Are you interested in how to open a dispensary in your state? If you are planning to venture into a billion-dollar industry, then go ahead; there is no better time than now! The legalization of medical and recreational marijuana in the states across the U.S. have attracted both budding and established entrepreneurs alike. While a cannabis dispensary seems like a good business to own, there is a high barrier to entry and many hurdles to cross before you can open the doors and sell your first gram of weed.
The vast list of obstacles to overcome in the opening, let alone running a marijuana dispensary, and the massive investment required to begin. But, once you are through the rough patch, everything flows smoothly and fetches a significant return on investment.
You must have accumulated a few questions by now regarding marijuana dispensaries, let us get to them one after the other.
What is a Cannabis Dispensary
A marijuana dispensary is a licensed facility for selling cannabis for recreational and medical purposes.
Difference Between Medical and Recreational Dispensary
Medical cannabis dispensaries are designed to provide patients with a safe place to receive information and cannabis grown to treat disease. They are usually regulated and taxed differently than recreational cannabis shops and for this reason cannabis prices can vary between them. The interior design of medical dispensaries is usually closer to a doctor’s office than a typical display case. Before visiting a medical dispensary you should prepare proper documentation and questions related to cannabis and your disease.
Unlike medical, recreational dispensaries are open to all customers of the age 21+ and are not authorized to give medical advice. The only document they require is your unexpired state ID or passport.
How Many Cannabis Dispensaries Are in the U.S.?
In February 2019, there were more than 2,000 cannabis dispensaries USA-wide, and California accounted for 261. According to a recent LA Times report, California now has 631 storefronts due to the high demand.
Now, a recent 2020 study reports that there are roughly 7,490 marijuana dispensaries in the USA. Oklahoma is first for the number of dispensaries and the number of dispensaries per capita. However, the ease of market entry majorly varies for every state as if they were completely different countries. Running a successful cannabis dispensary in the U.S. has its perks. This is why we have prepared for you a step by step guide on how to open a legit marijuana dispensary in the US in 2021.
#1 Understanding the Legal Status of Cannabis
Before you get into the steps on how to open a dispensary – make sure you understand the laws of your state.
Legality of cannabis by U.S. jurisdiction goes into 3 main categories: Legal, Illegal, Decriminalized. This can apply for recreational usage or medical usage (which splits into 2 categories- whole plant and Low-THC, high-CBD)
- Legal status would mean that recreational and/or medical cannabis usage is fully legal in those states. Currently, recreational cannabis usage is legalized in 12 states, medical cannabis usage is legalized in 37 states (usage of the whole plant), where 11 other states allow low-THC, high-CBD.
- Illegal status would mean the recreational and/or medical cannabis usage is fully illegal in those states and usage, possession, or sales can result in felony charges. Currently, recreational cannabis usage is illegal in 23 states and medical cannabis is illegal in 5 states.
- Decriminalized would mean that recreational marijuana usages, possession, or sales may lead to minor penalties. Decriminalization refers to a policy of reduced penalties for cannabis offenses, typically involving a civil penalty for possession of small amounts (similar to how a minor traffic violation is treated), instead of criminal prosecution or the threat of arrests. Currently, cannabis for recreational usage is decriminalized in 16 states.
Here follows a full list of the legal status in all USA states.
