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How to Open a Dispensary in Illinois 2024

July 22, 2024

Illinois has a well-regulated cannabis market that offers opportunities for entrepreneurs to open dispensaries. However, obtaining a dispensary license requires thorough knowledge of the regulatory framework, the application process, and compliance requirements. This guide provides a comprehensive overview of how to open a dispensary in Illinois in 2024.

Since the legalization of recreational cannabis, Illinois has seen rapid growth in the number of dispensaries. As of early 2024, the state has over 200 licensed dispensaries, including 92 social equity dispensaries, catering to the growing demand for adult-use cannabis and making significant contributions to the state’s economy.

How Can I Apply for a Cannabis Dispensary License in Illinois? 

Applying for a cannabis dispensary license in Illinois involves a structured process overseen by the Illinois Department of Financial and Professional Regulation (IDFPR). Below is a detailed guide on applying and using official sources for the most accurate and updated information.

Step-by-Step Application Process

Step 1: Understand the Licensing Types and Requirements

License Types

Illinois offers two main types of dispensary licenses:

The license application fee is $60,000 (non-social equity applicant) or $30,000 (social equity applicant) for a 2-year license.

Step 2: Prepare Your Application

Business Plan

A comprehensive business plan should include:

  • Business Structure: Organizational hierarchy and roles.
  • Market Analysis: Target market, competition, and growth potential.
  • Financial Projections: Startup costs, revenue forecasts, and funding sources.
  • Operational Plan: Daily operations, security measures, inventory control, and staffing.

Step 3: Secure a Suitable Location

Identify a location that adheres to state zoning laws and local ordinances. Ensure the area is not prohibited by its proximity to schools, parks, and other dispensaries. This step is critical as the area will be evaluated during application.

Step 4: Submit the Application

Documentation 

Complete the application form, ensuring all required documents are included. These are typically:

  • Proof of business registration.
  • Lease agreement or property deed for the proposed location.
  • Detailed business and security plans.

Step 5: Review and Compliance

Compliance with the Cannabis Regulation and Tax Act

Adhere to the Cannabis Regulation and Tax Act, which governs all aspects of cannabis production, distribution, and sales in Illinois. This includes:

  • Security Requirements: Installation of surveillance cameras, alarm systems, and secure storage.
  • Inventory Control: Implementing a tracking system for all cannabis products from acquisition to sale.
  • Staff Training: Ensuring all employees are trained on state regulations and customer service.

Step 6: Obtain Conditional Approval

Once your application is reviewed and approved, you will receive a Conditional Adult Use Dispensing Organization License, which allows you to open a dispensary. You then have 365 days to complete the setup and can request a 180-day extension if necessary.

Step 7: Final Inspection and Licensing

After setting up your dispensary in accordance with state regulations, schedule an inspection with the IDFPR. Once your dispensary passes the inspection, you will be granted an Adult Use Dispensing Organization License, authorizing you to begin operations.

Important Considerations

Record Keeping and Reporting

Maintain detailed records of all transactions, inventory, and training programs, and submit regular reports to the IDFPR as required. IndicaOnline offers an RFID tracking system, which provides you with a quick and comprehensive view of your dispensary’s operations and tracks your inventory levels across all your locations with ease.

Security Measures

Implement and maintain robust security measures, including 24/7 video surveillance and secure storage for cannabis products.

Advertising Restrictions

Follow state advertising regulations, which prohibit marketing to minors and require specific disclaimers on advertisements.

Social Equity Criteria Lottery in Illinois

The Social Equity Criteria Lottery (SECL) is a program designed to promote diversity and rectify the impacts of the War on Drugs within the Illinois cannabis industry. Governor JB Pritzker and the IDFPR issued 35 additional Conditional Adult Use Dispensing Organization Licenses to applicants who met the social equity criteria.

Eligibility Criteria

Applicants must meet one of the following criteria to qualify as social equity applicants:

  • Residency in Disproportionately Impacted Areas: Applicants must have resided in an area disproportionately impacted by high rates of arrest, conviction, and incarceration related to cannabis offenses for at least five of the past ten years.
  • Cannabis-Related Convictions: Applicants who have been arrested for, convicted of, or adjudicated delinquent for any offense are eligible for expungement under the Cannabis Regulation and Tax Act.
  • Immediate Family Members: Applicants with a spouse, parent, or child who has been arrested for, convicted of, or adjudicated delinquent for any offense eligible for expungement under the Cannabis Regulation and Tax Act.
  • Employment in the Cannabis Industry: Applicants who have been employed for at least five years by a cannabis business licensed under the Compassionate Use of Medical Cannabis Program Act.

