If you are looking to open a dispensary, you’re going to need a retail store from which to sell your cannabis products. This means entering the complex world of retail, so you’re going to have to get involved in activities like location scouting and leasing, shop-fitting, and visual merchandising.
However, even before you look at a specific location or schedule site visits, you first need to ensure that cannabis retail and dispensary licenses are being issued in your state. As we mentioned in a previous chapter, many states have a mandatory limit on the number of available retail licenses and thus the number of cannabis dispensaries allowed into their jurisdiction. In addition, other states will only review new applications for dispensaries during specified pre-determined time windows.
If you have finished with the research into getting a license and know where to—or not to—set up your cannabis dispensary, you can start looking for the ideal location for your cannabis dispensary. We have prepared some tips for you to follow to ensure that you find the right location for your dispensary.
Finding the right location for your dispensary is one of the most challenging tasks of setting up a cannabis dispensary. This is because of each jurisdiction’s regulations that govern where one can—and can not—open a dispensary. Furthermore, because cannabis dispensaries are a relatively new enterprise in most cities, there are no established locations that customers associate with the cannabis product. Therefore you cannot do what many entrepreneurs do—simply look for a location that consumers have grown to associate with your product. For instance, banks will often rent locations that were previously leased to other banks, or in the CBD, because that's where consumers know to go when they need a bank. Unfortunately, because the cannabis industry doesn't have such legacy spots in cities and towns, you will have to take more care in choosing a location because, if you don’t, you may not get the customer traffic that you need for your business to be a success.
To help you with this challenging process, we have prepared a guide with four easy steps below to help you situate your cannabis dispensary in the right location.
Even though cannabis might be legal in your state, that doesn't mean that it is legal to operate a cannabis dispensary where you live or plan to set up. Different jurisdictions have different criteria for deciding where—and where not—to site a cannabis dispensary.
To find out which municipalities, towns, and cities within your state you are allowed to open a cannabis dispensary, you should consult your state's legislature and your municipality and town ordinances. It would also help to check with a property/real estate agency for more guidance on the legality of your intended location. Furthermore, a simple call to your state’s cannabis regulatory agency should reveal whether applying for a retail license is even an option for you at this time.
Once you have confirmed that there are licenses available in your jurisdiction and have done the necessary research to identify a potential location, the next thing you need to do is to learn about your local zoning code.
While cannabis dispensaries might be legal in your state and municipality, they aren't necessarily legal in every zoning area. Therefore, you need to study the zoning code to identify which lots available for leasing would qualify for a cannabis dispensary and which ones don't. In addition, many states have restrictions against opening cannabis dispensaries within proximity of certain establishments like schools, addiction rehabilitation facilities, and hospitals.
For instance, Missouri’s medical cannabis law dictates that dispensaries may not be set up within a thousand feet of an elementary or secondary school, a daycare, or a church. In Michigan, cannabis dispensaries are not allowed to open in zones exclusively for residence. Michigan also doesn’t allow cannabis dispensaries within a thousand feet of a school.
As you can see, each state has its zoning code with its unique set of rules regarding where you may set up a cannabis dispensary. Check with your local area's zoning department for the zoning code and more information about your specific jurisdiction.
Once you have integrated the zoning department’s laws into your search for a location, you will narrow your search down to a few locations. The next step is to find which of the available locations would make for a successful cannabis dispensary. This means that you match your target consumer profile with the expected traffic in that location.
For instance, is that location on the way to or from work for your target market? Is there a subway station or significant transportation hub like a train station around your chosen location? This kind of infrastructure could lead to high foot traffic in and around your dispensary, which could mean a lot of sales for you.
Finally, when doing market research for your possible location, one of the things to consider is the sentiment of the surrounding community towards cannabis and cannabis retail. The last thing you want is for your business to be picketed by the locals in the area, which could kill your brand.
Unless you plan to buy a building to set up your dispensary, you will need to lease a property. This means that you will have a landlord whom you need to make sure is okay with operating a cannabis dispensary on their property.
