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So, You Want To Open a Dispensary...

Posted by Jill Lamoreaux on Sep 28, 2016 12:44:11 PM
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Jill Lamoreaux is a Çanopy mentor, alumni and founder of Sprk Labs. Jill is an entrepreneur, cannabis industry leader, and consultant for dispensary licensing and application.

So, you think you want to open a dispensary?

A green wave is rolling through the US. Medical and recreational marijuana ballot measures are conspicuously present this election cycle, and with legalization there's an almost knee-jerk reaction for those looking to capitalize on the growing cannabis industry: We should open a dispensary. While the opportunity is certainly considerable if you're playing the long game, the short-term considerations are significant. What do you need to know before getting serious about opening a pot shop?

What is the first step?

Apply for a license. Most states that allow for medical cannabis will establish a merit-based application process featuring a short window for submission following the legislative and rule making processes. These processes can be highly competitive depending on the number of licenses available.

What does it take to win a license?

At minimum, an applicant should possess a good team, strong local support, solid application materials and ample funding.

What else?

Of course, an applicant’s chance of success also depends on the number of licenses to be awarded (usually specified in statute), and the number of applications submitted. Depending on the attractiveness of the market and the cost to apply, your chances may vary greatly. Example: Maryland had a low application cost and good market dynamics and received over 800 applications for just over 100 hundred dispensary licenses available. Pennsylvania and Ohio are the next states to host competitive, merit-based application processes and are both currently in the rule making phase; each state features large populations and several qualifying medical conditions including chronic pain, indicating they will be strong, competitive markets. 

What about licensing fees?

One-time application and annual license fees typically range anywhere from $5,000 to $50,000 for dispensaries and tend to be much higher for cultivation licenses.

Sounds like I have a limited time to apply for licenses in any state - is this correct?

A limited number of states including Colorado and Massachusetts have open-ended licensing processes where an applicant can apply at any time; however, zoning issues and local approvals required tend to be significant barriers to entry.

Can I buy an existing license?

Purchasing an existing license is an option in many states, but the cost of a resale license varies widely, as does the risk associated with transferring a license. Few states allow for the license to transfer as an asset and most require the business entity holding the license be acquired which can present hidden liabilities. Extensive due diligence is critical.

What if I acquire a license - what's next? Next week, we'll look at the Top 5 things to prepare for when opening a dispensary, including wholesale supply and compliance.

Topics: Entrepreneurship, Legal