There is a growing interest among entrepreneurs in how to open a dispensary following the growing wave of legalization for both medicinal and recreational cannabis.
With medical cannabis undergoing widespread legalization, both investors and entrepreneurs are clamoring to be the first to establish themselves in this exciting infant industry. However, going first is not always best.
There are various issues that you have to consider before you decide to open a dispensary. Cannabis is a highly regulated substance—even in states where it has been legalized. There are many legal factors that you have to consider before you decide to open a dispensary. What are the laws regarding opening dispensaries in your state or province? What are the required licenses and permits for a dispensary in your location? These are just a few of the legal assessments you have to make before you decide to open a dispensary.
However, legal requirements are not the only hurdles you have to overcome before opening a dispensary. Given that a dispensary is also a commercial business, you also have to consider the business side of the venture. This means you have to prepare a business plan, put a team together, find suppliers, raise capital, pick a location and design a marketing strategy. These are just a few of the things you have to think about and plan for before opening a cannabis dispensary in your area.
Just because the cannabis industry is new and exciting, it doesn't mean that it is exempt from the rules of operating a successful business. This is why you have to be methodical about the process of opening your dispensary. You have to be ready to do the necessary research and check off all the boxes. You should also consider what you might look for in other hires, and ask yourself the same things.
We have prepared a comprehensive guide to help keep you on track as you embark on this exciting journey—starting with a detailed list of things you need to consider before you open a dispensary, let’s begin!
Much like any other business, you must have a passion for the cannabis business before you venture into opening a dispensary. It will feel like a heavy burden if you are simply trying to profit from a new industry without a passion for running your own cannabis dispensary.
As you will discover in this guide, it is hard work to start a cannabis dispensary. It will take a lot of time, resources, and commitment to see it through conception to success. You will be more prepared for the long haul if the cannabis business is your passion. Many early birds in the industry are suffering from severe attrition because they thought it was going to be a get-rich-quick scheme.
The cannabis industry is no different from any other industry. You have to work hard, be smart, and have a bit of luck to be successful. Because it is still early days for the cannabis industry, it is probably harder to start a cannabis dispensary than a business in an established industry with well-known rules and regulations and an experienced investor base. So it is important that you are sure that it is your passion before you invest your time, money, and social capital into it.
When considering opening a cannabis dispensary in either Canada or the United States, choosing the location you wish to set up in is key. The state or province you live in will determine whether or not you are legally permitted to open a cannabis dispensary and the unique requirements and licenses for you to open one. For example, thirty-six out of the fifty US states allow medical use of cannabis.
Because cannabis is a Schedule 1 controlled substance that is not allowed for medical or recreational consumption by the United States federal government, there is no universal federal legislation overseeing its production and sale. As a result, the responsibility to decide these things has been left to the legislatures within the states. In some states like California, each city has the right to make its laws. Less than a third of all the cities in California allow medical-use cannabis business within their borders.
This decentralized approach has resulted in different laws, requirements, and licenses for each state or city. Each state has its own licenses and requirements for applying for them.s. The states also control how much THC or CBD is in the cannabis that dispensaries can sell to their customers. The states also regulate what cannabis derivatives can and cannot be traded. An excellent example of this is the recent ban on Delta-8 THC by many states, including Colorado, which allow both medical and recreational consumption of cannabis. This is why the location where you intend to open your cannabis dispensary is essential.
It is crucial that you take your experience in the cannabis industry into account before you decide to open a dispensary. Have you ever worked for a cannabis dispensary or retailer? Are you familiar with the ins and outs of the trade? If not, are any of your partners experienced in the cannabis retail industry? While it is not impossible to run a successful cannabis dispensary without any prior experience in the cannabis industry, there is a steep learning curve ahead if you find yourself in that situation. The best thing to do is to surround yourself with a team of experienced partners that can bridge the knowledge gap and share best practices with you.
If you have prior experience in the industry, then make sure you identify ways to leverage that experience to create a better product, brand, and business model for your dispensary.
If you don't have any prior experience in the cannabis industry, then the next best alternative is some experience in retail. Because dispensaries are retail outlets for medical marijuana, the basic rules of retail are mostly the same, and best practices can be carried over from retail to running your own cannabis dispensary.
This crossover between operating a dispensary and a mainstream retail outlet means that those with retail experience are better suited to handle the demands of running a cannabis dispensary. For example, if you have experience in sales and marketing, then you can deploy your tried and tested lead generation tools and strategies, as well as lead conversion, to generate sales from your leads.
To continue the example above, you are also better equipped at identifying your target market and the best platforms for implementing your marketing materials. All these skills from retail would be relevant to running a dispensary, so it is better if you have some prior experience working in or managing a department in a retail business.
Starting a new business can be a very capital-intensive process, regardless of the industry you are in. However, starting a cannabis business is even more capital-demanding than most. Due to the high level of regulation governing cannabis retail, there are many expensive licenses and permits that cannabis entrepreneurs have to acquire before even setting up. This high cost of entry into the industry means that you have to raise capital very quickly and creatively.
Because cannabis business is not legal on a federal level in the United States, cannabis businesses like dispensaries cannot access financing from mainstream lenders like banks and other financial institutions. Financial institutions are not allowed to finance companies that are not legal under federal law. While the SAFE Banking Act seems set to change that, it will take time before state regulations and financial service providers adjust to doing business with the emerging cannabis industry.
As a result of this limited access to structured financing from banks, many dispensaries and other cannabis businesses have opted to sell equity to raise the necessary capital. The bottom line is that you have to be able to raise capital before you open a cannabis dispensary—otherwise your dispensary's chances of survival are very low.
Just because your state and city allow cannabis dispensaries to open up doesn’t mean that you automatically qualify for a license. It is crucial that you determine whether or not you are eligible for a license in your area before you incur any significant expenses on behalf of your dispensary.
There are no universal criteria for either awarding or rejecting an application for a license. Every state and local government has its own set of requirements and 'red flags' that will automatically get an application rejected. For most states and provinces, the applicant for the license has to be a legal resident of the state or province they are applying for a license in. The applicant must also have a clean criminal record.
In British Columbia, any involvement with organized crime is considered a red flag that will earn an applicant an automatic rejection. In Washington, the state also requires a background check for the spouse of an applicant. Should the applicant's spouse be found with a criminal record, this would disqualify the applicant from being considered for a dispensary license. This is why it is imperative that you make sure you are eligible to apply for a license in your area before making any substantial commitments.
One of the trickiest aspects of opening a dispensary is finding the right location. There are two significant constraints when choosing a location for your dispensary: finding a location with enough passing traffic and finding one that is in the right zoning area for a cannabis business.
While most businesses like restaurants, clothing stores, and pharmacies are primarily concerned with finding a location with enough traffic, cannabis dispensaries also have to comply with the state or city’s zoning laws. Many states have specific zones that cannabis businesses are prohibited from setting up in—for example, zones close to schools.
In Alberta, cannabis dispensaries are not allowed within one hundred meters of a healthcare facility, a school, or a school reserve. This is to avoid school children having easy access to cannabis. In California, cannabis stores cannot be located within six hundred feet of a school, daycare center, or youth center.
Besides zoning issues, there are also issues with some landlords refusing to lease to cannabis businesses due to the unique challenges of having a cannabis business as a tenant. Because cannabis business is illegal under federal law, many commercial landlords can’t afford to take the risk of leasing to cannabis businesses.
This is because leasing to a federally illegal business would violate several provisions in the standard lease contract—provisions like permitted use, compliance with the law, licensing, and inventory insurance would all be hard to enforce against a cannabis business such as a dispensary.
Starting a business in any industry always involves a certain level of risk. Every entrepreneur knows that there can be no profit without incurring some risk. Risk is a core part of doing business since it is the willingness to take on the risk that earns the entrepreneur the return on their investment. However, there are several reasons why cannabis businesses are a lot riskier than the average business.
Firstly, the cannabis industry finds it disproportionately harder to raise capital and access financial services than other industries. This makes cannabis businesses high-risk ventures that are doomed to fail unless they can keep raising capital.
Secondly, the cannabis industry still faces an uncertain legal future as politicians in every state contend with the question of whether to legalize cannabis or not. In these uncertain times, it is not unheard of for a cannabis product that was once considered legal to be banned, as has happened with Delta-8 THC. Many entrepreneurs and investors who had invested in Delta-8 THC products and brands have incurred tremendous losses due to its ban.
Given this high volatility in the industry, you need to accurately assess your risk appetite and comfort before deciding to open a dispensary. While the promise of a high return is alluring, the risk of suffering a heavy loss is also high, and you have to be prepared for that eventuality as well.
If after all of this, all signs point to go, then congratulations, your journey to take a step into the cannabis industry has begun, now it’s time to consider the first hurdle many cannabusiness owners have to overcome - laws and licensing.
The medical cannabis industry is very highly regulated—moreover, cannabis laws are not universal. Each state has its own laws and regulations regarding the sale of cannabis and it is not uncommon for different cities within one state to have different rules and require different permits and licenses for setting up a dispensary.
Some states will allow cannabis dispensaries to open but with limitations on the variety of products that can be sold. In Minnesota, for instance, marijuana dispensaries are not allowed to sell cannabis for smoking. Medical marijuana in Minnesota can only be consumed as a pill, oil, tincture—any method besides smoking.
Geography affects the types of permits and licenses that you will need to acquire and the kinds of cannabis products you are allowed to offer to clients. Certain jurisdictions have specific laws against certain things like synthetic products. A good example of this is Delta-8 THC, which is getting banned by many states because it doesn't occur naturally. If you want to offer Delta-8 THC to your customers, you have to make sure you are not in a state that has banned it.
As mentioned above, the laws governing the sale of cannabis products near you are based on the whereabouts in North America you live. In some places like California, it is not sufficient to know the laws of the state—you will also need to check the laws of the specific city you are in.
For instance, the laws governing cannabis dispensaries in Pasadena are different from those in Los Angeles. So it is also essential to know the city's ordinances and permit requirements in addition to those required by the state.
The Canadian system is more straightforward than the United States in that regard. Medical cannabis is legal across the entire nation of Canada. Canadian citizens with qualifying conditions can get prescriptions from a licensed doctor and order their medical cannabis online from a licensed dispenser. Medical cannabis dispensaries are not allowed to have stores for walk-in client pickups in Canada. Instead, all transactions must be done online. Here is a list of the licensed medical cannabis producers for each province in Canada.
Before you open a dispensary anywhere in North America, you must understand the different categories of legality across the various states. There are four main categories of legality across the different states that recreational and medical cannabis laws fall under. These are:
In legal terms, if a state permits the use of medical marijuana by its citizens, patients with certification of their qualifying condition from licensed medical practitioners can get medical cannabis from a dispensary in their area. The states that allow citizens to use medical cannabis also allow qualifying individuals and organizations to set up medical marijuana dispensaries with the appropriate licenses and permits.
In a state where cannabis enjoys full legal status, citizens can legally consume medical and recreational cannabis. These states allow both medical and recreational vendors to open and supply both markets, provided they have the correct licenses and permits.
In states where cannabis is illegal, both medical and recreational consumption of cannabis is prohibited. You cannot open a medical marijuana dispensary in such states or even be found in possession of cannabis without facing prosecution.
Let us begin by dispensing with a widespread myth among cannabis lovers. Decriminalization does not equate with legal. Instead, decriminalizing cannabis simply means that if you are found in possession of limited amounts of cannabis, the most you will face is a fine with no possibility of jail time.
As you can see from the breakdown above, it is not as straightforward as whether or not cannabis is legal. Visit this page to find out where your state lies in the various cannabis designations and know whether it is legal for you to own a cannabis dispensary in your area.
As mentioned above, medical marijuana is legal in all the provinces in Canada. However, medical cannabis is only allowed to be sold online to a patient with a qualifying condition and a prescription from a licensed doctor. The patients with a medical marijuana card can apply to a licensed producer and order their medical cannabis online. The product will then be sent by mail to the patient's doorstep.
That being said, many provinces allow retail stores to open for recreational clients and most provinces allow both government and privately owned stores to open. Below is a list of the provinces that allow private dispensaries to open to recreational clients. We have also included a breakdown of what you are allowed to sell and the purchase limit per customer.
In Alberta, privately owned dispensaries can operate and make sales in person to individuals 18 years or older. Online sale of recreational cannabis is only permitted to the government store. Customers are allowed no more than thirty grams of dried cannabis or its equivalent.
Just as in Alberta, privately owned dispensaries for non-medical cannabis are only allowed to sell cannabis in person. Online sales are only approved for government outlets. The legal age is 19, and the legal limit per customer is also thirty grams.
Manitoba differs from Alberta and B.C. in that licensed, privately owned stores can sell both in-person and online. But it shares the legal age of consumption of 19 and the legal limit of thirty grams for each customer.
In this province, privately owned dispensaries are only allowed in-person sales to citizens 19 years or older. The legal limit is thirty grams of dried cannabis or its equivalent.
Ontario permits privately licensed stores to make in-person sales to persons 19 years or older limited to no more than thirty grams of dried cannabis or its equivalent.
Saskatchewan is like Manitoba in that it allows privately licensed retailers to make both in-person and online sales of recreational cannabis to citizens 19 years or older. It also has a legal purchase limit of thirty grams of dried cannabis or its equivalent.
Other provinces like New Brunswick, Nova Scotia, Northwest Territories, and Quebec only allow government-owned entities to sell either in person or online. As a result, no private retailers of recreational cannabis can get licenses in those provinces.
As of June 17th, 2021, 36 states and four territories in the United States permit opening a medical marijuana dispensary. While each state has its rules regarding what is allowed to be sold to patients and in what quantities, the following states all allow some form of medical marijuana to be sold to patients with qualifying medical conditions:
· District of Columbia
· New Hampshire
· New Jersey
· New Mexico
· New York
· North Dakota
· Northern Mariana Islands
· Puerto Rico
· Rhode Island
· U.S. Virgin Islands
· West Virginia
Mississippi and South Dakota both had their legislations to legalize medical cannabis outlawed, and therefore they did not make the list. However, watch this space, as both decisions have been appealed.
The following list shows the States where recreational cannabis is legal for adults 21 years and older. Some states that appeared on the medical cannabis list above will appear on this one as well. That means that those states allow both medical and recreational cannabis.
However, if you are in South Dakota, don't rush to get your cannabis retail license because South Dakota Circuit Judge Christina Klinger ruled that the measure was unconstitutional. The decision is being appealed. Furthermore, Connecticut, Minnesota, and Hawaii look set to be the next states to legalize recreational cannabis for adult use, so keep an eye out for that if you are a resident in one of those states and are interested in opening your recreational cannabis dispensary.
If you are still reading, and you found your geographic location on the list, maybe it’s time to learn how to get a dispensary license!
The license you need to open a dispensary will vary depending on your state or province. Different types of dispensaries, like medical vs retail also require different licenses - also, a license isn't a guarantee as a lottery or set number of licenses may also be issued.
The next step is to navigate how to get a dispensary license.
There are no universal licenses and permits for opening a cannabis dispensary in either Canada or America. Instead, each state has the authority to set up its own licensing bureau, which has the freedom to introduce licenses and permits for businesses wishing to open a cannabis dispensary.
Furthermore, each state has the right to pursue its own path of enforcing its laws and permit requirements, so the penalties for operating without a license in one state don't transfer to other jurisdictions. Here is a list of the different states where cannabis retail is permitted and the unique license requirements for each state.
However, while each state's laws and the permits required are different, you need to supply some basic legal requirements when applying for a license for any type of business. These requirements include;
· Business Registration
· Tax ID Number
· General Business License
· DBA Filing
· Sales Tax Permit
· Other permits like an alcohol service permit if you are also going to sell alcohol to your customers
While these requirements are not all directly in line with your license application, having them in place could positively affect your application for a cannabis dispensary license.
In Canada, overseeing the licensing process for every province falls to the Cannabis Legalization and Regulation Branch. However, each province and territory operates independently when issuing a dispensary license and has its own licensing bureau.