Benefits for Social Equity Applicants

  • Additional Points: Receive additional points during the application evaluation process.
  • Fee Reductions and Grants: Eligible for fee reductions and grants the state provides to support business operations.

How to Get Funding in Illinois?

The Act supports minorities in Illinois in establishing cannabis dispensaries in poverty-stricken areas still affected by poverty. It includes a social equity application aimed at promoting and supporting marijuana businesses. Consequently, cannabis businesses are expanding to meet the growing market demand.

Banks are restricted from dealing with marijuana financing due to its illegal status at the federal level. Despite this limitation, there are financing options available in Illinois. Several financing companies offer cannabis business owners and start-up companies various options:

  • Working Capital: This involves receiving an advance on cash in exchange for a percentage of daily credit and debit card sales or monthly revenue. It provides quick cash without requiring collateral, making it an accessible option for cannabis businesses.
  • Cannabis Dispensary Loans: These include real estate loans, construction loans, and bridge loans. Real estate loans can be used to purchase land or property to establish a farm or dispensary. Bridge loans can address financial gaps, enabling business owners to buy new equipment and expand operations.
  • Invoice Line of Credit: This helps businesses purchase inventory, acquire new equipment, and cover unexpected expenses. It is a popular type of business financing, offering on-demand access to capital for short-term needs. Unlike traditional banks, private lenders have the flexibility to decide which loan products to offer.

The Current Cannabis Laws in Illinois

As of 2024, Illinois regulates cannabis under the Cannabis Regulation and Tax Act (CRTA) for adult use and the Compassionate Use of Medical Cannabis Program Act for medical use. Adults aged 21 and over can legally purchase and possess cannabis, with residents allowed up to 30 grams of cannabis flower, 500 milligrams of THC in cannabis-infused products, and 5 grams of cannabis concentrate. Non-residents can possess half of these amounts.

The state emphasizes social equity in its cannabis industry, offering additional points and financial assistance to applicants from disproportionately impacted areas or with past cannabis-related convictions. Compliance with state regulations includes strict security measures, inventory control, and comprehensive staff training. Businesses must maintain detailed records and submit regular reports to the IDFPR.

Illinois charges a tax on consumers who buy marijuana products: the Cannabis Purchaser Excise Tax. Marijuana dispensaries licensed by the state must collect this tax from purchasers and send it to the Illinois Department of Revenue (IDOR). When you open a dispensary, understanding these tax obligations is crucial for legal compliance. The tax rate depends on the type of marijuana product you buy:

  • High-potency marijuana (over 35% THC): 25% tax on the purchase price
  • Regular marijuana (35% THC or less): 10% tax on the purchase price
  • Marijuana-infused products: 20% tax on the purchase price

On top of the state tax, there may be additional local taxes on recreational marijuana sales in Illinois:

How to Stay Compliant in Illinois

Staying compliant with Illinois cannabis laws involves adhering to strict regulatory requirements set forth by the IDFPR and the CRTA. Here’s a detailed guide to ensure compliance:

Licensing and Documentation

  • Maintain Proper Licenses: Ensure your dispensary holds the appropriate licenses, such as the Conditional Adult Use Dispensing Organization License or the Adult Use Dispensing Organization License. Regularly renew licenses as required by the IDFPR to remain compliant when you open a dispensary.
  • Documentation: Keep detailed records of all business operations, including sales, inventory, employee training, and security protocols. These records should be readily available for the regulatory authorities to inspect.

Seed-to-Sale Tracking

Illinois mandates using a seed-to-sale tracking system to monitor cannabis from cultivation to sale. The state uses BioTrackTHC as its official seed-to-sale tracking system, which helps maintain transparency and prevent the diversion of cannabis products.

  • Integration: Ensure your dispensary’s software is integrated with BioTrackTHC for seamless tracking of all cannabis products when you open a dispensary.
  • Training: Provide thorough training for staff on using the BioTrackTHC system to ensure accurate and consistent data entry.

Choose the Best Dispensary Location in Illinois

When selecting a location for your cannabis dispensary in Illinois, you must adhere to guidelines set by the Illinois Department of Financial and Professional Regulation. Illinois has divided the state into 17 Bureau of Labor Statistics (BLS) regions for the purpose of assigning cannabis dispensary licenses. Each application must specify the BLS region, and if applying in multiple regions, then separate applications are required for each.

Location Requirements

  • Public Accessibility: It must be easily accessible to the public.
  • Safe Layout: The design should ensure the safe dispensing of cannabis.
  • Facility Specifications: Adequate size, electrical power, lighting, and parking are essential. Additionally, the location must have handicapped-accessible parking spaces and proper lighting at entry and exit points.
  • Product Handling and Storage: Sufficient space is required for handling and storing products.
  • Proximity Restrictions: The dispensary must not be within 1,500 feet of another cannabis retail location and should be at least 1,500 feet away from schools and daycare centers.

