How to Open a Dispensary: #1 Dispensary guide
Legalized recreational cannabis is on the rise with 18 states + Washington, DC has adopted the change. 37 U.S. states allow medical cannabis for qualified patients with certain ailments.
The demand for legal cannabis in the U.S. has boomed, which many predict will continue to increase until it’s legalized on a federal level.
The medical cannabis market is vast, but it does come with legal hurdles. While there are amazing opportunities within the cannabis industry, people must be prepared to take on some challenges. One obstacle is a steep learning curve. This is to be expected with facing and understanding the intricacies of such a new and rapidly maturing industry.
The following step-by-step guide will walk you through the basics of How to Open a Dispensary.
These steps alone can make opening a cannabis dispensary seem daunting. However, surrounding yourself with the right people as your cannabis business consultants, as well as other industry professionals, you will be equipped to handle challenges that may come your way.
Step 1: Learn About Your State Licensure Requirements
Depending on where you live, there are distinct zoning and licensure guidelines that regulate how retail weed dispensaries are run. It’s important to know what the rules are in your area before applying for a license. Most states will implement program-specific licensing structures for dispensaries (medical vs. recreational)
If you’re growing and distributing your crop, you’ll need two types of licenses – one for cultivation & one for retail distribution.
You need to do proper research on the different license types in your state, to see which one suits you best. This will help you avoid problems in the future.
When applying for a cannabis license in each state, you must note the deadline. This deadline is before the application will be reviewed to see if you can start operations.
Timing will be crucial for assembling the most competitive application possible. Missing deadlines for submitting your application could mean getting rejected before you even get to apply. Always research each step of the application process and fully understand all the points. Follow these steps to a tee!
Step 2: Find Your State’s Cannabis Laws
You need to find out what your state’s laws are before you can start selling cannabis products. Not only do you need to know the licensing requirements for your industry, but you also have to make sure that your company complies with federal law and local and state regulations.
States have drafted their own set of rules & regulations on how to open a dispensary, but municipalities are commonly asserting additional regulations that have to be followed.
Cannabis dispensary owners are subject to various laws – including ones that cover everything from statewide cannabis-related criminal laws to zoning.
Here are some to keep in mind:
- Do products need to be tracked from seed to sale?
- How much THC can be in a single serving of cannabis products?
- What are acceptable forms of payment?
- What are the tax laws associated with the selling distribution of cannabis?
- What are the Security requirements?
Step 3: You Need a Team
There are many aspects to running a cannabis business for which you will need to have the right team to ensure success.
This team should include:
- An experienced attorney in the cannabis industry.
- An experienced accountant in the cannabis industry – There are cannabis-specific tax codes that must be adhered to avoid being penalized.
- A knowledgeable compliance officer is necessary to ensure the regulations of your cannabis business are always met. They can help you with all aspects of making sure laws and regulations are followed so that every part of your business remains compliant.
- A retail professional with a solid understanding of POS systems and cannabis inventory tracking is a must when you open a dispensary.
- A security company that will keep your location compliant with state and local cannabis laws by installing and servicing security systems.
- An experienced cannabis cultivator that can appropriately manage every aspect of the cultivation operation if you plan on cultivating your own products,
One of the key aspects of having a successful dispensary is providing great customer service.
Having an excellent team who can connect with customers is important to ensure they leave feeling Happy and satisfied. Both medical patients and recreational shoppers alike will want to work closely with dispensary staff to determine the safest & most ideal cannabis consumption methods, dosage, usage recommendations & quality of cannabis products.
One of your top priorities will be to cultivate close relationships between customers and the sales team that dispenses your cannabis products Knowledgeable staff will help customers and patients choose cannabis products that are right for them.
“We’ll be Happy to help you find the right product”
It’s important to make sure visitors feel confident in the advice your team provides for administrating, dosages, and quantities of cannabis. Visitors want options and support and the security of knowing the choices they make will be safe.
Step 4: Create Your Business Plan
Once you have a strong understanding of the rules surrounding cannabis dispensaries in your state, it will be time to create a strong marijuana business plan that is integral to setting up your new dispensary.
This will help you establish long-term success. To successfully apply for a license and secure potential investors, it’s crucial to communicate your business plan comprehensively and coherently. This will also allow you to explain your idea properly and outline the specifics of your business.
A sound business plan that clearly defines your short- and long-term goals will help you more effectively build your business model, so it can support the benchmarks you and your team have set.
Here are a few things to consider when drafting your dispensary’s business plan:
- Clientele–You need to know who your target audience is from the outset.
- Are you catering to High-end cannabis consumers, budget-oriented consumers, or a mix of both?
This information becomes central to building a company that focuses on its needs.
- Product Selection–What types of products do you plan to offer? One way to differentiate yourself is establishing some key products and selected SKU this will speed up expansion efforts and customer acquisition.
- Business Operations–One of the most important aspects of a team is identifying the roles each member is going to fill. This includes a clear hierarchy of those who decide and those who implement strategies.