For example, in Ontario, the responsibility of issuing licenses falls to the Alcohol and Gaming Commission of Ontario (AGCO), which sets out a three-phase licensing process thatinvolves applying for a Retail Operator License (ROL) and a Retail Store Authorization (RSA) with the AGCO. It would also be best if you also got the necessary licensing for your employees. To get an ROL, you need to provide proof of access to funds and provide detailed background information about yourself to pass the security inspection.
In Manitoba, it is the Manitoba Liquor and Gaming Authority (LGA) that is responsible for awarding licenses to privately owned dispensaries to set up. However, any municipality has the power to reject any dispensary from setting up in its area, so you will also require prior permission from the municipality before you can set up in that area.
As you can see, each province has its system and approach to awarding licenses to prospective dispensaries in its area. Visit this page to get more information on the authorizing bodies of each province and their particular requirements.
Each state in the United States also has the authority to set up its own licensing body and determine which licenses are required for different cannabis businesses. For instance, cultivation businesses will require separate permits and supplementary documentation compared with companies in cannabis retail or processing.
So you need to know what type of business you are setting up. This is one reason why a business plan is required when applying for a cannabis license, as we will see in the next chapter.
Also, like Canada, one of the main criteria used when evaluating an applicant's eligibility for a license is whether they have access to the gross funds required to set up a dispensary, which can be a costly mission. Here is a list of the various costs of applying for a license in each state in the United States.
Furthermore, several states and cities have restricted the number of dispensaries that can open in their areas and limited the sizes of the dispensaries that do open. Some of the other main barriers to opening a dispensary include the high application and licensing fees, strict regulations, hectic managerial requirements, and thorough financial reporting. Here is a list of the different states, the authorizing bodies in those states, and the individual requirements for each.
The best advice we can give you to help navigate the legal hurdles of opening a cannabis dispensary anywhere in North America is to get a lawyer with experience of handling cannabis license applications in your area. They will make sure you apply correctly and that you don't waste time and money making mistakes that could lead to your application for a license getting rejected.
Alright, now that you have taken the time to consider why and where you will be opening a dispensary, let’s get to the next step. Before applying for a license, you are likely going to need a business plan.
If you are wondering how to open a dispensary, then a business plan is perhaps the single most important document an owner needs to create before setting up a cannabis dispensary.
Studies show that having a business plan can potentially double your chances of attracting investment and growing your business. This document will not only be helpful when applying for licenses and permits from authorities but also when pitching to potential investors and partners.
To get a license to open a cannabis dispensary in North America, you need to submit a business plan to the licensing bureau for approval. There are specific elements in the business plan that the states’ licensing bureaus are looking for, which must be present in your business plan for you to qualify for a license or permit to open a dispensary in a specific area. While all states might require details like location, information about the product and the team, some requirements are state-specific. So you need to do your research and find out what your state licensing commission prioritizes before writing your business plan.
To stimulate investor interest in your business idea, you need to be able to present a good, compliant business plan. In the investor community, this is considered the bare minimum an entrepreneur should do to get their idea considered. It is not enough, however, to tick all the boxes. You need a business plan that will make investors sit up and call you rather than one of your competitors.
Going into the cannabis industry is a very risky business at such an early stage in the industry's life cycle. With the absence of nationwide federal regulation of the industry, each state is beating its own path through the legalization process, which translates to increased risk for investors. That increased risk, along with the wave of cannabis businesses opening up, means that your business plan needs to help investors answer the question, “Why you in particular?”
A good business plan can also help you to flesh out the parts of the implementation process that you don't necessarily get to cover during the ideation phase of launching a new business. Aspects about running the business like day-to-day operations, human resource management, compliance, and even security can get overlooked during ideation. Writing the business plan enables you to engage with all aspects of your future business, not just the exciting ones. This is why it is such an important document to get right.
To ease this process for you, we have created a list of the ten most important elements to include in your business plan to give yourself the best chance of attracting investors and getting licenses.
Like every other business plan an entrepreneur has to write about their idea, you need to establish the need in the market that your business is solving and the way in which you plan to solve it. That is not as simple as saying there is no cannabis dispensary in the area because what if there is no need for one in the first place?
To establish a compelling argument for the need for your business in a particular area, it will help to do some research. Find out how the market in your area is accessing the product. What is wrong with that method? How would your business be a solution to that problem that you have identified? That is how you establish a need for your specific business and validate the opportunity you have identified to potential investors.
One of the essential elements to include in a cannabis business plan is your unique brand identity. This is important for both your potential investors and your license application process.
Brand identity refers to how the organization sees itself as a brand. For instance, what is your company's long-term vision? What are your values? What do you stand for? This information will help your potential investors understand you better and align themselves with your vision.
Furthermore, thoroughly articulating your brand identity will also help distinguish you from other license applicants at the licensing bureaus, which is vital because uniqueness and innovation are considered when awarding licenses.
Another essential feature of a good business plan is the target market. While the details of this are typically covered in a separate marketing plan, it is important enough to merit its own mention in the overall business plan. This is because identifying your target market early will help with many of the processes involved in setting up a cannabis dispensary.
Deciding whom you are targeting as a customer base will inform decisions to do with the product itself as well as branding, location, and the effective marketing strategies available to your dispensary. Furthermore, properly identifying and articulating your target market can help when applying for a license, as any ambiguity around your target market could be misunderstood as an intention to market to minors, which will get your application for a license turned down.
Location is more important for a cannabis dispensary than for most businesses. In most states, cannabis dispensaries are required to have a location before they apply for a license. This is partly due to the various zoning laws restricting where one can open up a cannabis dispensary.
States limit the number of cannabis dispensaries allowed to open in their cities and municipalities. Furthermore, in many states cannabis dispensaries are not allowed to be set up close to schools, hospitals, or youth centers.
This is the reason why you need to include your intended location in your business plan, and you need to make sure that your area's zoning laws approve this location.
Before approving an applicant for a cannabis retail license, most licensing commissions need to know that the applicant’s business model is feasible and that the applicant is capable of executing the plan once they get a license. As mentioned above, states limit the number of licenses they can give out and, as a result, the feasibility of the idea matters.
To establish feasibility, you will be required to submit a detailed execution plan. This includes your go-to-market strategy, launch budget, and your strategy to recruit employees. Other features like the technology you plan to use and your community outreach programs can also be included in this section of the business plan.
Another critical element of your business plan is your product description. This section appeals to investors and the licensing commission, as well as potential partners in the team. Describe the products you wish to sell in this section. This is important because not all products are allowed to be sold in all states. If applicable, explain the process of making that product along with the associated costs. Another important feature to add here is the paraphernalia required to consume your products and the benefits to your customers.
In addition to the above, you should also indicate where you plan to source your flower and the logistics involved in getting it to the store. All this information will increase your credibility to potential investors and cement the feasibility of your idea to the licensing commission in your area.
The financial section of a business plan is a significant element that investors consider before investing. That is because this section usually includes the projected revenues and profits of the business over time, the dividend sharing policy of the business, and details of other investors already on board. All this information is important for potential investors.
In addition to investors, the licensing bureau will also be interested in your financial information. This is because starting and operating a cannabis business is expensive, and you will need to demonstrate a capacity to raise capital before being granted a license. So make sure you indicate what your plans for raising capital are and who are your existing investors.
Your team is one of the biggest determinants of whether or not your business will succeed. The right team can help you identify opportunities, save time and resources, and meet your business goals. It can be a significant selling point for investors. That is why you need to include a section on the core team members, their credentials, and what they bring to the enterprise.
It is also crucial that you indicate the organizational structure and the business hierarchy so readers can understand what the decision-making process is in the team.
No business can survive today without a marketing plan. The cannabis industry is no different. It would help if you had a section in your business plan that covers how you intend to reach your target customers. Illustrate the consumer's journey from the first contact with the brand to becoming a qualified lead and eventually a brand customer.
In this section, you should identify your main marketing avenues based on where your target market can be found. This section should also include information on your competitors as well as your competitive advantages. Finally, indicate your key milestones and how you intend to measure the success of your marketing and sales performances.
To get approved for a cannabis license, you need to demonstrate an understanding of and ability to comply with the regulations governing dispensaries in your area. Compliance is crucial for cannabis businesses, as failure to comply could mean losing your license and losing your backing.