Zoning Compliance: The site must be in a properly zoned district.

Choose the Right Layout for Your Cannabis Dispensary

The layout and physical design of your dispensary have a significant impact on the customer experience. It is crucial to balance secure inventory management with an attractive, accessible shopping environment.

Ensure your marijuana products, especially flowers, are visible and easily accessible to customers, allowing them to explore and make informed choices. Consider these points to enhance your dispensary’s design and functionality:

  • Scalability: Design your space with future growth in mind. Plan for additional terminals on busy days and ensure there is room to expand.
  • Regulatory Adaptability: If you plan to sell medical and recreational cannabis, consider dividing your store to comply with separate licensing and inventory requirements.
  • Customer Convenience: Provide ample parking and transparent access to enhance the customer experience and manage increased foot traffic effectively.

Security Plan

The IDFPR mandates strict security measures to ensure the safety and compliance of cannabis businesses. Below is a detailed guide based on official sources:

  1. Surveillance Systems
  • 24/7 Video Surveillance: Install high-resolution cameras to cover all dispensary areas, including entrances, exits, sales areas, storage rooms, and exterior premises.
  • Camera Placement: Ensure cameras are strategically placed to capture clear images of all activities, particularly in high-traffic areas and points of sale.
  • Retention of Footage: As required by the IDFPR, keep recorded footage for a minimum of 90 days. Ensure storage systems are secure and accessible for the regulatory authorities to inspect.

2. Alarm Systems

  • Intrusion Alarms: Install alarms on all entry points, including doors and windows. A professional security company should monitor the alarm system.
  • Panic Buttons: To alert the authorities in an emergency, equip the dispensary with panic buttons in strategic locations, such as at the sales counter and in the manager’s office.

3.  Access Control

  • Restricted Access: Implement access control systems to restrict entry to sensitive areas, such as storage rooms and offices. Use keycard systems or biometric access controls to monitor and log entries.
  • Visitor Management: Maintain a log of all visitors, including contractors and vendors, detailing the purpose and duration of their visit.

4.  Physical Security Measures

  • Secure Storage: Store all cannabis products in a secure vault or safe when the dispensary is closed. The storage area should be constructed of reinforced materials and equipped with additional security measures.
  • Barrier Systems: Use physical barriers, such as security doors and window bars, to prevent unauthorized entry.

5.  Employee Training

  • Security Protocols: Train all employees on the dispensary’s security protocols, including how to respond to emergencies, handle suspicious activities, and operate security equipment.
  • Compliance Training: Provide regular training on state regulations and compliance requirements to ensure all staff members are aware of their legal obligations.

The Current Cannabis Market Potential in Illinois

Illinois has seen substantial growth in its cannabis market since the legalization of adult-use cannabis on January 1, 2020. The state’s robust market includes both medical and recreational cannabis, contributing significantly to the state’s economy.

Sales Figures and Market Growth

In the first half of 2024, Illinois continued to set records in cannabis sales. As of June 2024, the state reported the following monthly sales figures:

  • January 2024: $133,787,753.89
  • February 2024: $135,571,931.44
  • March 2024: $148,872,065.12
  • April 2024: $144,511,466.85
  • May 2024: $146,229,576.98
  • June 2024: $141,752,141.71

Source: IndicaOnline

Economic Impact

In July 2024, Illinois celebrated $1 billion in cannabis retail sales, marking another milestone in the state’s cannabis industry. With ongoing regulatory support and robust consumer demand, the state is well-positioned to continue its growth trajectory in the cannabis sector. This achievement highlights the growing demand and economic potential of the cannabis market in Illinois. 

Ensuring a Safe Cannabis Industry

Getting a license in Illinois requires a strong commitment, as dispensaries must follow stricter rules than most other businesses. The state has detailed regulations in place to ensure cannabis is sold responsibly. This means the application process is challenging, with strict financial requirements, background checks, and a focus on social equity. Understanding how to open a dispensary in Illinois in 2024 is crucial for navigating these complexities.

For those ready to face these challenges, the rewards can be great because Illinois’ legal cannabis market is firmly established and growing. Not only can successful applicants build a stable and potentially profitable business by following strict rules, but their dispensaries can also help create a safe and responsible cannabis industry in Illinois.

Ultimately, deciding to apply for a dispensary license depends on your willingness to take risks and stay compliant with the law. If you can overcome the initial challenges and have the necessary resources, getting a license in Illinois can lead to a successful business venture.