How to Open a Marijuana Dispensary in California

Ever since California legalized the recreational use of marijuana in 2016, dispensaries have been popping up all over the Golden State. Opening a marijuana dispensary is similar to starting any other type of business in California, except that the cannabis industry is highly regulated and requires more licenses than most businesses.

What Is a Marijuana Dispensary?

Within the marijuana industry, there are a variety of regulated activities, including cultivation, testing, manufacturing, distribution, and dispensaries. The dispensary is the final step in the supply chain--getting the product to the customer. Marijuana dispensaries include retailors that have a store-front where customers can visit, as well as delivery-only operations. Each type of marijuana dispensary activity has its own licensing requirements.

Research City and County Marijuana Regulations

While marijuana dispensaries are legal on the state level in California, they are not allowed in every town and county. Some places completely ban any establishment that sells cannabis. So before you take any steps towards opening your marijuana dispensary, make sure to check that it is legal to have one in your area.

If selling cannabis is allowed, you will have to obtain a license from the town or county where you are located and follow the local zoning laws. Some cities and counties only permit a limited number of licenses or only allow dispensaries in certain locations. California has a statewide ban that prohibits anyone from opening a dispensary within a 600-foot radius of a school, daycare center, or youth center.

Make sure you check the licensing requirements in your area and follow all the rules--running an unlicensed dispensary is a crime and may prohibit you from opening a legal dispensary in the future. You also may face criminal penalties, including jail time up to 6 months and a $500 fine.

Form Your Business

Starting a marijuana dispensary begins with the same steps as any other California business. You'll decide on a legal structure, choose a name, and file the appropriate organizational documents with the state. For more information on the basics of starting a business, see our article, Start Your Own Business In California.

Begin the City and County Permitting Process

Every city and county in California has different regulations to open a marijuana dispensary. These can be far more onerous than what's typically required to open a business. You may face several rounds of applications, fees, hearings, and opportunities for community input. You should be prepared to provide detailed information during the application process. Some of the requirements for the application may include:

Zoning Verification Letter: You may be required to get a letter from your local development department verifying that the location where you want to open your dispensary complies with zoning laws.

Live Scan and Criminal History Check: Every business owner must submit a Live Scan for fingerprints and agree to a criminal background check. If any business owner has a criminal background, your application may be denied depending on the circumstances.

Business Plans: Here you will fully describe how you plan to operate the business, including information such as financial forecasts, start-up costs and timeline, and details of day-to-day operations.

Safety and Security Plans: You may be asked to provide detailed information for how you will keep the premises safe and secure, including issues such as fire prevention, alarm systems, and security policies.

Community and Neighborhood Assessment: You should be prepared to provide information on how your dispensary will benefit the local community and impact the neighborhood.

Payment of Hefty Fees: The total fees to undergo the application process can be in the thousands of dollars.

Obtain Permits from the California Department of Tax and Fee Administration

If you plan on selling cannabis or products with cannabis in it, you must obtain both a seller's permit and a cannabis tax permit from the California Department of Tax and Fee Administration. You must have the seller's permit in place before you can apply for other required state licenses.

Apply for California State Marijuana Licenses

Next, you must apply for state licenses. Note that the state licensing bureaus recommend that you first acquire your county or city permits before starting your state applications.

All distributors and retailers must have a license from the Bureau of Cannabis Control. You may apply for an Adult Use License (A-License) or a Medicinal License (M-License). To apply for either license you must submit the following:

• Information about your business, including formation documents, financials, and plans for operating procedures.
• Information for all owners, including Live Scan fingerprints for a background check. You may be denied a license if any owners have a prior criminal offense.
• Evidence of compliance with the California Environmental Quality Act.
• A diagram of the premises, which must be drawn to scale. Include information such as the dimensions, exits, location of cameras, and limited access areas.
• A surety bond of at least $5,000, payable to the state of California.
• Proof of commercial general liability insurance.
• Payment of fees, which range from $2,500 to $57,000, depending on expected revenue.

If you will be growing your own cannabis, you need a license from the CalCannabis Cultivation Licensing Program. Finally, if you are manufacturing cannabis products, such as edibles, you need a license from the Manufactured Cannabis Safety Branch.