Highlight the standard operating procedures for running a cannabis business in your area and how you plan to ensure ongoing compliance with them. You should also indicate how you plan to secure your premises and inventory. What inventory management system will you use? What security equipment do you plan to put in place? You might need some help from a licensed security company to secure your business and to eliminate any liability from negligence.
Now that you have figured out the what, it’s time to figure out the how - how are you going to finance this new venture?
The cost of opening a cannabis dispensary is high regardless of where in North America you are. Prices vary from state to state, but the differences are marginal compared to the average. When you factor in costs like license fees, payroll, and leasing, opening a cannabis dispensary can cost anywhere from $250,000 to two million dollars.
When exploring how to open a dispensary, you need to draw up a well-researched budget and a feasible financing plan if you are ever going to have a successful launch.
If you need to find investors to finance your dispensary, you should start thinking about that right from the off. In most states, you will not be able to get a license if you cannot prove that you have access to a source of funds to finance your dispensary.
Another reason why budgeting and financial planning is essential before opening a cannabis dispensary is the limited access to financial services for cannabis businesses, especially in the US.
Cannabis businesses in the US fall into a grey legal area because they are still not permitted on a federal level even though they have achieved legality in some states. This makes it tricky for banks and other financial institutions to give the same financial services to cannabis businesses that they offer for companies that are legal under federal law.
Most banks and financial institutions are fearful of being penalized for serving entities that are not legal under federal law. While national sentiment in the US is currently for the nationwide legalization of cannabis, many financial institutions don't want to gamble and get fined since the federal government has not legalized cannabis consumption and business.
The SAFE Banking Act, which would allow banks to offer financial services such as credit lines, underwriting, and business accounts for cannabis businesses, hasn't passed the Senate yet. This is why cannabis businesses in the US suffer more liquidity issues than any other industry and why you need to research costs early, draft a reasonable budget and find investors who can plug the liquidity gaps that are bound to arise in running the dispensary.
When calculating the cost of opening a dispensary, you should divide the costs into two main categories—the upfront costs and the ongoing costs—especially for the first year of operations. Most people will only consider upfront costs like licensing and leasing fees. However, the costs that make dispensaries expensive are the ongoing costs you incur monthly like rent, utilities, cost of the product, and payroll.
These fixed and variable ongoing costs should be taken into account before starting your dispensary in case your first year of business is slow. Should your business take a while to make sufficient revenue to cover its costs, you need to have enough reserves to cover rent and payroll. This is why the first year's operational expenses should be included in your startup costs.
As mentioned above, the costs of starting a dispensary will vary based on the location and size of your dispensary. So we cannot give you exact figures. For example, while the minimum cost of starting a dispensary in Arizona is $150,000, it is $250,000 in Nevada. We can give you nationwide averages that will provide you with a ballpark of what your startup expenses might be. With that in mind, we can jump into what the cost estimates would be.
As mentioned above, the cost of opening a dispensary could be anywhere from $250,000 up to two million dollars. Some of the big-ticket items in these costs include $250,000 for payroll annually, $100,000 in annual rent, and $50,000 in renovations when starting. These rent and renovation figures don’t include the security deposit you would have to pay to lease the location in the first place.
Another ongoing cost to consider is the cost of the product, which is about $1,500 to $1,800/lb. Below is a summary of all our estimates for the costs you would incur to start your dispensary;
From our estimates above, it could cost about $1,050,000 to start and run a cannabis dispensary in the first year. As a proportion of this figure relates to ongoing costs, you might be able to offset some of it with the revenue you generate from product sales, but you can't count on those revenues during the budgeting phase.
While these are the costs that we can predict and estimate, there are other costs that we cannot. Expenses like the salaries for the directors and managers and the costs to secure supply chain contracts with growers and manufacturers are not easy to predict. These will depend on how well you can negotiate with suppliers and what products you intend to sell in your dispensary. Now that we have covered the startup costs for a dispensary, let us delve into the financing side of starting a cannabis dispensary.
Business financing refers to the process of raising capital to finance your business. As mentioned in the introduction of this chapter, getting funding for your cannabis dispensary is essential because cannabis dispensaries are expensive to set up, and it is almost impossible to get a license without a source of funds. Furthermore, cannabis businesses in the US cannot rely on the standard financial services from the banking industry that other businesses enjoy. That makes accessing financing beforehand even more critical for cannabis business startups than for most of the other industries.
However, despite not having access to mainstream financial services from banks, cannabis businesses still have various options to choose from should they need to raise capital. We have prepared a list of the most likely sources of financing for a cannabis dispensary that you can consider for your dispensary.
This is the best financing solution but is also the least likely source of funding. Most entrepreneurs don't have a million dollars of their own to commit to starting a dispensary. Even for those who do, assuming all the risk of a business in a precarious industry like cannabis would not be advised. It is best to share the risk with willing and capable investors.
Fundraising from friends and friends could help you avoid all the stress that comes from raising capital from investors who are only interested in making a return. Friends and family will most likely be interested in seeing you succeed, so they will invest primarily in you, the entrepreneur, more than in the idea.
Cannabis entrepreneurs frequently turn to friends and family because the banks won't finance cannabis business until it is allowed by federal law. However, money from friends and family can also be challenging to manage, especially if the investment fails to produce business success.
As mentioned earlier, most banks won't lend to cannabis businesses. However, some cannabis businesses can borrow from credit unions and cannabis-friendly banks. Cannabis businesses in cannabis-friendly states like Colorado, Washington, and Oregon can try their luck with the smaller banks in their areas which might be more willing to take their business than the bigger banks.
Fortunately, firms like Safe Harbor Private Banking, Dama Financial, and Nature Pay offer merchants financial services and help them locate compliant banks. There are also some states with robust regulations that support safe banking for cannabis businesses. These states include New York, Massachusetts, Florida, Illinois, and Minnesota.
With the recent hype around cannabis businesses, many investors are lining up for their opportunity to invest early in the sector before it gets more regulated and structured. There are many investors who will be compatible with your interests as an entrepreneur. The difficulty will be in finding them and convincing them to choose you over your competition.
To increase your chances of finding an investing partner offering you favorable terms, you should make sure to keep accurate accounting records, have internal SOPs and standard reporting. It would help if you also wrote a detailed business plan, which we covered in the previous chapter.
Even though the cannabis industry is relatively new, a few firms and funds are committed to investing in cannabis businesses like dispensaries. However, these firms will typically lend to cannabis businesses at high interest rates for short periods of time. The debt is also typically structured as convertible debt, meaning the lender can convert their debt to equity in the business if they wish. The terms are so steep because the cannabis industry is still new, unregulated, and highly risky. The terms should improve as the industry matures and the volatility reduces. If you are interested in this option, here is a list of companies for you to look up;
There is a growing number of cannabis businesses running to penny stocks as a way to raise capital. Penny stocks are stocks trading at less than $5 a share. In most cases, they are actually below $1 a share. While you can raise some money this way, your dispensary would have to be up and running before you can qualify. Furthermore, the amount of capital you can raise is relatively limited since they sell for so little.
This is an exciting opportunity for cannabis dispensaries to raise capital. Crowdfunding refers to the process of raising small amounts of capital from large groups of well-wishers. This fundraising method is usually set up on crowdfunding platforms like Kickstarter and GoFundMe.
According to a new law from the federal government, individuals can contribute up to $2,000 for a campaign, meaning that businesses can potentially raise over a million dollars from a crowdfunding campaign. Furthermore, one of the main advantages of crowdfunding is its flexibility when it comes to pay-back terms.
For instance, Kickstarter is a rewards crowdfunding platform which means that the recipient of the capital has to give a reward, usually the product itself, to each of the contributors to the campaign. Other platforms like GoFundMe are donations crowdfunding platforms that don't require the recipient to give anything back to the donors.
There are quite a number of options for you to consider if you wish to get financing for your business. Financing is essential for startups since it can mean the difference between having enough liquidity to carry on through a rough period and having to shut down. In addition, healthy financing can help you do the marketing and community outreach you need to get clients and outperform your competitors.
