How to Open a Dispensary in Arizona

How to Open a Dispensary in Arizona-01

Arizona Cannabis Laws

Arizona legalized medical marijuana in 2010. It legalized recreational cannabis in November 2020.

Keep in mind that just because something is legal at the state level doesn’t mean it is at the city level. Scottsdale, for one, has already preemptively banned new recreational dispensaries, though it will allow existing medical marijuana dispensaries to transition to recreational or dual-use dispensaries.

Recreational sales will be taxed at a rate of 16% in addition to local sales taxes between 6% and 9%. Medical marijuana, in contrast, has a 6.6% state tax and a 2-3% municipal tax.

The total number of dispensaries in the state are capped at about 130, or one dispensary for every 10 pharmacies in the state. Adults in Arizona are allowed to possess up to 2.5 oz in medical cannabis and 1 oz of recreational cannabis.

Can I open a recreational dispensary in Arizona right now?

Arizona began accepting applications for recreational dispensaries on January 19, 2021. To apply, you must be either:

  • An existing medical dispensary
  • Someone with plans to open a recreational dispensary in a county with fewer than two registered medical dispensaries. See the chart below from the Arizona DHS website for eligible counties. (Last updated 1/12/2021 and subject to change.)
County# of Dispensaries
Apache0
Cochise1
Gila1
Graham1
Greenlee0
La Paz0
Santa Cruz0
Yuma1

In addition, you also need at least $500,000 in liquid capital, control of a dispensary location, and approval from your local jurisdiction in order to apply.

You can apply online here.

Arizona also plans to give out an additional 26 social equity recreational licenses to “individuals disproportionately impacted by the enforcement of previous marijuana laws”. Social equity licenses are typically awarded to minorities, people charged in the past with low-level drug crimes, and/or people living in low income areas.

Exact details of Arizona’s social equity program have yet to be released.

Can I open a medical dispensary in Arizona right now?

Unfortunately, no, Arizona isn’t accepting applications for new medical dispensaries at this time.


Arizona Cannabis Market

The Arizona cannabis market is currently tough to get into due to caps on total licenses and stiff competition from large Multi-State Operators (MSOs). But it’s also a market with a strong existing revenue base and lots of growth and potential.

According to the Cannabiz Media license database, there are currently 123 active dispensaries in Arizona. Twenty-nine of these, or nearly one-fourth of the total, are located in Phoenix.

Marijuana Business Daily estimates yearly state revenues in medical marijuana of $750 million per year, and deems it the largest medical marijuana program in the country, with a retail sale growth rate of 34% in 2019. The Motley Fool, citing research by Arcview Market Research and BDS Analytics, estimates the size at $804 million, making Arizona the eighth-largest state cannabis market in the US.

MJBizDaily notes that large Multi-State Operators (MSOs) control 30% of the dispensaries in the state, with two – Harvest Health & Recreation and Curaleaf – controlling 1/6 of all stores.

As of November 2020, there are more than 290,000 qualified medical marijuana patients in the state, who have purchased over 190,000 pounds of marijuana since the year began.

On the recreational side, an independent fiscal analysis of the legalization of recreational weed estimated that the recreational market would reach over $1.04 billion in three years, based on the $137 average recreational spending per capita in states where it’s been legalized.


How to Open a Dispensary in Arizona

1) Establish Your Business

Start by establishing your business as a legal entity in Arizona. If you’re a medical marijuana dispensary you have to incorporate as a non-profit. Recreational dispensaries can be either for-profit or non-profit.

In general, non-profits are more heavily regulated and require more overhead and oversight, though they offer tax benefits such as the lower state tax of 6% (if you’re a medical marijuana dispensary) versus 16% for for-profit recreational dispensaries.

You can incorporate variously as a/an:

  • Individual
  • Corporation
  • Partnership
  • Limited liability company
  • Association or cooperative
  • Joint venture

Be sure to register with your state and federal tax authorities.


2) Start Planning

Planning ahead not only makes good business sense, you’re going to need it for the next steps – getting funding and applying for a license.

You’ll need the following documents just for your state licensing application:

  • Your company’s by-laws
  • Policies and procedures for inventory control, patient recordkeeping, security, and patient education and support
  • A business plan with:
    • Projected expenditures, both before and after the dispensary is operational
    • Revenue projections
    • Site and floor plans
    • Job descriptions

Hire a consultant or bring in an experienced cannabis entrepreneur if you need help with this phase.


