15 min read
How to Apply for a Dispensary License in California
Now more than ever, the cannabis industry is on the rise in California. All stigmas surrounding marijuana are fading, and people are beginning to understand the economic benefits of legal cannabis. According to the 2021 MJBizFactbook, the cannabis market will likely approach $7 billion in retail sales by 2025. Pretty promising, isn’t it?
While California’s cannabis market is thriving and expanding even further, more and more people are interested in being a part of it. Opening a dispensary looks easy and seems to be a great way to make bank. And in the end, it can be true, but let’s not forget about the main part – the beginning of your journey.
In the cannabis business, there are many factors you need to be aware of, understand, take into account, and strictly follow. Even though marijuana is legal at the state level, the situation hasn’t changed at the federal level. As a result, there are significant complications with payments, marijuana transportation, and various cannabis laws and regulations in different states. For instance, if you are sure you are compliant with California cannabis laws, the situation may be completely different in any other state.
As complicated as it may sound, opening a cannabis dispensary in California is worth it. However, you need to be ready for it, and getting a license is the right way to start.
Why Are California Cannabis Dispensary Licenses So Valuable?
First of all, let’s focus on the main reasons why the cannabis licensing process in California can be really slow:
- California has rather complicated environmental rules. From recycling to construction permits – everything can become an obstacle to getting a license.
- There are differences between state and local cannabis laws. After exploring and making sure to follow so many regulations, you will see for yourself how tricky this industry is.
- The costs of permits are high. It can be a real problem, considering the amount of money you also need for your facility, software, hardware, and lots of other essential things.
- There are not enough government workers responsible for processing the paperwork. As a result, some simple procedures sometimes take too much time.
Of course, the list is far from being complete. And probably, you are already starting to understand why getting a license might take much more time, effort, and money than you have expected.
Second of all, cities like San Diego have considerably strict land-use restrictions. Such cities usually go for setting the metric of allowing one retail license per 10,000 residents. The outcome of such firm limits? The license value skyrockets and turns obtaining it into a pipe dream.
This level of competition paired with possible protests from neighborhood groups leads to the licensing process being long, exhausting, and irritably unpredictable.
Fortunately, the situation is getting better. In order to help business owners turn their temporary businesses into full licensees, the state of California has given $100 million to 17 cities and counties. This money will be used to hire more staff and consultants who can fasten the licensing process and provide support to business owners. However, other cities and counties will not get anything, so the problem is far from being solved.
What Are Cannabis License Types?
In California, there are several types of marijuana licenses. The type and number of them depend on the type of cannabis activity your business performs.
The main types of licenses are:
You need a cultivation license to grow cannabis. Its variations are based on the type of lighting and product you use, the number of plants you grow, and the size of the canopy. They can also be indoor, outdoor, or mixed-lighting – it all depends on the amount of artificial lighting you use during the process and the area where you grow your plants.
They are for businesses that want to transport cannabis products between licensees.
Distribution licenses have two types:
- For distributors
- For transport-only distributors
With a distribution license for distributors, you can:
- Conduct quality assurance reviews
- Arrange testings of cannabis products
- Package cannabis products
- Re-package cannabis products
- Label cannabis products
- Re-label cannabis products
- Provide storage-only services for cannabis accessories, promotional materials or licensees’ branded merchandise, and packaged cannabis goods
With a distribution license for transport-only distributors, you can only transport cannabis goods. You are not allowed to distribute anything else apart from immature cannabis plants and seeds to retailers or retail portions of microbusinesses. However, you are permitted to transport cannabis accessories and licensees’ promotional materials or branded merchandise.
They can be for:
- Storefront retailers (people with brick and mortar dispensaries)
- Non-storefront retailers (people selling marijuana products only using a website or an app)
This license is given to those who want to process or extract cannabis. Additionally, you can package flower and roll or package pre-rolls on your licensed premises.
Manufacturing licenses have five types:
- Type 6
- Type 7
- Type N
- Type P
- Type S
These types are defined by the chemicals used, the types of activities performed during the process, and whether you operate in a shared facility or not.
Testing laboratory license
Having it, you can perform testing of cannabis goods. You must also get and maintain ISO/IEC 17025 accreditation. Moreover, you can be given a provisional license that allows you to operate while obtaining accreditation (of course, if all requirements are met).
After obtaining this license, you are allowed to engage in vertical integration. To get it, you must conduct at least three activities from this list:
- Distributor (transport only)
- Retailer (storefront)
- Retailer (non-storefront)
- Cultivation (with less than 10,000 sq. ft of canopy)
- Manufacturer (level 1 type 6)
If you want to organize a cannabis event, this license is for you. Only a cannabis event organizer licensee can be responsible for a particular event. This license allows onsite consumption and sale of cannabis products during an event at the location defined on the license.
