Embarking on the journey to open a new cannabis dispensary can be both exciting and daunting. This guide provides a high-level overview of the critical steps and considerations involved in setting up a successful dispensary. Whether you're exploring the cannabis industry for the first time or looking to expand, our outline serves as your roadmap to navigating this complex process.

Licensing and Legal Requirements

Before diving into the cannabis industry, understanding the legal landscape and securing the necessary licenses is paramount. Each jurisdiction has its own set of rules and regulations governing cannabis businesses. Start by researching your local and state regulations to ensure compliance from the outset.

Licensing and the various approval stages required can create unexpected delays that are entirely out of your control. Map out the required stages and approvals and make sure your opening plan factors in potential delays.

Physical Retail Space

Selecting a Location

The location and design of your dispensary play a crucial role in its success. Consider factors such as population density, average income, and nearby competition when picking a store location. Design your store layout to enhance customer experience, keeping in mind security measures to protect your investment.

Depending on the licensing and legislation in your local area, your options may be limited. If this is the case, then it becomes more important to select an operating model that matches with the space available to you.

Store Layout

The layout of your store can have a major impact on your operational efficiency and ability to attract customers. