As consultants, the most common question we get is “what does it take to open a dispensary in California? I am going to do it, no matter what!” In fact, we hear it so often we created an infographic to help us explain this process to potential investors in one of the most exciting business opportunities of the 21st century.
Before diving into this tool, you should note that a Retail Storefront Dispensary, aka a Type 10 Storefront Retailer License, is merely one of 26 license types that California has created. Your investment or lifestyle goals may be better met by or in combination with some of the other license types. But that is a different article.
We picked an iceberg as an analogy for our discussion because it perfectly matches the perspective of most of the investors that reach out to us. They are focused on how fancy their dispensary will be – “like an Apple store”, “like Starbucks”, “like a spa with super high end packaging”. But the harsh truth is that what the store’s display cabinets look like or what products it will carry is just the tiny tip of an enormous mountain of work that need to be done before your first organic edible can ever be sold.
The biggest portions of your dispensary iceberg come many, many months earlier (or not at all) as your journey towards cannabis entrepreneurship relies completely on your ability to obtain rights to use real estate on and in which your local city, or in some cases county, will permit cannabis business activity. And not just any cannabis activity, you need them to sign off on a Dispensary, the most politically charged and tumultuous approval one can seek.
Unlike opening a restaurant where you get to pick a location that is just right for your business, your city will tell you where you may be able to open a dispensary. In most cases, there will be a limited number of spots and plenty of competition. We have seen situations, where a landlord approves the use of their facility for a number of applicants and lets the city figure out who gets the license before picking their tenant.
Be cautious when entering a lease prior to obtaining your city’s approval as you may be stuck in a lease, often at a higher than normal “cannabis rate”, and not get permission at all or for many months after you started paying rent.
Assuming you have your rights in real estate locked up, now it’s your turn to run the gauntlet known as local approval. Each city has the right to set up their own rules but a common standard has definitely started to emerge as the later adopters look to their peers who have already been approving applicants.
Step 1: Registration- The city wants to know who is interested in applying, where the locations may be and they may start digging into your background and financing. Some knockout issues may occur and thin the herd a little at this stage.
Step 2: Detailed Application- Although the form looks simple, giving you a few lines to answer some questions, the truth is you’ll likely need at least 50 to 200 pages to fully answer what they need to know in order to approve your application. A simple business plan template that you find on the web is not going to cut it.
Step 3: Meetings with City Leadership- The local politicians and staffers are under a very bright spotlight as they lead their community into legalized cannabis. They will not approve you without getting to know you face-to-face behind closed doors first. This is their chance to know with whom they are potentially tying their political future.
Step 4: Public Meetings & Voting- Most cities will require a public hearing, most likely a city council meeting, in which your application is presented via a staff report, and a vote is taken. Some council members may vote against you and your application not as a result of your proposal, but as a vote against cannabis in general so be wary of how they voted on the issue in general before you applied.
Step 5: Conditional Use Permits- Unless your city has granted your business the right to business without one, you will typically have to obtain a Conditional Use Permit, which will introduce you to a whole new process, albeit far less political in nature. Your professional team, such as your consultants like our team will work with architects, security and building contractors, will present your plan for the city to approve.
Do I Have to Build My Location Before Applying?
Cities have the liberty to determine at what point they can approve an applicant for a State Application. Some require the full build out, while others will do so much earlier. If your city is just starting to get into cannabis, they may not have determined at which point they will bless your state application. For those cities anxious to start collecting taxes and generating jobs, they will hopefully work with you for the fastest route possible. This factor alone may have an impact of up to six months in your timeline.
As city approval is checkbox #1 at the state level, and now you’ve got it – it’s time to move on to your State Application. Wisely, the state’s system leaves all the political judgement local, where the heat is the most intense, focusing instead on compliance issues. You should not expect many surprises at the state level but you have to have your act together. The time to get your Annual License will largely depend on how well put together and professional your application appears.
At BeGreenLegal, we prepare local applications to the specifications of the state making sure that you’re covered and your ROI is maximized once you’re approved regardless of the city’s stated requirements.
Now that you’ve earned the right to do business you can finally turn towards the fun stuff that likely drew you to this opportunity in the first place. If the city didn’t already make you do the build out, you get to choose the finishes, design some custom cabinetry and align yourself with Brands and product suppliers via licensed Distributors. You may also want to develop some “house brands” via white label deals with manufacturers.
Depending on the size and role of your ownership team, you’ll need to fill in your org chart with care specialists, aka budtenders, admin staff, security and the like. They may need to be cleared by the local police and have to receive permits in some cases.
Now it’s time to promote yourself and imprint your culture and brand on your patient/client community, build out your email list, get your social media humming – all the stuff that may have driven you to this opportunity in the first place.
As you can hopefully see, your desire to open a dispensary in California is going to be tested and you will have to find the patience and stamina, along with significant financial resources and expert advice, to fight for your right to have a seat at the table of legal cannabis commerce.
We are here to help you through the process, just reach out and ask.
If any consultant has promised to deliver you a license for a set fee like $200k- RUN AWAY FAST! As you can hopefully see from this article, there are too many twists and turns as well as hard stops, that could be a roadblock to your dream. Only use consultants who charge you ethically and offer a pay as you go option for the work done at every step.