How to Open a Dispensary in New York

How to Open a Dispensary in New York-01

New York recently became the latest state to allow recreational cannabis use. The NY Senate Bill S854A makes widespread changes to pre-existing laws to make cannabis more accessible to everyone. 

According to the Marijuana Regulation and Taxation Act (MRTA), the legalization of recreational cannabis could bring in $436 million in tax revenue out of which New York City may gain an extra $336 million. The bill will affect an estimated 3.1 million cannabis users in New York state out of which 1.1 million reside in New York City. 

If you are a recreational cannabis user or want to start a business in this industry, or both, we are looking through all the important know-how needed to get a business going:

When Will They Start Accepting Applications?

According to the MRTA, the retail market along with its central regulatory authority, the Cannabis Control Board and Office of Cannabis Management, will most likely be set up by the end of 2021. This means retail sales could begin as early as spring 2022. 

Who Can Submit Applications?

Only the license for cannabis cooperative companies requires you to already be a resident of New York. Otherwise, anyone can apply for a license, though there are limits on the types and number of licenses a license holder can have at once.

What Can I Do Until Then?

Till then you can put together a detailed business plan for your business. It must include:

  • Financing plan
  • Operations plan 
  • QC (Quality control) and QA (Quality Assurance) plan
  • Labor compliance plan
  • Workforce and job creation plan
  • Security plan 
  • Anything else you can think of that would help you stand out and entice investors

What Kind of Licenses Will Be Available?

If you want to start a cannabis business, then the first thing to do is to check if your city or town is going to allow for it. Next, you can go in for applying for a cannabis microbusiness license. Ideally, you should develop a full-scale plan with complete market research and a well-defined business cycle before looking into the licensing. Here is a list of licenses you can acquire:  

Cultivator License

This type of cannabis license allows you to grow and sell cannabis to processor license holders. The license will cover all cannabis agriculture-related activities like planting, growing, cloning, harvesting, drying, grading, and trimming. 

You can also hold a processor and distributor license along with the cultivator’s license, but you can only process and distribute your own cultivation produce. 

Once you get the license, you may be subject to limits in processing volume therefore you will need a processor’s license to process more. You can also get the permit to operate in more than one location if need be. These decisions are made by the CCB.

Registered Organization Adult-use Cultivator, Processor Distributor Retail Dispensary License

A Registered Organization license allows companies to sell products they have manufactured at no more than 3 locations or dispensaries they own. 

The condition is that they cannot use any other kind of license for cannabis while holding this. 

Maintaining this license requires the RO to continue to offer medical cannabis to the volume pre-decided by the CCB. 

Registered Organization Adult-use Cultivator, Processor and Distributor License

This license allows for an adult-use cultivator, processor, and distributor activities for a single organization. The condition is that you can distribute only your own product at designated locations.  

Adult-use Processor License

With this license, you can buy cannabis products from cultivators and undertake a range of activities like blending, extracting, infusing, packaging, labeling, branding and otherwise making or preparing cannabis products. 

You also have the right to sell your processed cannabis product to license-holding distributors. 

The limitation is that you cannot sell any product to your distribution partners other than your own product. You may also not involve yourself or your business in any activities other than the ones falling under your processing license. 

Also, you must adhere to a soon-to-be-issued minimum operating requirement for a processor license to maintain your license. 

Adult-use On-site Consumption License

This license allows you and your shop’s patrons to consume cannabis products including smoking and vaping within the limits of your premises. The condition for keeping this license is that you cannot have an interest in any other MRTA authorized cannabis license. 

However, you can have 3 on-site consumption licenses at one time. 

Before you are formally given the license you must demonstrate the space available for the license and its intended use. This must be done within 30 days and the lease must be at least as long as the license validity. The leased space must also not be within 500 feet of any school or 200 feet from any place of worship. Further, all patrons of the shop must be above 21 years of age. 

Adult-use Cooperative License

This license is for vertically integrated cooperatives which can handle all parts of making and selling cannabis products from a licensed premise. This will include acquisition, possession, cultivation, processing, distribution, and sale.

The condition for getting this license is that all cooperative members must be New York residents must be registered as an LLC, LLP, or other business entity, must have subordinate capital, must be democratically controlled with one vote per member, distribute profits or assets based on active cooperative involvement among members and it must work according to the seven cooperative principles published by the International Cooperative Alliance in 1995. 

Adult-use Retail Dispensary License

This type of license allows companies to deliver cannabis products via a licensed dispensary. The conditions are that you cannot have interests in more than 3 dispensaries while holding this license type. 

Also, if your license is fully retail then you cannot have any other license while holding this one. 

For getting the license, those applying must display possession of valid premises within 30 days of final approval. The lease for the premises must be as long as the license validity and it must not be nearer than 500 feet from a school and 200 feet from a place of worship. 

For retail dispensaries, their shop must open to the public thorough from the front. 

Distributor License

This license type allows the holder to purchase products from processors and distribute the same to dispensaries and on-site consumption establishments as well. 

The condition for holding a distributor license is that you cannot have anything other than a cultivator and processor license. 

