How to Open a Dispensary in New York

How to Open a Dispensary in New York in 2024

The first step to opening a dispensary in New York is to form a business entity and prepare a business plan. Afterward, the applicant can submit their application for a dispensary license to the state's Office of Cannabis Management (OCM). However, it is essential to determine if the municipality where they intend to open and operate a marijuana dispensary permits cannabis businesses. New York administers a Social and Economic Equity (SEE) Program to encourage certain disadvantaged individuals to participate in its adult-use marijuana industry, including opening cannabis dispensaries.

Why Open a Dispensary in New York?

The Office of Cannabis Management (OCM) reported that New York-licensed dispensaries made over $70 million in cannabis sales through late August 2023. While this trend is expected to continue in the coming months and years, a report by CNBC suggests that the state has yet to maximize its potential in the legal cannabis market. In 2018, New York City Comptroller Scott M. Singer estimated that the state's legal adult-use cannabis market could generate at least $1.3 billion in annual tax revenues at the state level.

Against expectations, a 2022 OCM annual report revealed that only about $16 million in revenue was generated from cannabis tax, license fee, and application fee in State Fiscal Year (SFY) 2021-2022. The New York Medical Cannabis Program, with over 124,000 registered medical marijuana patients as of 2022, generated over $15 million of this revenue. The state’s recreational marijuana market contributed a paltry $120,000. According to cannabis experts, there are not enough legal retail dispensaries to meet consumers' demands and keep the illicit market in check. Hundreds of marijuana dispensaries must open in New York to meet existing consumer demand and rein in illegal cannabis retailers.

Types of Dispensary Licenses in New York

The following types of dispensary licenses are available in New York:

• Registered Organization License (Retail Dispensary) - This license authorizes registered organizations to sell the marijuana products they cultivated
• Adult-Use Retail Dispensary License - This license permits retailers to acquire, possess, sell, and deliver cannabis from their licensed premises to marijuana consumers
• Adult-Use Microbusiness License - With this license, a business may act as a marijuana producer (grower), distributor, and retailer. They may sell marijuana products directly to consumers

How to Get a New York Dispensary License

• Establish a business entity and file with the Department of State
• Prepare the following documentation:
• Detailed business plan
• Proposed location lease agreement
• Security plan
• Cannabis product packaging and labeling plan
• Transportation plan
• Create an account and apply for a New York dispensary license using the NY.GOV login
• Provide all necessary information and upload the required documents while filling out the online application form. Afterward, pay the required fee and submit the application
• The relevant state agency will review and process the application. If approved, the applicant will be issued a provisional marijuana dispensary license

The Office of Cannabis Management (OCM) is responsible for licensing individuals or entities interested in operating marijuana dispensaries in New York. The state's Cannabis Control Board (CCB) only recently approved the OCM's proposed regulations on how a business or person can get a dispensary license in the recreational marijuana market. It has already issued Conditional Adult-Use Retail Dispensary (CAURD) licenses in 2022. CAURD licensees were the first retail dispensaries to operate legal adult-use cannabis dispensaries in New York.

As of June 2023, 225 CAURD licenses have been issued, but only 15 are currently active. With the approval of the OCM's regulations for the adult-use marijuana market, businesses and individuals will be able to apply for retail dispensary licenses in New York beginning October 4, 2023. New York is currently not accepting applications for registration as Registered Organizations (ROs) - medical cannabis dispensaries under its Medical Marijuana Program. Through the state's Department of Health (DOH), New York accepted applications from applicants as ROs between April 27, 2015, and May 29, 2015. Afterward, the DOH issued initial licenses to five successful applicants authorized to operate medical dispensing facilities.

Information and Documents Required for a Dispensary License in New York

• The applicant's identity:
• Where the applicant is a business entity, the following details are required:
  • Name
  • Contact phone number
  • Percentages of the ownership interest
  • Contact details of the designated person who will be served
  • Address of the primary place of business
  • Website or social media handles of the entity
  • State of incorporation
  • Federal employer identification number
• If the applicant is an individual, they must provide their name, contact information, date of birth, and social security number
• Details of proposed dispensary premises, including the following:
• Floor plans
• Landlord information for leased properties
• The nature of the applicant's interest in the property, whether owned or leased
• Copy of the premises certificate of occupancy, rental agreements, proposed deeds, or leases
• Applicant's financial and ownership disclosures in the proposed dispensary business, including the following:
• Documents relating to the applicant's ownership structure
• The percentage of financial and ownership interest
• Information concerning the business continuity plan
• Applicant's criminal history, usually obtained from fingerprinting
• Information about settled, closed, or pending legal actions from the past 10 years

What Plans Do You Need to Open a Dispensary in New York?

