How to open a Dispensary

You Have a Cannabis Dispensary / Retail License, Now What?

 More than half of the adult population in the U.S. has access to some form of legal cannabis, with multi-billion-dollar cannabis sales in markets across the country. Entrepreneurs who have secured a cannabis dispensary license often benefit from a healthy profit margin, with most marijuana retail operations 75% profitable in the first year of opening.

In order to successfully launch a dispensary, cannabis business owners need to ensure their facility has the resources and corporate foundation to operate compliantly in their state market. 

1. Understand your State Regulations

 Since cannabis isn’t federally legal, each state has a different marijuana program framework that regulates how licensed cannabis businesses operate. For example, some states allow operators to grow, manufacture and sell cannabis goods, while others only allow for one of the three verticals listed above.

Understanding regulatory rules and cannabis compliance is essential to securing a dispensary license and is crucial to passing inspections and receiving Approval to Operate (ATO). Though new license holders may be familiar with state regulations from the application process, it is important to research local rules at the city level. Municipalities and townships can issue their own restrictive cannabis zoning and operational laws. There may also be nuances related to how cannabis is taxed. Depending on where you operate, cannabis products could receive a special recreational sales tax in addition to municipal and state taxes.     

2. Create A Financial Pro-Forma & Raise Capital with Cannabis Investors

Starting a dispensary retail operation requires a strong business plan and liquid capital to execute it. Because cannabis businesses cannot get traditional business loans, many operations are self-funded or raise capital. Typical dispensary operations require $1.5 to $3 million. During the application process, you most likely submitted a dispensary business plan that outlined expenditures and revenue projections. After securing a license, it is important to take this plan to the next level. In order to secure cannabis investors and raise funds, you will need to create a financial pro-forma and cannabis investor pitch deck. These will help illustrate the viability of your business for the long term.

Some important things to consider when creating financial pro-forma is what are some typical recurring expenses or one-time costs for your cannabis dispensary? Other items to build into your financials would be:

  • Research and development of assets
  • Recurring and non-recurring events
  • Effects of tax rate changes
  • Planned or possible disposals of business segments
  • Vendor or customer relationships
  • Technology

Want to learn how to invest in cannabis? Visit our Cannabis Investments page.

3. Establish Your Corporate Structure / Legal Paperwork

 One of the first tasks as a dispensary license holder is establishing your business as a legal entity in your state of operation. How you incorporate your cannabis retail establishment may depend on whether you will be operating under a medical marijuana or adult-use license.

In some states, medical marijuana dispensaries must incorporate as a non-profit, while recreational licensees can exist as a for-profit or non-profit. Though there are tax benefits to running a cannabis dispensary as a non-profit, there are extra regulations for these business entities requiring extensive paperwork and additional administrative costs.

No matter how you decide to incorporate your cannabis retail operation, it is important to register with both your state and federal tax authorities. Here are some different types of corporate business structures to consider for your marijuana dispensary. 

  • Sole proprietorship (Individual)
  • Corporation
  • Non-profit Corporation
  • Partnership
  • Limited Liability Company (LLC)
  • Association or Cooperative
  • Joint Venture

4. Design Your Brand Voice, Look, and Feel

 What do you want your dispensary to be known for? Are you planning on creating a chain of dispensaries or to be a local neighborhood joint that looks and feels like the rest of the community? Establish your brand to help you attract customers and investors. Avoid using pot leaves and green to differentiate yourself and ensure you are designing a logo that won’t be a problem for regulators as many of the State regulations prohibit design elements that include cannabis leaves, look like a state insignia or could appeal to children.

5. Secure Your Real Estate and Interior Design Concept

 During the licensing process, most applicants will need to show proof of ownership for a qualified dispensary space or a lease agreement. What constitutes a qualified commercial property is dependent upon local zoning laws and state regulations. It is important to understand the financial obligations that come with investing in real estate before securing a cannabis license, since application pools are highly competitive. If you still haven’t entered into a lease agreement or purchase contract after winning a retail license, this will be one of your first steps in the real estate process.

In cannabis, location still reigns supreme when choosing a property for your operation, but there are some additional logistics to consider. Your dispensary business needs to have an eligible population base with easy accessibility and close to major routes or highways. Adequate parking and street visibility should also be high on the list of must-haves. You will also want to consider how close your location is to other dispensaries.

6. Select Vendors & Team

Without the right team in place, it’s hard to build a successful business. Ensure you select vendor partners who share your values and meet the needs of your consumer or patient base. When starting a cannabis dispensary operation, there are several must-hire team roles such as: 

  • General Manager
  • Sales Associates, Patient Assistants, or Budtenders
  • Inventory Manager
  • Receptionists
  • Security Personnel
  • Compliance Manager

Other team members or contractors that are important to consider for your dispensary team are industry consultants who can help build out your operational plans, policies, and procedures, as well as a marketing manager and brand ambassadors. You may also want to consider working with a third-party cannabis delivery vendor depending on your state program rules and requirements. 

7. Execute Upon Operational Tasks

After solidifying your real estate, financial plans, and corporate structure, you will need to experts to help you make your dispensary business a reality. These may include interior designers, general contractors, and industry veterans who understand your market and vendor opportunities. Additionally, a professionally designed and installed security system is essential and often a requirement. In regard to IT and enterprise resource planning, there are many options to consider for your retail POS, seed to sale systems, and networks. Some platforms are more functionable and specifically tailored to the cannabis industry, so it is important to do your research and find what software offers the best solutions for your needs.

8. Draft Standard Operating Procedures

Standard Operating Procedures (SOPs) are used in all industries and are essential documents to ensure a company is able to deliver its products and services efficiently and in a profitable way. They also provide a standard for how tasks are performed and completed within an organization, and most importantly indicate compliance within sector regulations and operational requirements. 

Overall, SOPs allow the company to run effectively and proficiently so a company can communicate to its employees, provide governance, and translate changes in a streamlined manner. Cannabis, as one of the most highly regulated industries, is a sector where SOPs are necessary from the beginning. As a tool, SOPs help to provide consistency, reduce errors, and improve communication. Cannabis companies that do not have robust SOPs in place open the door for compliance oversight and violations, which could ultimately lead to an operation being shut down or having to pay heavy fines. Here are some of the essential procedures that should be established for dispensary SOPs:

  • New Hiring Procedures
  • Opening and Closing Responsibilities
  • Inventory Management
  • Delivery Protocols
  • Security Procedures
  • Cash and POS Management
  • Quality Assurance
  • Product Recall Procedures
  • Crisis Management Protocol
  • Customer Check-In and Experience

9. Plan a Grand Opening Party

Grand opening celebrations are a great way in any industry to boost retail traffic and build brand awareness. Depending on your state of operation, there may be limits on marketing and advertising for dispensaries. Some programs require that the name and license number of the cannabis retail establishment must be visible in all ads, in many markets there are stipulations that prohibit marketing images and messaging that would appeal to individuals under 21.

Here are some activations to consider when promoting your new cannabis dispensary with a grand opening event:

  • Branded swag giveaways
  • Promotional product deals
  • Educational workshops
  • On-site vendor demonstrations
  • Fundraiser or community partnership