Well, you are not well on your way - with a legal license, business plan and funding all ready to go. So what is the next step? Finding and fitting your location! In the next chapter we explore how to set up shop.
To open a cannabis dispensary in the United States, 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 lease term.
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:
The landlord’s bank might be uncomfortable receiving cash from the landlord on behalf of a federally illegal business.
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.
Now that you have your store set up and ready to go - it’s time to find the dream team and get things rolling!
Building the right team can be one of the most challenging parts of starting a new enterprise. However, a good team can save you thousands of dollars and help you retain your best customers and secure your best practices. While building the right team is a challenge in every industry, it is particularly so in the cannabis industry because of the stringent requirements for dispensary employees in North America.
Also, because the cannabis industry is a relatively new one, it is hard to find qualified and experienced employees who can help you survive the rough seas of starting up and plotting a path to success.
The first decision you need to make when building your team is what positions you plan to fill. We have prepared a breakdown of the core roles you need to fill to start well and grow sustainably.
When hiring your first team to help you get your dispensary up and running, you should divide it into two—dispensary employees and consultants.
The consultants are those members on the team whose services you need periodically, but not regularly enough to make them full-time employees. These team members will usually be called in to perform specific functions like file taxes, carry out audits and assessments, and other specialized duties for the dispensary. You should check to verify that your consultants are appropriately licensed to carry out the duties they do for your dispensary.
Some of the roles that are usually filled by consultants include:
This is the most important role you need to fill before you open your cannabis dispensary. Because the cannabis industry is relatively young, there is still a lot of grey area regarding the industry's regulations and policies.
For instance, in the United States there is a gap between the positions taken by the federal government and many states over whether to legalize either medical or recreational cannabis consumption. Because of the grey area within the regulations, cannabis businesses should always be able to fall back on the services of a lawyer to help them navigate the complexities of the legal position.
There are two main reasons your dispensary will need a lawyer on retainer. The first is to navigate the registration and licensing process for the dispensary. The second is in case you need good representation should you ever have to go to court.
The second most important consultant you will have in your team will be a Chartered Public Accountant (CPA). The company accountant will help you sort out your payroll, pay your state and federal income taxes, and comply with any other IRS or CRA requirements.
Having a good accountant will help you comply with mandatory payments, deductions, and declarations and save you a lot of money in accounting errors and penalties. Therefore, you should make sure you hire the best accountant you can afford because a mistake from them could cost you a lot of money or, even worse, take you to jail.
Every state has created its system to regulate cannabis dispensaries. However, because of the lack of uniformity of regulation across the different states, compliance with the regulations looks different from one state to another. As a result, your dispensary needs a full-time compliance officer to help you manage and document all aspects of your business for compliance purposes.
Furthermore, the compliance officer handles any paperwork that needs to be filed and administrative reporting mandated by the state. Once the business is established, it is common for most employers to train their office managers to play the role of the compliance officer. However, you should get an experienced professional to help you set up the right processes during the startup phase of the dispensary.
This is another important role that you need to fill before you even open your doors to customers. In most states, you will not get a license before passing a security audit carried out by a licensed professional in the security industry. Many states have security and surveillance guidelines that you have to adhere to qualify for licensing, so having your own professional oversee the installation of your security system could help speed along the process of acquiring a license.
It should go without saying that, after getting your license, you will need to secure the valuable product in the store and your staff members. Therefore, as a bare minimum, you're going to need a 24/7/365 security presence, including live personnel, transport planning, alarms, cameras, and recording equipment.
Now that we are done with the key consulting positions you need to fill, let us move on to the key employee positions that will also need to be filled before receiving customers. These include:
This is perhaps the most important role you’ll need to fill early on. You will need a qualified and experienced retail store manager to run the dispensary. This person can assist you during the initial set-up of the store, advise on best practices, help evaluate suppliers, recommend potential employees, and provide a great deal of general assistance in running your storefront.
It is not uncommon to find business owners trying to operate as store managers and, while it is not illegal, it would not be recommended. Store managers in cannabis dispensaries have to be licensed to work in a cannabis business, which is not something the entrepreneur would ordinarily have. Furthermore, we mentioned in the previous chapter that a cannabis business is first-and-foremost a retail business. Having a qualified and experienced retail store manager could help implement those things you can only know after spending time in the retail industry.
Your budtenders are the first line of contact for your customers, so their performance can make or break you. In today's world, where everyone has a cell phone with internet access and is one click away from the global internet, an unprofessional or ill-tempered moment by a budtender can kill your brand—and with it, your time, effort, and resources.
Furthermore, a simple mistake like selling cannabis to an underage customer or unqualified patient (for medical cannabis dispensaries) could result in you losing your business license and being put under a states-wide lifetime ban from ever again applying for a cannabis license.. As a result, it is important that you find the right people and give them adequate training to be ambassadors for your brand. They should be the most informed people in the room on the quality of the product and the effects that are to be expected. Your budtenders play a crucial role in your customer experience, so make sure you get the right ones.
It’s critical to hire an experienced and dedicated inventory manager whose sole job is to conduct daily inventory audits and reconciliations and handle any inventory reports or inspections by the regulators. In addition, your inventory manager needs to monitor the product quantities in your stores and make sure top-selling items get restocked as efficiently as possible.
Your inventory manager needs to implement an effective inventory management system that helps you identify missing products easily and also catch defective products and execute recalls smoothly. This is another important hire that you will need to get right.
Cannabis dispensaries are attractive targets for both employee and outsider theft. For this reason, investing in qualified and trained full-time security personnel to complement your security system would be a great idea.
Another reason why security officers would be a good idea is because of how hard it is to get comprehensive insurance coverage, especially in the United States, where the cannabis business is still not legal at federal level. Therefore, you are better off beefing up your security than betting on insurance should something go wrong.
Now that you know the key roles you need to fill, let us take you through how to hire great employees. Most people think that employment is simply about offering key personnel favorable salaries to work for you—but it is much more than that.
We have prepared a guide of six steps for you to follow to hire and retain great team members. Those six steps are:
Cannabis is a niche industry that offers a unique product. Cannabis consumers are of a certain demographic and profile and can be found by identifying where they would 'hang out’. Given that cannabis appeals more to the young than it does to the old, you should investigate where the Millennial and Gen Z groups spend their time.
For most of them, you will find that their favorite hangout spot is the internet, so you will have to invest in social media ads and recruiting campaigns. You will also have to join online jobs platforms like weednextdoor.com, which specialize in helping cannabis businesses find employees interested in working for them.
In addition to recruiting online, you should source referrals from your best employees. who are great sources of references for target employees, since they know what you need from an employee, and will be able to spot who is going to be a good fit. It would help if you also considered recruiting on campuses because cannabis is popular among the younger generations.
A good job posting acts like a good hook to a story. With a good posting, you can be sure that the best available people will apply for the job, especially if you figured out where to find them. Several elements comprise a good job post:
If your job posting includes all the above, you will receive the best applicants available on that platform.
One of the best ways to identify a potential diamond in the rough is to design a thorough and smart interview process. Aim to use the interview process to get a sense of the candidate's background, past job experience, strengths, and weaknesses, as well as their dreams and ambitions. As a result, you will be better placed to identify who could best fit in your team and who can best represent the interests of your company going forward.
While many employers often skip this step, calling those listed as references on the applicant's resume can help you gain some insights and context on the candidate that you could not get from the candidate themselves—insights like what the candidate is like to work with, manage, and how they align with your value system.
Candidates often exaggerate their strengths and diminish their weaknesses. Calling the references and asking them to evaluate the candidate's strengths and weaknesses might be a more revealing experience than the interview with the candidate. You will be more likely to get meaningful feedback on the candidate's nature and work ethic—speaking as one manager/employer to another—than as an interviewer to a potential recruit.
The onboarding process also plays a big role in the performance of a recruit. It could make the difference between a recruit hitting the ground running and failing to adjust to the company culture and leaving prematurely. During the onboarding process, there are some steps you can take to make sure that your recruits adjust to your culture quickly and participate in the company's success. These steps include:
Hiring the best talent and offering them big paychecks won’t mean much if you can’t retain them. All a high staff turnover does is increase your costs of recruitment and destroy your organizational culture and morale.