The Office of Cannabis Management requires potential marijuana dispensary owners in New York to submit certain plans, including business, site, and security plans. Having a business plan for a proposed cannabis dispensary in the state helps the owners assess the financial aspect of the business and provides strategic guidance on its ownership.

A New York dispensary business plan should contain the following:

• Market research, describing methods used to identify a need in the market and recognize target consumers in the proposed business location
• Description of cannabis products and/or strains and how the business owner intends to source them
• Financials, showing the following:
• Detailed budget
• Source of business financing
• Projected yearly revenue
• Long-term projections, such as variable costs, operational costs, and net profit
• Leadership structure, which must include a summary of the qualifications and experience of each individual in the leadership team
• Information about competition, including their weaknesses and strengths, and the business intends to beat them

The following information must be documented in a site plan prepared for a proposed marijuana dispensary in New York:

• The location of the licensed business premises
• Perimeter dimensions
• Sanitary facilities locations
• Documentation that the proposed dispensary premises meet the state's requirements
• Proposed activities in each spot of the licensed premises
• Details of all property boundaries, including roads, water, and physical boundaries
• Entrances and exits, including emergency exits, to the premises and the dispensary facility (property)

At a minimum, a security plan should include a description of measures the dispensary owner(s) will administer to ensure the following:

• Lock all perimeter windows and doors
• Prevent access to the dispensing facility by unauthorized individuals by securing all entrances
• Provide the safety of everyone on the licensed premises
• Safety of cash, including storage and moving it to banks
• Prevent loitering on the premises, especially by individuals who have no business on the premises
• Provision of sufficient illumination to facilitate surveillance in and outside the dispensary facility
• Provision of perimeter alarm and video camera surveillance

Are There Municipal Requirements for Opening a Cannabis Dispensary in New York?

New York cannabis laws permit municipalities to opt out of cannabis businesses, including marijuana dispensaries, within their boundaries, and the deadline to do so was January 2022. Generally, anyone who intends to open a retail dispensary in a county, village, or city that allows marijuana businesses must notify the municipality of their plan by submitting the OCM-06009 Form to the local municipal clerk. In addition, they must adhere to all established local regulations.

Under the New York cannabis law, local municipalities have the right to express an opinion against or for approving recreational dispensary licenses. The municipality's expressed opinion will form a part of the application record with which the OCM will recommend to the CCB to either deny or grant a license.

How Long Does It Take to Get a New York Dispensary License?

The CAURD licenses were the first step in developing the New York marijuana industry. Following the recent final approval of adult-use cannabis regulations in the state, the OCM will publish the processing time of a New York dispensary license in the coming weeks.

Where Can You Locate a Cannabis Dispensary in New York?

The Office of Cannabis Management (OCM) must approve the location of a marijuana dispensary as part of its site plan. A dispensary's location in any New York municipality must comply with local zoning ordinances.

• Unless approved otherwise by the OCM, it is unlawful for a dispensary to be located within a certain radius of another premises licensed as a dispensary in any New York municipality. The radius depends on the population of the city or county, as listed below:
• A local municipality with less than 20,000 population - 2,000 feet
• A municipality with 20,000 or more inhabitants - 1,000 feet
• In New York, a retail dispensary may not be located on the same road and within 500 feet of a property, and its grounds operated solely as school grounds
• A licensed dispensary may not be located on the same avenue or street and within 200 feet of a building occupied exclusively by a religious body

Here is a list of cannabis dispensaries in New York.

Can Licensees Have More Than One Dispensary Location in New York?

A New York Conditional Adult-Use Retail Dispensary (CAURD) license only authorizes the licensee to operate from a single premises. However, Retail Organization (RO) licenses that sell medical cannabis products are permitted to operate from multiple locations within the state's borders.

How Much Does It Cost to Open a Marijuana Dispensary in New York?

