Understanding the Medical Cannabis Dispensary Business

Nope I don't own a dispensary but I have done enough evidence to post a blog on it, so take it for what its worth. I'm a non-dispensary patient or owner letting you know what I know about opening a dispensary. First and foremost you may already know that due to the state ran programs there is no cookie-cut model available in the business of medical cannabis shops other known as 'dispensaries'. The dispensary business in some states is less prohibitive than others. It's important to look at the entire national landscape of the industry when determining what the strategy of your company will be when getting into the business. Why? Well I have seen evidence that the market right now is very much about positioning for growth driven by looser legislation. Based on what I have seen and heard many cannabis entrepreneurs have opened dispensaries looking to "cash in on the green rush" without having a real affinity for the plant. I think the markets like California and Colorado (not sure about Washington) are excellent markets to open a dispensary in order to gain industry experience and create a structure for future locations in markets all over the USA. The way I see this industry rolling out from a dispensary standpoint is that most states will be "limping in" to this industry with many first time local entrepreneurs thinking that they want to open a dispensary in their home state, the issue is that when new state ran programs open up local governments do not want rookie dispensary owners. State governments are looking for proven dispensary owners that have a proven set of operating procedures from soup-to-nuts so they can count on these dispensary owners to steer away from diversion of product to the black market. State governments will want to see that an applicant into the industry not only is felony-free but that they have a legitimate business planned to help the sick. Regardless of what market you operate a few things hold true. Most states are looking to go into a model known as "seed-to-sale" a vertically integrated market where dispensaries grow and distribute their own medicine allowing auditors more transparency but also putting more responsibility on dispensary owners to get into the game. Prospective dispensary owners have to understand one major knock against the business (other then the Schedule 1 CSA of cannabis) the 280e IRS tax code . This piece of tax code is a punitive and prohibitive tax put on all dispensaries and will restrict all tax write offs making it challenging to operate and causing many businesses to have to open a shell corporation to buy supplies from just to get write offs. This tax code causes additional accounting, legal, and operating costs of a second business unnecessarily. The voices of this fledgling state ran industry are not being heard, but it is critical this piece is understood. Another issue with the "seed-to-sale" model is it prohibits purchasing cannabis from distributors forcing 100% of cultivation to come from the dispensary which could lead to challenges of patients getting certain medicines due to geographic restrictions and also could be a problem for dispensary owners if any crop issues arise and they cannot supply an adequate amount of medicine. My advice for any cannabis entrepreneur out there would be to start small, create your standard operating procedures and continue to expand on your franchise-like model. Don't be afraid to look nationally into different markets at the lesser restrictive state programs initially, gain your footing, and expand your empire into other markets based on your experience in the existing ones. If you do not do this, you will be applying for licenses to dispense cannabis paying lofty 5 figure application fees only to get turned down because a company already operating in the industry will get that license.