Since Proposition 64 passed in 2016, California adults have largely enjoyed the recreational consumption of cannabis. To meet the needs of millions of cannabis consumers, thousands of dispensaries have sprouted around California since the end of cannabis prohibition. But don’t let the high number of dispensaries fool you. Opening a dispensary in California takes much time, effort, and money. Many don’t consider how strenuous of a process it is to obtain a license to operate, find a location, and invest in a powerful dispensary POS system.
Luckily, BLAZE has you covered. This guide will give you all the information necessary to open a successful cannabis dispensary in California.
This includes:
- Application and License Fees
- Day-to-day Business Operations
- Marketing and Promotion
- Banking
Each municipality operates differently from the next. If you’re wondering where to start, here’s the perfect place! Read on to learn how to open a dispensary in California in 2021.
Licensing
To open a dispensary in California, you must first apply for a license then pay the non-refundable application fees. Its also advisable to first get a local city or county license if your jurisdiction requires it. This can save you valuable time and money. It can also determine if your dispensary can fully operate in the city you’re applying to.
The application fee for an annual license costs $1,000 per application. Once granted a license, you’ll then pay an annual licensing fee that is determined by a for the first year. The licensing fee can range between $2,500 – $100,000 for retailers. This amount can rise from $5,000 to $300,000 more if you plan on cultivating cannabis. These fees are annual, non-refundable, and can cost more for modifications of dispensary premises.
Location
There are some unique challenges when locating real estate for your dispensary. Not everyone is comfortable renting out their space for a cannabis operation. Moreover, most states have strict regulations about where a dispensary can be located. These include proximities to schools, daycares, and other dispensaries. Also, some cities can elect not to grant access to cannabis store-fronts, meaning cannabis delivery is only acceptable.
In California, your licensing application can be denied if your premises don’t fully comply with regulations. You must be further than 600 feet from a school or daycare. Manufacturers and cultivators are to also avoid residential areas. Also, rules vary by the county in California and some counties restrict the number of cannabis retailers that can operate in a given area.
For these reasons, rent in a prime location can run your dispensary an annual range of $100,000 – $200,000, plus an additional $50,000 for furniture, renovation, and taxes.
Business Operations
The cost of doing business is omnipresent in the cannabis industry, especially in California. Day to day costs such as wages, security, and a reliable dispensary POS system are considerable investments. Let’s break down the ongoing cost to operate a dispensary.
Wages
Having fully-trained effective budtenders is invaluable for dispensaries to operate smoothly. Estimate how many budtenders you should hire, as well as a supervisor, store manager, and security staff based on your size. The cost of wages can range from $200,000 – $500,000 annually in California.
To break this down further, you can estimate dispensary wages based on industry trends. Then, use that information to determine your budget and how many budtenders you should hire. Try not to be cheap, though, as any successful dispensary can create demand quickly and gain loyal customers in a flash.
Based on data from Salary.com, the median annual wage for a budtender is about $40,000. The low end of that being $31,000 and the high end reaching up to $50,000. These wages vary based on location and the cost of living.
Dispensary POS Software
Unique obstacles and opportunities in the cannabis industry require a point of sales (POS) system tailored for a dispensary. These cannabis POS systems should help manage your inventory, transactions, and compliance with your state. This is especially important as California has some of the most comprehensive regulation laws in the country.
Systems such as BLAZE offer a full suite of dispensary services. Features such as seed-to-sale software and cannabis distribution software add more value to your dispensary. Based in Los Angeles, BLAZE is a valuable software that understands the ins and outs of opening a dispensary in California. With software that is constantly updated with real-time data, BLAZE lets retailers worry less about compliance and regulations and more about sales.
Depending on your needs, dispensary POS software ranges from $300 – $600 a month, plus additional fees for hardware such as iPads, iPhones, and POS equipment.
Security
Cannabis security is a necessary investment to keep your dispensary safe from break-ins and robberies. Surveillance hardware such as cameras and monitors not only helps deter crime but maintains compliance. Dispensary security in California can cost $50,000 – $70,000 annually. Let’s further break these costs down.