How Many Dispensary Licenses Can California Handle?
California is called “the Golden State” for a reason. It has been and will remain to be the biggest cannabis market in the world. Now, there are 823 licensed cannabis dispensaries. With the current population of almost 40 million people and the rule of 10,000 people per store, there can be about 4,000 retail licenses issued. Not to mention a significant number of tourists visiting this state every year, even during the COVID-19 Pandemic. And if you also have an online store, the increase in income can be pretty impressive. No wonder the retail licenses in California arouse great interest.
What Is the Cost of Opening a Dispensary?
The prospects of opening a dispensary in California are truly delightful. The industry is growing, dispensaries are getting more customers, and public opinion on marijuana is slowly but steadily changing for the better. It seems like a perfect time to make a fortune while doing what you really like!
However, before you start thriving, there is a fair amount of money to be spent. In some ways, opening a dispensary is similar to starting any other retail business. But when you get to know more about strict state regulations, you see the situation in a whole new light. Anyway, first things first.
In general, opening a dispensary can cost you from $150,000 to $2 million. This includes money spent on:
- Getting a license
- Yearly rent
- Up-front renovation
- Annual staffing
- Annual professional services
- Business equipment
- Annual marketing
- Surveillance and security system
- Capital requirements
If you know that someone’s budget is $1 million, it doesn’t mean that yours has to be the same. Everything depends on lots of different factors, from the ones you can control, like choosing a building with reasonable rent, to the ones you have no control of, like capital requirements.
What are Dispensary License Application Fees?
The thing is, all cities and counties in California are allowed to choose and set the fee schedule for licensing. That’s why you can get to know the cost of obtaining a dispensary license only if you know where you will be certified.
The dispensary license cost in California varies a lot. The initial application fee is $1,000 (non-refundable). If your license is approved, you will have to pay a licensing fee between $4,000 and $120,000. The amount of money depends on the estimated value of your operation. You will also have to pay this fee every year to renew your dispensary license – it’s not a one-time thing.
How Can I Apply for a License?
When it comes to getting a California dispensary license, you need to be ready for a highly competitive race. Apart from licenses being in high demand, there are also issues connected with zoning restrictions and relatively small application windows. The only way to be sure you are fully ready is to be exceptionally well prepared. How? There is a list of necessary steps to take:
- Create a solid business plan.
We need to remind you again – opening a cannabis dispensary in California has to be taken seriously. It’s not something you can do in your free time or when you retire. The level of competition is high, the number of people willing to open a dispensary is high, the overall tension is high. So, dive into this industry only if you’re sure you’re ready to devote yourself full-time to your business.
As a starting point, you need to focus on understanding your target audience and building both your marketing strategy and brand in a way that is appealing to them. Understanding your goals, knowing what resources are at your disposal, making sure that you are compliant with all regulations, and being able to prove you have what it takes to become successful. Everything is of utmost importance at this stage.
You must ensure you have a well-thought-out business plan before you apply for a license. Otherwise, there is no point in wasting money.
- Find an appropriate property for your dispensary.
Everything has to be according to all rules and requirements. We have already mentioned severe restrictions concerning cannabis business locations and environmental regulations – they are the main reasons why finding the right property for your cannabis dispensary can be such a burden in California.
After going on your quest for the perfect location, you soon find out that there is a limited number of cities and areas in them allowing cannabis retail businesses; a limited number of neighborhoods where it is allowed to open a dispensary; and even a limited number of buildings with all the needed features. Not to mention the rules prohibiting opening a marijuana dispensary close to daycares, schools, parks, churches, and other similar places. And all of these when you need to ensure your clients can easily find you!
It’s better to check every single detail once again. In the fast-paced cannabis industry, you can’t but keep up with all changes in laws and regulations.
- Submit your application package for approval.
You must have an application package with all the documents required by state and local authorities. They usually include data on:
- Operations in your dispensary
- Safety and security measures
- Track and trace compliance
- Knowledge of all the needed licenses and permits
- Odor control
- Community relations
- Compliance audits and inspections
Such documents are time-consuming, lengthy, and can be really confusing. Also, the regulations tend to change rather often, so you must double-check them as many times as it takes to stay compliant.
- Get approval from the state.
Now it’s time to make use of everything you spent so much time and effort on. Your application package must be checked and approved by your state officials and other important agencies first. No worries – if you are sure your business plan is rock solid, your property is compliant with all the regulations and requirements, and your application package is complete and double-checked multiple times, preferably by some professionals in this sphere, everything will go like clockwork.
- Prove your dispensary can benefit the community.
Dealing with local authorities is another part of the licensing process. It would help if you showed that your cannabis business is good for the local community. There will be no objections if local officials get a clear picture of who you are, what your business is, what kind of valuable asset you can be to their city. However, if you fail to do that, everything you have worked so hard on will be in vain.
