How To Get A Dispensary License

Cova seed to sales POS

People often say that making money while doing something you love is the goal in life, and for cannabis aficionados, that could mean opening a dispensary. The local shops are always busy with customers, and the cannabis industry is showing no sign of slowing down. So why not get in on a piece of the action too?

If you're reading this, you've probably done some preliminary research and have come to the conclusion that setting up shop takes a great location, high quality cannabis product, Seed to Sales Software, a solid team and ultimately a dispensary license

Here is the cost of opening a dispensary.

While opening a marijuana dispensary is similar to launching any other type of small business, due to certain state regulations and financial hurdles to overcome, it's a lot more expensive than one might think.

The cost of opening a cannabis dispensary ranges from $150,000 to $2 million. That includes key costs of around $250,000 for annual staffing, $100,000 in yearly rent, and $50,000 for up-front renovations. Of course, everyone's budget is different, and there are a lot of variables when it comes to capital requirements. Some costs are in your control; others are tied to the jurisdiction you're in.

costs of opening a cannabis dispensary

Let's take a closer look at the nature of these startup costs, and the various factors that influence how dispensary costs vary so greatly from market to market. Then we can review some examples of those cannabis retail costs in different US states.

Dispensary License Application Fees: Charges Just to Get in the Game

While these fees vary from state to state, an accurate expectation would be to spend about $5,000 for your license application alone. So, before you even sell your first gram, you're spending a good amount of money just to get a green light. This is one of the first steps in opening a dispensary, and the typically non-refundable fee is in addition to your annual license fee, which can range from around $1000 to north of $10,000.

Real Estate Costs and Challenges: Locating a Brick-and-Mortar

Location is everything, but it may be in short supply. There are usually strict rules about how close a dispensary can be to a school, and often how close it can be to another dispensary. Finding a retail space that will allow a dispensary to operate on the premises is only half the battle, as you also need to find an area that has good visibility and ideally high foot traffic.

You'll probably pay a premium for being in the cannabis business. Annual real estate for marijuana store expenses might run $100,000. Add to that the one-time cost of remodeling the space to meet regulations, match your brand identity, and optimize store flow. That could easily be another $50,000 up-front.

Cannabis Industry Banking Rules and Fees

Marijuana dispensaries fall into a very gray area in the business world, as they are technically illegal from a federal standpoint in the US. Because of this, many banks don't want to transact with a dispensary for their initial investments as well as their day to day needs.

To get around this, owners will do business with credit unions or even private marijuana banks if they're present in the area. Unfortunately, this comes with a cost as these organizations realize you might not have any other choice, and they can charge holding fees of up to $2,000 per month.

Ongoing Costs to Operate Your Marijuana Business

Once you've passed through the first set of monetary hurdles, you're in a good position to become operational. Before opening day, remember that you'll need afull compliant POS system, a security system, and inventory to sell.

The electronics might run you about $25,000, and in states where it's illegal for dispensaries to grow their own flower, stocking your shop with quality product could run at the rate of $1,500 per pound.

Other operational costs include your advertising budget. Depending on your location, and how many competitors you have, this could run into the $25,000 range before you know it.

It's never a bad idea to have an attorney on retainer for any business, as well as having robust insurance policies should anything happen. Given that the marijuana industry is vulnerable in many ways, these annual costs might approach $50,000.

To run any business successfully, you need dedicated and fully trained employees. The size of your shop will certainly dictate how many people you need on staff, but assuming you have a few budtenders, a supervisor, and a store manager, you can expect your annual payroll to run close to $250,000 if you're paying them at industry standard rates.

How much it costs to open a dispensary in California

In California, you'll pay $1,000 to apply for a dispensary license, and if approved, you'll pay a licensing fee between $4,000 and $120,000, depending on the estimated value of your operation. You'll also need to factor in real estate, which can cost between $50,000- $100,000 annually, as well as other startup costs. The cost of living is high in California, and you can expect to pay employees a bit more than national averages, with budtenders each costing around $30,000 – $40,000 per year.

The average up-front investment to open a dispensary in California is between $80,000 and $250,000. Ongoing operating expenses will cost you between $30,000 and $70,000 each month.

How much is costs to open a dispensary in Oklahoma

Getting a dispensary operation off the ground in Oklahoma costs between $80,000 and $140,000 up-front, with ongoing monthly expenses of $30,000 to $40,000. Cost of living and minimum wage are quite low, so you can probably hire good budtenders at a bargain. Real estate in Oklahoma is also a lower cost than in states like California or Colorado, though you may still face the same challenges finding a good location and a willing landlord. The application fee for a medical marijuana dispensary license is $2,500.

How much it costs to open a dispensary in Missouri

The medical marijuana industry in Missouri is still fresh and full of opportunity. The estimated up-front cost of opening a dispensary in Missouri is between $85,000 and $150,000. Ongoing expenses like salaries and lease or mortgage payments average around $30,000 to $50,000 per month. Slightly higher than Oklahoma expenses, but cost of living and commercial real estate prices are still quite low.

The application fee for a medical marijuana dispensary license is a non-refundable $6000, and the annual license renewal fee is $10,000.

How much it costs to open a dispensary in Michigan

Michigan's dual marijuana market makes for some interesting variables. The state now allows medical marijuana dispensaries, called provisioning centers, and adult-use cannabis retail stores.

Applications for latter will be accepted starting November 1, 2019. The application fee for either type of license is $6000. For provisioning centers, there is a regulatory assessment fee of $44,000. For an approved adult-use cannabis retail license, the initial fee is $25,000.

But overall, the cost of opening a dispensary in Michigan is comparatively low, with an up-front investment of between $47,000 and $136,000. The state's bargain real estate and lower staffing costs help keep ongoing costs to between $24,000 and $48,000 per month.

How much it costs to open a dispensary in Illinois

In Illinois, existing medical cannabis license holders have first crack at an Early Approval adult-use recreational license, for a hefty non-refundable application fee of $30,000. Add to that a Cannabis Business Development Fee of $100K (or 3% of June 2018-2019 sales) for same-site registration, or 200K for a second site license.

For a new adult-use dispensary license, the non-refundable application fee is between $2500-$5000, depending on whether you qualify for the for the state's Social Equity program. Once approved, a license will cost you $60,000 for 2 years, or $30,000 if you meet the Social Equity criteria.

$75,000–$180,000 or more is what you'll need to budget up-front to open a cannabis dispensary in Illinois. Ongoing costs could range from $26,000–$71,000 per month, much of that driven by real estate lease rates that could be as high as $20K per month in high-demand locations.

How much does a dispensary owner actually make then?

How much you'll make as a dispensary owner depends greatly on your market size, the competitive landscape, and, ultimately, how much revenue your dispensary is generating per year. To learn more about how much an average dispensary makes see our post on Dispensary Profit Margins and Falling Cannabis Prices.

How Much Are You Worth?

Are you overwhelmed yet by the true cost of opening a marijuana dispensary? There's one final piece of the puzzle, which again varies dramatically from state to state.

When applying for your license and permits, you have to prove that you have enough capital to remain a viable company in the industry. Some states don't require that you have any assets at all, but others like Pennsylvania stipulate that you have $2,000,000 in assets with at least $500,000 of it in liquid cash.

When it's all said and done, the average cost of all of the aspects we've mentioned is between $250,000 and $750,000. If you've been fortunate enough to find an investor to hand over this kind of cash, congratulations!

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