In case you have all three, you can only distribute your own products and no one else’s. 

Those holding exclusive distribution licenses can change a fee as set by the CCB based on product volume. They must also keep to the minimum operating requirement to continue holding the license. 

Microbusiness License

This license type allows the holder to have restricted cultivation, processing, distribution, delivery, and sale rights. They can do all the above for their own cannabis and cannabis-derived products. The condition is that they cannot hold interest in any other type of cannabis business or license. 

Further, they can only carry their own product brand at their sale outlets and no other. The exact criteria for what qualifies as a microbusiness will be set by the CCB and all license holders along with their business must adhere to it. These licenses will be subject to social and economic equity.

Delivery License

This license is for companies or their owners who want to operate a cannabis retail delivery service to the end-user. They can hold this license-free of other types of adult-use cannabis licenses. The condition is that they cannot have more than 25 persons working under them on full-time paid delivery contracts per week. 

The license holders cannot have an interest in more than one license as well. 

The exact specifics of the delivery license holder’s right are yet to be determined by the CCB and these licenses are subject to social and economic equity initiatives. 

Nursery License

This type of license allows companies to produce, distribute, and sell all kinds of cannabis clones, young plants, seeds, and related agricultural products. 

Nursery license holders can get a cultivator’s license to sell to other license holders including microbusinesses, cultivators, registered organizations, and cooperatives. 

The CCB will soon clearly define the exact rights under the nursery license and will be subject to social and economic equity initiatives.

What are the key aspects of New York’s Marijuana Regulation and Taxation Act?

  • 40% of the tax income earned by adult-use sales will be directed to communities that have been harmed by the drug war.
  • Low- or no-interest loans, fee reductions or exemptions, and assistance in preparing applications and running a business will be provided to social equity applicants.
  • Allowing microbusinesses to create vertical operations, which will help them reach economies of scale. Vertical integration would be forbidden for all firms except existing MMJ operators.
  • Within the first three years after issuance, social equity licensees will be restricted from selling or transferring their licenses.
  • Individuals from “communities disproportionately impacted by the enforcement of cannabis prohibition,” as well as minority- and women-owned enterprises, handicapped veterans, and financially troubled farmers, are defined as social equity applicants under the new law. The release of detailed guidelines is still pending.

How Much Marijuana Can You Possess Right Now?

Bill S854A makes several stipulations for cannabis possession by patients, recreational users, and businesses. 

For patients, the possession limit is a maximum of 60-days worth of supply as determined by their prescribing caregiver. They may also possess a new 60-day supply set on the last 7 days before their current running 60-day supply is over. 

For recreational users above twenty-one years of age, possession of 3 ounces of cannabis or 24 grams of concentrated cannabis is legal. 

How Much Will It Cost to Start a Cannabis Business in New York?

Application fees: In New York, obtaining a cannabis producer/dispensary business license costs $210,000. If your application is denied, you will receive a refund of $200,000.

License fees: In New York, a producer/dispensary license costs $200,000, and you must renew your license every two years.

How Can I Get Funding?

Now that we have some estimated figures, we’ll look at a couple of options for raising the funds needed to cover them:

Business Loans

You can use several different forms of loans to fund your cannabis business. Which one is best for you is determined by your financial needs:

Types of cannabis business loans:

  • Equipment finance is a type of lease or loan that is used to purchase equipment for growing, processing, and other purposes.
  • Working Capital Loans are an option when your firm doesn’t have enough recurring revenue, it helps to cover overhead costs like payroll and inventories.
  • Merchant cash advances provide dispensaries and other consumer-facing enterprises with a cash advance on future purchases, which you must repay plus a predetermined fee.
  • Invoice factoring allows growers and other businesses to sell outstanding invoices to factoring companies at a discount. These are frequently charged based on how long it takes your clients to complete their invoices.
  • Purchase order financing allows you to borrow money to fulfill customer orders. When your clients pay for the order, you reimburse it plus a fee, just like with factoring.
  • Commercial real estate loans provide funding for the acquisition of land, warehouses, and other physical sites required to run a cannabis business.

 Here’s what you generally need to qualify for a business loan:

  • Good personal credit
  • A lengthy credit history – Your application may be influenced by the duration of your credit history. In most cases, you’ll require at least three years.
  • No bankruptcies
  • You must have a business bank account.
  • Requires a minimum amount of time in the business. Lenders usually demand that you have been in business for at least six months to a year.
  • Legal standing – To be eligible, all business owners must be US citizens or permanent residents.

