Guide To Getting A Dispensary License

Most businesses are subject to various licensing, permit, and registration requirements for public safety, tax, or other reasons. You must establish the normal business entities and licenses as required by state and local laws first, as well as create a business plan. In the cannabis industry, licensing requirements and fees depend on the business category—cultivation/grow, retail distribution, cannabis processors such as extractors, manufacturers of edibles, among others.

Cultivation operations are complex and organized differently than a retail cannabis dispensary/storefront, so most dispensaries skip cannabis cultivation in favor of purchasing products from commercial growers, concentrate manufacturers, infusers, edible manufacturers, and others. However, some dispensaries are dual-operators, which means they are also licensed to cultivate certain amounts of cannabis. Additional applications, license fees, and regulations may apply.

How To Apply For A Dispensary License

First, get well-acquainted with the rules, regulations, and requirements at the state, city, county, and municipality levels. Many states have restrictions for residency and background which can apply to owners, contractors, and employees. In some states, those with previous convictions may not be eligible to work in the industry or apply for licenses.

It takes a lot of money to get licenses, establish operations, acquire real estate, or land to build a storefront. Dispensary license costs can vary widely by state and market. These fees can range from a few thousand up to hundreds of thousands per location. For example, in Arizona, dispensary license application fees are $25,000 per location and nonrefundable.In addition, in  Arizona dispensary licenses must be renewed and fees must be paid annually or biannually in order to remain compliant with the state’s laws. Arizona regulations require proof of at least $500,000 in liquid capital for all dispensary license applicants, and only qualified applicants will be considered when new licenses are opened for competition.

Competition for cannabis dispensary licenses is fierce, especially when competing with multi-state operators. While some states hold an open application period and award many licenses, others like Arizona are more restrictive and limit the number of licenses issued. For instance, nearly 400 cannabis entrepreneurs paid $25,000 each to the State of Arizona for the chance to win a permit for a future cannabis business license lottery. The lottery on April 19, 2021, awarded 13 new rural county permits across the state.

To date, 143 Arizona dispensary licenses have been issued, with 125 in operation. Most pending locations are waiting for the buildout of retail stores to be completed. An additional 26 licenses will be awarded to social equity applicants. Arizona dispensary license applications for social equity applicants will be accepted December 1 – 14th, 2021.

Local laws and regulations frequently come into play. For instance, in October 2020, in Arizona, the towns of Sahuarita, Payson, and Gilbert preemptively banned certain aspects of recreational cannabis legalization prior to the November elections. Gilbert issued a partial ban on any recreational sales within their town except for existing medical dispensaries that obtained dual-licensing, effectively limiting availability to the single dispensary within the town limits. The City of Scottsdale adopted a similar ordinance, limiting recreational cannabis sales to established dispensary locations.

“Licensed marijuana dispensaries can sell for $20 million or more in Arizona. The rural licenses are likely less valuable because they can’t relocate to large metro areas, but still are potentially worth millions.” – AZ Central

In the highly regulated cannabis industry, the number of licenses needed to start a dispensary can make it very challenging to start a business. For now, license scarcity is the biggest barrier to entry into the lucrative Arizona cannabis market. Since most states strictly limit the number of dispensaries and applications, a robust secondary market for dispensary licenses has been created. Investors and expanding MSOs will need to look for an Arizona dispensary license for sale.

In closing, the state-by-state licensing complexities for opening a dispensary require a lot of industry-specific experience and legal savvy to navigate effectively, which is why you should only hire a firm with cannabis industry expertise.

Additional Resources

Things you need to do to get a cannabis business license
Common mistakes to avoid when starting a cannabis business

Arizona Recreational Cannabis Licensing

Arizona state filing requirements for dispensaries: click here.

Arizona Department of Health 2021 adult-use regulations for the recreational market.

Arizona Department of Health social equity program regulations