Being able to retain employees is one of the markers of a successful business. Therefore implementing a talent retention strategy early on is key. Here are some of the ways to do that:
Now that you have your great team in place - it’s time to start building some systems around how to optimize your operations!
Standard Operating Procedures (SOPs) are the documents, protocols, systems, and procedures that your cannabis dispensary will have in place to manage the business's day-to-day operations. SOPs help companies to guide their employees on executing their business tasks to increase efficiency and profitability in the long term.
Regulators require dispensaries in the cannabis industry to have SOPs in place to ensure that they abide by the guidelines set forth. However, while adhering to regulatory guidelines is important, that is not the only reason you should design and implement robust SOPs.
Good SOPs can act as a compass for your employees and become a minimum expected quality of service that can build brand loyalty. SOPs will also ease the onboarding process for new team members who can check the guidelines before executing new tasks to ensure proper task completion.
We have prepared this guide to help you design SOPs to help you comply with the regulators' requirements and improve your dispensary's efficiency and profitability. However, your SOPs are only as good as your level of enforcement. Good SOPs are not a substitute for employee training and quality management. You need to enforce the SOPs through regular training, drills, and exemplary leadership. Before we get into the SOPs, here is a detailed look at why they are essential.
As mentioned above, most state regulatory bodies issue SOP guidelines for cannabis dispensaries to follow. These SOPs are intended to ensure that businesses comply with the regulations and that regulators can easily monitor the dispensary’s operations for quality assurance and compliance.
Your dispensary will be required to submit periodic documentation to regulators to verify that you are enforcing the SOPs that guarantee compliance with the regulations. This will help you maintain your dispensary's license and safeguard your business operations. Due to the heavy consequences of failing to comply with the regulations, you should implement the SOPs laid out herein.
SOPs are designed to guide your employees through their daily tasks and duties. They help ensure that no matter who in your team performs it, each task is done the right way and in compliance with the regulations. This understanding of roles and duties will vastly increase your dispensary's operational efficiency, which in turn will increase your profit margin.
Furthermore, good SOPs coupled with regular training can reduce employee errors and time wasted redoing tasks, thus increasing productivity and customer satisfaction.
Sailors in the Navy do drills for a living. They are deployed for several months at a time in carrier groups at sea, running daily drills, war games, and simulations. This repetition of the drills and simulations gives the sailors the confidence required to deal with any eventuality, however unlikely or unpredictable.
Implementing good SOPs can help your team build the necessary confidence in their roles to manage unexpected events and crises without breaking character or protocol. It is that level of military-grade drilling and task execution that will help you avoid getting penalized for failing to comply with the regulations and possibly losing your dispensary license.
Customers greatly benefit from a well-curated customer journey beginning the moment they walk through your doors and ending when they purchase a product. Implementing well-thought-out and intuitive SOPs that take into account every moment of the customer experience can standardize your customers' experience, regardless of who in your team they were in contact with. In addition, standardizing your customer service can help you build brand loyalty and make you an industry leader in your area.
Furthermore, providing a standardized and well-curated experience for your current customers can help you attract new clients to your dispensary. While many states do not allow cannabis businesses to advertise openly to consumers, there is no law against customers using word of mouth to tell their friends about your business and the quality of service.
Good businesses will use their SOPs to comply with regulations and become more efficient. Great businesses will go one step further. They use the SOPs as a platform to manifest their brand identity and create an organizational culture.
For instance, if part of your brand identity is teamwork and support for each other, then you could design your SOPs to require tasks to be done in teams with well-defined roles for each team member. In addition, you could require that new team members always work in partnership with a more experienced teammate. That could easily foster teamwork within your dispensary and make sure that teammates who need help always have someone in their team to go to.
While every dispensary is different in terms of the products and services it offers and the organizational structure, many of them share the same operations. Operations like opening and closing the store, sales transactions, and security protocols are staples in the cannabis dispensary industry.
We have prepared a list of the main operating procedures you need to have before serving your first customer. These SOPs will ease your compliance with the regulators, increase your efficiency and help you to become more profitable in the long run. Here are the SOPs you should be thinking about:
All brick and mortar retail stores should have SOPs in place for opening and closing the store. These SOPs help ensure that the store is closed properly and that no locks are left open for burglars to exploit.
For instance, employees should check for any signs of a break-in or forced entry into the store before opening every morning. They should also check to make sure that all products in the display and stores are accounted for.
At the end of the day, employees should check that the security cameras are working and lock all the doors and display cabinets. In addition, they should check and report any obvious security threats outside the store at closing time. Other end-of-day SOPs include generating sales and compliance reports as well as closing the cash registers and POS system.
Many cannabis dispensaries violate their customer check-in procedures and end up facing fines and license suspensions by regulators. Due to this, it is crucial that you implement your customer check-in SOPs with redundancies to ensure compliance.
By law, you are required to screen every customer entering your dispensary to make sure they are of legal age and are legally allowed to purchase cannabis at your dispensary. This process would include scanning the customer's ID to make sure it is genuine and valid, checking the customer's age, and entering these details into your customer database.
Sales transaction processes are crucial to the business because this is how the company generates its revenues. Sales processes could include the greeter (first customer contact), boxing and packing, and the cashier. Depending on the size of the dispensary, these roles could be performed by different employees or all assigned to one.
Other sales transaction processes include answering customer product questions, recording shipping information, and processing various forms of payment. It would help if you integrated your SOPs with the technology you're using, like POS systems. It is essential to get this process right as any errors could result in material losses for the dispensary.
Suppose you are allowed to deliver products to your customers in your area. In that case, there is no doubt that you will be required to submit supplementary documentation and take the appropriate security measures to safeguard the product while in transit.
Furthermore, there should be packaging and shipping guidelines with regards to the different types of products. For instance, you should have procedures in place to pack and mark fragile deliveries—like glass bongs—clearly to ensure safe delivery.
Suppose you have outsourced your deliveries to a third party or use a delivery management tool or software. In that case, you should incorporate those details into your SOPs so your employees are clear on how to proceed with shipping a customer's order.
Cannabis businesses face many problems when storing and moving cash from the store. Since cannabis businesses are not legal at the federal level in the United States of America, they are limited in the services they can receive from banks. As a result of those limitations, dispensaries struggle with large amounts of cash being stored on the dispensary's premises.
In addition to the cash, dispensaries also have many valuable products in inventory which makes them a desired target for criminal behavior. That is why the security and cash management protocols are usually set by the regulators and are tightly followed by the dispensary operators. For example, there are SOPs about which employees are allowed in sensitive areas like stores and cash safes, how long to keep security camera recordings and how to report a robbery. The SOPs also indicate when and how often armored trucks can pick up cash and how it is stored while at the dispensary.
Track and Trace SOPs are important for every cannabis dispensary. In order to comply with the regulations, you have to adopt track and trace SOPs into your inventory management system. These track and trace SOPs should cover inventory management processes like procurement, transportation to store, product transfers, and audits.
Given how important track and trace SOPs are for compliance, you should automate this process if possible. Track-and-trace automation software can help you define the roles for each activity and integrate compliance checks. For example, it’s important to check that products are appropriately labeled, tested, counted, and intact when receiving. They should also be fitted with RFID tags as required by the law.
Quality assessment SOPs will make sure your product is up to the required standard by the regulators and that you are not violating any laws over what ingredients can be included in your products and how they are made. Failure to comply with these SOPs or pass a quality assessment could leave a dispensary owner at risk of losing their license.
Product recall SOPs will come into play when a defective product needs to be recalled from the market. This can be stressful for the team as it will lead to customers complaining, and management concerned at the losses being recorded. One of the most valuable assets to have in this situation would be SOPs that guide your team on how to act in this situation without losing their cool or professionalism.
These SOPs could help you manage a crisis while limiting the loss of customers. They include how to recall the products, how to speak to customers and what the employees are allowed to offer to assuage the anger and disappointment of the clients, and how to investigate what could have gone wrong with the product.
These are the major SOPs that we believe you should have in place before opening. However, having them is not enough. In order to benefit from them, you and your management team should enforce them and include performance indicators, so you know who is meeting the SOPs and who isn't.
