How to Open a Dispensary in Illinois

Overview

Are you wondering how to open a cannabis dispensary in Illinois? This page is dedicated to keeping you up-to-date on the latest news and announcements relevant to opening a cannabis business in Illinois. This includes helpful advice on what is to come next for the state. 

On January 1st, 2020, Illinois became the eleventh state to legalize adult-use marijuana, as well as the first to develop a state marijuana program through legislation. Governor J.B. Pritzker signed the Cannabis Regulation and Tax Act in June 2019 amid the state’s recent progressive political movement. This allows Illinois residents age 21 or older to purchase up to 30 grams of marijuana and non-residents to purchase up to 15 grams. The vote was successfully passed. 

On July 22nd, 2022, 149 conditional adult use dispensing organization licenses were issued to applicants chosen via three lotteries for 185 licenses conducted in 2021. On July 29th, an additional 28 licenses were issued, with another 5 issued on August 12th, and a final 3 issued on August 19th. All 185 available licenses from the initial round of licenses have been fully issued. The awardees had one hundred and eighty (180) days to choose a place for a physical storefront and get the complete Adult Use Dispensing Organization License. 

On November 10th, 2022, the first full adult-use cannabis dispensing organization licenses in Illinois were issued to social equity applicants. Ivy Hall, which is 61% owned by African Americans and is situated at 1720 N. Damen Ave. in Chicago in Cook County, was granted a social equity applicant license by the Illinois Department of Financial and Professional Regulation (IDFPR). Green Rose, which has its location at 612 North Wells Street in Chicago and is owned 2.5% by African Americans and 15% by Latinos, has been granted a second social equity application license by the IDFPR.

On December 21, 2022, the timeframe for the subsequent round of cannabis dispensary license applications was announced by the IDFPR. On January 30, 2023, IDFPR started accepting applications for 55 more conditional cannabis dispensary licenses. The 17 Bureau of Labor Statistics (BLS) Regions received the 55 licenses.

On June 3, 2023, a budget bill was approved by both chambers in Illinois which includes provisions enabling licensed marijuana businesses to claim state tax deductions that are currently disallowed at the federal level due to IRS code 280E. The bill also allocates funds to a cannabis development fund and extends the deadline for conditional licensees to secure a physical storefront. On June 7, Governor J.B. Pritzker’s (D) signed the bill into law, formally enacting its provisions. 

The Opportunity Size

Numbers from Statistica.com project that the cannabis sales value in Illinois will reach at least 532 million dollars by 2025. With a 2022 population estimate of 12.785 million, it’s evident this will be a hot market to start a cannabis business.

Retail sales of cannabis for recreational use in Illinois continued their steady ascent in 2021, reaching more than $1.2 billion. This represents a gain of around 85 percent from the beginning of 2020 through November of 2021 alone. The medicinal cannabis program served a total of 136,000 active patients, who together incurred additional expenses of $362 million. More tax income was earned from the fiscal year 2021 than alcohol sales, coming in at over $300 million.

Local Cannabis Restrictions & Laws

When Illinois legalized recreational marijuana at the start of 2020, it also permitted the 55 existing medical marijuana dispensaries to (1) add adult-use cannabis sales at their existing locations and (2) open a second adult-use cannabis location. The state is currently licensing cannabis retailers and others along the supply line. However, local jurisdictions can opt out of cannabis sales, just like other states.

Medical Marijuana

Illinois’ relationship with legal cannabis started in 1931 when the state prohibited the use of cannabis. This was part of a nationwide anti-cannabis trend in which a majority of the states participated. In 1978, Illinois passed the Cannabis Control Act, which allowed for the use of medical marijuana. This act required action from two state departments, Human Services and the State Police; however, neither department took action, essentially rendering the act void. 

It wasn’t until August of 2013 when then-Illinois Governor Patrick Quinn signed a bill legalizing the use of marijuana for medical purposes. The Compassionate Use of Medical Cannabis Act allows qualifying patients to use small amounts of medical cannabis to treat cancer, glaucoma, AIDS, and other debilitating medical conditions. 

