The Cheapest States To Open a Cannabis Dispensary

Opening a cannabis dispensary is a lucrative opportunity to pursue in many states. Marijuana sales in the United States were over $25 billion in 2021, and in 2022, analysts expect this number to rise to $32 billion.

If you’re interested in opening your own cannabis dispensary, you first have to decide where in the U.S. you will open your storefront. Thirty-eight states legalized medical marijuana, while nineteen permit the sale of recreational, adult-use marijuana. Each state has its own laws, regulations, and cost considerations to figure into your plan.

General Costs of Opening a Cannabis Dispensary

The cannabis industry can be tricky because it is still illegal at the federal level, classified as a Schedule I substance along with heroin. However, opening a dispensary in many states is legal and can be a highly profitable business endeavor.

Licensing Fees

Because each state has its own set of rules and regulations regarding the cannabis industry, the licensing process is unique. On the lower end of the spectrum, business owners may pay a licensing fee of $250, like in Oregon. On the other hand, in states like Maryland, licensing fees can cost upwards of $125,000.

Licensing fees often come in stages. Some states require business owners to pay an application fee, an initial licensing fee, and a renewal fee to keep their licenses up to date. Licensing fees can sometimes differ within a state due to the size of the business. Additionally, many states limit the number of licenses handed out to dispensaries at a given time.

Banking

Because the cannabis industry is in a legal gray area, many banks are unwilling to work with dispensaries. Luckily, business owners in the cannabis industry have other options, like banking with privately held cannabis banks and credit unions. But be warned — these banks know businesses in the cannabis industry have no choice but to bank with them, so they may require you to pay hefty fees.

Real Estate Costs

When you open a brick-and-mortar dispensary, one essential factor to consider is the cost of real estate. Finding an affordable location for your business can be challenging, depending on the city or state. On top of that, in more conservative-leaning states, finding a landlord open to housing a cannabis dispensary on their property may be tricky.

You also want to consider renovation costs when looking at real estate. You may need to renovate the location to fit your business needs, and expenses can differ from place to place.

Employee Wages

The state you’re in is a massive determinant of how much you’re required to pay your employees. Excellent customer service is essential in the cannabis industry because your customers will often look for recommendations from the staff. You need to hire people who know their stuff. Do not open a dispensary unless you’re prepared to compensate your staff fairly. That being said, you should consider average wages in your state when analyzing potential business costs.

On top of customer service personnel, you will need talented management and security teams. You may also want to consider hiring a lawyer, especially because of the volatility of the cannabis industry in the United States.

Insurance

Investing in good insurance is essential for any business owner, and arguably even more so for those in the cannabis industry. That’s because the legal scene around marijuana in the United States is complicated. Remember to get insurance for your dispensary so you’re protected if something goes wrong.

Taxes

Each state has its own regulation on taxation in the cannabis industry. Taxes will impact your sales, which is vital when determining the cheapest state to open a dispensary.

Additionally, some states offer tax breaks or incentives to marijuana-related businesses. Make sure to research the tax regulations in your state to see if you qualify.

Software Costs

Most businesses need a POS (point of sale) system to run their business. POS is the software that allows you to make sales electronically. You can find POS systems specifically designed for cannabis dispensaries.

Another software cost to consider is a security system. Your store is filled with desirable and expensive products. Protecting it from burglars and other security threats is vital.

Inventory Costs

Obviously, before you open your dispensary, you need to have an inventory to sell. Because of laws around cannabis production, growing seasons, and transportation expenses and regulations, inventory costs range from state to state. Some areas allow dispensaries to grow cannabis, while others require sourcing products from certified growers and distributors.

Marketing & Advertising

To compete with the other dispensaries in your state vying for consumer attention, you'll want to invest in an excellent marketing strategy. Some states have more competition than others, which is something to consider when selecting a location for your dispensary.

Cheapest State To Open a Medical Cannabis Dispensary

Consider all those factors when deciding whether or not opening a dispensary in your state is profitable or even affordable. On top of that, you must keep in mind whether or not your state has legalized or decriminalized medical cannabis only or recreational cannabis.

Some states with medical-only cannabis are restrictive regarding what organizations are permitted to dispense marijuana products. For example, New Hampshire only permits non-profit Alternate Treatment Centers to grow and dispense medical cannabis. Other states have strict licensing policies or moratoriums on new dispensary applications.

Oklahoma is an excellent example of a state where only medical marijuana is legal, and the cost of opening a new dispensary is relatively low.

Oklahoma

Opening a medical dispensary in Oklahoma can be a good option when considering up-front costs, real estate prices, and the cost of living. The application fee for licensing your dispensary is $2,500.

Oklahoma has a comparatively low cost of living and, therefore, lower real estate prices than many other states on this list. That means you can more easily find a brick-and-mortar store and pay talented employees wages that you can afford.

Because of Oklahoma’s conservative climate, finding a bank to support your business can be more difficult. Additionally, beginning in August 2022, the state legislature placed a moratorium on new dispensary licensing through August 1, 2024. As a result, prospective dispensary owners will have to wait until they have the opportunity to open new cannabis dispensaries in Oklahoma.

