As more states introduce legislation that legalizes adult-use or medical cannabis, many savvy businesspeople are curious about the process of opening a dispensary. The upfront investment of opening a dispensary may be intimidating, but the projected growth of the industry is, for many, worth it.
Opening a dispensary involves a lot of moving parts: accessing capital, building an inventory, and remaining compliant are critical for anyone interested in operating in the legalized cannabis, CBD, and hemp industry. Additionally, there are significant differences in fees for companies of different sizes.
In this article, I’ll break down the process of opening a dispensary into seven steps. Keep reading to learn how to get your business started on the right foot.
How to Open a Dispensary
So, you’ve decided to start a dispensary. What’s next? You might have a great name and a solid understanding of the industry or products, but it takes a lot more than just that.
Here’s how to open a dispensary in 2022.
1. Assess Your Eligibility
Before you set out to start a dispensary, you should confirm that your business is eligible in your state. The majority of states have legalized either medical or adult-use cannabis, but there are still plenty of restrictions surrounding the type of businesses that can operate.
Check out the legislation in your state and confirm that you’re eligible before you proceed with the following steps. Most experts believe that universal regulation is fast approaching, so you may need to put your plans on hold for that day.
Until then, it’s best not to waste your time and resources if you are ineligible.
2. Research the Market
If you have previous experience as a business owner, this step will be easy for you. Conducting research on your local cannabis market will involve the same processes as conducting research in any other market.
Challenges could arise, however, if legislation has only recently passed in your state. In this case, you may only have information regarding the illicit market in your area. Here are a few things you can do when facing this problem:
- Conduct research on neighboring states with legalized cannabis
- Examine cities with similar population sizes and demographics
- If you’re opening an adult-use cannabis dispensary, take a look at the medical market in your area, if one exists
- Consider meeting with a consultant
Market research is an essential step in opening a cannabis dispensary, so don’t skip over this part. Be sure to conduct thorough research and gather credible sources. It will pay dividends when you start applying for funding, insurance, and licenses.
3. Find a Compliant Commercial Space
Most states have regulations about where dispensaries are allowed to operate. These vary by state, but typically you can expect to have to steer clear of schools and churches. Consider partnering with a commercial real estate agent who specializes in dispensaries or cannabis businesses to help you understand what spaces will be compliant with local regulations.
If your state has just recently passed legislation regulating adult-use cannabis, many commercial landlords could feel hesitant to lease to you. This is one of many times when your market research will come in handy. Demonstrating the success of other dispensaries in similar neighborhoods could go a long way.
4. Create a Business Plan
At this point, it’s reasonable to begin composing a comprehensive business plan. Gather your market research and create some data visualizations. Add all the necessary information about your commercial space. Confirm and validate your eligibility.
Some other information you can begin to gather in this stage are outlined below.
This is one of the most challenging parts of opening a dispensary because financial institutions are uniquely stringent with any cannabis-related businesses.
For this reason, you’ll have to obtain funding from investors which is no easy task. Also, the barrier to entry for dispensaries is significant in most places across the country.
You don’t actually have to access capital at this point, though you certainly need a realistic and detailed plan for how you plan to meet this requirement.
Create a Budget
In the planning stage, you should also prepare a detailed, scalable budget.
Include information such as:
- Rent costs
- Licenses and licensing fees
- Hiring costs
- Inventory cost
- Transportation and storage of inventory
- Security costs
Since you’ve already conducted extensive research and found a compliant property, you should have most of the information you need.
Do Your Research
Any good business plan should include information about your competitors and the local market. If you completed the previous steps thoroughly, this should already be complete. Include information about unlicensed and licensed competitors, demographics, and psycho-demographics.
Be sure to present the data you obtain in a visually pleasing way, and remember that this document will need to convince investors and other business partners to believe in your plan.
5. Apply for a Business License
Like most of the other official processes on this list, the steps for applying for a cannabis business license will be different in each state.
More than requirements, many states even have license prioritization programs designed to ensure diversity, equity, and inclusion in their state’s cannabis industry. In New Jersey, for example, officials prioritize certain businesses based on a specific set of criteria.
In this stage, you’ll have to have access to capital, since many of the licensing fees and application fees are expensive. In an effort to make the cannabis industry more equitable, however, dispensaries that don’t exceed a state’s requirements for microbusiness status can qualify for more affordable licensing fees.
6. Obtain Inventory
Once you’ve applied for and obtained your license, it’s time for the fun part: building out your inventory. The process for this will vary depending on whether you are an adult-use or medical dispensary.
Although this stage is exciting, it can also be filled with risk. A significant number of cannabis product manufacturers routinely mislabel or mishandle their inventory. This can be done through falsified or outdated lab reports and inaccurate claims.
Products that are mislabelled or not tested properly pose a significant liability risk to every member of the supply chain. Not to mention the reputational harm that can be inflicted upon your business in the case of a customer complaint, FDA warning letter, FTC warning, or product recall.
Take extreme caution when selecting products to carry in your store. Not only could these choices make or break your business, but they could also cause catastrophic harm to your customers.
Unfortunately, there are very few ways to ensure you are getting the best cannabis products for your dispensary. One strategy is to work with a licensed, reputable distributor. This could unlock specialist knowledge about the manufacturers and brands available to you. But distributors don’t always have access to verified and validated sources such as authentic COAs and lab reports.
The best way to have complete confidence in the products you stock in your dispensary is by using Qredible®. Qredible is the legalized cannabis, CBD, and hemp industry’s only digital registry of validated and verified products and businesses.
Using advanced blockchain technology, Q-Verified labs submit all data directly from the testing equipment into a blockchain registry, making it impossible to modify the original document.
Without a doubt, all professionals that want to protect and grow their business need to be in Qredible. It is quickly becoming the industry standard for quality and those who do not opt-in will soon notice their customers, business partners, investors, and others in the industry turn away to seek more trustworthy options.
7. Create a Marketing Plan
Once you’ve established yourself and selected products you can stand behind, it’s time to let your city know who you are. Set up a website and social media accounts, then set up Google My Business so you can begin gathering customer reviews as soon as you open.
Marketing for cannabis companies is complex. There are few universal pieces of advice since many marketing and advertising regulations are governed by the state.
I won’t lie—it’s difficult to keep up with the changing rules regarding cannabis marketing. But there are resources that can help.
But by signing up for Qredible, not only can you monitor the compliance of your manufacturers and business partners, but you can also monitor your own messaging. It’s one of many ways Qredible helps you to stay on top of the rapidly evolving regulatory landscape in your state.
Qredible’s AI-driven technology actively monitors your brand messaging on packaging and online to protect you from any potential liability. It also monitors the products you sell, so you can make sure every product that leaves your dispensary is compliant.
Find Support for Opening a Dispensary in Qredible®
Starting a dispensary is a challenging but rewarding process. With a cannabis regulation compliance tool like Qredible, you can make that process infinitely simpler and less risky.
To find out more about our resources designed to help you stay compliant, select the right products, and even obtain funding from financial institutions, set up a discovery call today. Our team would love to learn more about how we can support you.