|State||Medical||Recreational||Date legalized||Legal Age|
|Alaska||legal||legal||Feb 24, 2015||21 years +|
|California||legal||legal||Jan 1, 2018||21 years +|
|Colorado||legal||legal||Nov 6, 2012||21 years +|
|Georgia||CBD oil less than 5% THC||illegal||–||–|
|Idaho||CBD oil with 0% THC||illegal||–||–|
|Illinois||legal||legal||Jan 1, 2020||21 years +|
|Iowa||cannabis oil less than 3% THC||illegal||–||–|
|Kansas||CBD oil with 0% THC||illegal||–||–|
|Maine||legal||legal||Nov 2016||21 years +|
|Massachusetts||legal||legal||Jul. 2018||21 years +|
|Michigan||legal||legal||Dec. 2018||21 years +|
|Nevada||legal||legal||Jul 1, 2017||21 years +|
|North Carolina||CBD oil||decriminalized||–||–|
|Oregon||legal||legal||Jan 1, 2015||21 years +|
|South Carolina||Cannabis oil less than 0.9% THC||illegal||–||–|
|Tennessee||CBD oil less than 0.5% THC||illegal||–||–|
|Vermont||legal||legal||Jan 11, 2018||21 years +|
|Washington||legal||legal||Jan 2012||21 years +|
|Washington DC||legal||legal||Nov 2014||21 years +|
Understand Federal Laws & Regulations
Although over the years, the legalization of medical and recreational marijuana has roped in many entrepreneurs, cannabis usage is still not legal on a federal level. This is why as a business owner , you must always keep yourself updated with the latest laws and regulations to adjust accordingly. Check for the governing authority in your state and keep updating yourself with all the developments mentioned on their website.
Understate States Laws and Regulations
As it became clear already when it comes to cannabis each state has its own laws and regulations and if you are planning to start your own cannabis dispensary it is best if you understand the types of sales permitted for marijuana for each state.
|Type of Sale||State|
|Sale of CBD or low THC oils permitted – 10 states||Georgia, Idaho, Iowa, Kansas, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee|
|States that allow general medical sales – 37 states||Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia|
|States that allow recreational cannabis sales – 12 states||Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, Washington, Washington DC|
State by State Cannabis Dispensary Licensing Information
The table mentioned above gives information on the licenses that states provide and also detail on the type of license you can apply for in different states.
Now, you must know which state authority to approach for moving your application for consideration. The licensing procedure varies for each state. The time required for getting the license approval is different for every state.
|Alaska||Apply on Marijuana Establishment License.|
|Arizona||Apply on The Arizona Dept. of Health Services Medical Marijuana Program|
|Arkansas||Apply on Arkansas Medical Marijuana Commission|
|California||There are three licensing authorities present in the state: Bureau of Cannabis Control, CalCannabis Cultivation Licensing, Manufactured Cannabis Safety Branch. It depends what license you are looking for i.e. testing lab, cultivator or retailer, which will determine who will issue the license to you.|
|Colorado||Retail marijuana licensees: pick the type and apply here|
|Connecticut||To get the license visit Medical Marijuana Program website|
|Delaware||Medical Marijuana Program: apply here|
|Florida||Medical Marijuana Program: apply here Florida Department of Health for licensing.|
|Hawaii||Approach the Hawaii Dept. of Health for the licensing and registration info. To be the next one you must keep checking the website. At present they are not accepting any registrations.|
|Illinois||The Department of Financial and Professional Regulation issues the license for dispensaries. Here is the website.|
|Louisiana||Learn about The Beginning of the Licensure Process here.|
|Maine||Find application and forms for Marijuana Store|
|Maryland||You will need to approach the Maryland Medical Cannabis Commission to know the procedure and application.|
|Massachusetts||The Department of Health looks after the processes related to Registered Medical Dispensary (RMD). You can apply here to apply for the certification.|
|Michigan||Marijuana Regulatory Agency (MRA) regulates the state’s medical marijuana facilities and licensees. You can apply here.|
|Mississippi||Medical marijuana will be legal in 2021. A licensing system has not yet been established. Look for licensing requirements and other details as they become developed.|
|Missouri||Medical marijuana is legal for patients with a qualifying condition. Apply here. Read our Blog on How to Open a Dispensary in Missouri|
|Montana||The dispensary licenses are available periodically here.|
|Nevada||Nevada Department of Taxation provides the licenses.|
|New Hampshire||The state is not issuing any licenses at the moment and it has 4 established Alternative Treatment Centers at present.|
|New Jersey||Learn more on the Division of Medicinal Marijuana site.|
|New Mexico||To seek permission for dispensing medical marijuana you must approach the New Mexico Department of Health. But, to apply for the license you must be a Licensed Non-Profit Producer (LNPP). Currently, you can not apply to become an LNPP. Keep yourself updated by visiting the official website.|