- Keep your license after getting it.
Even though you have managed to obtain a long-awaited and sought-after dispensary license, there are years ahead of you of renewing and keeping it. It’s just the beginning.
State and local officials will regularly pay you visits to conduct inspections. They will check if you are compliant with the laws, perform inventory audits, and even follow the operating procedures mentioned in your application. So, you need to be ready all the time.
How Can I Renew My License?
Every year you must renew your California dispensary license. There is nothing to worry about – this process is not as complicated as getting your license for the first time.
Remember that you need to renew your dispensary license up to 60 days before its expiration date. Even if you fail to remember it, you will get an automated email with the necessary instructions.
The steps you need to take further include the following:
- Check if all your information and documents (premises diagram, product list, standard operating procedures, vehicle information, and cultivation plan) are up-to-date.
- If necessary, specify your business’s gross annual revenue for the previous year.
- Give evidence of profit and loss statements or tax returns.
- Make sure all of your financial interest holders and business owners are disclosed.
- Sign your application.
- Pay your license fee.
- Submit your application.
- If the process of renewing your license is successful, download its certificate.
- Replace your previous license certificate with the new one.
The best advice is to ensure you don’t miss your deadline and start preparing for your license renewal process in advance. Any mistake can lead to huge fines and even license suspension. Not a great prospect after working long and hard to get it in the first place.
What Do I Need to Know About Commercial Marijuana Laws in California?
In the cannabis industry, everything is under thorough control. There are sets of laws and regulations to comply with. Purchase limits, transaction and operational requirements, labels, and licenses – you cannot afford to miss even one single detail.
Of course, there are endless pages with regulations, and it will take a lot of time to understand and remember at least a small part of them. At the very beginning, you need to have at least a common understanding of the essential requirements and restrictions. So, let’s have a look at the main ones.
You already know that in order to sell marijuana, you must get a retail license first. California has two types of licenses (adult-use retail and medicinal retail) and also two types of retail (delivery only and from a storefront).
The Department of Cannabis Control (DCC) is responsible for issuing licenses. Also, don’t forget about getting approval from your local authorities as well.
You need to include the following information in your license application:
- Primary contact person
- Business organization structure
- Social security number (or federal employer identification number)
- Seller’s permit issued by the California Department of Tax and Fee Administration
- Evidence of compliance with the California Environmental Quality Act
- A declaration stating that the location of your dispensary is not within 600 feet of any schools or youth centers
As a business owner, you also need to provide your individual profile. It must include:
- SSN, DOB, address, email, phone number
- Information on criminal convictions
- Information on ownership of financial interest in any other cannabis business
- License denial
There are several reasons why you may not get your license. They are:
- Violent felony convictions
- Felony convictions including deceit, fraud, or embezzlement
- Felony convictions for sale of controlled substances to minors
- Incomplete application
- Incorrect application
- Premises not compliant with the regulations
- Failure to pay owed income taxes
In case of a felony conviction, an applicant can sometimes be considered to be rehabilitated.
- Restrictions to opening a cannabis dispensary
Of course, opening a cannabis dispensary is different from starting any other business. And endless laws and regulations don’t make it any easier.
The main restrictions that can become huge obstacles in the future are:
- Banking restrictions due to cannabis still being illegal at the federal level. As a result, it is highly unlikely that federally regulated banks will give you checking accounts. That’s why most operations in cannabis dispensaries are usually cash-only. It may cause certain difficulties for your customers and pose security problems for you and your business.
- Sourcing and distributing restrictions are another problem. According to federal law, you are prohibited from transporting marijuana across state lines. All raw products and materials must be sourced from within the state as well.
- Tax considerations are also on the list. You must pay income taxes like any other business. However, you cannot deduct some operating expenses. Taxes will be higher for you due to federal income tax being on the gross income amount.
- Restrictions on purchasing and selling cannabis
You are allowed to process, transport, purchase, obtain, possess, and give away marijuana if:
- You are 21 years of age or older
- You have no more than six living cannabis plants
- The amount of concentrated cannabis is not more than 8 grams
- The amount of unconcentrated cannabis is not more than 28.5 grams
Of course, requirements and regulations can change. To be ready for that and make any necessary modifications or updates, you must keep up with this fast-paced industry.
When applying for a dispensary license in California, you need to be 100% prepared. Even a tiny mistake can ruin everything. The whole process is long and tiring, to say nothing of the amount of money you will have to spend. And in California, where the demand is high, unlike the chances of finally getting the desired license, you have to be ready for everything!
Then again, if you manage to get through all the required stages of the licensing process and emerge victorious, nothing will be able to stop you from achieving your goals and gaining success. Of course, if you don’t relax and keep playing by the rules.