How To Start a Cannabis Delivery Service

How To Start a Cannabis Delivery Service-01

Some people outside the industry view delivery as a quick and easy way into the cannabis business. All you need is a car, some product, and maybe an app, right?

Unfortunately, the way the laws are in many places, that’s usually not the case. (Of course, if legality doesn’t concern you, it actually may be that easy to start a cannabis delivery business, but we’re not going to advocate you break the law here.) Most states require you to already be a physical cannabis dispensary to be able to perform deliveries, or at least have some kind of commercial, physical location where you store your products.

If you’re an existing dispensary that’s looking to get into delivery, and you’re in a place that both allows cannabis delivery and has licenses available for the taking, you’re in a good position. You’re just going to need a license, one or more company vehicles with a few customizations, employees willing to drive for you, and an app that receives and tracks delivery orders.

We wouldn’t expect your startup costs to be more than in the low tens of thousands of dollars.

Why Open a Cannabis Delivery Service?

As we mentioned up top, starting a cannabis delivery service isn’t necessarily easier or less costly than starting a standard cannabis dispensary from scratch in most locations. But if you’re willing to bear the startup costs or you’re already an existing cannabis dispensary, offering cannabis delivery is a no-brainer. You’re reaching an entire new audience of people that don’t have the time or are reluctant or unable to travel into your dispensary.

It especially makes sense now in the aftermath of the pandemic, as many people have gotten used to having everything delivered to them.

While some in-store customers may convert to delivery, delivery sales are unlikely to supplant in-store and online sales because each demographic has its own set of clients.

Make Sure It’s Legal In Your Area

State Law

Here is a list of states that allow cannabis delivery under a strict regulatory regime through either retail license or a specific delivery license:

  • Arizona
  • Arkansas
  • California
  • Colorado
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Nevada
  • New Mexico
  • New York
  • Oregon
  • Rhode Island
  • Vermont

Municipal Law

Keep in mind that just because your state allows cannabis delivery, that doesn’t necessarily mean the city you operate in or the city you’re delivering to allows it. Here in Southern California where our headquarters is, for example, a city like Santa Ana allows cannabis dispensaries and deliveries, but almost all the cities around it ban both cannabis establishments and delivery. There are probably examples of where a dispensary can deliver cannabis to a residence across the street in one direction but not one in the other direction.

Newer states like New Jersey and Connecticut are trying to avoid situations like these by allowing cities to ban cannabis establishments but not deliveries to private residencies.

Delivery vs. Transportation

Also, take note of the difference between delivery and transport. Delivery is from a business to a consumer, transport from one business to another. Most states actually make it illegal for cities to ban cannabis transportation, which would make it difficult for cannabis companies to do business and would be pretty hard to enforce in any case.

Medical vs. Recreational

In addition, some states have different policies for delivery based on whether you’re delivering medical or recreational cannabis. Many allow medical deliveries, as makes sense since some people have medical conditions that prevent them from driving or walking to a dispensary.

Put Together a Delivery Operations Plan

First, think about how you’ll run your cannabis delivery operation. Consider things like:

  • How you’ll receive orders. Does your website currently accept online orders? Do you have software that allows you to create delivery orders at all?
  • How will deliveries be performed? Most states prohibit the “ice cream truck” model where a truck with a full inventory of products drives from one location to the next, never returning to a physical dispensary or storage location until the end of the shift. Do you perform a delivery as soon as it’s ordered, or do you wait until a certain number of delivery orders come in and then go out for efficiency’s sake?
  • What kind of vehicles will you use? What changes do you need to make to them so that they comply with state law?
  • Who will perform the deliveries? Do you need to hire an additional person?
  • What’s the process once a delivery order is received? How do you gather and prepare the products for transport and securely get them out to the car?
  • How do you handle cash transactions? How much change should drivers carry with them?

Get Your License

This process depends on where you are and if you’re an existing dispensary, but it’s a similar process to getting any type of license. You go on your state or city’s cannabis website and see if they’re accepting applications for cannabis delivery licenses. If they are, fill out all the required forms. If they’re not, check back later.

The forms you fill out typically include:

  • A business plan
  • A delivery plan (described above) – detailing how you intend to transport cannabis, including the processes you’ll use
    • Details of the vehicles you’ll be using – make and model, year, license plates
  • A tracking plan – detailing how you’ll track and keep records of all deliveries
  • A security plan – how you intend on protecting your products and drivers from theft

Make sure to read your state or city’s laws closely to ensure your plans cover all the required processes and rules. Get some help from a cannabis consultant or lawyer if you need it.

You may or may not have to already have your company vehicles ready for inspection before your delivery licenses can be approved.

How much does it cost to get a license?

Because each city and county is free to set their own licensing fees, there is no way to answer this unless you know where you want to get licensed.

There are two basic types of license fees in general. There is an application fee, which is paid when the application is submitted and covers the cost of having the regulating body assess and process the application. Then there’s the actual license fee, which is paid after the application is granted. The license cost is usually paid every year for renewal.

The cost of a state license varies according to the type of license you’re applying for.

Get One or More Company Vehicles

Most states don’t allow you or your employees to use your personal cars to make deliveries, so you’ll need to buy at least one company vehicle if you don’t already have one for deliveries to and from other businesses. Anything clean and professional-looking should do fine – Civics, Malibus, maybe a subcompact of some kind.

Depending on the state, you may be required to customize your vehicle with:

  • A secure lockbox to store cannabis products
  • A GPS tracker (the one built in to your phone and app may suffice)
  • Cameras pointing both inside and outside the vehicle

Most states that we’re aware of do not allow you to put any company branding or any indication that there are cannabis products in the car. Perhaps they’ll loosen these laws once the cannabis black market disappears somewhat and there’s less likelihood of people robbing cannabis delivery vehicles to resell the product on the street.

Get Delivery Software

Your dispensary’s POS software may already have all the delivery features you need; many of these applications do. Some like BLAZE and Meadow even started out as delivery-centric programs. In any case, double-check that your POS software has the delivery features you need, which may include:

  • The ability to create delivery orders
  • A mobile app so drivers can track deliveries on the go
    • An integrated ID scanner
  • Integration with the state tracking system such as Metrc

There are also specialty delivery applications like Eaze and Onfleet that can integrate with your POS software if you need more delivery features.

Alternatively, Consider Using a Third-Party Delivery Service

In some states you can outsource your delivery to a third-party company, kind of like how restaurants use Grubhub and Uber Eats. That way you can just start doing deliveries without having to purchase and customize a company vehicle or worry about implementing any dramatically new processes. Of course, this also means sharing your revenue with someone else, which you may not want to do.

Get the Word Out & Get Started

Before or once you start doing deliveries you need to get the word out. Cannabis marketing regulations are pretty strict so be sure to read up on them and make sure you’re complying with them whatever you do.

Depending on how much you think your target audience will care about delivery or how unique it is in your area, you may or may not want to lead with it in whatever marketing you do – on billboards, social media, Google Ads, Weedmaps, etc. You’ll at least want to mention it on your website and in signage at your store, and perhaps have your budtenders mention it to customers during the checkout process.

Give time to your delivery operations to start and flourish, even if you don’t get a lot of delivery requests as soon as you launch your services. Whether it’s new or existing customers who opt to use the service more frequently, you’ll likely discover that it develops a loyal customer base over time.

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