|New York||The Department of Health in New York takes care of the Medical Marijuana Program. Only Registered Organization can dispense medical marijuana.|
|North Dakota||The Division of Medical Marijuana which is part of the Department of Health, North Dakota takes care of the Medical Marijuana Program.|
|Ohio||Learn more about an application on the site of Ohio Medical Marijuana Control Program|
|Oklahoma||Find business application information here.|
|Oregon||You can apply for recreational as well as medical marijuana licenses.|
|Pennsylvania||Learn about licensing for dispensaries here.|
|Rhode Island||The Department of Health looks after the dispensary licensing process. Apply here.|
|Tennessee||How to open a dispensary in Tennessee? Read here|
|Texas||Texas has a limited medical marijuana program officially named the “Compassionate-Use Program”|
|Utah||Medical cannabis is legal but the Department is not currently accepting applications for medical cannabis pharmacies. Learn more.|
|Vermont||The Department of Public Safety issues the licenses for cannabis registration.|
|Virginia||Medical marijuana is legal for qualified patients. Learn more.|
|Washington||The Washington State Liquor and Cannabis Board issues the license.|
|Washington D.C.||The medical Marijuana Program comes under the D.C. dept. Application form.|
|Wisconsin||How to open a dispensary in Wisconsin? Read here|
#2 Conduct Market Research
Start with market sizing and forecasts. If the market is projected to have strong growth, you can feel more confident in the decision to open a dispensary. For instance, adult-use marijuana markets are popping up east of the Mississippi River. So if you live in or around the Mississippi River, starting a cannabis dispensary can be a profitable business.
Next, it is important to know what other successful dispensary owners are doing. Competitors can be threats, role models, or even opportunities for you. When researching your competition, make sure you look at your business and identify the opportunities and what sets you on the path to success.
Analyzing product types helps you determine new product development, business expansion, and marketing and cannabis advertising strategies. In the emerging cannabis industry, new product types keep entering the market every day. From flowers and concentrates, new edibles and drinks, the industry is adding more products to draw consumers’ attention. Tracking these additions is important to understand the market and consumer trends as well as identifying business development opportunities.
Consider all the best ways to compete in both – local and international markets. These include product trends, distribution channels, marketing platforms, and competitive landscape analysis. Understand the local culture, perceptions of health and wellness, and shopping styles.
#3 Cannabis Dispensary Business Plan
To get started with your cannabis business, you must have a smart business plan which equips with the knowledge of the industry, the unforeseen expenditures, and the challenges that may come in your way.
Opening up a cannabis dispensary can get complicated and challenging and are not equipped with the knowledge of the laws and industry, and a good business plan. With thorough research here we are introducing you to a few risks and challenges that you may face along the way.
#4 Startup Capital & Budget
Before starting a cannabis business, you must be able to show that you have a considerable amount of money in your savings account to run your business smoothly. The startup capital requirements vary for every state. Roughly estimating the startup costs, it can be anywhere between $150 000 to $2 million depending on your business plan.
Most of the banks do not allow making cannabis business transactions through them. So, you will have to operate the business using cash, which is susceptible to theft. On an estimate, the capital required to open a dispensary can be anywhere between $200,000 and $800,000.
Also, you must take into consideration the budget requirements for the following:
- Employee salary
- License application fee
- Storage of product and transportation
- Rent cost
#5 Setting up your Operation
Property Location for the Dispensary
The property which you are planning to purchase or already possess must be compliant to a lot of legal requirements.
The property must stand at least 1000 ft. away from any church, residential zone, and any other compliant property. There is a considerable risk involved here as the rules and regulations change every two years. So, if you are planning to rent one, make sure that the landlords keep themselves updated with the latest developments and make changes accordingly.
Also, converting a location into a cannabis dispensary requires remodeling and making a lot of changes. So, make sure that your landlords are fine with it.
Choose under which business entity you want your business to be registered. Choosing the right entity will decide how much taxes you will have to pay. It also determines the level of risk that you are exposed to in the business. The US states recognize a dozen different types of businesses like S-corporation, limited partnership (LP), general partnership (GP), limited liability company (LLC), C-corporation, etc.