Even though cannabis retail may be considered legal in your area, you still need to consult your potential landlord to find out if they are okay with it. Some landlords may be nervous about losing tenants or foot traffic from families to their location because of your enterprise. Others will be concerned about the lack of federal guidance on how to lease to a cannabis dispensary. Because cannabis is not legal at a federal level, some landlords will be concerned about the enforceability of the lease agreement signed with you and any liability they would take on by leasing to you. You should acknowledge those concerns and work together to mitigate them before signing the lease agreement.
Once you have zeroed in on a handful of locations that meet your search criteria, then the next step is to choose one and apply for a lease on it. Of course, the process of leasing a location will go differently based on where in North America you are.
For instance, in Canada, medical cannabis dispensaries in most provinces are only allowed to operate online. As a result, operators of those dispensaries are not required to set up stores in most locations but rather get registered as growers in a province and start shipping products to patients with qualifying conditions directly via mail. This saves medical dispensaries in Canada from the hustle of scouting a location and applying for a lease.
On the other hand, recreational cannabis dispensaries can set up physical stores in Canada, provided they follow certain federal and provincial regulations. Some of the federal regulations they have to follow include:
In addition to those federal restrictions that dispensary operators have to follow, they are prohibited from promoting and marketing their products and accessories like bongs, water pipes, and vaporizers anywhere other than within the store.
Furthermore, a recreational cannabis dispensary operator must adhere to certain rules concerning the location before they can get approved for a license. Some of the restrictions on the location include:
For more information on the real estate regulations for cannabis dispensaries to follow, look at this Guide for landlords that want to lease to non-medical cannabis dispensaries.
As complicated as the regulations in Canada seem, they are relatively straightforward compared to the rules and regulations to follow to secure a lease for a cannabis dispensary in the United States. It is not that the rules in the United States are more complicated—they just aren’t clear.
Because of the disconnect between state and federal law regarding cannabis retail in most states in America, there are no clear federal guidelines for landlords or tenants to follow when getting into a lease agreement. Most of the rules are determined by the state in which the dispensary is located.
However, while there is a grey area regarding the legality of leasing to a cannabis dispensary, many landlords with mortgages will not be able to lease to cannabis dispensaries. This is because borrowers from banks are not allowed to have any illegal activity happening on their premises. Therefore you need to find out if there is a mortgage on the property or if the owner will likely mortgage the property during the contracted leaseterm.
Suppose the property is not under mortgage and the landlord is comfortable leasing to you. In that case, there are still some aspects of your agreement that you need to decide on together because the standard operating procedures might not work for a cannabis business. These include:
Rent Payment: The landlord’s bank might be uncomfortable receiving cash from the landlord on behalf of a federally illegal business.
Rent Computation: Most commercial lease fees are either fixed or a percentage of the business revenue. This wouldn’t be an option for a cannabis dispensary as the landlord might be perceived to have a stake in the business and thus be liable for certain things.
Designing your cannabis dispensary can be difficult because of the various tastes and preferences that your clients are going to have. However, regardless of the style, design, and layout you choose, three fundamental goals need to be achieved in order for your dispensary to succeed and to qualify for the appropriate dispensary location permits. These three goals are:
One of the main things that will get customers into your door and keep them coming back is the customer experience you design for them. You can control a lot about the customer experience with various layout designs and setups.
For instance, if you are targeting customers in a hurry, including an express checkout lane conveniently close to the shelves with your top-selling products will help them save time and come back on the next occasion they need to pick up something in a hurry. On the other hand, if you target a slower, more curious, and inquisitive demographic, perhaps you can consider including comfortable lounge-style seats and a well-annotated product menu.
Some of the other features in your dispensary that you could tweak to help your customers have a more wholesome and positive experience in your store include:
While it is essential to make sure that your dispensary is set up to attract your target market, you should keep in mind that your customers will have different desires. So it is important to try and accommodate as many of them as possible.