A monthslong MJBizDaily investigation into the enterprise practices of marijuana multistate operator MedMen Enterprises reveals a widespread sample of not paying invoices, abruptly closing shops and terminating workers with out warning.
In keeping with inside communications obtained by MJBizDaily, regulatory filings and interviews with dozens of hashish manufacturers, business distributors and former workers, MedMen regularly disregarded invoices, breached contracts and ignored exhaustive makes an attempt to resolve excellent balances.
A few of MedMen’s high executives, together with former CEO Ellen Deutsch Harrison and performing Chief Monetary Officer Amit Pandey, have been included in on-line exchanges with manufacturers and contractors searching for restitution for his or her unpaid invoices for months, in accordance with emails obtained by MJBizDaily.
One California distributor that’s owed tens of 1000’s of {dollars} is planning to file a lawsuit in opposition to the Los Angeles-based firm, MJBizDaily has realized.
Different contractors – some owed upward of 5 figures – are considering authorized motion in opposition to MedMen as effectively, sources informed MJBizDaily.
The developments coincide with the latest closures of three MedMen shops in California, ongoing layoffs and a administration shake-up.
As soon as one of the crucial celebrated manufacturers within the regulated marijuana business, MedMen’s fall from grace has led to deep monetary and regulatory troubles.
As the corporate burned via tens of tens of millions of {dollars} on the steadiness sheet and a multibillion-dollar valuation, its notion as an investor and business darling within the early days of marijuana regulation has morphed right into a retail pariah in California and different markets.
Retailer closures and past-due regulatory filings
MedMen continues to be one of the crucial well-known marijuana operators within the nation, and its shops typically are lauded for his or her smooth, trendy designs.
The multistate operator has about 20 shops in California, Illinois, Massachusetts, Nevada and New York, however that quantity is shrinking amid its newest restructuring.
MJBizDaily reported on Jan. 31 that the corporate initiated one other spherical of company layoffs.
A day later, native media shops reported that MedMen unexpectedly shuttered its flagship location in West Hollywood, scarcely a month after the corporate had shed different property throughout the nation.
The West Hollywood closure got here days after the corporate’s third management change in lower than two years.
On Tuesday, MJBizDaily first reported that the corporate closed two Northern California shops in Emeryville and San Jose.
In the meantime, MedMen is sort of a 12 months behind on quarterly monetary reporting required of publicly traded corporations.
Essentially the most lately filed quarterly monetary assertion, ending in April 2023, highlighted a extreme money crunch as the corporate ended the quarter with $7.6 million in money or money equivalents and a working capital deficit of $383.2 million.
Regulatory filings with the U.S. Securities and Alternate Fee present the corporate has been concerned in a number of important lawsuits associated to unpaid invoices. The plaintiffs embody:
Enterprise brokers over asset gross sales charges.
Workplace furnishings distributors in Indiana.
A number of landlords in New York and elsewhere.
MedMen additionally spent tens of millions of {dollars} to settle alleged breaches of actual property contracts and associated damages for unpaid lease.
In late January, MedMen’s share value on the OTC Professional Market, the place the corporate trades as MMNFF and as soon as commanded $7.52 per share, sank to zero.
MedMen didn’t reply to MJBizDaily requests for remark.
Intestine punch
Punch Distribution has been making an attempt to gather on its MedMen invoices for greater than a 12 months.
A couple of months in the past, Los Angeles-based Punch obtained an sudden verify, however the cost lined lower than 10% of the entire, co-founder Samantha O’Donnell informed MJBizDaily.
The alternate prompted Punch to make follow-up calls with MedMen executives to develop a cost plan.
The hashish model that Punch represents and was trying to gather cost for has a near-decade relationship with MedMen, in accordance with O’Donnell.
“We strive to not let retailers run up these loopy payments that they gained’t have the ability to pay, however because of the long-standing relationship, we felt comfy with persevering with to launch new orders,” O’Donnell mentioned of constant to work with MedMen regardless of its excellent steadiness.
However as checks obtained from MedMen turned smaller, the time between funds turned longer.
Fed up, O’Donnell mentioned she despatched MedMen executives an electronic mail final month threatening authorized motion.
The e-mail garnered an instantaneous response from then-CEO Harrison, who really helpful a Zoom name to hash out the main points.
On the day of the scheduled name, O’Donnell’s workforce was informed Harrison couldn’t make the assembly.
A couple of days later, Harrison resigned from the highest publish, together with board Chair Michael Serruya.
Harrison didn’t reply to questions MJBizDaily despatched through direct message on LinkedIn.
After the resignations, MedMen requested to pay Punch Distribution the rest of its debt over a 12 months, O’Donnell mentioned, calling the provide “loopy” as a result of MedMen already had surpassed its time period agreements.