Get Registered for License, Permits, and Taxes
There is no relaxation on the taxes either, and you will have to be prepared to pay heavily for running a dispensary. The worrisome part is that the dispensaries have to pay more taxes than you are required to pay in a regular retail business.
The laws surrounding starting your own business can be different for every state, so decide up a location and consult an attorney in your state who can help you through the process. Obtaining proper licenses and permissions is vital because that sets the basis for your business.
If you get through this process, then you can stay rest assured that your business will be guarded against any legal implications. Before you even open a business, you will have to register for various state and federal taxes.
Design your Dispensary
Now it’s time to plan your design standards. Designing a dispensary is not easy because what “looks good” is a subjective evaluation and can’t be taken as a final benchmark. However, there are some standards that are critical for every retailer:
- Functionality and flexibility
- Public attractiveness and inclusion
- Safety and protection of employees
Designing a dispensary is a challenge, especially in terms of regulatory compliance. It can be hard to organize your store in accordance with the laws of your state but also to prioritize the best possible customer service.
Think about the number of rooms and their sizes. Usually, dispensaries don’t have waiting rooms which makes it uncomfortable for customers to stand in long lines, so the best solution is to have 3 rooms: one for employees, one for waiting, one for shopping.
Here is a great example of Herbology Dispensary – Gaithersburg
You should also make sure your store is wheelchair accessible. Many of your visitors will come to your store for medical reasons, and some will most likely be disabled.
Get your Product
Throughout your journey, you must make sure that you are acquiring a good quality product for the dispensary, and the most critical aspect is that you are doing it on legal grounds. While some dispensaries sell self-grown cannabis or focus on a specific form of the product, you can create your own offering which will include edibles, concentrates, indica or sativa strains, oisl etc. Build up a product range you connect with trusted wholesalers.
Hire a Team
Next step in your how to open a dispensary plan will be to hire a team. The staff in your shop will play a significant role in the success of your business. The team is the face to your brand, and for a medical cannabis dispensary, it is mandatory that hire smart and qualified staff for attending the customers.
Here are the must-have staff in a dispensary:
Hiring could become one draining task, so you can rope in some professional hiring companies that will shortlist the right candidates for you. Once they take the pain of finding and providing you with the option, you only have to select the one which you think will fit and adapt to the business surroundings.
As you plan on expanding your business, the demand for passionate professionals will only grow. After a while, you have to introduce a few more professionals in your shop.
- Human Resources Manager
- Delivery Driver
- Finance Officer Accountant
- Marketing Manager
- Brand Ambassador
Open Business Bank Account
You must have a dedicated business banking account. You can also apply for a business credit card, which is crucial for the protection of assets. Want to know why? Well, keeping your business and personal account separate means you can protect your assets if in case your business is ever sued. Also, separate accounts make tax filing and accounting easier.
POS, Inventory & Compliance Software
Software is a necessity when it comes to charging customers, managing inventory and saving time on running back-end and front-end tasks efficiently. Unlike similar POS systems for other industries, software developed for the cannabis industry in particular not only helps you manage, track and charge your customers but is also compliant with ever-changing regulations.
As picking the right software provider requires some research, you may need extra time for testing few systems. While choosing the right software, consider if it meets the following requirements:
- Easy to Use
- Integrates with seed-to-sale tracking systems
- Pulls informative reports
- Has 24×7 support.
#4 Web Presence and Marketing Your Dispensary
Before developing your marketing strategy, make sure it complies with the advertising rules in your state. Once you make sure which tactics are appropriate for your business, ask yourself these basic questions:
- What are your products?
- How big is your market opportunity?
- What is your sales and distribution setup?
- What geographic area do you sell to?
- What competitors exist in this marketplace?
Set Up Marketing Goals
Once you define the objectives you want to achieve, there should be a set of goals specific to your business. That will help you stay focused and make the correct steps on the way to the desired result.
Let’s say you have the following objective: 50 purchases on the day of opening. To accomplish it, define the goals:
Goal 1: Collect 500 emails of potential customers and send a sequence of emails with an invitation to your dispensary opening
Goal 2: Print 1000 booklets and hand them out in the neighborhood area of the city.