The next thing in your plan should be how to hire the rest of the team. This will include things like employee compensation and benefits.
- Cultivation–Where will you be sourcing your cannabis products from?
- Will you have an in-house commercial growth operation or will you be getting them from a legal wholesaler in your area?
- Are you considering an integrated production model for total control of every aspect of cultivation, manufacturing, distribution, and retail?
This means that you should have plans in place to stage these operations correctly as well as implement industry-proven methodologies which have been proven to work.
- Environmental Considerations—Cannabis-specific environmental reduction plans are important for navigating the legalities of growing weed. They’ll help you plan your future business without running into any unforeseen violations.
- Inventory Control—As legal cannabis distributors, you’ll be required to record all transactions from seed to sale, on your POS system. This will allow you to comply with all state regulations for sales.
Step 5: Secure Financing
Starting a dispensary takes a lot of time and effort, but with proper planning and sufficient capital, it can be set up to achieve success. You will need to research all costs associated with getting your license in your state; the process may vary based on the requirements you’re looking for.
A lot more goes into financing a dispensary than simply paying fees. You need to guarantee you have the capital to cover the costs of starting up and make it through any licensing process.
How much does it cost to open a dispensary?
These are a few typical example fees to be on the lookout for when you open a dispensary:
- Licensing Fees
- Application Fees
- Rent/mortgage for your retail location
- Renovations necessary for your dispensary
- Financial services
- Professional Services fees
- Security and surveillance costs
- Equipment (cash registers, POS systems, computers, etc.)
- Product costs
- Marketing costs
Getting a cannabis dispensary up and running costs on average $500,000+, depending on the type of look and feel you’re going for. This includes things like utilities & advertising your dispensary, new entrepreneurs should expect these costs to be somewhere in the five-figure range. Securing financing for a cannabis dispensary can be challenging, as cannabis is still illegal on a federal level, making banks unwilling to offer loans.
Because of limited financing options, you may need to go with another source of funding.
Some of the most popular ways to get money to open a dispensary include:
- Business Loans–Credit Unions are a common option instead of banks. While major banks cannot loan you money, it is possible to secure a loan from a credit union.
- Strategic Partnerships–cannabis is a rapidly growing industry with many opportunities for people looking to get involved. Partnering with individuals who have the financial resources will make it easier to find the funding you need.
Another benefit can be that by choosing the right partner, you can also find benefits like marketing help or an additional set of hands that will only help your business grow and make your team even stronger.
- Cannabis Specific Investment Groups–Many private investors are looking to get involved in the cannabis industry, including cannabis investment groups. While this can be a great way to raise funds, it’s important to understand that many of these investors will charge High rates of interest which makes their deal quite expensive so you should explore other potential solutions before choosing to work with a cannabis investment group.
- Angel Investors–You can find angel investors who provide funds for your business for partial ownership. If you have a good business plan, you may appeal to an angel investor interested in financing your dispensary. Don’t forget, if any person contributes any capital to your company, they will need to be listed on the application and undergo a background check.
Step 6: Best Location to open a dispensary?
Once you have the money, finding the right location is key. You will want to make sure that you stay within local and state regulations and pay close attention to whether or not the area has any red tape. For example, some regions will not let dispensaries near schools, parks, churches, the community center, or the library.
Start by doing some market research to figure out what would be the best area for your business.
Check factors like zoning, industry competitors, etc.
- What areas are close to your target customer base?
- What are the local ordinances, bans, or allowances?
- What is the total number of licenses permitted?
- Is the community cannabis-friendly?
- Do you have enough space for parking?
- How close is the location to major roads or highways?
- Do you have a lot of foot and car traffic near the location?
- What level of competition do you have?
- Are there any other dispensaries in the area?
Even though cannabis is legal in your state, it doesn’t mean that all commercial real estate landlords will allow businesses to open there. To make sure you rent from someone supportive of a retail cannabis business, discuss your business plans with your landlord.
Step 7: Learn the Industry Inside and Out
You must understand every aspect of your chosen industry once you have secured funding. If you want to be a successful cannabis retailer, you must have complete mastery of the technical knowledge associated with running a cannabis business.
It will be essential for you and your team to fully understand the basics of retail sales, customer service, and industry compliance. Having this background knowledge will ensure compliance with all rules and regulations and make you a better sales agent and dispensary spokesperson.
If you want to cultivate or process your product, this knowledge is important. To get the best yields per square foot within the facility, you need to enroll in a horticulture program, grow room design, and electrical engineering course.
If you want to stay up to date on what’s happening in the world of cannabis, take the time to educate yourself and learn as much as possible. Staying on top of new cannabis products will keep you up to date with consumer demands.
Step 8: Design and craft your retail experience
It’s time for the fun part…
The time has come to set up your dispensary. To develop a strong retail experience that will appeal to your target customers, you must pull together highly detailed conceptual designs for the layout of your dispensary location.
