How do you get started opening your dream dispensary?
In this episode of the Kaya Cast Podcast we discuss some of the basics in opening a dispensary including costs, franchising and more. We also share insights into how much money you can make as a dispensary owner.
Plus, we dive into software solutions to help you launch and grow your thriving cannabis retail store.
Maria McCliggott: first I have to ask you, Tom, have you ever jumped about starting your own small.
Tom Mulhern: I have actually, I would love to start a coffee shop, somewhere in the woods. I would include maybe some fly fishing gear in there and maybe a stage where people could do concerts. What about you? Have you ever thought of doing any sort of business? I think I'd
Maria McCliggott: have always thought I'd be really good at running a retail.
Tom Mulhern: what type of retail store would you have? I think maybe
Maria McCliggott: clothing, but maybe some cool little home goods as well.
Tom Mulhern: Maybe your dream is to start a cannabis retail shop or a dispensary, but you're not sure where to start. Stick around cuz today's episode is all about that. All about starting a dispensary, what a dispensary is and how much it costs to open a dispensary and even some tools and tricks to help you.
On your journey of opening a dispensary.
Maria McCliggott: So before we really jump into this conversation, we probably need to answer a big question here. What is a dispensary?
Tom Mulhern: So basically a dispensary is a place that sells marijuana or cannabis products for medical or recreational purpose.
Maria McCliggott: cannabis has really become this major player in the healthcare system. It's got an ever growing support for the legalization and investors and manufacturers are waking up to the opportunities that this is bringing
Tom Mulhern: Cannabis is still. Illegal under federal law in the United States, but it's been legalized in 35 states with really more on the way more states legalizing marijuana make marijuana and cannabis use.
And cannabis has been legal in Canada since 2018. We're well on our path to legalization across the world and. We're just starting.
Maria McCliggott: California was actually the first to make the drug legal in 1996. So people have obviously known how much money that this is gonna bring for a long time.
Now. So thousands of dispensaries have opened across the country and they're offering cannabis for sale, both for recreational and medical purpose.
Tom Mulhern: And I grew up in Colorado and Colorado as a proud Coloradoan Colorado has the largest number of marijuana dispensaries in the United States.
So it sees easy to see why there's such a high interest in marijuana and dispensary businesses.
Maria McCliggott: Dispensary owners are really becoming those community educators. And they're telling people about the benefits of using cannabis, especially for medical and health related issues.
Tom Mulhern: So now that we know what a dispensary is, we need to look at how much profit does a dispensary actually make.
Maria McCliggott: So an estimate's actually putting the profit after tax at 12% with over 90% of dispensaries reporting. Good to great revenue. Looking
Tom Mulhern: at the global cannabis market. It's projected to grow from 28 billion in 2021 to over 197 billion in 2028 within compound annual growth rate of 32%. A lot of money to be made there.
Maria McCliggott: Lots of money, but there's business costs to consider as well. So if you're opening a dispensary, you have to consider your size and location there's taxes, pricing of your actual product, daily transactions, all those operating costs.
Tom Mulhern: Yeah. There's so many costs in running a business, whether it's a retail store or a coffee shop or a cannabis retail.
And on average, the cost of operating a dispensary can be between 200,000 and 1 million. Now this cost is obviously dependent on the size of the business outlet, but there's a lot of costs that are involved in running a dispensary.
Maria McCliggott: Application and licensing alone can be as high as $200,000.
Tom Mulhern: There's other specialized legalized services. There's day to day operational cost of paying your bud tenders and paying rent and those sort of things. What other things are there that you have to keep in mind?
Maria McCliggott: There's always your POS system, your employee management software payroll.
Tom Mulhern: So really at the end of the day, running a dispensary has costs associated. It just like any other business does, but you have to factor that. With how much a dispensary owner makes. So here's the big, here's the big question, Maria, how much could a dispensary owner make running a profitable business?
Maria McCliggott: So dispensary owners are reporting that on average, they're making $500,000 a year running their dispensary.
Tom Mulhern: That's a lot of money. That's why a lot of investors and entrepreneurs are investing in cannabis. That's why it's such projected to be such a growing industry because there is a lot of money to be made there.
Maria McCliggott: It definitely is. But you have to remember that it's not an easy job. Dispenser owners are occupying that top tier position in the cannabis retail business. So they're in charge of raising all the capital for their business. They have to set up the administration and the management. They're responsible for keeping the business operating smoothly.
There's a lot of tasks involved.
Tom Mulhern: There's a lot of tasks. There's a lot of pressure. There's all of that. But according to MJ, biz daily, There most dispensary owners receive over $500,000, like we said, but a quarter or more are estimated to have revenues of over a million dollars. You gotta balance the stress of running a dispensary with, Hey, there's a chance to make some good money there.
If the weight of starting a dispensary from scratch is too much to bear, there's also the alternative route of acquiring a franchise.
Maria McCliggott: So let's talk a little bit about what a franchise actually is. .
Tom Mulhern: Franchise is set up when a business allows a third party called a franchisee to operate under their brand structure and sell a product or service under the brand's trade name.
Maria McCliggott: So think like businesses such as Wendy's Tim Horton's, those are franchises, right?
Tom Mulhern: Yeah. The franchisee pays the business and initial fee and continues to pay those annual royalties. And a certain percentage of sales to be under that brand. So as a franchise, you get access to the same systems that the large operators are using and you get to run a business with the same name and really that market value of people knowing who you are.
Maria McCliggott: Yeah, that sounds great. So instead of starting from scratch you've already got a brand name that. Recognize there's existing products that people know about, and they're probably gonna help you out with all of your operating standards and marketing as well.
Tom Mulhern: But the downsides are there as well.
Maria, There's fees involved in, like I said, there's fees involved in running a franchise. Sometimes they can be up to a hundred thousand dollars or even a percentage five to 6%. You can't change the brand or the business name. If you wanna go on a whole different route, you can't really do that when you're a franchise as well.
You're forced to use their existing framework for. Managing the teams and systems in place and there's even legal issues if you're in the United States, crossing borders with franchise locations. So it's a pretty big choice that you gotta make between whether you're just gonna go out on your own and start something new, or whether you're gonna, partner with a larger franchise.
Maria McCliggott: So someone is wanting to go out on their own and they're just gonna go for it and open a dispensary, but maybe they're not so good at handling the administrative side of the business. Any options?
Tom Mulhern: There's tons of great softwares out there. There's tons of really great People who will work with you to open your dispensary there's point of sale systems.
And actually one of the, one of the great options out there is Kaya push because it really levels, it levels the playing field when it comes to running a dispensary, cuz it. Gets rid of those really annoying tasks of HR and payroll and onboarding and employee management all in one easy platform. And it's cool, cuz it integrates with a lot of the point of sale systems that as a dispensary owner, you have to put in place.
So Kaya Push is a great option. There's really good software out there for everything you need to really get started. Opening a dispensary.
Maria McCliggott: That sounds awesome. So now that we know how much dispensary owners make, are you rethinking your business idea?
Tom Mulhern: Maybe we'll add some weed and coffee because really they go so well together could always do some weed brownies.
Maria McCliggott: That's right. Maria, thank you so much for taking the time to discuss this huge question that people are asking and. I look forward to having more conversations about this helping business owners in the cannabis industry really get started and do what they love.
Tom Mulhern: And be sure to subscribe and if you have any topics or even ideas, feel free to reach out to Maria or myself, and we'd love to chat with you more on the Kaya Cast podcast.