How to Open a Dispensary in Illinois

The Cannabis Security Experts

How to Open a Dispensary in Illinois

January 10, 2021 Licensing 0

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 1, 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 successfully passed. Here’s why:

  • Supporters of legalization argue that it eliminates the harms of marijuana prohibition, including the hundreds of thousands of arrests around the US and the racial disparities underlying those arrests.
  • Legalization will increase tax revenue for the state and prevent billions of dollars flowing into the black market. According to legalization advocates, all of this will outweigh any of the potential downsides (such as increased cannabis use).

The Opportunity Size

Numbers from Statistica.com project that the recreational cannabis market in Illinois will reach at least 928 million by 2024. With approximately 12.63 million residents as of 2020, it’s evident this will be a hot market to start a cannabis business.

The impact on the actual state for recreational marijuana would be tremendous. 2020 estimates indicate that the state approached $150 million in tax revenue within its first 11 months of legalization. The state is also said to account for about 6% of total US cannabis sales.

In November, Illinois generated almost $106 million in combined recreational and medical marijuana sales. According to state officials, marijuana sales are expected to grow to $127 million in fiscal year 2021. At this rate, it’s likely that the state will start collecting more tax revenues from recreational weed than from sales of alcoholic beverages.

Local Cannabis Restrictions & Laws

When Illinois legalized recreational marijuana at the start of 2020, it also gave permission for 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 are allowed to opt-out of cannabis sales, just like other states.

Medical Marijuana

Illinois’ relationship with legal cannabis started in 1931 when the state prohibited use of cannabis. This was part of a nationwide anti-cannabis trend which a majority of the states participated in. 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 for the treatment of cancer, glaucoma, AIDS, and other specific 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

As of November 2020, 21 grower permits have been awarded, with licenses for 40 smaller craft growers currently pending. Furthermore, there are 80 recreational dispensaries open across the state, with 30 dispensaries yet to open under the state’s inaugural legislation. However, current laws could allow for as many as 500 locations within the state.

Medical Cannabis Dispensary Application Fee and Guidelines

Alongside the registration materials, applicants must submit a non-refundable registration fee of $30,000.

For a comprehensive list of guidelines on Medical Cannabis Dispensary Registration in Illinois, you can check here.

Recreational Use/Adult Use Dispensary

Initially, authorities planned for a total of four waves of license granting, with corresponding dates: 

  • Permission to sell for existing dispensaries in current locations began on January 1, 2020.
  • Permission to sell for existing dispensaries in new locations began on January 1, 2020. 
  • Conditional licenses for up to 75 new licenses were scheduled to be completed by May 1, 2020.
  • Adult-use licenses for up to 110 licenses will be issued by December 21, 2021.

However, there have been delays in the license-granting process, the circumstances of which have led to certain companies taking legal action.

On April 30, 2020, a day before the deadline for granting conditional licenses, the Governor issued Executive Order 2020-34, unilaterally suspending the deadline due to the COVID-19 pandemic. In a subsequent order (Executive Order 2020-55), the Governor extended the COVID-related deadline suspension to October 17, 2020. 

Prior to this, however, the Illinois Department of Financial and Professional Regulation (IDFPR) had already identified 21 license applicants who achieved perfect scores, based on guidelines set by the General Assembly. This was announced by the IDFPR on September 3, 2020. On September 21, 2020, the Governor unilaterally postponed the license allocation indefinitely to give lower-scoring applicants a chance to improve their scores. This was reportedly based on unspecified feedback from unidentified “community leaders and stakeholders.”

In their motion to compel authorities to comply with the statutory process for awarding licenses, the petitioners argued that while the Governor “may have been empowered to suspend the statutory deadline” due to pandemic-related delays, the way it was done and its alleged intent violate the Illinois Cannabis Regulation and Tax Act.

Regardless of these developments, the number of licensed retail stores in Illinois is still projected to reach a maximum of 500 by the year 2025.

Illinois Application Requirements

The full application for an Adult Use Dispensing Organization License is a comprehensive, holistic analysis of the future business you intend to create, along with an assurance of the applicant’s capability to follow through. The following components make up the majority of the grading scale for awarding licenses, but Labor & Employment Practices, Suitability of Employee Training Plan, Security Plan, Environmental Plan, Illinois Owner, Status as a Veteran, and a Diversity Plan are sections that could give your business a competitive advantage.

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 alone 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

To be considered a Social Equity Applicant, applicants will need either:

  1. 51% ownership by principal officers who have resided in disproportionately impacted areas for at least 5 of the last 10 years.
  2. 51% ownership by principal officers who have a record of arrest or conviction for an act eligible for expungement under Public Act 101-0027.
  3. 51% ownership by principal officers who are members of an impacted family.
  4. Ten or more full-time employees, 51% of which must live in disproportionately impacted areas, have a record of arrest or conviction for an act eligible for expungement under Public Act 101-0027 or are members of an impacted family. These employees must be engaged in full-time work at the time of submission.

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 household 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 run by the Department of Commerce and Economic Opportunity (DCEO). 

Recreational Use/Adult Use Dispensary Fees

Each of the four licensing waves comes with corresponding fees.

  • Early Approval Adult-Use Dispensing Organization Licenses (Current Location) required a non-refundable license fee of $30,000 and a non-refundable business development fee of 3% of total sales from June 1, 2018 to June 1, 2019 or $100,000 (whichever was lower).
  • Early Approval Adult-Use Dispensing Organization Licenses (New Location) required a non-refundable license fee of $30,000 fee and a non-refundable fee of $200,000 paid to the Cannabis Business Development Fund.
  • Conditional Adult Use Dispensing Organization Licenses required a non-refundable application fee of $5,000 and a license fee of $60,000 for a 2-year license (only if the license was awarded).
  • Adult Use Dispensing Organization Licenses required a non-refundable application fee of $30,000 and an annual renewal fee of $60,000 (only if the license was awarded).

As per Executive Order 2020-18 (and reinforced by Executive Order 2020-74), the deadline for submitting applications (except for current medical marijuana dispensaries applying for Early Approval Adult Use licenses) was extended to April 30, 2020 due to the impact of the COVID-19 pandemic. 

According to the Illinois Department of Financial and Professional Regulation, current medical marijuana dispensaries may submit applications for “Same Site” Early Approval Adult Use licenses until March 17, 2021. Furthermore, Secondary Site licenses will be granted until March 31, 2021, but applications must be submitted to the Department “on a timeline that gives the Department a reasonable amount of time to review the application and perform an inspection of the site.“

More information on new applications will likely be available after the adoption of the new system in early 2021.

For a comprehensive list of guidelines on the Illinois Adult Use Cannabis Program, you can check here.

Future Cannabis Plans for Illinois

There is much potential for growth in the industry in 2021, 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:

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