How to Open a Dispensary in Illinois

If you are wondering how Illinois cannabis dispensary policy works, this article is for you. We will take an objective to look at how to open a dispensary in Illinois, the Prairie State, and walk you through the entire process. 

In June 2019, Illinois legalized recreational cannabis and became the 11th state on the list. In two years since adult-use marijuana sales to adults aged 21 and older started, Illinois became one of the top-selling cannabis states in the U.S. 

As for medical cannabis, its legal operation took effect in 2014 and is making impressive strides in the adult-use sector. Its 110 recreational use dispensaries hit a record $1.38 billion in sales in 2012. 

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

The organization that oversees dispensary licensing is the Illinois Department of Financial and Professional Regulation (IDFPR).  

Under the act, IDFPR grants priority to medical dispensaries for applying to sell cannabis through Early Approval Adult Use Dispensary Organization License. With this license, the current medical dispensaries may sell recreational marijuana. There are additional documents that applicants must submit to get this license.  

The new businesses that want to open a dispensary in Illinois must undergo background checks. They must also disclose relevant financial history, student loans, and tax returns. If you fulfill these requirements, the IDFPR will issue you a conditional Adult Use Dispensing Organization License.  

This license does not permit you to purchase or sell cannabis but gives you 180 days to find a relevant premise for your dispensary within your assigned geographical area. After you pass the inspection and pay licensing fee, you will be granted a full Adult Use Dispensing Organization License and start your retail activities. 

What is a Social Equity Application?

If you want to learn how to start a dispensary in Illinois, you must get acquainted with the necessary licensing and application requirements. One of key importance is a Social Equity Application. 

A Social Equity Applicants are the individuals disproportionately harmed by marijuana prohibition and discriminatory law enforcement. They may legally receive financial and technical assistance from creating a business plan to applying for a license throughout the state. A Social Equity Applicant must be an Illinois resident and meet one or more of the criteria listed down:

• Has at least 51% ownership and control by one or more individuals who:
  • Have lived in a Disproportionately Impacted Area in 5 of the past 10 years (see map of Disproportionately Impacted Areas).
  • Have been arrested for, convicted of, or adjudicated delinquent for cannabis-related offenses eligible for expungement, including cannabis possession up to 500 grams or intent to deliver up to 30 grams.
  • Have a parent, child, or spouse that has been arrested for, convicted of, or adjudicated delinquent for cannabis-related offenses eligible for expungement, including possession up to 500 grams or intent to deliver up to 30 grams

Additional benefits social equity applicants have are that they may receive 50 points (out of 250) from IDFPR on their applications score; pay reduced license and application fees; receive access to low-interest loans for starting and operating a cannabis business.

 Can I Open a Dispensary in Illinois Right Now?

If you are looking for the answer to this question, then we can tell you that you can. Under Illinois’ Cannabis Regulation and Tax Act, cannabis businesses can legally apply for adult-use dispensing organization licenses to sell marijuana to persons aged 21 years and older.

How Much Does it Cost to Start a Dispensary in Illinois?

The cost of opening a dispensary is an essential part of the road to learning how to open a dispensary in Illinois. 

IDFPR will award a Conditional Adult Use Dispensing Organization License to successful applicants, which costs $5,000. Social equity applicants are required to submit a reduced non-refundable fee of $2,500.

The cost of opening a dispensary in Illinois can be around $75,000 to $180,000. That includes real estate, equipment, and security. Monthly operating costs will be between $26,000 and $71,000 monthly. 

You will have to pay the licensing fee once you’ve passed the dispensary inspection, along with a non-refundable application fee. The license is valid for two years. For social equity applicants, the cost is $30,000 for a two years license. 

Operating expenses include:

• lease: between $2,000 and $20,000, 
• attorney costs: about $3,000 
• payroll for staff: about $10,000-$15,000
• Marketing: around $2,000
• Minimum working capital for $100 revenue/month: between $9,000 and $20,000
• Other business costs: $2,000-$4,000

How to Get Funding in Illinois?

The act facilitates minorities in Illinois to open their cannabis dispensaries in regions where poverty is still widespread. Therefore, the act has established a social equity application which is based on promoting and supporting marijuana business. Moreover, more and more cannabis businesses broaden their operations due to the growing demands of their customers in the market. 

Banks are restricted from a dealer with marijuana funding as marijuana is still under illegal status at the federal level. However, this fact limits financing options, there are still some funding options in Illinois. Financing companies are offering canna-business owners and start-up companies several financing options that are:

• Working Capital – you’re advanced cash in exchange for a percentage of your daily credit and debit card sales or monthly revenue. It is quick cash and an easy way to get a cannabis business cash advance that does not require collateral. 
• Cannabis Dispensary Loans – companies offer cannabis real estate loans, construction loans, and bridge loans. Cannabis real estate loans can be used to purchase land or property to establish a farm and dispensary; bridge loans can fill a financial gap that might prevent business owners from buying new equipment and expanding operations. 
• Invoice Line of Credit – it can help you purchase inventory, get new equipment, and fund any unexpected expenses. It is one of the most popular types of business financing. Unlike traditional banks, private lenders are free to decide which loan product they’d like to offer. A line of credit gives you on-demand access to capital when you need it most. It allows you to cover short-term expenses. 