Late final week, O’Donnell instructed her attorneys to begin the litigation course of in opposition to MedMen, searching for cost for invoices totaling between $50,000 and $70,000, she informed MJBizDaily.
“Sadly, that’s simply the place we’re,” she mentioned.
An industrywide challenge
West Coast Remedy (WCC) reached its personal boiling level when MedMen continued putting new product orders whereas failing to pay down its substantial excellent steadiness.
The Orange County, California-based hashish model is without doubt one of the largest within the state, with an in depth line of flower strains, concentrates, edibles and vape merchandise offered at a whole lot of stores.
WCC Chief Advertising Officer Jonathan Jones declined to offer a precise quantity his firm is owed by MedMen, however he signaled that “six figures” is within the ballpark.
“It’s most likely more cash than anybody else would wish to have on their books,” Jones informed MJBizDaily throughout a telephone interview.
There’s likelihood WCC additionally misplaced merchandise that have been in MedMen’s possession when the retailer abruptly shuttered its West Hollywood storefront.
Some customers have been unaware of the closure once they arrived on the retailer on Santa Monica Boulevard, WeHo Occasions reported Feb. 1.
“Personally, it’s actually irritating as a result of it makes it tough to function within the area,” Jones mentioned of the MedMen fallout.
The difficulty of unpaid invoices within the marijuana business extends far past MedMen.
The issue has develop into systemic for operators nationwide – and notably these in California, the world’s largest hashish market.
A few of WCC’s retail clients have invoices which are greater than 120 days previous because of the firm, Jones mentioned.
“There’s fairly a number of storefronts that owe us cash,” he mentioned. “The difficulty is industrywide. It’s not remoted to only MedMen.”
‘Solely paying essential accounts’
Alina Nguyen was employed in 2021 as an editor for MedMen’s weblog Ember, which publishes academic and model content material about hashish tradition.
The Los Angeles resident moved into an interim full-time contract advertising and marketing position in 2022, after a spherical of layoffs eradicated key advertising and marketing leaders and your complete artistic division, she mentioned.
Nguyen’s position morphed right into a advertising and marketing supervisor place, wherein she developed MedMen’s content material calendar and employed and onboarded copywriters, entrepreneurs and different editorial freelancers.
She spent a 12 months rebuilding a skeleton workforce for the multistate operator.
“I used to be fairly integral to the corporate,” Nguyen informed MJBizDaily throughout a telephone interview.
Round August 2023, Nguyen informed MedMen she deliberate to cease working for the corporate until her colleagues have been paid.
By then, Nguyen mentioned, MedMen was behind on her paychecks and people of three different contractors in her division.
Greater than a month handed with out cost.
On Oct. 5, Nguyen obtained an electronic mail from a MedMen accounts-payable supervisor confirming that a number of invoices weren’t paid.
“We’re solely paying essential accounts proper now because of our money constraints,” the supervisor mentioned in an electronic mail obtained by MJBizDaily.
“We can pay these payments after we are in a greater place.”
Nguyen highlighted that response in follow-up emails despatched to MedMen’s payroll and authorized departments in addition to company executives.
She obtained a quick response from Harrison, implying this was the primary time she’d heard of the issue.
Then, correspondence went darkish.
Nguyen hasn’t heard from the corporate in months, and he or she is owed greater than $6,000.
“They’ve ghosted me since November,” she mentioned.
Desperation in the end led Nguyen and some others to speak with MJBizDaily.
“Going public could be the solely factor that’s going to get them to pay. I’ve adopted up so many instances, it’s unbelievable,” she mentioned.
“I’m drained, however I’m nonetheless going to maintain pursuing this. MedMen can’t get away with doing this to so many small companies and households.”
Naima Davis mentioned she has not been paid by MedMen since July 2023.
The Atlanta-based contractor makes a speciality of SEO. She dealt with web site analytics and developed quarterly monitoring studies for the MSO.
Davis’ $1,500 month-to-month retainer lined software program subscriptions she paid for out of pocket.
After a month handed and not using a paycheck, she despatched emails to numerous departments in addition to Harrison, who mentioned she would look into the matter.
“Then, I waited,” Davis informed MJBizDaily. “I didn’t hear something again.”
Her final correspondence with MedMen was in November.
Davis mentioned the corporate owes her $2,000, together with $500 for software program subscriptions.
“I’m a single mother. Any greenback that comes out of my pockets impacts my youngsters,” Davis mentioned.
“We’re human beings. We’ve got households, and never paying us impacts our households.
“Whether or not you suppose we deserve it or not – or whether or not it’s a small quantity, a big quantity, whether or not it’s my full-time revenue or my supplemental revenue – it’s nonetheless my livelihood.
“And it nonetheless impacts my household.”