Goal 3: Advertise in the local newspaper.
Goal 4: Find 10 Instagram bloggers and place ads on their profile (it can be either a classic advertising format or free product testing, or a giveaway of a T-shirt or bag with your corporate identity).
How to Open a Dispensary: Branding
Cannabis branding will help you stand out from the competition. Regardless of the product your dispensary provides, your brand name alone will bring images, logos and ideas to your customer’s mind. This is the result of effective branding. To use branding to your advantage, you need to determine who you want to reach out to and what your brand represents.
For example, if you aim to reach out to working-class consumers, you can emphasize the affordability and simplicity, while when reaching out to wealthy shoppers, you can focus on superior quality and exclusivity.
If you don’t want to send conflicting messages to your customers, it’s important to be consistent when promoting your brand.
Online promotion is crucial when it comes to launching a dispensary. Make sure that potential customers will easily find information about your brand on the following pages:
- Your website which must have an age verification popup
- Google My Business and Yelp accounts with your physical address, phone number, email address, and pictures of the location
- Your listing on cannabis directories (Leafly, Ganjapreneur, Weedmaps, Pot Guide etc.)
- Social media pages (Facebook, Instagram, Twitter).
While many retailers still have restrictions to sell products online, it’s great news that more than 90% of retail spending is still in stores. Yes, customers may spend some time searching the internet to buy cannabis but they are more likely to visit a nearby dispensary than make an online purchase.
How can you attract more customers to the dispensary?
First, think of cooperating with other local cannabis-friendly businesses (like restaurants or breweries), and promote them as well. It will put your business in front of a warm audience that is already interacting with a specific product or service.
Second, involve existing customers in the spread of word of mouth. Give them a discount in exchange for a review on the most popular platforms.
And last but not least – don’t underestimate traditional methods like distribution of flyers nearby or an advertisement spot in a public place.
Build Loyal Audience
A loyalty program is the key to building your audience that will come back to your store and bring new warm customers. To be successful, the program must benefit both you and the customer. There are several types of loyalty systems:
Points-Per-Dollar Spent Model is a cashback system that suggests rewards points that the customer gets each time he makes a purchase. To make this system more efficient, you should provide transparent statistics on the bonuses your customers have on their account – that will encourage them to come to your store sooner. More than that, the system will increase the average check per customer.
Visits-Based Model means that you give the customers rewards each time they visit your dispensary. It’s perfect for new people who are not ready to spend much money during their first visit but are likely to come again.
#5 Launch a Grand Opening
The main benefit of a soft launch is that you make a “test drive” of the whole system called dispensary and identify weak points of your business. In other words, you open a dispensary for a limited audience and collect their feedback on your brand. After a soft launch, you have extra time to eliminate the weaknesses and educate your team to handle the grand opening. This is less stressful for both you and your team and helps the employees to get better through servicing the customers.
And, why not the most crucial part of the cannabis business plan is to host a grand opening party. It will make your existence felt in your state. Because this is a cannabis dispensary, then this could probably be the most awaited news for the people as not every place has its cannabis dispensary.
Hire a PR team to publicize the whole event for you weeks before the event.
On the grand opening day, to earn some customers, you can do the following things:
- Offer great deals to the first 100 customers.
- Send out flyers, brochures that mention the products you have on board.
- Invite influencers who can create a lot of buzz for your business. When people in your state get to know that you have called in some famous influencers, then get prepared to witness a massive influx of people to your dispensary.
Despite the high competition in this industry, a good product and the right promotion will increase your chance of success by almost 100%. We sure a lit bit of some sincere marketing techniques will give your cannabis dispensary some serious push!
Keep visiting our blog as we keep on updating it with the latest news and developments happening in the cannabis industry.
Olivia Solero is the Co-founder of Cannabis Stack. Olivia has an unusual blend of creative thinking and the ability to put that thinking into effect. She likes to write; loves to edit; she knows how to lead, follow or get out of the way; she is good with a buck and wicked smart when it comes to data.