Medical Marijuana Dispensary and Cannabis Business Opportunities

According to the language of the Medical marijuana’s pilot plan in 2015, the plan was to:

• Award up to 22 permits to grow and cultivate via the Department of Agriculture
• Award up to 60 permits to dispense via the Department of Financial and Professional Regulation

Medical Cannabis Dispensary Application Fee and Guidelines

The cost of opening a medical cannabis dispensary in Illinois includes an application fee of $5,000. Fees are non-refundable. Each application must be accompanied by a single application fee.

For comprehensive medical cannabis dispensary application instructions in Illinois, you can check here.

Recreational Use/Adult Use Dispensary

Illinois Governor J.B. Pritzker signed the Illinois Cannabis Regulation and Tax Act (the “Act”) into law on June 25th, 2019. As drafted, the Act requires 75 new adult-use dispensary licenses by May 1st, 2020. However, there have been delays in the license-granting process, the circumstances of which have led to certain companies taking legal action.

On July 15th, 2021, to address delays and controversy, the Illinois General Assembly approved H.B. 1443, signed by the Governor, that changed the procedure for issuing new adult-use dispensary licenses. Under this new system, two more lotteries were organized to award 110 adult-use permits, for a total of three lotteries in which 185 licenses would be awarded.

Only applicants with at least 85% of available points entered the first lottery for 55 new licenses on July 29th, 2021. The second lottery for 55 licenses was held on August 5th, 2021, and included applicants with an 85% or above and Social Equity ownership and control requirements. On August 19th, 2021, the last adult-use lottery for 75 licenses was held. 

Recreational Marijuana Business Opportunities

Through a series of lotteries, the IDFPR has so far granted 196 conditional adult-use cannabis dispensing company licenses. Before completing the necessary on-site inspection mandated by the Cannabis Regulation and Tax Act, complete licenses will be awarded when the Department receives and evaluates the applications for the full licenses.

On January 30, 2023, IDFPR started accepting applications for 55 additional conditional licenses to operate cannabis dispensaries. The deadline to apply was extended to April 21, 2023. On April 27, 2023, the IDFPR announced a total of 2,700 applications were submitted for the lottery to obtain licenses for conditional adult-use cannabis dispensaries.

Illinois Dispensary Application Requirements

A number of changes were made to the rules by Illinois regulators for social equity applicants seeking one of the state’s 55 new adult-use retail licenses. Some of the most notable shifts are:

• The process of applying for a license will be greatly streamlined.
• In order to guarantee that conditional license holders are spread out geographically, the number of licenses that are granted as a result of any lottery will be distributed across the BLS regions.
• The associated fees will go from $2,500 down to $250.
• The elimination of military veteran preference points and residence criteria.New dispensary applicants will only be allowed to submit one application for consideration throughout the state.
• The winners will all be chosen by means of a lottery.

Illinois Dispensary Security Plan

Your security plan plays a major part in communicating that your organization is prepared for the risks of opening and operating a cannabis dispensary. Submissions will require a detailed description of electronic facility access control and surveillance, physical security measures like alarm systems and security guard patrol routes, in-depth employee emergency protocol and training, and cash/inventory management. Applicants must include a copy of a contract with a private security contractor licensed under Section 10-5 of the Private Detective,

Private Alarm, Private Security, Fingerprint, Vendor, and Locksmith Act of 2004.

Business Plan, Operating Plan, Financials, and Floor Plan

Along with the security plan, your submitted business plan will present how your dispensary or grow operation will be managed. These two segments account for more than half of your final application score, so detail and precision are crucial to success. Your business plan will need to include the following:

• Description of the proposed point-of-sale system
• How your organization will process customer purchases and dispense cannabis
• How you will track denials of sale
• Methods for maintaining purchaser confidentiality
• Product/Service description
• Legal and Administrative compliance strategy
• The intended volume of stored cannabis at your proposed facility

The remaining requirements (outside of the business plan) of this segment include:

• Day-to-day operations and staffing plan for hours of operation
• Compensation and benefits for full-time employees
• Proof of sufficient funds and financials to operate the proposed dispensary
• A floor plan that demonstrates an understanding of operating processes, compliance regulations, and security requirements
• Accommodations for safe storage of products

Knowledge or Experience in Cannabis or Related Fields

Each principal officer must submit an anonymized resume detailing their relevant qualifications and education that make them suitable candidates for operating an adult-use cannabis dispensary. This may include an academic degree, professional certification, or industry experience in either cannabis or business management. Additionally, each principal officer will be required to demonstrate intimate knowledge of the cannabis products he/she/they intend(s) to sell, especially information on particular strains of cannabis and methods of consumption.