A public shaming
Since 2017, MedMen has carried Kush Queen merchandise at its California shops, offering the woman-owned hashish model with publicity each on the corporate’s cabinets and thru its Ember weblog.
Late final 12 months, the retailer stopped paying invoices to Kush Queen’s distributor, Past Legends.
After weeks of back-and-forth electronic mail threads with the corporate, together with exchanges with Harrison, Kush Queen founder Olivia Alexander had sufficient.
In late December, she blasted MedMen on LinkedIn, Instagram and X, previously generally known as Twitter, for not paying a $1,560 invoice.
Her posts generated greater than 100,000 views and loads of business chatter about MedMen and the sample of unpaid invoices by hashish retailers, maybe the largest problem going through marijuana manufacturers nationwide.
“I’m actually sick of those corporations behaving this fashion,” Alexander informed MJBizDaily in a telephone interview. “I’m taking a stand.”
The general public shaming labored, and MedMen lately paid the bill.
However the episode left an impression on Alexander and tainted her yearslong partnership with MedMen.
“Even when they needed to order extra, we’d stand in solidarity with these owed funds and by no means ship them extra product,” she informed MJBizDaily through electronic mail.
Extra layoffs, upheaval
MedMen initiated one other spherical of company layoffs on Jan. 26.
The variety of workers affected is unknown, however personnel within the Los Angeles-based firm’s accounting and advertising and marketing departments have been amongst these laid off, sources informed MJBizDaily.
One terminated worker realized of the layoffs on Jan. 29, three days after MedMen despatched termination notices.
The worker, who requested anonymity for concern of jeopardizing future job alternatives, realized concerning the layoffs after studying a termination discover despatched to their private electronic mail.
“I’ve emailed the HR division. I’ve referred to as. No one is responding,” the supply mentioned.
“This was very merciless. They handled us like trash.”
Cesar Orquiz, who labored in MedMen’s retail retailer in San Diego for 4 years, was laid off Feb. 5, together with roughly 15 different employees on the Kearny Mesa location.
Throughout his previous few shifts, Orquiz mentioned he noticed few clients as stock dwindled.
A number of large manufacturers canceled product shipments to the San Diego retailer up to now month or so, he informed MJBizDaily in a telephone interview the day after his job was terminated.
Orquiz mentioned MedMen closed sure worker accounts and revoked entry to his pay stubs and W-2 kinds.
“So, I can’t file for unemployment proper now,” he mentioned.
Different former MedMen employees informed MJBizDaily they’re struggling to achieve approval for unemployment advantages outdoors California as a result of MedMen has did not report the layoffs to the suitable state companies.
“It’s taken a toll, and it’s been very traumatic,” Orquiz mentioned.
One other marijuana business open secret
“Everybody is aware of that nonpayment is the single-biggest challenge that each model is going through,” Kush Queen’s Alexander mentioned.
The widespread downside is taken into account one other open secret within the hashish business, but marijuana manufacturers and distributors have been reluctant to name out unhealthy actors via social or mainstream media.
Their stance is comprehensible, contemplating dispensaries and hashish retailers are the gateway to shoppers, model growth, gross sales and, in the end, development.
MJBizDaily contacted dozens of hashish corporations, service suppliers and former workers – all of them believed to have excellent invoices with MedMen – however solely a handful would communicate on the file about their experiences.
Whereas unpaid invoices are a marijuana business downside nationwide, the problem is pervasive within the California market, the place it has festered for years.
The subject went viral on social media final week, after a video surfaced exhibiting Norman Yousif, CEO of the Off the Charts retail chain, boasting about how a lot cash his firm “saved” by avoiding funds to mom-and-pop hashish manufacturers.
“Have you learnt how a lot cash we saved by not paying the distributors as a result of they went out of enterprise, or they by no means collected?” Yousif mentioned within the video. “We’ve saved a whole lot and a whole lot of 1000’s.”
Off the Charts operates 17 shops in California and one in New Mexico, in accordance with its web site.
Lawmakers in California and New York final 12 months proposed establishing credit score phrases for the hashish business, akin to these established within the liquor area.
The laws, which might have required marijuana corporations to pay product invoices inside a set timeframe, died in committee.
Additionally in 2023, a gaggle of California distributors and types representing greater than half the state’s wholesale B2B hashish market employed a credit score affiliation to fee retailers in hopes of decreasing a whole lot of 1000’s of {dollars} in unpaid invoices – and reining in repeat offenders.
The group and its members declined to offer MJBizDaily with credit score studies for MedMen or different retailers.
“I don’t perceive how corporations like MedMen can exist,” Alexander mentioned.
“They’ve burned each bridge. There’s nothing left for them.”
Chris Casacchia may be reached at [email protected].
