Considerations for Opening a Dispensary or Building a Cannabis Facility

Share This Post

As more states create cannabis programs, expectations and standards are becoming more defined, but there’s still a lot of uncertainty in the industry. Whether you’re opening a dispensary or building a cannabis facility, just getting started can be harder than you think.

As we learned from a recent expert panel on the Business of Cannabis, the majority of aspiring cannabusiness owners greatly underestimate the amount of time, resources, and funding they’ll need to get off the ground.

Higher Yields Consulting Considerations for Opening a Dispensary or Building a Cannabis Facility

Because each state is different, the panel experts advised that anyone interested in opening a dispensary, cultivation, or extraction and manufacturing facility start by carefully reading their state’s regulations and rules. Then, take advantage of every available resource, including professional guidance. 

Read on for more key considerations about the business of cannabis for anyone interested in opening a dispensary, launching a cultivation, or building an extraction and manufacturing facility.

How to Save Failing Social Equity Programs 

Historically, social equity programs haven’t had much success. Most applicants simply don’t have the resources to compete against big multi-state operators (MSOs), and are often taken advantage of as a result.

Since MSOs control the price, they control the product. The key to improved social equity programs, then, boils down to properly allocated funds, education, and resources to help small businesses and minorities band together against MSOs. 

There are two approaches to accomplish this. First, state governments can create incubator periods with designated facilities to provide each social equity applicant with the education and experience needed for successfully opening a dispensary, cultivation, or extraction and manufacturing facility. 

Second, on a more local level, towns and municipalities with existing MSOs can use the money gained from those MSOs to train and support social equity operators while amplifying those operators’ own voices. 

Cannabis & the Workplace

Regardless of whether you’re opening a dispensary, building a cannabis facility, or overseeing employees at any other type of cannabusiness, it’s important to understand that the legalization of cannabis has prompted new questions about regulating employee consumption. 

To help keep workplaces safe for all, employers will need to update company policies with cannabis-specific language and train current and future employees on the appropriate procedures. 

Considerations to address include:

  • Dignity & privacy: Considering how long cannabis remains detectable in a person’s system, understand the circumstances under which you are allowed to test, and how to conduct tests with respect to employees’ privacy. 
  • Testing & reports: When and how will tests be conducted? What actions will be taken if there are positive tests, reports, or accidents on the job? Spell out expectations and procedures as clearly as possible. 
  • Offsite prohibitions: Understand what restrictions employers can and can’t enforce on the use of cannabis when employees are not at work, especially if the employees have medical reasons for consumption.
  • Medical use: While employers are not required to allow cannabis use onsite — even for medical purposes — certain accommodations may be needed to address the reason an employee has been prescribed medical cannabis.
  • Working from home: This is an extremely gray area, as cannabis use while working from home is difficult or even impossible to detect and enforce restrictions on. 

Ultimately, employers who actively engage with cannabis policies and listen to their employees’ needs and concerns will be best equipped to cultivate a safe and comfortable working environment. 

Introducing Cannabis to the Community

Cannabusinesses have enormous potential to benefit local economies by bringing in new business and real estate revenue. However, many municipal officials, landlords, and communities maintain closed-off attitudes toward the industry and treat cannabusiness differently than other small businesses.

Higher Yields Consulting Considerations for Opening a Dispensary or Building a Cannabis Facility

Despite state-level legalizations, cannabis is still federally illegal, and some people simply won’t be open to it as long as that’s the case. But while certain communities may never fully embrace the industry, others will open up in time as they see its positive effects on neighboring municipalities. 

In the meantime, if you’re serious about opening a dispensary or building a cultivation or extraction and manufacturing facility in your municipality, the best thing you can do is start making connections with local officials, help correct misconceptions, and educate your community about the benefits of cannabis. 

Section 280E: The Cannabis Industry Stumbling Block

One of the biggest hurdles for anyone considering opening a dispensary, cultivation facility, or other cannabusiness is finances, especially taxes. 

Cannabis is still considered a Schedule 1 controlled substance, so according to Section 280E of the Internal Revenue Code, cannabusiness owners are unable to take typical business tax deductions or credits on the income gained from cannabis sales. 

However, while no one can avoid Section 280E, there are still many tax deductions that cannabusiness owners can and should take advantage of. Taxes aside, there are plenty of financial resources available online, from events and conferences to expert consultants. 

If you are considering opening a dispensary, cultivation or manufacturing facility, or any other cannabusiness, be sure to research financial opportunities thoroughly, keep your records in order and above reproach, and take every tax deduction you can. 

Cost of Opening a Dispensary or Cannabis Facility

So what does the process of opening a dispensary, launching a cultivation, or building an extraction facility look like, and just how much money do you need? 

While costs vary greatly, opening a dispensary can cost between $150,000 and $8.5 million. Setting up a cultivation facility typically costs around $400 per square foot, plus operating expenses. Building an extraction facility can cost anywhere from $8,000 to $1 million, depending on the processes and equipment used. 

The process of opening a dispensary is often fairly quick and straightforward, but building an extraction or a cultivation facility may involve higher equipment costs and, sometimes, frustrating delays. 

For those who can’t afford steep setup costs, a few states offer the alternative to start out as a microbusiness and potentially convert to a bigger business once established. Starting a microbusiness carries the same degree of difficulty as any other business, but it comes at a much smaller cost of entry and could be a viable option for some. 

Start Preparing Now

Despite the challenges of getting started, the cannabis industry is ripe with potential for those who are able to follow due processes. If you’re considering opening a dispensary, a cultivation facility, or another cannabusiness, don’t wait — even if your state’s program isn’t open yet, you don’t want to fall behind. 

Starting up a cannabusiness is not easy money. To be successful, you need to understand how to run a business in this specific industry, and for that, you’ll need expert guidance every step of the way.

Ready to start laying the groundwork for your own cannabusiness? Reach out to us to schedule a consultation today.

Higher Yields Consulting Debit Cards, Compliance & Cannabis Payments
Cannabis POS Systems

Debit Cards, Compliance & Cannabis Payments

Payment processing in the cannabis industry poses a distinct challenge. The lack of federal legalization — and lack of participation from major payment networks — prevents the acceptance of debit or credit cards for cannabis

Read More »