Now that you have your store humming, it’s time to increase productivity with technology!
Running any business successfully in the 21st century requires integration with technology. In that regard, cannabis dispensaries are no different. As a dispensary owner, you will need to purchase software to help with daily operations such as sales, inventory management, and security.
Cannabis dispensaries are heavily regulated entities and, as a result are constantly required to submit documentation to prove their compliance with the regulations. Some of the documentation required from dispensaries includes:
With all those regulatory requirements, staying compliant can be both labor-intensive and time-consuming without the aid of relevant technologies. Technology can help your dispensary lower the incidence of human error that would inevitably occur if your team had to manually record and manage all the required documentation. Those human errors could cost you a lot of money in penalties for failure to comply with the regulations.
With this in mind, we have prepared a list of the various technologies you might consider installing in your dispensary to operate efficiently and compliantly. However, before we go into that, let's highlight what you should look for when choosing technology for your dispensary.
The first and most important thing to look for when choosing technology for your dispensary is how easy it is to use. Complicated software often creates more problems than it solves. It requires time and money spent training your employees to operate effectively. In addition, complex software makes it easier for your employees to make mistakes that could put your dispensary out of compliance with the regulators.
For those reasons, investing in easy-to-use technology is the right way to go for your dispensary. Easy to use technology will reduce the time spent on-boarding new employees and increase your operational efficiency as well as profitability due to a reduction in employee errors.
As mentioned above, cannabis dispensaries are heavily regulated entities. This level of regulation means you will spend a lot of time and effort ensuring that all the business' operations are compliant with the rules.
Therefore, your dispensary needs to invest in technology designed with the regulations of the cannabis industry in mind. In addition, you need technology that helps you remain compliant. For instance, a POS system that tracks your daily sales to ensure you don't exceed your sales limits would help you remain compliant with that specific regulation.
Technology is only as good as how reliable it is. For your cannabis dispensary to run smoothly, you need technology that is dependable.
A software crash during business hours could have serious adverse effects on your dispensary. It could cost your business thousands of dollars in lost sales and render your dispensary non-compliant with the regulations. Many dispensaries learned this lesson the hard way when MJ Freeway, a Denver-based POS system, was hacked and had to suspend its services for some time. This hack affected over a thousand cannabis dispensaries in 23 states.
Due to the potential costs of a technology breakdown, you should take care to find reliable technology.
One of the things to look for when choosing software and technology for your cannabis dispensary is the potential for that technology to improve your customer experience. With so many cannabis dispensaries popping up everywhere, retaining customers can be one of the hardest things. Customers have gone from having zero options to multiple options offering multiple products in just a few years.
This rapid growth of the industry means that retaining customers is the key to long-term survival and profitability. And while customers will come to your dispensary for the first time out of curiosity, they will only return because they had a good experience the last time. For that reason, your dispensary needs to invest in technology that helps it give customers a good experience. For example, that could mean setting up an e-commerce website with a menu for convenient ordering and shipping.
We are living in the era of big data and data privacy. And given that cannabis is still a sensitive topic in some circles, customers need to trust that their data is safe for them to feel comfortable giving you the information you require to complete a sale.
Now that you know what to look for when choosing technology for your dispensary, we can look at the various technologies you will need to install in your dispensary to remain compliant and competitive with the rest of the industry.
Every cannabis dispensary needs good inventory management software. Inventory management systems ease the process of making orders from your suppliers and verifying inventory numbers.
Cannabis dispensaries often have tens of thousands of dollars in inventory. That could be tempting for criminals and employees if not well managed. With inventory management, you will be informed in real-time whenever there is a discrepancy between your inventory management software and the results of a manual stock inventory.
Furthermore, inventory management systems will inform you when you are running low on certain strains and products and invite you to order a new shipment from your supplier directly on the platform.
If you are in a state that allows dispensaries to have e-commerce stores, you should invest in a website with e-commerce functionality. This means having a marketplace on your website for customers to make purchases for pick-up or delivery from the convenience of their homes.
Your e-store should have all the compliance protocols of your brick-and-mortar dispensary. In addition, you should be able to gather KYC information from your customers to verify their identities and eligibility to purchase cannabis products.
Furthermore, your website should indicate other compliance information like your license number, your business hours, customer eligibility information, and the products you have in your inventory.
Perhaps the most helpful technology you need in your dispensary is a POS system. Your POS system enables you to process sales transactions and the various modes of payment available to the customer. However, that is not all a dedicated cannabis dispensary POS system can do.
Your POS system could also be responsible for inventory management and compliance with the regulators’ requirements. A cannabis POS system can aid compliance by managing customer check-in, rejecting transactions after closing time, or when the daily sales limit has been reached. This can help you avoid getting penalized if your employees are not vigilant enough to enforce the regulations.
Furthermore, a compliant POS system will also automatically produce sales and customer reports that will be available for regulators to assess your compliance whenever they need to. Cova is an example of a great POS system that cannabis dispensaries can use.
To effectively manage your employees and extract maximum productivity, you will need a sound employee management system. Employee management systems help you design shift schedules and track employee time logs. However, great employee management platforms like Push go even further than that.
Push offers an all-in-one HR, scheduling, and time tracking system that integrates with payroll. With Push, you can access powerful features like employee clock in, employee surveys, self-onboarding services, employee license tracking, and digital renewal. The Push platform also allows you to pool your sales and labor data to track your store's performance in real-time, thanks to the POS integration.
If you plan to hire a team and pay them, you need integrated payroll software. Your payroll software helps you manage employee payroll, calculate deductions and make contributions to the IRS directly. If you are using Push to manage your employees as recommended above, you also have access to Push's payroll software.
The Push payroll software integrates with your other systems—such as employee management—so that when an employee clocks in, their hours are automatically recorded and billed in payroll. This system also makes automated payroll tax deductions and pays employees via direct deposit.
A customer relationship management system allows your dispensary to engage with the customers even after the sale is made. This enables you to know and serve your customers better.
With a customer relationship management system, you will maintain real-time information on your customers' preferences and be better placed to give them the exact products they want to see. You can also use the data you gather to design customized and targeted marketing content for your customers.
As we mentioned above, retaining customers is one of the biggest challenges faced by most cannabis dispensaries in the US as more states legalize cannabis and give out more licenses. A customer relationship manager could help you increase your customer engagement and thus generate loyalty from them.
Most states in the US require strong security measures to be in place for cannabis dispensaries to remain compliant with the regulations. For that reason, you need a security system equipped with cameras that monitor both the interior and exterior (without any blind spots), electronic locks, and an easy way to notify the police in case of a security breach.
Furthermore, as part of your security, you should integrate track and trace technology into your inventory logistics so you can track your shipment from when it leaves the supplier’s stores to when it gets to yours.
You cannot know what the best technology is for you if you don't know your needs. Therefore, before you begin engaging technology vendors, understand what you need. Find out what other dispensaries your size with similar products are using.
Furthermore, find out what the regulations and requirements are in your area. While you might not need some services, they may be required by the law.
You cannot find out what technology is best for your dispensary if you don't know what budget you’re working with. Begin by identifying how much you want to spend on each technology and see what is in your price range. This process is also suitable for identifying what features you need and which ones you can do without.
Before you commit to a technology service provider, try and find social proof of its functionality and effectiveness. Take the time to gather evidence from other users like you regarding the effectiveness of that tool. Look up reviews from other users, and visit the customer page on the company’s website to see if any reputable brands or competitors of yours are using the service.
It is crucial to assess the technology brand's after-sales support and maintenance once you have narrowed down your search and are down to your last two or three options. As we mentioned earlier, reliability is essential when choosing what technology to use in your dispensary.
Make sure to review the support services offered by the company. For instance, is there a support team available 24/7? Is it an automated electronic support system, or can you talk to a human being? Can you call, email or text? How long do they take to respond? Answers to these questions will help you decide whether you can rely on a company's support or not.
Where possible, sign up for a free trial to get a chance to use the service before you commit to it. This will help you assess whether the technology does what you want the way you want it. This is a better way to know whether a product suits your needs than doing research online since no other client has the exact needs you do.
