The Cost of Operating a Dispensary

The Cannabis Security Experts

The Cost of Operating a Dispensary

February 19, 2020 Licensing 0

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 that exceeds that of any Target or Bed Bath and Beyond.

Opening a dispensary also requires a prospective owner to have a lump sum of capital to prove that they can afford the start-up costs, annual fees, and operating costs.

Let’s break down the cost of operating a dispensary and determine if the investment is one you’re able to make.

Capital Requirements 

One of the differences between opening a cannabis dispensary and other retailers is the capital requirements that coincide with dispensaries. Before you even get to the application and licensing stages, some states require financial statements proving that you have sufficient liquid assets to keep your business operating.

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 start-up costs together. 

You should still keep in mind that every state has its own regulations surrounding the capital. 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.

Application

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 start-up fees as well.

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. 

Licensing

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, which varies based on location, is 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 are required 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. At the same time, 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 there are additional costs for insurance policies, license renewal fees, taxes, legal retainers, and more.

Dispensary Construction & Design

Finding a permissible location with foot traffic and parking might cost up to $100,000 per year. This includes property fees, which dispensaries pay premiums due to the nature of the field. Once you find your location, you can expect to need to make renovations- or maybe your building new construction. You will likely spend around $150k for the build-out of your dispensary. Of which, $50k will be put towards design – elements such as chairs, tables, display, and check-out counters, artwork, and lighting. Keep in mind that actual construction costs often exceed the initial anticipated costs.

Employee Wages & Training

The payroll costs for a staff of budtenders, store manager, and security team can total more than $250,000 annually when they are given standard industry prices, $10 – $20 per hour. This doesn’t include benefits, snacks/drinks for employees, and other items.

3rd Party Vendors & Inventory

As the owner of a retail store, 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 the 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 larger, more successful brands are spending $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.

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