How to Open a Marijuana Dispensary

How to Open a Marijuana Dispensary

Pot is a hot topic, even for those who don’t smoke it.

The recent legalization of marijuana in several states has been unprecedented. By legalizing both recreational and medical marijuana, states have opened a new industry that people are clamoring to take advantage of.

We talked with two dispensary owners from pioneering states: Mitch Woolhiser, owner of Northern Lights Cannabis Company in Denver, Colorado, and Lincoln Fish, CEO of OutCo Labs, which manages the dispensary Outliers Collective in San Diego, California. While their experiences were different, their general attitude was similar: Opening a dispensary is not for the faint of heart. It takes a lot of hard work and time before it becomes profitable.

“It’s one of the hardest things you could possibly do,” says Mitch Woolhiser. “It has to be taken seriously.” Opening a dispensary requires careful compliance with laws and regulations and a large amount of starter capital. “You’re not going to make money if you aren’t following these rules,” Lincoln Fish says. “It’s an expensive business to run.”

But if hard work, up-front cash, and bureaucratic red tape don’t deter you, opening a dispensary is an opportunity for you to be a pioneer in what is soon to be a massive, national industry. Marijuana Business Daily projects revenue generated by dispensaries and retail stores to reach between $6.5 and $8 billion by 2019.

“It’s still at the ground floor of the whole thing,” says Mitch. “It’s still a good time to get in.”

Read on to find out how you can open a dispensary.

1. Assess your commitment and eligibility

Lincoln Fish moved into the medical marijuana industry to challenge hypocrisy.

“I was with most people. I thought, ‘These are drugs, this is bad,’” Lincoln says. “Then you start to learn how much hypocrisy surrounds marijuana. Alcohol and tobacco are far more damaging, far more addictive. Schedule 1 Narcotics by legal definition are highly addictive, shown to have no medicinal benefits and can be harmful to the point of lethality. Alcohol and tobacco meet all three of those requirements and marijuana meets none.”

Mitch Woolhiser saw a magnificent and unusual business opportunity in the budding marijuana industry in 2010. “This is something that, as a business person, you can do that’s almost revolutionary,” he says. “It’s the opportunity of a lifetime. What product suddenly becomes legal that hasn’t been for a long time? Not since alcohol prohibition has something like this happened and it probably won’t again in my lifetime.”

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But Mitch and Lincoln both warn against opening a dispensary solely for financial gain. “If the only reason you’re getting into this is money, you’re not going to have a good time,” says Mitch. “It’s not a ‘get rich quick’ scheme. It’s a long game. You have to have something more to motivate you.”

It’s also important to recognize that background checks are often required, not only for the owner of a dispensary, but also the investors and employees. If you have a criminal background, you may not be eligible to open a dispensary.

Furthermore, if medical marijuana is not legalized in your state, any dispensary is liable to be shut down by the federal government. If there are no existing laws or regulations in your area, opening a dispensary probably isn’t a good idea. “If the city or county hasn’t passed anything, then the default position of the state is that there is nothing legal there,” Lincoln says. “You have to be very careful. That could be a problem. You could get shut down.”

Considering the money you will spend opening a dispensary, trying to operate one illegally is not worth the risk.

2. Do your research

The dispensary business is rife with legislation and regulation. Even determining how you’ll accept payments as a cannabis business is a complicated topic.

To be successful as a dispensary owner, you must understand not only the existing laws around marijuana cultivation and sales, but also the proposed laws and changes that will go into effect in coming years.

Lincoln Fish recommends reading the Cole Memorandum, which gives guidance to U.S. state attorneys on how to prioritize the enforcement of marijuana laws. If you’re in California, he also recommends reading Proposition 215 and Proposition 420.

“There are a lot of rules to follow, and I would strongly advise that people get help right from the get-go: a lawyer and a CPA,” says Lincoln. NORML has a database of lawyers from all over the U.S. who specialize in the marijuana industry.

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Both Mitch and Lincoln recommend a study of U.S. Code 280E, a tricky tax code that can slip up dispensary owners, particularly in budgeting.

3. Find a rental property

“The key is to find a compliant property,” says Lincoln. In San Diego, a compliant property must be more than 1000 feet from a church, school, residential zone, and another compliant property. It’s important to remember that a property that is compliant now might not be in two years.

“When you access a property, make sure it will be consistent with new laws that take effect,” Lincoln says.

A compliant property means different things in different places, and even if you find one, you have to be honest with the landlord about your plans to open a dispensary there, and they might not be supportive.

When searching for a place, consider if it is convenient for potential customers. Identifying a target market can help you choose a good location for your store.

It’s also important that most, if not all members of your community are comfortable with a dispensary in their area. If your county or city has had ballot proposals on marijuana laws, access the ballot results for any area where you are considering a property.

4. Write a business plan

A business plan separates you from the crowd and appears professional and prepared. Any good business plan will start with how to access capital, which is one of the most challenging parts of the marijuana industry.

Because of the federal illegality of marijuana, you can’t get a bank loan for a dispensary. Personal funds or angel investors are recommended. Budgeting is another consideration in your business plan.

Besides your product costs, there are other considerations for your budget: rent cost, cost of license, licensing application fee, employee salary, transportation and storage of product, and security.

In addition to knowing about the licensed competition in your area, opening a dispensary requires you to think of the unlicensed operators. Research the unlicensed competition landscape and what law enforcement is doing about it.

Conduct market research to identify your customers. This will help inform your marketing and pricing strategy.

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5. Get licensed

Getting licensed to open a medical marijuana dispensary is usually difficult and expensive. Be prepared to spend a lot of time on compliance and have a lot of resources ready.

6. Get product

Obtaining a good product for your marijuana dispensary, and ensuring you do it legally, will be a central part of opening a successful dispensary. Many dispensaries grow their own marijuana, and in some states this is mandatory. Opening a retail facility first and then putting an eye toward having your own cultivation facility is recommended.

Opening a dispensary doesn’t mean you have to sell marijuana in its typical form.

7. Market your dispensary

Decide what makes your dispensary competitive, and sell it.

Your target market will inform some of your marketing choices, but being on Weed Maps and Leafly is essential. Check the regulations around marketing your dispensary.

Stay informed

With this information, you have a good chance of opening a successful, lucrative dispensary.

Lincoln Fish encourages those with the right motivations to join the industry of medical marijuana. With marijuana legislation changing often, it is important to stay abreast of new information to ensure you are operating in a safe and legal manner. Refer to the resources listed below for more information.

Resources:

– NORML: A one-stop resource for all information about the fight to legalize marijuana nationwide.

– Cannabis Business Times: A recommended resource.

– 420 Intel: A recommended blog.

– MJ Business Daily: Provides consistent research, statistics, and coverage of the legalized marijuana business.

– The Green Solution: A wholesale medical marijuana supplier.

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