Well, you are all set up and ready to roll - but now it’s time to thrive. In the next chapter, we will dig into dispensary growth!
Once you have completed the messy business of starting up and have found a successful business model for your cannabis dispensary, your next goal should be to grow and expand your brand to compete with the other giants on the national stage.
It is imperative that you identify the right time and opportunity to grow your dispensary's reach. Many businesses fail just when they are beginning to expand because they are trying to scale up too fast and too soon. It would be best if you took your time after starting to iron out all the teething problems with your business model and gather best practices before you begin to expand your dispensary.
For instance, one of the things you need to figure out ahead of attempting to scale should be your brand identity—your target market and marketing message. You shouldn't try to expand before you know your target market and how you plan to attract them to your brand. Growth doesn't mean targeting a wider audience but rather doubling down on your target audience and refining your methods of attracting them.
One of the challenges of expanding in the cannabis industry is the difference in regulations in the various states. For instance, in many states, an applicant for a cannabis business license has to be a resident of that state. That would limit your ability to grow from one state to another, but it doesn't affect your ability to scale within your state. So, as you decide to scale your dispensary business, pay close attention to what the regulations allow you to do.
However, suppose you have confirmed that your business model is successful and scalable, and you have determined that your expansion plans comply with the regulations. In that case, you are indeed ready to grow. We have identified a few ways for you to grow your business:
One of the main ways many dispensaries kick start their growth ambitions is with a flashy grand opening that attracts a lot of buzz for the brand and gets it noticed by new customers. While most customers will be there for the deals and offers on different products, your goal is to make sure they stay even after buying their bud and that they have a memorable experience they can associate with your brand.
To that end, we have prepared a few things you could do to make your grand opening more engaging and fun for your customers. They include:
If you are thinking of having a launch party for your cannabis dispensary, it should be at your dispensary's location. This is because the dispensary will be convenient for existing customers who are used to making a trip to that location to attend the launch party.
Furthermore, new customers will leave the event knowing exactly where your business premises are and have a good sense of the atmosphere and vibe of your dispensary. It would be a massive missed opportunity to hold your grand opening anywhere else unless the regulations in your state prohibit it.
Among the main attractions that bring customers to dispensary launch parties are the massive discounts on many of the dispensary's products. Some dispensaries offer up to 50% off all their products to attract customers to the launch party. Of course, you don't have to go that far, but giving offers on your products during your launch party is an excellent way to attract customers and move slow inventory.
There is a common stereotype that cannabis makes people sluggish and lazy. You don't want 'sluggish' as the theme of your dispensary's grand opening. 'Sluggish' will make all your customers crave their cozy couches, and your event will be done in no time.
The best solution is to include some fun activities in your agenda to get your customers on their feet. One of the easiest ways to do that is to have music performances by DJs and artists at your event. You could also have activities like bouncing castles, stoned yoga, a painting corner, among others. The activities will make your launch party more memorable.
Everyone knows you can’t throw a party and invite cannabis consumers and not feed them. The munchies will inevitably kick in at some point during the party for most of your guests. If you don't have a food plan on-site, many customers won't stay as long as you want them to.
The food should not be complicated, however. Snacks and fast food like hot dogs, burgers, and pizza slices will do the trick for most of your customers. So you can simply rent a food truck for the day.
Cannabis businesses are not legally allowed to give out cannabis for free to customers—but there is no law against giving out free merchandise. As a result, many dispensaries take the opportunity to give away merchandise to grow brand recognition and loyalty among their customers.
Simple things like T-shirts, caps, sunglasses, lighters and rolling paper could go a long way in growing your brand recognition among your customers and their friends.
It is crucial that you leverage social media platforms and influencers to market your event. Many customers at cannabis dispensaries are young Millennials and Gen Zs. Most young people use social media to find out what's happening and what their friends are planning to attend. Therefore, you have to market your event on social media.
It would help if you got a social media influencer to plug your event, say they will be there, and post about it during and after the event. This will get their thousands of followers to know about your event and also plan to attend.
Another way to grow your dispensary’s reach is by marketing your brand to your target audience. While cannabis dispensaries are heavily restricted in terms of marketing by government regulations, many have found creative ways to connect with their customers while remaining compliant.
Marketing can do a lot for a cannabis dispensary. With good marketing, a cannabis dispensary can grow its brand presence and position itself as an industry leader and an integral part of the culture. Brands with good marketing also have a higher chance of retaining their customers, increasing their revenue, and even attracting investors.
However, cannabis dispensaries face many challenges when trying to market their products. Some of the biggest challenges include:
To resolve some of these challenges and grow your customer base, we have prepared six effective marketing strategies you could deploy at your dispensary. These strategies will help your business attract new consumers and increase its revenue and market positioning.
The first step to a good marketing campaign is to brand your identity. This includes your logo, packaging, customer service, and tone when you write and talk about yourself. A good brand helps consumers distinguish you from the competition and gives them positive preconceptions about your dispensary. For example, it could make a customer think your dispensary is cool or fun before they visit.
The idea of legal cannabis is still new to many people, and that means there will be lots of questions from curious customers that need to be answered. Getting media coverage of your dispensary, answering questions, dispelling myths, and sharing the benefits of cannabis can help you reach new audiences and give the brand legitimacy.
Cannabis businesses have strict rules to follow when marketing their products. While the specifics of the regulations vary from state to state, they are essentially the same on social media. Direct advertising of cannabis products is prohibited by the major social media platforms. You should stay abreast of all marketing regulations to avoid facing penalties.
While many social media platforms prohibit selling and marketing cannabis directly, there are other ways you can leverage social media to grow your brand, specifically your brand identity. For example, you can use social media to curate a fun or relaxed atmosphere that could market your brand as a lifestyle choice and not just a consumer product. That is what tobacco and alcohol companies have been doing for decades. Read this article for more information on leveraging the major social media platforms (Facebook, Twitter, LinkedIn, and Instagram) to grow your brand.
You can also use paid ads or PPC (pay per click) to boost engagement, lead generation, and sales. In addition, paid ads can help your brand generate inorganic traffic during its early stage before it has any brand recognition.
One of the best ways to generate qualified leads and convert them into sales is with content marketing. Content marketing can demonstrate your thought leadership and increase consumer confidence in and loyalty to your brand. Furthermore, with online content like blogs, podcasts, videos, you can use Search Engine Optimization tools (SEO) to be seen more prominently by your target audience.
Once you have built a good strong brand with a diverse market appeal and high consumer confidence, then it is easy for you to expand by franchising your brand to other entrepreneurs that don't want to spend money and time building a new brand of their own. Franchising can help you expand your reach and grow your revenues without taking on any additional responsibilities like applying for new licenses or hiring new staff.
However, you should make sure you remain compliant when you expand into new territories. Most laws are different in each state, so it would be easy to be found in violation as you grow into new regions—so, take extra precautions.
To conclude, the journey of starting a cannabis dispensary can be a grueling one—but it can also be a rewarding one, if you are passionate about the business of cannabis and you take the proper steps. There are over 11,000 cannabis dispensaries in North America, and there are thousands more awaiting approval. So while the cannabis industry is still young, it is not low on competition.
That means that you have to give your dispensary the best opportunity to survive and succeed by doing everything by the book—whether it is applying for a license, writing your business plan, scouting a location, finding investors, or building your team. All these elements are just as essential when starting your cannabis dispensary.
Building a cannabis dispensary requires much attention to detail and dedication to the project for it to succeed. But if you have read this entire guide, we know you are dedicated enough so succeed!
We wish you luck as you begin your journey to open your cannabis dispensary, and when it’s time to start managing your people and setting up technology - KayaPush is there to help!
“KayaPush has it all in one platform where you can kind of build what you need. Especially as a start-up, that’s important to us to be cost-friendly. You have the best price for what you’re offering. ”
-Marry Ann from Riverside Wellness-
The scheduling app is awesome, first of all. It takes away a lot of communication that needed to happen manually with my team. It streamlines a lot of things that were not streamlined in previous businesses that I worked with.
KayaPush made creating the schedule and applying different tags to the scheduling, for example, a lot of fun and easy.The goal was to spend less time on data processing, and employee management systems to keep the dispensary compliant.