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So You're Opening a Dispensary - What You Need To Know

Posted by Jill Lamoreaux on Oct 6, 2016 12:34:00 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. In a prior post on marijuana retail operations, she covered the first steps in the process of opening a dispensary, including acquiring a license, fees, and windows of application. In this follow-up post, we discuss operation models and what to prepare for once a retail license is acquired.

What if I acquire a license? What's next?

Once a license is won or acquired, the real work begins. Licensees have several options when it comes to start-up and operations, including:

  • an owner-operator model
  • partnering with an existing operator
  • hiring a consultant for start-up assistance, or
  • utilizing a full service operations and management company

How do I decide which model to use?

When deciding on the operating model that works best for their unique situation and needs, licensees should carefully consider the following:

  • their investor’s expectations
  • market dynamics
  • the internal long-term strategic plan

and should consider those elements in tandem with these dispensary facts:

  • Due to restrictive tax rules for dispensaries (the dreaded and confusing 280E), profit margins are very slim and licensees should be cautious when making deals that require shares of equity or any portion of gross revenues.
  • Licensees that do not control their own cultivation and processing operations fare much worse than vertically integrated operations on the taxation side, especially those in recreational markets.

The top 5 things new dispensary licensees should prepare for:

  1. A dispensary operation is a typical retail operation (even in medical markets), only with many more headaches. 
  2. Even in states with patient and physician or customer and business-friendly regulations, cannabis programs often face major start-up problems which can require regulatory or legislative changes to rectify. Having sufficient reserves for working capital may be critical in surviving long-term delays.
  3. If your dispensary does not have a bank account it is still possible to operate, but cash handling will take a great deal more time, effort and expense than ever imagined.
  4. The wholesale supply of cannabis and manufactured products is inconsistent in availability, quality and price - especially in new markets. Utilizing purchasing contracts to keep your shelves stocked and to give patients/customers choices, as well as, consistent access to their favorites is crucial.
  5. Managing the compliance for your dispensary also includes closely monitoring compliance issues for all of your vendors – is their license valid, does their labeling meet requirements, are their quality assurance tests valid, have they had recalls before, etc.?  

Undoubtedly, owning and operating a marijuana retail outlet is tough. Heavy regulation and taxation, keeping compliant with state laws, and the heavy penalties faced when missteps are made can create headaches upon headaches. But if you have a long-term vision, a strong team, dependable funding, and a lot of patience, the payoff can be incredible.


Topics: Insider, Entrepreneurship, Legal