Create the Comprehensive Cannabis Business Plan

The application process comprises the submission of a comprehensive business plan. Preparing a detailed cannabis business plan will help you achieve your goals and give you a clear picture of how to start a dispensary in Illinois. It would be best if your plan included a description of how your dispensary will operate long-term. The plan should also include the definition of purchase and dispensing processes, customer confidentiality, and the point-of-sale system. 

• An executive summary
• An industry overview
• Market analysis
• Sales and marketing plan.
• Competitive analysis
• Management, Operating, and Financial plan
• Appendices and Proofs

Making a comprehensive plan will help you throughout your business journey and prove to the license issuer that you are serious about the next steps.

The Current Cannabis laws in Illinois

It is also very important to know the current cannabis laws in the process of learning how to open a dispensary in Illinois. Under the law enacted on January 1, 2020, adults aged 21 and older are allowed to purchase recreational marijuana from licensed retail entities in Illinois. They may possess up to 30 grams of marijuana, up to 500 milligrams of THC in a marijuana-infused product, or up to 5 grams of marijuana concentrate.

As for medical cannabis, qualified patients with a doctor’s recommendation may legally consume medical marijuana. However, individual cultivation, even for medical use, is not permitted. 

On legalizing recreational marijuana at the start of 2020 in Illinois, 55 existing medical marijuana dispensaries were allowed to (1) add adult-use cannabis sales at their existing locations and (2) open a second adult-use cannabis location. However, it should be noted that local governments may opt out of cannabis sales. 

How to Stay Compliant in Illinois

Cannabis dispensary owners must create an account with the state’s verification system that records transactions, inventory, cannabis products acquisition, and disposal of cannabis every day.

Cannabis retail business owners must have a real-time, web-based, and state-accessible inventory control and POS system. 

BioTrack is the official tracking program Illinois cooperates with. It uses its tracking and reporting means to provide Illinois state and local governments with tax accumulations, product quality-assuring, and preventing illegal cannabis production, sales, and consumption.

Choose the Best Dispensary Location in Illinois

The IDFPR in Illinois has assigned 17 Bureau of Labor Statistics (BLS) regions to cannabis dispensary licenses. Your application must include the name of the BLS region in which you are applying. If you are applying in more than one region, each application must be submitted individually.

The location must meet the following requirements:

• Must be suitable for public access;
• Must have a layout that promotes the safe dispensing of cannabis;
• Must have sufficient size, electrical power, lighting, and parking;
• Must have handicapped-accessible parking spaces, entry, and exit lights; 
• Must have relevant room for product handling and storage;
• Must not be located within 1,500 feet of another cannabis retail location;
• Must be in a properly zoned district and at least 1,500 feet from schools and daycare centers.

Choose the Right Layout for Your Cannabis Dispensary

Your dispensary’s layout and physical design define the experience your customers have while shopping. 

It would help if you tried to balance a secure store inventory (to be easy to track, audit, count, and fill orders) with a beautiful layout and experience. 

As a new dispensary business, you want your marijuana products to be seen and accessible, especially the flower. Customers should be able to explore your product offerings to make the best choice to solve their needs. 

You can consider the following things to arrange your dispensary design and functionality – Add a terminal if needed on a busy day, and try to provide your dispensary space with room for growth. Take the time to brainstorm about the future and how your current area could handle your business as it grows or the market as it changes.  

The current trend is for medical marijuana to be legalized first, followed by recreational after a couple of years. That’s great because it opens up your customer base, but that may mean changing how your store looks or operates to handle both medical and recreational. Some dispensaries split the store in half, operating with separate licenses, tags, inventory, etc.

Not everyone supports cannabis, so the increase in traffic, especially foot traffic, could lead to complaints. It’s also a better experience for customers to have a place to safely and efficiently park.

Security Plan

Being aware that the law in Illinois obliges dispensary businesses to demonstrate how they plan to prevent theft and other crime from occurring in and around their property is an integral part of learning how to start a dispensary in Illinois. The plan must emphasize safety procedures that protect customers and staff in case of breaking, a detailed protocol for storing and delivering cannabis products, record-keeping and cash. 

The Current Cannabis Market Potential in Illinois

Illinois has great potential to become one of the most lucrative opportunities for cannabis entrepreneurs. The state is expected to become the major player in both recreational cannabis and medical marijuana markets throughout North America. 

After legalizing recreational marijuana in Illinois, $2,5 billion in annual sales was a prediction. So far, Illinois has accumulated $147,2 billion during the first four months and continues to grow. This step caused the expansion of the current medical cannabis dispensaries to reach a maximum of 185, including a total of 500 cannabis dispensary licenses across the state of Illinois. 

Conclusion

Dispensaries face a much higher standard than the average business when it comes to legal compliance. The same applies to the state of Illinois; the cannabis industry is highly regulated in the state and provinces. You will have to satisfy some stringent requirements when opening a dispensary in Illinois and face an ongoing struggle to ensure you remain legally compliant at all times.