The cost of opening a marijuana dispensary in New York will largely depend on the location and the size of the dispensing facility and may range from $500,000 to over $1 million. The following are the average costs a business owner may incur when opening a dispensary in the state:

• Cost of leasing a retail space - Between $4,500 and $10,500 per month, depending on size and location
• CAURD license application fee - $2,000
• Registered Organization (RO) license application fee - $10,000 (non-refundable)
• Cost of renovating the facility (if the building is required to meet municipal regulatory standards) - Anywhere from $320,000 to $800,000, depending on the size of the property
• Operational costs - An average of $110,000 to $120,000 per year
• Inventory supply costs - This will vary, depending on stock and store size, but business owners should prepare for an average of $1,600 per pound of marijuana products
• Staffing costs - An average of $22/hour. Dispensary owners are encouraged to start with at least five employees, including several budtenders and a manager. Employee wages may run into over $350,000 annually
• Taxes - Depends on the cannabis sale amount and the product type

Do You Need an Insurance Policy for a Cannabis Dispensary in New York?

Insurance coverage is not a mandatory requirement for opening a marijuana dispensary or operating one legally in New York. However, getting coverage to protect a dispensary business against unforeseen losses is recommended. Any cannabis dispensary owner in New York should consider the following insurance policies:

• Commercial Property Insurance - This covers the cost of replacing damaged, lost, or destroyed business property and stolen inventory
• Product Liability Insurance - This pays legal costs in a situation where a customer files a lawsuit against the business over harm caused by a marijuana product bought at the dispensary
• Inland Marine Insurance - This protects business property stored off-site or in transit
• Workers' Compensation Insurance - This covers replacement wages and medical bills for an injured dispensary employee
• Professional Liability Insurance - Also known as errors and omissions insurance, this coverage protects the business if a third party sues and claims financial loss owing to an error committed by the business or its employees

The premium a New York cannabis dispensary will pay for insuring its business varies depending on several factors. Common ones include:

• Policy limits
• Required coverage
• Dispensary size
• Location of the business

How to Get a Grant to Open a Dispensary in New York

The following are some ways to raise the funds needed to cover the costs of opening a marijuana dispensary in New York:

• Self-funding - This involves taking funds from one's savings to establish a dispensary
• Commercial Real Estate Financing - To purchase a warehouse, land, or secure a lease
• Equipment Financing - A form of lease or loan used to acquire equipment required for processing cannabis and other dispensing activities
• Friends and Family Loans - Borrowing from friends and family members, which may come at lower interest rates
• Equity Financing - Obtaining funding from private equity companies. Most equity firms offer dispensaries short-term financing in exchange for a share of the business or at high-interest rates
• Purchase Order Financing - This involves borrowing funds to meet marijuana orders already placed by consumers and repaying the lender once the consumers pay for their supplies
• Home Equity Loan - This is usually offered as a line of credit with a house as the collateral
• Social Equity Investment - Anyone who qualifies for the social and economic equity program in New York can apply for a loan, grant, and technical assistance to open a cannabis dispensary. Under this program, members of communities who marijuana prohibition policies have impacted can access resources to participate in the state's marijuana industry through the implementation of a social and economic equity plan

Does New York Have a Social Equity Program for Cannabis Dispensaries?

Yes, New York has a Social and Economic Equity Program (SEEP) to enable certain individuals to participate in the state's recreational marijuana industry. It is the leading focus in the state, establishing a goal to award 50% of all adult-use cannabis licenses, including dispensary licenses, to social and economic equity applicants. The following categories of people qualify for the SEEP in New York:

• Persons from communities excessively impacted by the enforcement of marijuana prohibition in the past
• Distressed farmers
• Minority-owned businesses
• Women-owned businesses
• Service-disabled veteran-owned businesses

Typically, priority is given to the following SEEP applicants:

• Applicants with incomes lower than 80% of the median income in the municipality in which they reside
• Members of a community gravely impacted by the enforcement of past marijuana ban
• Applicants who (or their family members) were convicted of marijuana-related offenses before the state's new cannabis regulations came into effect

Social and Economic Equity Program applicants in New York should expect to enjoy waived or reduced dispensary licensing and/or application fees. This eases barriers to entry into the state's legal cannabis market and clears the pathway to licensure.

Does New York Tax Marijuana Dispensaries?

Yes. In New York, recreational cannabis products are exempt from sales tax. However, they are subject to an adult-use marijuana products tax of 13% imposed on recreational marijuana dispensaries or distributors. This includes a state excise tax levied on marijuana products sold by a dispensary at 9% of the sale price and a local excise tax imposed at 4% of the cost of the marijuana products. Registered Organizations (ROs) pay a 7% excise tax on medical cannabis, which must not be added as a separate charge on sales invoices or receipts issued to retail consumers. The state's Department of Taxation and Finance collects marijuana taxes from New York-licensed dispensaries.