How Much Does It Cost to Open a Dispensary?
With the cannabis industry expanding, dispensaries are opening up around the country. Similar to opening retail stores in other industries, cannabis dispensary owners will need a physical location, a motivated team, high-quality products, and the technology to do it.
However, a cannabis dispensary is not just any retail shop. Opening a dispensary entails state applications, licenses, fees, security systems, and computer hardware/software exceeding any Target or Bed Bath and Beyond. While this page is about how much it costs to open a dispensary, please click here if you are looking for a complete guide on how to open a dispensary.
Opening a dispensary also requires a prospective owner to have a lump sum of capital to prove that they can afford the marijuana dispensary startup costs, annual fees, and operating costs.
So how much does it cost to open a dispensary? Let’s break down the cost to start a dispensary and determine if the investment is one you’re able to make.
One of the differences between opening a cannabis dispensary and other retailers is the capital requirements that coincide with dispensaries. Some states require financial statements to prove that you have sufficient liquid assets to keep your business operating before you even get to the application and licensing stages.
Capital requirements are a regulatory standard for banks that determine how much liquid capital they must keep on hand concerning their overall holdings. One way to calculate your capital requirements is by adding the required expenses, investments, and startup costs together.
It would be best to keep in mind that every state has its capital regulations. For example, opening a medical marijuana dispensary in Pennsylvania requires a prospective owner to show $2,000,000 in assets with $500,000 of it liquid. Some states don’t have capital requirements.
Financial Service Costs
Because cannabis dispensaries are illegal from a federal viewpoint in the United States, many banks are wary about transacting with dispensaries, both for their initial investments and their day-to-day requirements. The task of finding banks that will work with dispensaries might be difficult.
Using local credit unions is a common consideration instead of a traditional bank. Private marijuana banks are already available in a number of jurisdictions. However, there are potential fees of up to $2,000 a month for this service.
The first step in opening a marijuana dispensary is winning a dispensary license. To win a license, you must complete a proper application. The fee for submitting the application is non-refundable. It will cost you anywhere between $2,500-$5,000, depending on which state you are applying in and whether or not you qualify for the state’s social equity program. Depending on how you complete your application will add to your startup fees.
While it comes with an additional cost, hiring an experienced team of consultants to assist with the application process will boost your chances of winning a license.
If your application wins, a license will cost you as well. The first step in opening a dispensary is getting a license. The licensing process varies based on location and can be extensive and expensive. Expect to undergo thorough background checks and spend at least $5,000 on licensing fees.
In places like Washington, the number of licenses granted by the state is capped and only available by purchasing one off of a current licensee. This can run between $25,000 and $60,000 for two years, or $30,000 if you meet the Social Equity criteria.
Due to the high demand for a license, those who hold them have to pay an annual renewal fee. For example, dispensary owners who are residents of Nevada have to pay $3,000 annually to renew their licenses. Those in Connecticut are required to pay $75,000 for renewal in addition to the $25,000 initial application fee and $75,000 registration fee.
Keep in mind that there are additional costs to open, like insurance policies, license renewal fees, taxes, legal retainers, and more.
Real Estate Costs
It would be best for your cannabis dispensary to have good visibility where many people walk by. Marijuana real estate may be purchased or leased to operate your cannabis companies. The cost of buying a real estate property may vary considerably; for example, it might range from $128 per sq ft to $393 per sq ft. For those restricted to leasing the property, rates might vary from $3,500 to $10,000 or even more each month.
Dispensary Construction & Design
Once you find your location, you can expect to make renovations- or maybe your building new construction. It’s essential to think about how the property will be built and renovated to meet standards, improve store flow, and reflect your brand image. According to Grow America Builders, the build-out costs for small dispensaries are between $350,000 and $500,000, mid-sized dispensaries are between $500,000 and $750,000, and large dispensaries are above $75,000. It can also cost between $350,000 and $1 million to renovate an existing building.
Add in $50k for design – elements such as chairs, tables, displays, check-out counters, artwork, and lighting. Keep in mind that actual construction costs often exceed the initial anticipated costs.
Costs of Products
The cost of cannabis may vary significantly from one state to another depending on factors such as growing technique, quality, and product type, among others. When growing cannabis in a state that permits vertical integration, it may cost more than $500/pound to produce your own product, as well as the cost of stocking up on edibles, topicals, and other goods.
Employee Wages & Training
The payroll costs for a staff of budtenders, store manager, and security team can total more than $250,000 annually when given standard industry prices, $10 – $20 per hour. This doesn’t include benefits, snacks/drinks for employees, and other items.
Professional Services Fees
You should be aware that beginning a marijuana-related business puts you theoretically subject to federal raids and arrests. The specialized legal work necessary when dealing with a product as strictly controlled as cannabis may cost upwards of $50,000 per year.
In addition, you can protect yourself and your organization from financial loss by investing in reliable insurance products. Insurers for small medical marijuana dispensaries often charge between $97 and $159 per month, depending on the company’s location, size, staff count, and revenue.
3rd Party Vendors & Inventory
As a retail store owner, you will need to invest in other companies to help you run and manage your store. Third-party vendors will supply the inventory that stocks your shelves, while security systems, armed guards, and integrated point-of-sale systems will collectively keep your dispensary operational. These fees can total upwards of $25,000, not including inventory.
Marketing & Other Expenses
All of this money was spent to have a top-notch application, location, design, products, and system efficiency because you want your patients to return to your dispensary. However, if they don’t know it exists, they will never walk in the door in the first place. While you can advertise on a smaller, more local scale, the more prominent, more successful brands spend $10,000 to $25,000 each month on marketing, advertising, and PR. At this point, you may also want to consider the legal fees associated with trademark and copyright protections.
Despite the hundreds of thousands of dollars required to open and operate a cannabis dispensary, nearly 90% of operating dispensaries, wholesale cultivators, and infused products companies report that they are profitable. If you’re looking to submit an application, contact us today. Our team has worked on dozens of successful applications.
The cost of opening a dispensary varies. Examining the provided ranges above and then looking at your state’s requirements may be very beneficial. It’s always a good idea to be prepared for the financial aspects of starting a dispensary, rather than being caught off guard.
Are you interested in learning more about opening a dispensary? Fill out the form below and let’s talk.