TABLE OF CONTENTS
- Where do I start?
- When can I apply?
- How much does it cost to apply?
- Why is the application fee so high?
- How many applications are approved?
- What should I already have in place before I apply?
- What makes some applications successful and others not?
- My application was approved—now what?
- How can I maximize my chances for success?
The year 2020 introduced endless amounts of chaos into our lives: a global pandemic, a more volatile political climate than we’ve ever seen, and the widespread return of tie-dye. But it wasn’t all bad; trained dogs in Namibia saved 45 endangered rhinos from poachers, Bernie Sanders gave us perhaps the best meme of the decade, and four more states voted to legalize marijuana. With 15 states and Washington D.C. now offering legal recreational weed—and 20 additional states allowing medicinal use—members of the federal government have even begun a more concerted push toward legalization.
As a result, cannabis retail sales increased by an astonishing 40% from 2019 to 2020, and they’re projected to double in the next four years. It’s no surprise, then, that many of the entrepreneurial-minded are considering opening dispensaries in their own states. Unfortunately, the idea is popular, and the competition is stiff. Most states accept only a small fraction of dispensary license applications, and those that are rejected don’t receive refunds on their costly application fees. But the complications don’t stop once the application is approved. Maintaining compliance once your doors are open can be an ongoing headache for the ill-prepared. More often than not, it includes litigation.
This may seem daunting—indeed, it should seem daunting—but for the committed, the determined, and most importantly, the informed, there are clear paths to opening and maintaining a successful dispensary. Read on for a step-by-step description of what you can expect when opening a dispensary in your state.
Where do I start?
The first step you’ll want to take is to become intimately familiar with your state’s regulations. Every state has different requirements for dispensaries, and the devil is in the details when it comes to which applications are accepted and which are denied. To find the full regulations, visit your state’s government website. Be prepared, however, to spend some time searching. Some state sites can be difficult to navigate, which can make regulations tricky to find. But trust us: knowing the regulations inside and out will you give you a crucial leg up over your competition.
When can I apply?
Open application periods depend on the state. Some states accept applications year-round while others only accept applications during designated times. Things can get even trickier with these states because they often won’t release the dates of application periods until shortly before the window opens.
Nevada, for example, makes an announcement on their website 45 days before applications open—and they only remain open for 10 days. This underscores the importance of having your application ready to go at a moment’s notice. You don’t want to find yourself in the position of having to throw together a haphazard application in order to meet a sudden deadline.
How much does it cost to apply?
The application fee can be exorbitant, and though (like everything else) it varies by state, you can usually expect it to be in the thousands. In some states, the application fee alone can be as high as $30,000. States also require additional fees for additional licenses. In other words, if a state’s fee is $2,500 and you’re attempting to open three dispensaries, you must apply for—and pay for—three separate licenses. Another unfortunate commonality between states is that the application fees are non-refundable. With how few applications are approved, this means that the vast majority of applicants lose substantial amounts of money.
Keep in mind that this only covers the application itself, not the initial license or renewal. In some states, the cost of the license itself can be as much as $100,000. This is why stacking the deck in your favor from day one is so crucial. Considering both the financial and the time investments of the application, the notion of braving the process alone becomes significantly more daunting. Having experienced professionals in your corner increases the likelihood of your application’s success by magnitudes.
Why is the application fee so high?
There are two primary reasons for these high fees. The first is that the regulatory department requires funding to manage the process of reviewing applications. The second, though, has more important implications for potential applicants. Simply put, the fee acts as a barrier to entry. A high application fee ultimately limits the number of applications received because many either can’t afford it or aren’t willing to put skin in the game without the guarantee of a license. This is bittersweet news for hopeful applicants. While it means that you’ll face less competition because of the added barrier, it also means that you must prepare your own budget to absorb those costs.
How many applications are approved?
Once again, the number of applications distributed depends on the state. Noticing a trend? Some states are more relaxed while others have much more stringent approaches. Oklahoma, for example, has one of the most relaxed application processes in the country. In addition to their lower fees, they have no cap on the number of licenses they distribute, which reduces competition during the application process. But remember, this means there could be even more competition once your doors open since there will potentially be more dispensaries.
Illinois, on the other hand, has a much more competitive application process. In 2020, the state received applications for more than 4,500 sites but only distributed 75 licenses. We’ll do the math for you; that’s an approval rate of less than 2%. When you consider that every client we’ve helped has scored in the top 10% of applications, the decision to enlist the help of professionals becomes that much clearer.
What should I already have in place before I apply?
If you’ve ever been inside a dispensary—and if you’ve made it this far, we’re assuming you have—you already know that security is a big deal. And, in the age of COVID, it’s taken on a new role, with many security employees now also checking customers’ temperatures upon entry.
