How to Overcome the Biggest Challenges When Opening Dispensary

by | Dec 16, 2022

Opening a new dispensary can be an exciting time, but there will be a number of challenges you’ll need to face. With new social equity licenses becoming available and states like Missouri and Maryland legalizing adult-use recreational cannabis, we wanted to put together a resource to help new dispensary owners.

Below we dive into the challenges you may face when opening a new dispensary and provide guidance on how to overcome these.

Finding a Location for Your Dispensary

One of the first challenges you’ll face is finding a location. Before you select where you’d like to set up shop, confirm the area allows cannabis retail businesses to operate within their jurisdictions.

Verify what’s allowed in the county, city, or town of your desired location and familiarize yourself with the zoning restrictions, such as the required distance from schools or churches. Zoning codes can typically be found through the city planning and zoning department. If you do face pushback from the city officials or town planners you can try to work with them to get them on board with your proposed opening.

In addition to making sure the location you select meets zoning requirements, you’ll also want to consider how the location will impact your traffic. If you live in a state dense with dispensaries, it could be beneficial to pick an underserved area with a higher potential to attract local shoppers.

Don’t pick a location without having first visited and vetted the area. Before finalizing where you want to open your dispensary, complete regional market research in the surrounding areas and spend time engaging with the local community. This will be the best way to determine if the area you select is the right fit.

Receiving City Approval to Open Your Dispensary

Now that your site is selected, you’ll need to receive city approval to open your dispensary in your desired location. You’ll have to attend town meetings to build your case and earn the trust of the locals in the area you want to open in.

Often, the people attending these town halls and city officials will be concerned the dispensary might be an unsafe addition to their community or it will be an unsightly structure. Come prepared for these meetings. Show blueprints or renderings of your store, talk about your security plan, provide demographics on your potential clientele, mention the job opportunities this will add, and bring stats on projected revenue that could benefit the community.

Newly recreational states can see an almost 70% opt-out rate from cities that don’t want a dispensary opening in their area. But, with the right data and information, you can demonstrate the value your business could have for the community.

Finding Capital to Fund Your Dispensary

The next big hurdle to overcome is finding capital. To start a business you need money to cover the pre-start-up costs, pay for inventory, construction, and more. You’ll need to raise money to support your build-out and cover start-up costs. It’s not uncommon for a dispensary startup to cost upwards of $250k+ just to open — this will also include buying inventory which can be quite pricey. It’s also fairly common that new dispensaries won’t make money in the first few months. This will need to be something you account for when raising funds.

Since the cannabis industry is limited in the banks you’re able to work with or loans you’re able to receive the best way to find capital is usually through friends and family, family offices, cannabis strategic funds, or local investment groups. You’ll want to tap people who have an appetite for risk or have the ability to invest in a risky business.

It’s likely there are several compatible partners you’ll be able to work with that are interested in the cannabis industry. If some of the above options aren’t viable for you, consider looking for cannabis-specific investment groups. You may also be able to find a capital broker who specializes in the cannabis industry.

Constructing Your Dispensary

Now that you have your location selected, dispensary approved, and capital you’ll need to figure out the construction, which includes architecture, engineering, and security. These will all be very critical pieces to consider. First, you’ll want to decide if you are retrofitting an existing space or building from the ground up. Building from the ground up can definitely be the more expensive of the options per square foot, but it can also be the most time-efficient and allows you to build your dispensary to your exact specifications.

If you choose to retrofit an existing building, understand there might be a few hiccups you encounter during the building process. During a retrofit, you could be faced with a myriad of unanticipated challenges, driving the cost of the construction project up and increasing the amount of time the build-out takes.

If you can, when you select a construction company, try to find someone who has built a dispensary before. This way they’ll be familiar with what’s needed. Building a dispensary will have very specific requirements that differ from a typical retail construction. You’ll need to work with state regulations which can be cumbersome so experience pays off to avoid making costly mistakes. Tap people who know what they’re doing for every key decision in the buildout — security, vault spaces, HVAC, etc.

If construction is not within your budget, leasing is always an option. However, you’ll need to ensure the space you lease has the basic physical features needed for a dispensary. It’s worth noting that while leasing can be cost-effective it can also come with a lot of watch-outs — make sure to do your research before deciding to lease.

Finding Cannabis Products to Stock Your Dispensary

Perhaps the most important challenge to overcome before you open is finding products for your dispensary. The products you stock need to be high-quality and comply with all regulations in your market. Traditionally to do this, you’d need to build relationships with cultivators and distributors in the industry and find partners you can trust. Building relationships can be time-consuming and it’s often hard to get in the door as a newcomer.

Working with a company like Leaf Trade can provide you access to the best products from cultivators in your region. The Leaf Trade platform empowers you to build relationships in the industry and find brands you can trust. Leaf Trade has built-in workflows to make sure that any products you purchase on our platform comply with all regulations in your market. And, since we know it’s tough enough to start a dispensary, creating an account with Leaf Trade is free.

Leaf Trade is an easy-to-use solution for dispensary owners new to the industry. Once you’re logged into the platform, you can readily order inventory that’s updated in real-time, to stock your dispensary and be up and running. Our platform is designed for verified, licensed retail dispensaries to access available cannabis product inventory in their state, regardless of the connections or experience you have.

Creating Opening Buzz for Your Dispensary

To drive traffic to your store when you open you’ll need to find a way to create buzz. Marketing for cannabis can be very restricted on social media, especially if using paid advertisements, and through traditional avenues such as radio, TV, print, and billboards.

You have to find creative ways to get in front of your audience to drive them to your dispensary. Organic social media can be effective but to keep your account from getting suspended you’ll need to be mindful of what you post. Try not to use the words cannabis or marijuana as social networks scan for these terms and will block your content or remove your account. You also should never mention selling products — keep it vague and just promote your store in general.

Before opening it’s recommended to create an SEO-optimized website. This can be great to help get your brand out there in front of customers in your area looking for dispensaries and can also be a great way to showcase your brands, products, and offerings.

Another way to get customers in on opening day is by offering discounts. Once they’re in you should create a loyalty program to keep them coming back. Discounts can be offered to loyal shoppers based on amounts spent, holidays, or special occasions to drive the desire to return to your store.

The number one factor in recreational sales is convenience. Your highest frequency visitors will be those who live closest to your dispensary. For this reason, you’ll want to find a way to be a part of the local community. Word of mouth and networking will be key to helping drive traffic. Get to know the businesses and stores around you and try to find ways to promote your business.

Setting Your Dispensary Up for Success

These challenges may seem daunting at first, but there are so many resources out there to help you overcome these and get started. Doing your research and finding the right partners will be essential to the success of your new dispensary. If you can, seek the advice of experts in the field and find meet-up groups who are able to advise you on your journey.


Want to see first-hand how Leaf Trade can power your new dispensary? Book a demo today.