How much does it cost to start a dispensary?
The cost to open a dispensary can vary greatly depending on your location, store size, and buildout. For those that cut corners, luck out on retail space, and are opening in a state like Oklahoma where labor is cheap, dispensary startup cost totals could be as low as 334k. More commonly that number ranges from 500k to 2m. Before you let these numbers crush your dreams, check out ourother post, “How Profitable is a Dispensary: 3 Key Metrics for optimal Margins.” You’ll see just how big this opportunity is.
Ready to see what it takes to open a dispensary? Here’s a full breakdown:
1. Licensing and Application Development: 25k-250k
First, we need to make clear that securing a cannabis business license (CBL) can be extremely complex, time-consuming, and expensive. In certain states it is easy to apply and become licensed. For example, in Oklahoma it takes little more than paying the $2500 fee and filing a registration through the OMMA. However, because there are over 2000 dispensaries licensed in the state the market is very saturated.
In most other states becoming licensed is quite an ordeal. The dispensary license cost is more than the fee you pay to the state. You will likely need to hire a lawyer to help you through the grueling application process.
The Application Process
Applications can be as long as 1000 pages of legal documents and one mistake can lead to your entire application being thrown out. Cannabis consultants charge between 50 -150k or more to create a complete, competitive application. Another, more affordable option is the CHT Accelerator, which makes applying for your license as easy as filing taxes online. However you choose to develop your application, make sure you take your time and do it right. Your app is more than checking off a to-do list, it is the development of the key elements of your business and will be used as the source of SOPs for the day-to-day running of your dispensary.
2. Real Estate: $2500 - 10k+ monthly
A large portion of your dispensary startup cost should be allocated to finding prime real estate for your business. If you don’t think this applies to you, then you better be planning on adding an amusement park, World’s Biggest Bong attraction, or hosting superstar rappers and music acts to bring in traffic.
Location, Location, Location.
Location is everything. How much it will cost you depends on several factors:
- The size of your retail space
- Whether you buy or rent. (most rent, but if buying is an option it is a smart way to build assets for your company)
- Where your store is located – This is the most important part: you want a prime location even if you have to pay premium rent.
- Whether the buildout is worked into your rent or you are doing it yourself. Some landlords will work a buildout into a lease, easing the amount of upfront capital you need to get up and running.
Costs for real estate can range anywhere from $20 per square foot to $40 and up. Smaller spaces in low-rent areas could run you $2500 per month, whereas a 4000 square-foot store in a prime location could cost over 10k monthly.
3. Legal Services: 30k -50k per year:
Keeping your business compliant is essential or you risk losing your license. Your dispensary can be audited anytime by the state. If every box isn’t ticked you could be fined, shut down, even have your license revoked. You will need to keep a law firm or attorney in your back pocket to help you stay compliant with current regulations. Retaining a law firm can cost $2500 per month, more if you go over allotted time or you hire a premium attorney.
You will also need to retain legal services to help with the details of several of the documents needed for your application. In addition, you may want help creating cannabis business plan, pitch deck, and financial projections. Law firms that specialize in the cannabis space can help create these documents for you. If you have the extra cash, it is a good investment.
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4. Staff: 150-250k
According to Vangst, a retail store general manager’s average salary is between 55-90k. Budtenders make $14-$25 per hour. If you have several stores you may want to hire a Director Of Retail Operations, which will cost you between 80-150k per year. Manage the store yourself and you may get away with 150k a year in salaries. Have a huge store and/or need highly experienced staff? Be prepared to spend at least 250k. (Click here to download the Vangst 2021 Cannabis Industry Salary Guide: https://vangst.com/reports/salary-guide)
5. Furnishings and Equipment: 18k - 100K+
The costs of your furnishings and equipment vary greatly depending on your dispensary layout. For example, if you decide to go with a kiosk model (More on model types via Flowhub’s Dispensary design quiz https://flowhub.com/dispensary-design) you will need to budget for kiosks (often over a dozen) and high end displays. However, this model requires the least amount of staff and thus reduces overhead overall. In contrast, a mobile model sends your budtenders to walk the floor and build carts for clients using a mobile tablet. This model may have lower equipment costs but will require more staff. You should budget at least 40k for furnishings and equipment. Go the DIY route and fix up used gear and you could cut that number in half. If you plan on buying the shiny new stuff you’ll need to set aside more.
