights property as well, similar to its Battle Creek location, Klar said.
However, it’s the company’s expansion into New Jersey that holds potential to transform Quality Roots from a marijuana retailer to an operator for hire.
The company’s Marlton, N.J., store is set to open in May, but Quality Roots is not a license holder. Instead, it has signed agreements with three license holders in the Garden State to provide financing and operate the dispensaries. The second store is slated to open in October.
The marijuana industry across Canada and the U.S. is filled with MSOs, but they are typically large organizations, such as New York’s The Cannabist Co., Chicago-based PharmaCann and New York-based Curaleaf Holdings.
Quality Roots is much smaller than these organizations, with expected revenue of $100 million in 2024. Curaleaf reported $330.2 million in revenue in the third quarter of last year alone. However, Curaleaf remained unprofitable during the quarter, reporting a $92.3 million loss.
Quality Roots chose the MSO role in New Jersey because of the state’s rules, which limit a license holder to only one retail outlet.
“We are bringing an understanding of how to make these stores successful,” Klar said. “We think MSOs are the style of play we can be successful with. That’s how we see our growth.”
Klar said the company plans to expand the MSO side of the business to more states, including Michigan.
To fund this expansion, Quality Roots recently secured $10 million in new financing from a Chicago-based cannabis lender. The company had previously secured $15 million in financing from the lender, Klar said.
The company’s equity investors also include family members of metro Detroit-based companies Farbman Group and Schostak Brothers & Co. Inc.
Quality Roots is largely operated by Klar, his two brothers, dad and two friends.
Klar also previously founded Toyology Toys with three retail locations in Bloomfield Hills, Royal Oak and West Bloomfield. That company is run by his wife and mother. The Klar family also previously owned several Sav-Mor Drug Stores in metro Detroit before selling to CVS in 2014.
