CONCORD — Should recreational cannabis shops in New Hampshire look and operate as franchises like McDonald’s or as heavily regulated stand-alone retailers.

A model for how recreational marijuana would be sold if it is legalized in New Hampshire was approved in the House Finance Committee Tuesday but the conflict over it is far from resolved. The committee voted in favor of an agency model, where the state would have influence over marijuana businesses, but not full control. It would also allow stores to have unique interior features.

But the legislation faces an uncertain future in the state Senate, which appears to prefer a franchise model, giving the state full control over the industry. Under this model, stores would be identical, like a fast food chain, but owned by individual franchisees who would be responsible for running the actual businesses. The franchisor, in this model, would be the New Hampshire Liquor Commission.

House Bill 1633, sponsored by Rep. Erica Layon, R-Derry, would allow anyone 21 and older to possess and consume marijuana in New Hampshire. The bill sets up guidelines for the regulation and sale of the drug.

Under this bill, consumers could buy cannabis legally at 15 retail locations authorized by the New Hampshire Liquor Commission. The stores would be run under an agency model in which the state would hold significant power over businesses without it being a state-run industry.

However, New Hampshire Gov. Chris Sununu as well as members of the Senate have voiced their preference for the state-run franchise model.

Layon’s model ultimately won out in the House when the Finance Committee voted 19-6 on Tuesday to approve HB 1633 with her amendment that made clear the use of the agency model. The committee had earlier rejected an amendment from Rep. Dan McGuire, R-Epsom, which was influenced by language from Sen. Daryl Abbas, R-Salem, and other senators, that would’ve replaced Layon’s bill with the franchise model.

The agency model’s victory in the House committee is likely to set up a fight with the Senate and governor if it passes the full House on April 11.

The bill also passed with other changes included in Layon’s amendment and another from Rep. Peter Leishman, D-Peterborough.

Agency vs. franchise model

Under the agency model, Layon said the state would not be “going into business” with the retailers that would own individual stores, meaning the state would not be setting things like wages or prices.

Layon said the agency model is better because with the franchise model, promoted by Sen. Abbas, the state’s Liquor Commission would set the prices at all levels, from the grower to the manufacturer and up. She says this wouldn’t allow for a “functional market” and could lead to predatory pricing.

Abbas told WMUR the agency model is too similar to the retail model that he said has failed in other states.

The franchise model, he said, “Offers the market protection so a larger company or a larger operation can’t oversaturate the market and manipulate the sale price, causing the smaller places to go under.”

Layon said that her model is more restrictive than anything that’s passed in other states. She thinks the franchise model would be too risky.

“I don’t want to substitute a state cartel for the illegal cartel, and I’m worried that if they’re setting all the prices, that’s what’s going to happen,” she said.

Layon also said under an agency model, marijuana stores could each have a unique look and feel. She said there would be certain guidelines to make sure New Hampshire has “classy cannabis:” all 15 of the stores under her bill would have the same exterior, and there would be no neon lights, no cartoony faces, no decorations that would be glorifying misuse of marijuana allowed. But outside of those regulations, retailers could do what they want to the inside.

She said that making stores somewhere people want to shop is an important factor in marketing and attracting customers. Otherwise, she said, “there’s no point in doing any of this.”

“The question is do people want to go to sort of a big box McDonald’s for their cannabis, or do they want to go to something that’s a little bit more unique? We don’t have the same range in the Northeast as you would have in California, but there’s one place that literally looks like a Bath and Body Works,” Layon said. A franchise model, she continued, “would totally prohibit any innovation that way and how somebody would run a store.”

How will cannabis bill fare in the NH Senate?

In the Senate, many members have repeatedly voted against cannabis legalization in the past.

“I’m not a big proponent of marijuana, even though I personally supported medical marijuana and decriminalization,” said Senate President Jeb Bradley, R-Wolfeboro, at a press conference in January. However, he said, he sees an “opportunity” for legalization.

The agency vs. franchise models will likely be a point of contention in the Senate. Abbas is not the only senator who opposes the agency model. Sen. Cindy Rosenwald, D-Nashua, has also voiced her preference for the franchise model that she said would allow for more state control.

Layon, however, thinks there is a path for the bill to pass the Senate.

Will NH Gov. Chris Sununu support the legalization of marijuana?

In May 2023, Sununu flipped his stance on marijuana to being open to legalization – if done the “right way.”

HB 1633 was modeled in large part based on his stipulations.

“My model has been set to meet everything that he has set out publicly,” Layon said. Indeed, some of the language of her bill mirrors his May statement, including a prohibition on “marijuana miles,” where stores are densely concentrated.

However, Sununu supports a franchise model over the agency model outlined in Layon’s bill. She said he changed to the word franchise at the “11th hour,” but she thinks agency stores are an acceptable path because they still include significant state influence.

Her bill also doesn’t include a Sununu-supported ban on lobbying by franchises, something she thinks would be a legal liability.

Layon said she is talking to Sununu’s office now to see if there are any remaining gaps in her bill that he would like to see filled.

“I think that there’s the potential of a path to passing my bill even without the governor if necessary, but I’d much rather have everybody realize that this is something that is important,” said Layon.

Echoing Sununu’s stipulations, she continued, “And we need to do it in a way that’s going to maximize safety and not tax revenue.”

Separate operational and regulatory control

Layon included separating operational control and regulatory oversight of cannabis shops in her amendment due to fears they would not be able to implement the agency or franchise model the legislature is suggesting because of federal government rules.

“It might technically be legal but not actually be legal,” she said. While states have been legalizing recreational use of cannabis since 2012, it is still illegal under federal law, and she thinks the government could go after the state for having too much oversight of the industry.

If that were to happen, having a separate operational control would allow the state to pivot to a different model that would be allowed.

Layon said separating the two is also “good practice.”

“You also don’t want somebody who’s a business partner overseeing regulatory compliance,” she said.

NH penalties for people using cannabis in public being worked out, too

Issues over criminal charges still in place for cannabis consumption were brought up by representatives and the ACLU of New Hampshire.

“This bill not only keeps the current misdemeanor charges for people smoking in public, but it also increases the second-violation fines,” said Rep. Heath Howard, D-Strafford.

To address this, Rep. Peter Leishman amendment, 1339H, changes the unspecified “misdemeanor” charge for the third offense of smoking or vaporizing cannabis in a public place (which could be charged as a Class A misdemeanor and lead to jail time) to a Class B misdemeanor, which would impose a $1,200 fine but no jail time.

This article originally appeared on Portsmouth Herald: NH marijuana franchises vs. agency stores at center of debate