How to Open a Dispensary

So you’ve looking into becoming a master grower, maybe took a few courses on budtender training, peeked into the many options available in the medical marijuana industry and… nope. You want something more. You aren’t the type who’s content to punch a clock or work hard for someone else’s profit – You want to be The Boss.

Do You Have The Expertise Required?

If you live in a legalized area, such as in Colorado or in California, you may have been tempted into thinking about opening your own cannabis dispensary. The perks seem obvious: Money, influence, a booming business and all the bud you can smoke. But don’t fall into the trap of thinking that it’s easy – Being a dispensary owner takes a lot of long hours and hard work that can be daunting to anyone really peering into the business end of running a dispensary. To open a dispensary often requires vast legal knowledge and a hefty amount of startup funds, and keeping that dispensary open day-to-day takes a lot more than just propping up your feet, chatting with customers and puffing some good wax.

But. If you’ve got the knowledge and the drive (not to mention the financial investment) running your own dispensary location can hit that sweet spot between “lucrative” and “fun” that so many people dream about. By the time our article is done you should have everything you need to know to get started on the path of opening your own legal marijuana store – Let’s get started.

The Laws & Legalities of Opening a Dispensary

First, to define the answer to the question of what is a dispensary: A “dispensary” is a location that sells legal, often medical marijuana products. These storefronts operate against United States federal law but within state law; while all cannabis industry business is considered illegal by the US government, individual states may set their own regulations on illicit substances.

Is Cannabis Legal in Your State?

To open a dispensary you’ll first need to see what your local and state laws have to say about it – Again, in the United States each legalized state has its own rules about how many dispensaries can be set up and in what locations, whether sales are recreational or if only a medical marijuana dispensary can be built, and so on.

Start with NORML

norml logo

For a basic understanding regarding marijuana laws in your area we recommend using the resources available at the National Organization for the Reform of Marijuana Laws (AKA “NORML”) website. Founded in 1970, NORML is one of the leading non-profit organizations in the United States advocating the nation-wide legalization of cannabis, and maintains fairly comprehensive information on federal law and legal issues on a state-by-state basis.

Consider Hiring A Lawyer

Even then – a website can only tell you so much; hiring a local lawyer who specializes in cannabis industry law for your state will eventually be a necessity, as you will need someone who can effectively navigate the paperwork and other forms of red tape that will be required of your business. The NORML website linked above has a section devoted to finding a local lawyer and can be an excellent starting point for finding legal aid in your area.

Dispensary Licenses, Fees and Taxes

Budtender weighing weed from a glass container

Related to the above topic all legalized states have some fashion of licensing requirements that you’ll need to meet before you can open a cannabis product store. Much like when opening a bar a failure to procure a dispensary license will likely result in jail time, heavy fines, seizure of assets and many other such unpleasantries, so make sure you’re confident in your compliance with local laws – Again, this is where it’s important to keep a cannabis-specialized lawyer on retainer.

Start with a Business Plan

Several states, such as in Missouri and in Michigan, will also require a business plan to be submitted to the state regulatory board. A small business plan for a dispensary entails answering several key questions about your planned business, it’s expected sales, it’s clients, and it’s overall mission statement (IE: medical marijuana or recreational). Writing a thorough business plan for a small retail store is, to be honest, not the most exciting or glamorous work – It requires a solid framework and excellent writing skills, and should be steeped in knowledge of both local laws and culture. Even if not required by the state writing a business plan such as this is a good exercise for any business owner, and we recommend asking your legal representation for more advice if you’re unsure of where to start.

License Applications

When applying for licenses expect your associated application fee to be hefty, as many states have several different licensing requirements not just for cannabis-specific businesses but for small businesses in general. Be prepared to show a significant amount of bankroll before receiving your dispensary license; there’s a different requirement for startup capital for each individual state but most are in excess of $100,000 (such as $150k in Pennsylvania or $250k in Nevada) and you’ll need to show that you have this cash on-hand and liquid before these states will even entertain offering you a license.

Don’t Forget About Taxes

On top of licensing fees, which often require renewal, expect your marijuana dispensary to run into very hefty taxation. Again, the US Federal Government does not recognize marijuana as anything other than a Schedule One narcotic (the highest/most dangerous rating of narcotic), meaning it does not recognize businesses operating as dispensaries in legalized states, and all the usual operating expense claims a small business could make on their federal taxes no longer apply. Though owning your own marijuana dispensary can be lucrative if you make it big, a poorly run dispensary with no clientele can quickly sink the owner into massive amounts of tax debt.

Choosing a Dispensary Location

If you’ve managed to navigate the field of legal landmines above and are ready to open your own dispensary one of the most important choices you can make is location. Many states have zoning regulations on where marijuana dispensaries can be located, and laws barring cannabis sales within a certain radius of school buildings or other public locations are common. Real estate agents are very well aware of where these areas are, and locations close to border areas will be more expensive than others; if your state laws say a dispensary cannot be located within 500 feet of a school expect properties 520 feet away from said school to be sky high in rent.

map of denver dispensaries

If possible look for a location that faces a major street and has easy parking access; anything off of a side road will be cheaper but can be more difficult to draw attention to, particularly if you have already-established competition in the area.

