Even as states across the nation begin to loosen their stringent laws on cannabis use, there are still many challenges when considering opening a dispensary. Entrepreneur Donnie P. is well acquainted with the muddy waters of dispensary ownership. As the owner of the cannabis dispensary Green Leaf and one of the only African-American dispensary owners in Louisiana, Donnie has wrestled with his fair share of red tape and legal hoops. However, the tactics he’s used in navigating that rocky road has led to a good amount of success and notoriety.
The Biggest Hurdles
Starting on the road to owning a dispensary takes a lot of forethought. One cannot just plunk down some cash on a building and start selling cannabis products. Even though the legal stranglehold on cannabis is now easing in some states, there are still some matters to consider before hanging out your shingle.
1. Rules and Regulations
“The first hurdle is state and federal regulations,” advises Donnie. These regulations can be harrowing, especially for the newbie dispensary owner. Perhaps the biggest hurdle is the fact that marijuana is still prohibited federally. It is classified as a Schedule I drug. Even though the Drug Enforcement Agency (DEA) can legally prosecute people dispensing cannabis under federal law, they have not been since the recent relaxation of marijuana laws across the country. That is not to say that the tides could not turn. If anything, public opinion can be fickle, and so can politicians. The drug still technically being federally illegal could lead to potential complications for dispensary owners.
Besides the essential business licenses you need to open any business, you must have a specific license to open a dispensary. Depending on the state, granting these special licenses can be restrictive. One’s background and residency come into play, as well as the background and residency of any employees and investors. Donnie suggests banding together with fellow dispensary owners in your state to navigate the path of regulations together and fight back if necessary.
“State regulations of a cannabis business can kill your business,” he explains. “You have to work as a group with other dispensary owners to battle the regulations.”
2. Money Matters
“The second issue is financial means,” says Donnie. Having the money to start your dispensary and ensure it remains open and thriving can be a tough hill to climb. Depending on the size of one’s business, costs may vary. For a small dispensary with a handful of employees, costs can fall around the low six-figures. On the other hand, larger dispensaries can run into the millions to open and operate correctly — and successfully.
Costs can run the gamut. Some expenses you can control, such as where you decide to set up shop, or how many people you choose to hire. Others can depend on location, and states determine what these costs may be. As such, it makes sense to have a business plan and budget before getting started as with any business venture.
Taxes are also a hurdle for cannabis dispensaries. The federal government imposes what is known as a 280E tax on dispensary businesses, limiting the actions they can take. The 280E tax code prohibits businesses engaged in selling certain controlled substances from writing off typical business expenses related to that activity. If dispensary owners are not diligent about financial matters, this tax code implication could make or break their business.
3. Education
Donnie stresses the importance of educating the market and the public on the benefits of cannabis. Public opinion on the use of cannabis, whether medically or recreationally, can waiver depending on location and market demographics. It helps to know your market and then, in turn, know how to sell to them.
Many of today’s adults grew up in a society that labeled marijuana a gateway drug, or a dangerous and illegal pastime. This shift in the way we, as a society, view marijuana requires continued education to make it a societal norm. Business owners can include information on their websites about the benefits of cannabis use, host informational classes or meetings, and join groups that seek to spread the word on the positives of marijuana.
The Importance of Being Proactive
Donnie believes being proactive sets successful dispensaries apart from those that fail.
“You have to do your research before jumping in head first,” he says. “If you don’t, you’re going to lose a lot of money.”
With all of the complicated bureaucracy associated with opening a dispensary, the financial considerations, and the need to sell your idea to a sometimes skeptical (and judgemental) public, dispensary ownership may not be for the faint of heart.
Although, with proper planning and deep-diving research, you can successfully join the ranks of dispensary owners like Donnie, who are thriving in this relatively new market of cannabis sales.