There are alternative inventive ways to obtain a loan if your cannabis firm does not qualify for a business loan lender:

  • Crowdfunding. The Securities and Exchange Commission (SEC) in the United States allows individuals to invest up to $2,200 in small businesses in exchange for a share of ownership. Companies can raise up to $1.07 million this way, and crowdfunding is one way to do it all in one place.
  • Business lines of credit. Alternative finance providers also provide lines of credit to help cannabis businesses fund continuing expenses, albeit they are typically more expensive than loans.
  • Real estate loans. These loans can be used to purchase or refinance the buildings or raw land that your firm requires.
  • Private equity funding. Some private equity firms may be willing to provide short-term, high-interest loans or funding in exchange for significant ownership of your business.
  • Venture capitalists. Wealthy investors interested in helping small businesses grow, generally in exchange for equity, may be found in practically every industry.
  • Angel investors. Angel investors, like venture capitalists, assist businesses in their early stages and often deal with smaller sums of money.
  • Personal loans. Do you have a good credit history? You might have a higher chance of having a personal loan accepted. However, check with your lender to see if you can use the funds to start a cannabis business.
  • Home equity loans. A home equity loan or line of credit allows homeowners to borrow against the value of their homes. However, you must make certain that your use is legal.
  • Friend and family loans. Friends and family members can also invest in your company by lending you money and earning interest. Engage the services of a lawyer to assist you in drafting a legally binding contract that will keep everyone accountable.

How Big Is the Current Cannabis Market in New York?

Cannabis use for medical purposes has been legal in New York since 2013. 

According to the MRTA, the retail market along with its central regulatory authority, the Cannabis Control Board and Office of Cannabis Management, will most likely be set up by the end of 2021. 

This means retail sales could begin as early as spring 2022. According to most major predictors, the first year’s sales alone may deliver upwards of US$ 1 billion in sales. With the expected steady increase in sales, the numbers go up to US$ 4 billion. 

According to the offices of the Governor of New York, they estimate to gain US$300 million in taxes from sales each year. 

As far as products based on cannabis go, the New York market primarily has buds, oils, and tinctures. Out of these, buds form the biggest market share and are expected to grow the fastest after recreational cannabis legalization. 

Now, depending on the state legislature related to smoking, particularly with connection to workplace regulations, there may be space for other cannabis products such as pills and edibles to enter the market. These already exist in the market to some degree, but their popularization will predicate heavily on the actual law passed by the NY State Assembly.

How Big Will the Retail Market Be?

By 2025, New York is estimated to produce $3.7 billion in sales.

Who are the Key Players in the Cannabis business ready to invest in New York?

At present, there are several major companies in the cannabis market looking to invest in New York. The following is a list of the most important ones:

MedMen Enterprises

MedMen recently acquired PharmaCann for $682 million, which holds the largest license numbers in the entire state of New York. It had also acquired Bloomfield, one of the original five cannabis license holders back in 2018. According to their spokesperson, Daniel Yi, the company is poised to bring its experience and considerable commercial and corporate resources to bolster its New York operations. They said they will focus on a clear path of ownership for local operators and an inclusive cannabis program driven towards greater social equity.

Curaleaf

Curaleaf currently has a presence in seven New York counties and more are due to open as per its website. It is positioning itself well to take advantage of the growing cannabis market in New York. Since it is one of the first movers in the area among the big names, it has a considerable head start for having dispensaries. Further, acquisitions will help it establish itself as a big player in NY’s cannabis scene and investors are definitely going to watch out for that.  

Vireo Health

Vireo Health is one of the very few private big-time companies in the New York cannabis market at the moment. It is a physician-led multi-state medical cannabis company and pitches itself as a driver for compassionate cannabis-based care products providers. Its top honchos have faced the ire of the law for being embroiled in a shipment of cannabis oil from Minnesota to New York. While this is definitely a big concern for the company specifically since it is held privately, the actual impact of this event is yet to be seen. Whatever the outcome, Vireo Health is sure to be a medical cannabis powerhouse and may look into branching towards the recreational sectors as well. 

How Can Cure8 Help You Setup Your Retail Cannabis Business?

Cure8 is the go-to IT partner for the cannabis business. We’re the firm you call whenever you need help with anything tech – including POS systems, surveillance systems, networks, and back-office PCs.

Though we are happy to serve you on an as-needed basis, we prefer to work with you as a long-term partner, assisting you in planning your IT so that it aligns with your overall business goals and monitoring, managing, protecting, and supporting your IT 24 hours a day, 7 days a week so you never have to worry about technology or downtime and are always secure and compliant.

We’re confident that our clients feel the same way.

Our solutions include:

  • We take care of setting up dispensaries from a scratch
  • We are always there to help you run and grow your cannabis cultivation business
  • We assist you in planning, building, & maintaining the technology you need to run a more efficient and scalable business.
  • We expertise in designing, building, and managing your technology, so your focus remains on running and growing your cannabis distribution business. 

How can we help you set up a robust cannabis business?    

  • We Plan – Get advice, guidance, and planning services from our cannabis IT experts
  • We Procure – Avoid hours of research and let the experts at Cure8 procure all the IT hardware and software your business needs, at one go
  • We Install – Get your IT set up quickly, seamlessly, and affordably by the professionals at Cure8
  • We Secure – Our security services help cannabis businesses stay protected, maintain compliance, and ensure the continuity of your business.
  • We Manage – We manage your IT, so you can focus on running and growing your cannabis business.
  • We Scale – Either your growth is gradual or exponential, our IT support will help you scale and expand seamlessly.

Cure8 helps cannabis businesses to solve their IT problems and get the professional-grade technology they need to launch, thrive, and grow. If you want to open a retail cannabis business, talk to our experts.

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