One thing that many people don’t consider is that security is not thrown together after licenses are approved; rather, detailed security plans are a major part of the application itself. For example, will you handle security internally, or will you hire an outside company? What kind of security equipment do you plan to use? Do you have the capital to cover that equipment? These are the kinds of questions you’ll need to have answered before you submit your application.
Considering how competitive the application process is, these often-overlooked details can be the difference between a successful application and thousands of wasted dollars on non-refundable application fees. One additional benefit to working with professionals is that we have established security plans already in place, which you’ll be able to use for your application.
This is another one of those easily overlooked details. Where is everything in your shop going to go? The floor plan might feel like one of those minor issues to handle later, but it’s actually another crucial component to the application. To complete your application, you must already have a completed floor plan ready. But in order for your application to have a shot at acceptance, your floor plan needs to meet certain requirements, which—you guessed it—vary by state.
Working with an architect to design the layout is an important step to preparing your application, but keep in mind that the flow of your layout has a measurable impact on your sales. Another aspect of the service we offer is developing appropriate floor plans that both score well on applications and maximize your business’s profitability once your doors are open.
Cash on hand
The application fee itself can be a hefty obstacle, but it isn’t the only expense you’ll need to be ready for. In many cases, before they’ll even consider your application, states require you to show that you have enough existing capital to cover first-year expenditures. This can include everything from the license fee itself to office supplies, products, legal fees, and employees.
With how competitive these applications are—and how much revenue states are able to generate from successful dispensaries—they want to make sure that they only issue licenses to people they believe can be successful and profitable. Your bottom line is likely dollars and cents, and it’s important to remember that this is often partially true of state governments as well.
Standard operating procedures
Before you can even submit your application, you must have all of your standard operating procedures, or SOPs, established. Don’t make the mistake of underestimating the depth of this task. Your SOPs include everything from inventory control and cash management to security and sales, and this process alone can easily take hundreds of hours to complete.
People attempting to open dispensaries often consult law firms to help with the application process. While a lawyer’s expertise is useful in navigating the legalese of the application, the simple truth is that they don’t have the business strategy experience to provide much useful insight in drafting the SOPs. In fact, many lawyers themselves rely on our expertise to help their clients in this arena. Working with a team of cannabis business specialists can save you untold hours because we’ve already established SOPs and can easily adapt them to fit your circumstances.
This is another often overlooked but immensely important area of the application. States pay close attention to the actual people behind the applications, and a credible and varied ownership team is crucial to a successful application. Typically, applications will require a biography and resume for every member of the ownership team, and knowing what the state looks for can be the difference between an application’s success or failure.
This might go without saying, but it’s also imperative that every member of the ownership team can pass an FBI background check. Any blips will result in a failed application, so it might be worthwhile to perform your own background checks on each owner, especially when considering the time and money you’ll already be investing into acquiring your license. States will generally still perform their own checks, but at least you’ll have avoided any eleventh-hour surprises.
What makes some applications successful and others not?
It can be anything, or it can be everything. We said it before, and we’ll say it again: the devil is in the details. States often create needlessly confusing applications with the clear intent to trip up applicants. With the limited number of licenses available, states want easy reasons to dock or dismiss applications. For example, one application score was docked five points simply because the ownership team didn’t include any veterans. Another application was denied because a single box was checked incorrectly.
At this point, it’s worth mentioning that there is an appeals process available to denied applicants. States have weathered significant scrutiny regarding their application-scoring procedures, and plenty of pokable holes remain. If you find yourself in an appeals process, a team of experienced professionals in your corner will significantly improve your chances of success.
My application was approved—now what?
You’ve chomped your fingernails to nubs during the 3-6 months of waiting (the typical application review period), and the moment has finally come: your application was accepted! Unfortunately, your issues with state oversight are far from over. Now you need to find your location, acquire all the special-use permits from your local jurisdictions, and maintain compliance with the relevant governmental agencies. This all boils down to copious record-keeping, and if you fail a compliance check, it can often be months before you get another chance.
Another commonly overlooked challenge of maintaining a successful dispensary is employee management. The nature of the industry is such that it invites a high turnover rate, and this is often exacerbated by inexperienced hiring and training practices. Many new dispensary owners simply don’t know the right questions to ask prospects, which results in cycles of re-training and re-hiring. This process wastes a significant amount of a new business’s most valuable commodity: time. Another benefit of working with professionals is that we’ve hired and trained countless employees specifically for dispensaries, and our experience in this area will allow you to spend your time on more productive activities.
How can I maximize my chances for success?
If you’re still reading, you’ve learned by now that opening a dispensary isn’t for the faint of heart. The application process alone takes thousands of dollars and months of work, and only a select few applications are accepted. That being said, a successful dispensary can bring in millions of dollars in annual profit—not to mention the intrinsic rewards in knowing that you’re providing a product whose health and psychological benefits enhance your customers’ quality of life. If you’re serious about not just opening a dispensary but opening a thriving dispensary, investing in professional help from the outset sends your odds even higher than your product will.
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