Evidence of Status as a Social Equity Applicant

While this section is optional, it is a distinct and valuable portion of Illinois license applications. Applicants whose proposed organizations are eligible as Social Equity Applicants must be Illinois residents and qualify for at least one of the criteria detailed in the following section.

Social Equity and Disproportionately Impacted Areas

When it comes to the requirements for social equity, candidates must meet either requirement:

Option 1: 

• 51% ownership by principal officers who have resided in disproportionately impacted areas for at least 5 of the last 10 years; or 
• who have (or their parent, guardian, kid, spouse, or dependent has) a record of arrest or conviction for an act eligible for expungement under the Illinois Cannabis Regulation and Tax Act

Option 2: 

• 26% ownership by principal officers who have resided in disproportionately impacted areas for at least 5 of the last 10 years; or who have (or their parent, guardian, kid, spouse or dependent has) a record of arrest or conviction for an act eligible for expungement under the Illinois Cannabis Regulation and Tax Act.
• The applicant will operate a dispensary in DIA for at least 2 years from final license granting;
• During the first 2 years after the final adult use dispensing organization license is issued, the Applicant will acquire at least 25% of its goods from one or more “Social Equity Applicant” infusers or growers
• During the first 2 years after the final adult use dispensing organization license is issued, the Applicant will acquire at least 30% of its contracts from registered Illinois BEP vendors operated by minorities, women, and individuals with disabilities;
• The Applicant will facilitate cannabis industry training or education at an Illinois community college for at least two years after the adult use dispensing organization license is issued. This will be done with a $250,000 grant and mentoring for program students and alumni.
• Within 60 days of conditional license granting, Applicant will provide $250,000 as an unrestricted grant to another Social Equity Applicant or Option I lottery winner; or
• The applicant will contribute $500,000 to the Cannabis Business Development Fund within 60 days of conditional license granting.

Disproportionately Impacted Areas are geographic regions with high records of arrest, conviction, and incarceration for cannabis-related activities, or areas affected by one of the following:

• 20%+ poverty rate
• 75%+ of students participating in the federal free lunch program
• 20%+ of households receiving SNAP assistance
• Two consecutive years with 120%+ the national level of unemployment

The Social Equity Applicant Low-Interest Loan Program

In addition to other measures for social equity, a 20 million dollar low-interest loan program is run by the Department of Commerce and Economic Opportunity (DCEO). 

Recreational Use/Adult Use Dispensary Fees

The cost of applying for an adult-use dispensary license includes a non-refundable application fee in the amount of $250 that must be paid by each applicant. This cost will be transferred to the Cannabis Regulation Fund.

Next Steps for License Awardees

The Illinois Department Of Financial And Professional Regulation provided the next steps for awardees. This includes:

Conditional licensees must complete the following stages within 180 days to get an operating license.

• Select a suitable location
• Ensure that all application forms for Principal Officers are up to date with updated fingerprints
• Fill out the Request for Inspection Form
• Provide floor plans for evaluation
• Make the necessary payments
• Obtain a form from the local zoning authority titled “Notice of Proper Zoning”
• Provide either an escrow or a surety bond

Future Cannabis Plans for Illinois

There is much potential for growth in the industry, as more municipalities are welcoming cannabis retailers. Additionally, there is a planned lottery to award 75 new recreational licenses, following the state’s plan to give hundreds of unsuccessful applicants another chance to qualify.

Medical marijuana has been available in Illinois since 2015. To date, the Illinois Department of Public Health (IDPH) has approved more than 140,000 qualifying patients. However, as mentioned earlier, it has stopped paper applications for the Medical Cannabis Patient Program as of 12/01/2020, a move geared towards the adoption of the new system in early 2021.

Are you looking for more assistance and are serious about opening up a marijuana dispensary in Illinois? Would you like to be informed when new opportunities to apply for a cannabis license are available? We can help. Reach out to us by a messenger in the lower right-hand corner or get regular up to the date news on starting a dispensary by joining our mailing list below: