Opening a California dispensary has never been more promising, with the state being a pioneer in cannabis legalization. California is home to one of the fastest-growing cannabis markets in the country with plenty of opportunities for investors. As of 2022, the state’s legal cannabis market was valued at $2.2 billion and is expected to grow at a 12.2% rate between 2023 to 2030. This means that by 2030, it’s estimated to be valued at a whopping $5.4 billion!
After the legalization of medical marijuana in 1996, it took the state of California another 22 years until it was legal for recreational use. The first recreational dispensaries began opening their doors in January 2018. Fast forward to today, there are currently about 1,000 legal dispensaries for its 40 million residents, which still leaves many areas underserved.
If you’re thinking about opening a California dispensary, you’ve come to the right place. In this guide, we’ll be exploring different aspects of opening up a dispensary in the Golden State, from cannabis laws to zoning requirements. Without further ado, let’s get into it.
Overview of 2023 California Cannabis Laws
Before diving into opening a dispensary, it’s important to familiarize yourself with the cannabis laws in California. Depending on whether you’re an individual consuming cannabis or a business selling it, the laws can affect you in different ways. Below, we’ve listed the basic laws that a potential California dispensary owner should know.
Cannabis Laws Affecting Individuals:
- Adults aged 21 or over can consume cannabis for recreational use
- The maximum amount that can be purchased in a day is one ounce (28.5 grams) of cannabis flower and up to eight grams of cannabis concentrates
- It’s illegal to consume cannabis in public places and within 1,000 feet of schools, daycare centers, and youth centers
- Individuals who are of age are allowed to grow cannabis at home for personal use up to a maximum of six plants per household (this can be dependent on the municipality)
- It’s illegal to drive under the influence of cannabis
- It’s illegal to bring cannabis purchased in California into another state even if it’s legal in the state you’re going to
Cannabis Laws Affecting Businesses:
- A license is required for all commercial cannabis activities
- Cannabis is subject to laboratory testing for potency, contaminants, and other factors prior to sale
- All cannabis products have to be labeled and packaged according to the requirements set by the California Department of Public Health (CDPH)
- Businesses that have a commercial cannabis license are required to use California’s track-and-trace system
- Cannabis-specific employment laws must be followed, such as a minimum age requirement, certifications and training, and employee background checks
Check out our labor law checklist for California dispensary owners.
Keep in mind that laws may vary depending on what municipality your business is in. Since cannabis is still a very highly regulated industry in both California and the United States, dispensary owners need to stay up-to-date on local cannabis laws to stay compliant and out of trouble.
Is a California Dispensary Profitable?
A typical dispensary in the US has an average profit margin of 15-20% or even higher for newly legalized markets. Considering that California is a relatively well-established market, the estimated long-term profit margin for a dispensary here is about 12%. Taking into account the gross revenue for a dispensary in the US ranging from $2.1 to $3 million annually, dispensary profits still tend to hit well into the six figures. Using a conservative estimate of $2.1 million gross revenue, a California dispensary can make a profit of $252,000 per year.
As for dispensary owners, their average salary can range anywhere between $250,000 to $500,000 per year depending on the profit margins and gross revenue. Most owners pay themselves a salary of about 10% of the annual gross revenue.
How to Open a Dispensary in California in 2023
Just like any other business venture, there are many different factors to consider before opening a California dispensary. If you’re still in the beginning stages, the California Secretary of State has a simple guide available on how to start a cannabis business entity to give you an idea of where to start.
Generally, the biggest barrier to entry for dispensaries is obtaining a cannabis license since it requires a thoroughly written application and sometimes a lengthy waiting period.
Before even starting an application, some factors to consider are:
- Whether your jurisdiction has a merit-based or lottery-based application process
- Securing a location for your dispensary and the cost of real estate in California
- Sourcing funding for your cannabis business venture
- Getting experienced people on your team to help you craft your application
If you’re already at the application writing stage of your dispensary journey, we’ve created an in-depth guide on how to write a winning cannabis licensing application to help you navigate the process.
How Much Does a California Dispensary License Cost?
The cost of a cannabis license in California varies depending on what type of license you need for your business. Typically, a dispensary only selling cannabis products to consumers will need a retail license. However, if your business grows, processes, and sells cannabis on the premises, a microbusiness license is required rather than a retail license. Since most dispensaries only sell cannabis products, for simplicity, we’ve listed the fees of a retail license below.
Application Fee: $1,000 regardless of gross annual revenue
License Fee: Ranges between $2,500 to $96,000 depending on gross annual revenue
How Much Capital Do I Need to Open a California Cannabis Dispensary?
Depending on the location and size, on average it costs anywhere between $80,000 to $250,000 to open a dispensary in California. Finding sufficient funding and being realistic with your budget will help you to ensure you have enough to finish your project.
What Are the Security Requirements for a California Dispensary?
Cannabis businesses face unique security challenges, and most jurisdictions in California require dispensaries to have a security plan in place. The security plan should cover security measures to keep staff and customers safe, as well as precautions for the safe transportation and disposal of cannabis. Each jurisdiction will have its own requirements for an adequate security plan, so ensure you’re familiar with the rules to stay compliant.
What Are the Zoning Laws and Real Estate Requirements for Dispensaries in California?
Currently in California, 482 cities and 58 counties in the state have been given autonomy in regulating commercial cannabis land use and zoning. This means that in addition to state laws, dispensary owners must comply with local laws as well, which can vary.
California state law only requires cannabis businesses to:
- Be located further than 600 feet from any school
- Have a location that’s in a fully enclosed building
- Provide a neighborhood responsibility plan
Considering the highly regulated nature of the cannabis industry and the cost of real estate in California, it’s a necessity to be aware of all the land use and zoning laws in place prior to securing a location.
Final Thoughts on Opening a California Dispensary in 2023
Owning a cannabis dispensary in California can be a profitable business venture. However, just like any other new business, it may take some time to gain traction with your local market. Patience is key since it could take anywhere between 2 to 5 years from ideation to operations when it comes to starting a dispensary. Although it may seem like a daunting challenge at first, it’s possible to create a successful business with the right tools and mindset.
As a business owner, sometimes it can feel like there’s a never-ending to-do list. Consider using an all-in-one people operating system like KayaPush to take some tasks off your plate. From payroll, time tracking, recruiting, and more, KayaPush is designed specifically for cannabis businesses. Book a demo with us to learn how we can help!