Product
If you’re a cannabis retailer that is not vertically integrated, your dispensary will need to purchase wholesale cannabis products. Having a diverse and expansive product selection, including vapes, flower, CBD, edibles, and accessories will give you the best chance at reaching more customers and increasing shopping carts.
According to data from MJBizDaily.com, cannabis dispensaries who want to open a dispensary can look to pay some of the following prices for wholesale flower:
These figures just show the average prices of bud per pound by some of California’s cannabis cultivators. If you want to know how to open a dispensary in California while getting the best wholesale deals that fit your budget, the most effective thing you can do is network. Get with local groups, such as The Cannabis Chamber of Commerce, and find retailers that fit your needs. Be upfront with your budget and filter out who you can work with while still upholding your brand and core values.
Marketing
Unlike Field of Dreams, building a dispensary won’t necessarily mean customers will come. Platforms such as Google and Facebook won’t allow for cannabis advertising. And in states recreational cannabis is legal, there are strict regulations on how dispensaries can promote themselves. However, this is hardly an obstacle and should push you to try more creative channels to market your brand. A good rule of thumb is to dedicate 3-5% of your yearly gross revenue to marketing, advertising, and promotion.
In California, licensees must abide by the following advertising regulations:
- Dispensaries must not give away cannabis products or merchandise for free. This includes a Buy One Get One Free promotion.
- Ads and marketing promotions must be at least 1,000 feet away from a school or daycare.
- Billboards cannot be on a state highway or near the California border.
- Ads must target audiences that are 21 and older.
- Ads can only be displayed where at least 71.6% of the audience is older than 21.
For a full list of California cannabis marketing regulations, click here.
Promotions
Depending on your budget, there are marketing platforms that can fit just about all of your needs. Cannabis marketing platforms such as Warpspd use customer data and analytics for personalized marketing experiences. These insights are vital for return business and building a loyal customer base when first starting out. Warpspd and other marketing platforms integrate seamlessly with BLAZE dispensary POS software so you can have all your POS and marketing tools in one spot.
BLAZE dispensary POS software also gives you the power to create profitable promotions, Promotions like Buy One Get Ones, Bundles, and loyalty rewards are great ways to penetrate the market. To determine an accurate marketing budget, check out the Licensing table and deduce 3-5% of your yearly gross revenue. This number is what you should spend on marketing your dispensary.
Banking
Before you open a dispensary in California, you must secure banking. Banking in cannabis can be tricky. Because it’s not yet legal on the federal level, many banks tend to shy away from doing business with a dispensary. This is why some dispensaries are cash only or do business with local credit unions.
In California, however, some of the high tides of cannabis banking are beginning to calm. In September 2020, Governor Gavin Newsome signed Assembly Bill 1525 into law. The law does two important things:
- Ensures that banks and other institutions that do business with dispensaries are not committing a crime and removes penalties for entities that service cannabis operators.
- The bill allows financial institutions to request information for cannabis businesses from the state and local authorities, such as applications, licenses, and other valuable data. This encourages more banks to do businesses with cannabis operators by giving them access to data that can absolve them from wrongdoing.
Bill 1525 doesn’t directly address the high banking costs, deposit, and handling fees that cannabis operators experience. Since this gives clear leverage to the banks, rates can cost $2,000 – $4,000 per month or more.
Conclusion
Opening up a dispensary is tedious and tiresome, but totally worth it. The cannabis industry is growing rapidly and cannabis use is on the rise in every adult demographic. That’s why now is the perfect time to open a dispensary.
Dispensaries that use BLAZE cannabis POS software are already at a major advantage. Our seed-to-sale software enables vertical integration that can elevate your dispensary to new heights. BLAZE Distro software takes the worry out of inventory management and reporting. And powerful integrations make sure you’re covered on all fronts – from cultivation, to compliance, and even delivery. Book a demo with BLAZE today if you’d like to open a dispensary in the simplest way possible.