6. Security Systems: 10k - 80K
Most states require a complete system of security cameras, door access control, and burglar alarms. Cameras should cover every inch of your dispensary, and they can be set up to be monitored from anywhere in the world. Not every employee should have access to the room where your product is stored. You’ll need access controls to allow for the selective restriction of access to any place or resource. You may also need building fortifications from windows and doors to bullet and blast-resistant materials. Installation can cost a pretty penny – around 10k for most basic setups. You can easily spend 80k on security systems. 10k will buy you basic camera security and monitoring capabilities.
Here are 4 Security firms that work with Cannabis Companies:
7. Marketing/ Advertising: 30-90k annually,
According to MG Magazine, you should spend between 3-9% of your gross revenue on marketing and advertising. So if you have sales of 1m per year, you would spend between 30k-90k on ads, events, SM, and other marketing opportunities. PR is a good way to promote your store’s grand opening. Costs for PR campaigns range from a few thousand dollars a month to over 50k per month. (For the record, we don’t advise spending 50k per month on PR unless you are a very large company.) If you decided to use a PR company to promote the opening of your location, it’s best to hire them for at least 6 months, 3 months before you open. This way you can build excitement and buzz around your grand opening, and then support it with interviews, articles, and photo ops for at least 3 months afterward.
8. Product: $500-$4000 per lb.
How much product you need to have on hand will vary greatly depending on the size of your store and location. As a rule of thumb, you should keep at least a one week’s supply of flower on hand at any given time. If you are selling 2lbs per day, you would need to have 14 lbs in stock on the day you open. Prices vary from $500 – $4000 per lb, depending on the current market conditions and state in which you are operating. Expect to invest between 7k and 56k in product before you open your doors.
9. Build Out / Construction: 30k -250k+
The build-out of your retail dispensary will be one of the larger expenses on your roster. Sometimes a landlord will foot the bill up front and let you make monthly payments worked into your lease. Usually, a deal like this comes with a much longer-term – say 10 years as opposed to 5 or 6. If you get lucky and find a space that doesn’t need any major reconstruction you may be able to greatly reduce buildout costs. On the other hand, if you have a large space that needs to be gutted down to the studs you may be looking at over 250k in construction costs. Some larger buildouts with custom built-in furniture and high-end finishings can cost over 1m.
When searching for your retail space, keep your buildout budget in mind. Don’t be afraid to ask if your landlord is willing to front the costs of the buildout in exchange for longer lease terms.
10. Banking Fees: 6k-60k annually
It’s probably not news to you that the industry has a big problem. Most institutional banks are unwilling to work with cannabis companies. Due to the passing of the Controlled Substance Act, it is too much of a risk for them andthey could be penalized. The SAFE Banking ACT would prohibit federal regulators from punishing financial institutions for working with cannabis companies. It has been passed the House 6 times, however it has yet to pass the Senate. This is why cannabis banking is so expensive.
There are a few banks that will take your hard-earned dollars and store it for you but you will pay for it. Monthly fees range from $500 on the low end to 5k at the top. That fee doesn’t usually cover any other regular banking transaction fees or costs. It is just a “covering our asses” fee. So, if you don’t want to stuff wads of cash inside your mattress every night, get ready to pony up.
So, how much does it cost to start a dispensary? If you cut corners, buy used equipment, skimp on security, and happen to be a regulatory attorney – you could be up and running for a little over 300k. For the rest of us it will cost between 500k and 1m dollars to get a full scale, staffed and stocked operation off the ground.
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