Jeff Breier stumbled onto his new business venture when he put one of his armored vehicles up for sale on Craigslist. “I got an overwhelming number of responses from security companies in the cannabis industry, and ‘ding!’ the bell rung,” he said.
The former police officer and security consultant then approached Todd Kleperis, a contact from security industry dealings in China. In early 2016 the pair opened Hardcar Security, a privately owned protection, transportation, and distribution company serving the California cannabis industry.
Under, Breier, COO, and Kleperis, CEO, the business has grown exponentially since, driven by the 2018 legalization of recreational marijuana in California as well as the tightrope walked by Hardcar’s clients. Cannabis sale and use is still illegal under federal law — meaning growers and dispensaries have to find non-traditional methods to manage revenues that can’t be banked traditionally.
At the same time, Hardcar is helping to establish best practices regarding the safety and security of cannabis products and cash, and the company is even providing input to state regulators.
As this industry matures, “Everybody is winging it,” Breier says.
A Protected Fleet
After retiring from police work, Breier spent 17 years in South America and Mexico driving armored cars and managing armored car fleets. “I was with Fortune 500 executives in hot zones with high violence and high kidnap rates,” he says.
Prepared with his new business idea and a background in armored vehicles, Breier approached a major vehicle armoring company to collaborate on a custom upfit that would meet the needs of the cannabis industry. “Based on our orders, they’re making a ‘canna-line’ for us,” he says.
The “canna-vans” — Ford Transits — are sourced through local dealers and routed directly to the upfitter.
In addition to armoring, the vans are equipped with safety and security technologies that Breier calls unprecedented in the security industry. Without getting into details (Breier is guarded for competitive and security reasons) the vans have a unique version of a starter interrupt system that involves a key fob, a geo fence, and a time window.
The vans are also equipped with telematics used to track the fleet and monitor driver behaviors. Breier worked with the telematics provider to customize an alert system that contacts him and law enforcement in the event of an incident.
Two vans have refrigeration units (“reefers”) that will hold a 20-degree temperature and are insulated to Department of Agriculture standards. One of the reefers is used specifically to transport a popular cannabis concentrate. “I call it an armored ice cream truck,” Breier says.
The fleet of six vans will soon grow by two more, both with refrigeration and part of a continuous pipeline. The top 20 growers and distributors are clients; Hardcar is building business with the next tier.
“We need to be at 25 (vehicles) at this time next year to handle all of our customers,” he says.
Vans on the long-haul routes rack up about 40,000 miles a year, while vans on the shorter Southern California runs accumulate 20,000 miles.
While the company has not yet needed to sell any vehicles, Breier says the specificity and cost of the upfits necessitates replacing major parts instead of ordering a new van. “The glass alone is worth more than a motor and transmission,” he says.
Owing to the nature and value of the assets, potential breakdowns are handled under strict guidelines.
One van is always on hand to take over if needed. In the event of a breakdown, the driver must wait with the van until the spare arrives, at which point the cargo is transferred to the new van. The driver continues the “canna run” in the replacement van, while the second driver manages the process of repairing the breakdown.
For refrigerated product, Hardcar guarantees continuous temperature control. During a breakdown, the reefer vans have a built-in backup generator with a fuel tank good for eight hours.
Because cannabis is still illegal under federal law, the banking industry has stayed out of the market. As such, Hardcar will transfer money into a private vault service (“close to a mini Fort Knox”) and also act as an intermediary between cannabis companies and some banks.
Hardcar’s agents are more than just drivers, Breier says. Predominantly ex-military and many returning from tours in Iraq and Afghanistan, “Their understanding of asset protection is already in them,” he says. “They have protected our country and our way of life.”
“My agents are instant coffee,” he says. “We add a little Hardcar water and they’re literally good to go.”
As ex-military, Hardcar agents understand how to handle unexpected situations. “They think on their feet,” Breier says. “They’ll give us solutions on the spot and determine which ones have the least amount of risk.”
Hardcar pays its agents $25 an hour, well above the average for route delivery drivers of light trucks. The agents are trained in the specifics of cannabis distribution and how to help retail dispensaries follow a standardized set of protocols regarding chain of command. Many dispensaries, Breier says delicately, “are trying their best to come up to the corporate level.”
Owing to agent training and strict protocols, Hardcar claims “first-mover advantages” in relation to insurance. The shipments carry $2 million in cargo insurance, and are also covered for loss if seized by law enforcement. The (unnamed) insurance provider no longer writes this specific policy, though Hardcar is grandfathered in.
Cannabis Best Practices
Hardcar hasn’t yet had any safety incidents — or even close calls — related to money or cannabis transfers, though assaults in general are on the rise, particularly in dispensary parking lots and during home deliveries. “Criminals are looking for the soft target, ‘the Susie in the minivan,’” he says.
According to Breier, this is the most vulnerable link in the chain of custody. He mentions talking to a dispensary owner who just had her driver robbed at gunpoint, and she chalked it up as a cost of doing business.
For these reasons, Hardcar is working to establish a set of industry safety protocols regarding transporting and exchanging money and product. The protocols are designed to work with California’s regulations that require all dispensaries to have a camera system and a guard.
While agreeing with the intent of the regulation, Breier says it’s easy for a criminal to overcome that system, particularly involving underpaid guards. “There’s no hero there,” he says. “Once you put a gun in his ear, and say let us in and you’ll go home, of course he’ll let you in. He’s not stupid.”
One Hardcar program — termed Vendor Verify or Agent Verify depending on the type of client — is a GPS-based system that sends a series of messages to the destinations alerting them of the van’s arrival.
In preparation for the Hardcar delivery, the program teaches guards how to do an “advance,” or sweep an area for threats, and then take the necessary steps if a threat is perceived. After the scan is completed, the guard accesses a touch-screen program on a tablet to signal all clear. When the van arrives, the guard escorts the Hardcar agent into the building.
States and the Fed
As a pioneer in the logistics side of the cannabis industry, Hardcar has also become a focal point to help refine processes and define best practices on the state level.
The company is helping the state draft transportation guidelines based on the company’s white papers. One suggestion adopted by the state was the ability to perform shipments in vehicles not marked for commercial use.
Another challenge is helping the industry convert from paper to electronic invoicing and manifests. Hardcar is trialing two invoicing systems and testing their compatibility with the states’ software.
The state is also working with Hardcar to define methods of collection and transfer of quarterly taxes. According to Breier, cannabis businesses are eager to follow the same protocols of any mainstream retail store. “The goal is to get compliant, corporate, safe, and sane.”
On the federal level, there are no signs of intent to decriminalize cannabis — in fact, the opposite might be true under the current administration.
Hardcar continues to deposit millions of dollars into the Federal Reserve for the largest growers and distributors in California. The irony of paying federal taxes on a still-illegal product is not lost on Breier. “They used to dump a duffle bag of money on the table at the IRS, and no one likes that,” he says.
Originally posted on Business Fleet