3) Get Funding

Federal law prevents many mainstream banks and investment firms from funding cannabis dispensaries, but there are plenty of investment firms that specialize in raising funding for cannabis firms, including the most prominent ones listed here:

https://www.newcannabisventures.com/cannabis-investors/

Private investment from family and friends is another option.


4) Find a Home

At the moment getting a license is more difficult than locking down real estate for your dispensary, so make sure you have a decent chance of getting one before investing in anything.

You need to own or be renting a qualified space before you submit your license application. You’ll need proof that your dispensary complies with local zoning laws and state restrictions, such as ones that prevent you from being located too close to schools or day care centers.

Keep in mind that Arizona prioritizes applications based on 1) how close the proposed location is to other dispensaries; and 2) how many registered patients are within 10 miles of the location; so be sure to do your research and select your store location carefully.


5) Get Your Licenses

Most available medical marijuana dispensary licenses in Arizona are already taken.

The state will be accepting applications for recreational dispensaries from January 19, 2021, to March 19, 2021, with priority given to existing medical marijuana dispensaries that want to switch to recreational or a dual medical/recreational model.

In some cases your best bet may be to buy an existing license and adapt the business how you want.

If more medical marijuana dispensary licenses are made available, you’ll have to submit an application that includes:

  • Information about all your top directors and investors
  • The documents listed in the planning section of this blog post
  • Proof that you own the intended dispensary property

Registering a new dispensary costs $5,000.

In addition to your business license, you’ll also need to register all of your employees (submitting all their info and agreeing to background checks), at a cost of $500 per ID card.


6) Set Up Shop

You’ve got your licenses, real estate, and ingenious plans, now you need:

  • Employees (if you haven’t lined them up already)
  • A well-designed interior
  • Products
  • A professionally-designed and -installed tech and security system

If you don’t have people with experience in these areas on your team, it’s time to bring in some outside experts. This includes interior designers, general contractors, veteran cannabis buyers, and an IT company with a background in cannabis and/or retail.

On the IT end, this is where Cure8 can help. We’ve helped dispensaries throughout North America to design, build, and manage the IT for their stores, including their POS and seed-to-sale systems, surveillance systems, networks, and back office IT. Let us know if you need assistance.

In addition, check out our e-commerce site for curated cannabis hardware at affordable prices.


7) Launch

Ok, you’re ready to get started. It’s time to get the word out.

Arizona doesn’t put too many limits on marketing and advertising. At least with Prop 207, it only stipulates that you have to put your dispensary’s name and license number in all your ads, and avoid designs and messaging that would appeal to people under 21.

Post-launch is another area where Cure8 can help. We can manage your tech and security for you, making sure:

  • Your POS system stays up even during your busiest times
  • You stay compliant when it comes to records retention and the operation of your surveillance systems
  • Your networks are protected from hackers and ransomware 24/7


How Much Does It Cost to Open a Dispensary in Arizona?

Opening a cannabis dispensary in Arizona is expensive. According to the Phoenix New Times, purchasing an existing license before the legalization of adult-use cannabis could cost you $5-$10 million dollars.

Now after the Proposition 207 the cost is expected to be “worth many times their previous value.”

If you meet the requirements, your best bet would be apply for one of Prop 207’s 26 social equity licenses. Details on eligibility for social equity licenses should be released soon, but generally these licenses are given to members of communities that were disproportionately affected by the nation’s harsh drug laws in the past.


Starting a Cannabis Delivery Service in Arizona

Arizona allows medical marijuana dispensaries to deliver cannabis to patients. You have to do the delivery:

  • In an unmarked car
  • With no marijuana products visible
  • “A means of communication with the dispensary”

And also create and carry a detailed “trip plan” document with you that describes the products you have, who you’re delivering them to, and where.

On the retail side, Prop 207 says that regulators have to allow cannabis delivery and lay out delivery rules no sooner than January 1, 2023, and no later January 1, 2025. Only dispensaries with a physical store will be allowed to do deliveries, and all deliveries must be:

  • Logged
  • Limited to a certain amount of cannabis
  • Performed in unmarked vehicles with GPS tracking, video surveillance, and locked compartments for cannabis products


Need Help With Anything?

As mentioned, Cure8 can help you with any aspect of your dispensary’s tech and security, from planning to installation to management.

We can also swoop in to help in emergencies – like POS and network outages, and dispensary POS systems that need to be installed in just a few days.

Outside of tech, even if we don’t have the answer to your question, we’ll be happy to connect you to the people that do. We have connections with people and companies up and down the cannabis supply chain, from business and grow consultants to financing experts.

Drop us a line at [email protected] any time.

Click here to read on How to Open a Dispensary in Washington State


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