This part of the process takes a lot of thought and strategy to build a successful brand that will appeal to consumers. It is important to understand that dispensaries have certain unique layout features that are distinct from other retail businesses, and you will need to configure your retail space with these items in mind.
Working with an interior designer can help you with space design. The space should be efficient, warm, and welcoming for patients/customers.
There are several things to keep in mind when designing your cannabis dispensary:
- Limited Access and Restricted Access Areas–Most states will require you to distinguish between one section of your dispensary as a “Limited Access Area” and the other as a “Restricted Area”.
- Limited Access Areas are the spaces where your customers can wait to be served, browse your products, and speak with an associate about purchasing. These areas help by giving them a place to wait while they’re browsing.
- Restricted Access Areas are work spaces behind the scenes, where employees do things like shipping/receiving, inventory/storage and product processing.Areas like your staff rooms and office must be off-limits to your customers, and you should design a layout that separates these areas from the customer spaces.
- Medical vs. Recreational Cannabis–Medical and recreational cannabis customers should be kept separate because of the differences in the level of cannabis products each sector will need. It is vital that you comply with local regulations for this. If your state doesn’t require that these areas be kept separate, it’s a good idea to have a unique experience for the medical vs. recreational section in your dispensary.
- Customer Flow–Customers will move through your store, so it’s important to think about how you’ll handle this. Minimizing crowded spaces is the key to making sure everyone has an enjoyable experience. For example, sitting in waiting areas can be a big help! Besides the space to keep inventory, you want a wide enough countertop for shoppers and multiple cash register and POS systems to avoid bottlenecks caused by customers who spend a lot of time engaging sales associates.
The sales floor should have enough counter space and staff to serve multiple customers at a time. Some customers are knowledgeable and know what they are looking for, while others require more information to be provided so they can make an informed decision.
- Dispensary Aesthetic– Designing the right retail space, which looks warm and inviting, is essential. While there may be exceptions to the rule, most customers do not want to walk into a dispensary that’s decorated with black light posters, tie-dyed drapes, and other typical “stoner” decor.
This is a professional business and should look the part. It’s essential to create an atmosphere that removes the dated stereotype of cannabis products. Depending on your preference, you can choose a modern, natural, or rustic environment for your dispensary.
Your interior design and color schemes should be aligned with your brand image and should always remain professional and inviting.
Step 9: Hiring Staff
Your management team was placed in place as part of the step 3. Those people may not be the day-to-day operators of your dispensary. Your store should come together nicely, but to ensure that your team comprises quality people who can be trusted, you need to look for the right employees.
To ensure your business runs smoothly, the following staff members will be needed:
Bud tenders – these are the customer-facing employees of your dispensary. They need to answer questions for customers and provide them with the information they need on all of your products.
A successful Sales Associate must also be able to maintain a High level of customer service, as they are the first line of contact for customers’ queries.
They need to make sure people enjoy their experience at this store so that they keep coming back. Your staff should also adhere to local and state laws for retail cannabis sales.
General Manager – One of the most important positions of your team, this person will tackle a variety of tasks, from hiring & training staff to scheduling & more. They’re crucial for all aspects of daily operations., your General Manager will follow all local and state regulations.
Greeter or Receptionist – As the first person customers interact with when they visit your dispensary, the greeter will check IDs and directing customers. They will also set the tone for the entire customer experience, so it’s important to hire people who are friendly, knowledgeable and Happy to engage with customers.
Security staff – Security is an integral part of any type of business and this is no different for medical marijuana. The dispensary has a lot of cash and product and so it needs protection. That’s why security will be there to make sure you stay safe.
Inventory Manager – As an industry, cannabis is regulated with strict and specific inventory and tracking laws. This job is very important, yet challenging. Your inventory manager will carry out inventory audits and updating records of transactions. This helps make sure that product is not being stolen or illegally sold.
Purchasing/Vendor Manager – You may cultivate products at your own cultivation facility, but it is still necessary to offer a range of edibles, tinctures and other products that are not produced on site. Dealing with vendors and negotiating purchasing agreements can take up a lot of time.
It’s best if they are handled by an employee that is specifically assigned to them rather than the general manager, who could try to handle other important tasks.
Software and IT – Your cannabis dispensary is going to need a diverse collection of tools in order to function smoothly. You’ll need to use a computer for processing intake.
You will need a dedicated POS system to manage and track all daily sales You may also want to provide customers with tablets that are specifically designed to display merchandise. This way, they can fully consider their options while browsing your entire stock of products without waiting for help from you or your staff.
There are many small but important things that can make or break your business. You need lots of different services to run the day-to-day operations smoothly, which includes technological devices like barcode scanners, receipt printers, and Wi-Fi.
These things are quite essential to run a business successfully, so if any of them have malfunctioned, it could affect the whole flow of your company’s work! It’s best to have someone you can call on who is accessible who will handle any technical issues that may arise.
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