As of May 2021, Oklahoma has over 350,000 medical marijuana card holders, and the number has grown yearly since the state legalized medical marijuana in June 2018. As more patients join the pool of potential customers in Oklahoma, dispensary owners are more likely to see growing profits.

Cheapest States To Open a Recreational Cannabis Dispensary

For those looking to open a recreational cannabis dispensary affordably, it can be much cheaper in some states than others. It’s crucial to consider the up-front costs and the costs of running your business for years to come when determining the best state to open your new cannabis dispensary.

Oregon

As one of the states with the longest-running recreational cannabis programs in the country, Oregon is one of the best places to start your marijuana business. While real estate can be pricey and wages are relatively high, the licensing fees are pretty reasonable for aspiring weed business owners.

Applicants must pay a fee of $250. Once approved, the state determines what tier the business falls under, which determines the dispensary’s annual licensing fees. These fees range from $1,000 to $5,750 per year.

The competition is fierce in Oregon! Dispensaries must rely on excellent marketing campaigns to entice customers to choose their products over all the other options.

Michigan

Licensing costs are a bit higher in Michigan than in Oregon. Still, there is comparatively less competition among cannabis dispensaries because the industry only got its feet off the ground after 2018, when the state legalized recreational cannabis. It wasn’t until December 2019 that dispensaries began selling recreational marijuana.

However, dispensaries in Michigan are beginning to pop up quickly due to the lack of restrictions on the number of dispensaries the state can license at a given time.

New dispensaries must pay a licensing application fee of $6,000 to be considered legitimate cannabis businesses in Michigan. Once approved, the dispensary is sorted into one of three classes depending on the quantity of its cannabis inventory. Those in Class A with up to 500 plants pay an annual licensing fee of $150,000, while businesses in Class C with up to 1,500 plants pay $500,000 annually.

New Jersey

New Jersey is a lucrative place to be for emerging cannabis businesses. It only became legal to sell recreational adult-use cannabis in New Jersey in the spring of 2022, so the market is ready for more competitors. The low state tax rate of six percent on cannabis sales is another intriguing point to consider for business owners. Not to mention New Jersey’s large population and close proximity to New York City, which brings in plenty of customers.

The licensing fee in New Jersey for recreational dispensaries is $20,000, which applicants submit at the time of application. Rejected applications will receive a refund of $18,000. On top of that, New Jersey makes it easier for small businesses to flourish in their cannabis industry by creating special microbusiness licenses for companies with five or fewer employees.

Massachusetts

Massachusetts is a safe bet for opening your recreational dispensary with its straightforward and fast-paced licensing process, a massive number of consumers, and mid-range tax rates.

The application fee to open a dispensary in Massachusetts costs $1,500, followed by an annual licensing fee of $10,000. It often takes less than 90 days for the state to approve a business license; a much shorter time frame than other states.

Additionally, the money from the Massachusetts weed market tells an exciting story to any new business owner. According to a May 2022 report from the Cannabis Control Commission, recreational marijuana dispensaries in Massachusetts sales grossed over $3 billion since November 2018.

It’s important to consider that there is plenty of competition among dispensaries in the state, which means marketing costs can be high. Also, Massachusetts real estate can be expensive, especially when you get closer to Boston. Wages in Massachusetts are another issue. The Massachusetts minimum wage is one of the highest in the country at $14.25 per hour.

New Dispensary Owners Common Mistakes

According to Dr. Marla Royne Stafford, a Professor at UNLV, lack of funds and understanding of the business are the two biggest mistakes a new dispensary owner can make. “People enter the cannabis industry without the proper education and not understanding the challenges, the regulations, and the market,” Dr. Stafford told Wealth of Geeks.

“Nobody should enter any business without adequate knowledge, and the cannabis industry is constantly evolving and is very complex because laws differ by states. Without understanding these complexities and how the business works, a new entrant is increasing the already substantial risk of a business failure.”

New dispensary owners must also consider potential competition looming around the corner. According to Professor Brad Poulos, cannabis business expert and instructor at the Ted Rogers School of Business Management, one mistake new dispensary owners make is “overestimating the local demand and not taking into account the likelihood of local/nearby competition.”

“It’s impossible to know who is going to open a dispensary around the corner from your planned location, therefore it makes sense to assume that you will face a local competitor (or two),” he finished.

Is Owning a Dispensary Profitable?

Examining the lengthy rules and regulations around the cannabis industry can point many entrepreneurs away from the cannabis industry. But that doesn’t mean it isn’t worth considering opening a dispensary in your state. Adult-use cannabis dispensaries are making huge profits across the country.

Wall Street projects that by 2030, the cannabis industry in the United States will be worth $100 billion. Americans are proving each and every day that they will pay for good weed, and intelligent business people continue to enter the game.

This article was produced and syndicated by Wealth of Geeks.


Maya (she/they) is a professional freelance writer and editor. Her writing is featured in TransLash News & Narrative, Healthline’s Bezzy Depression, HorrorPress, the Episodes Newsletter, and more. They’re passionate about social justice, history, and entertainment journalism. In her free time, she loves binging horror movies, spending time with her girlfriend, and needle-felting monster sculptures.

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