Marketing Your Dispensary

Getting the word out about your new dispensary can be tricky, and it can be made even trickier by local laws restricting what forms of advertising specific businesses can engage in. Some states restrict marijuana dispensaries from using television or billboard advertising, while some states restrict advertising on the radio or in local newspapers.

Social Media Marketing

Even without traditional marketing social media can work wonders for spreading news about your business. Twitter promotions and Facebook advertising campaigns are fairly standard; we also recommend gathering email addresses from your clientele at the point of sale and sending out email reminders of promotional offers in-store, as email has a fairly high rate of customer engagement. Text message campaigns are also viable but can be seen as intrusive by the client, so run at your own risk.

Consider Hiring Help

professional at desk

If planning on using social media as your main marketing ploy it can be worth it to hire a social media strategist; tempting as it may be to tweet all day, paying someone who knows the ins-and-outs of engagement and brand management can take a load off your own shoulders and see better returns than just doing it yourself. A good social media manager will be sharp, quick on their feet, and capable of not just responding to but positively engaging with potential customers, freeing you up to spend more time dealing with the day-to-day needs of the store.

Curb Appeal

Signage will be important to draw in new customers but, again, states may have specific laws on what sorts of iconography and language can be used on a storefront (IE: no cannabis leaves, no images of a lit joint, etc) so make sure to check before you find yourself out of state compliance and hit with fees.

Dispensary Compliance & Store Inventory

You’ve got your dispensary license, you’ve got your location, people are beating down your door to buy your product…. but what is that, exactly? Obviously you’re going to be focusing on cannabis-related products but what type? Are you a high-end bud store? Concentrate-focused? Purely medical marijuana? All of the above?

Consider Specializing in One Area

Though the temptation can be to serve as an all-in-one outlet specialization can be a good thing, particularly if settling in an area with a lot of competition. If opening up in an location that already has, say, seven other general-purpose dispensaries, starting a medical marijuana dispensary that purely focuses on high-quality concentrates can not only bring you a different type of client base from your competition but it’s more likely to leech away some of their established customers as well.

dried cannabis in a pile

Stocking Products

After you’ve settled on exactly what sort of marijuana dispensary you want to be you’ll need to start filling your shelves with product. Though each state has it’s own regulations on the matter finding wholesale outfits for retail cannabis locations isn’t difficult, often requiring little more than a google search for “Wholesale retail marijuana (insert your state here)”. Setting up a vendor account usually requires proof of being licensed and may take several days to complete but once you’re verified and in the system you’re free to order as much marijuana & related products as your bank account (or local laws) will allow.

Network & Make Connections!

We also recommend getting to know the growers and producers in your own local area – Keep an eye out for cannabis industry trade shows, conferences and other events in your area that can let you rub elbows and get to know others in the business. Not only is this just a good way to share information and learn it can also be a great method for getting new and unique products into your store, sometimes even exclusively or at a discount. The power of getting to know people should never be discounted, and the more contacts you can make in the local area the better you’ll be.

Compliance & Inventory Tracking

Some states require dispensaries to utilize a product tracking & inventory system as well, with logs of items purchased and sold tracked to ensure compliance with state laws. The “Marijuana Enforcement Tracking Reporting Compliance” system (AKA: METRC) is one such popular tracking system used across many states, and software such as this may be a virtual requirement depending on your dispensary’s location. Learning how to interface with this and similar software will likely be a must as a new dispensary owner.

metrc logo

Our Final Tips

We said at the start that if you choose to open a marijuana dispensary it can be fun but that doesn’t mean it isn’t hard work, and anyone who thinks that running a cannabis retail business is a way to make a quick & easy buck is sorely mistaken. Start to finish, from finding a location to getting your licenses to opening your doors, you can probably expect a minimum time investment of six months, likely closer to a year before you can begin selling product. And that’s assuming you even get to open your doors in the first place.

Don’t Get Discouraged

Even though attitudes have improved that doesn’t mean you may not face push back both locally and legally, which can destroy all of the effort you’ve put into opening your location. Marijuana dispensary stores are still seen as “immoral” in the eyes of some – Particularly in conservative states such as in Texas or in Florida (where opening a dispensary is difficult in the first place) there are those that may be so offended by your presence they will seek to ruin your business. Any open dispensary can be a target by the outraged, even a medical marijuana dispensary, so making sure you have all of your ducks in a row is important, and this is one of the reasons we say a lawyer is mandatory when opening a dispensary; if someone from the local Moral Citizens Squad decides to crusade against your perfectly legal business having a lawyer on call will save you a lot of time and headaches.

Time to Start!

Again, don’t think that opening your own marijuana dispensary is going to be an easy job – Expect long hours and the usual blood/sweat/tears combo that comes with anyone opening their own business. But as any successful dispensary owner will tell you, there’s no other business quite the same, and the rewards are pretty self-evident. We hope our guide on how to open a dispensary has given you the knowledge you need to get out there and open your own location. Just remember: Patience, knowledge, and a lot of cash will see you through. Best of luck!

dried cannabis at a dispensary

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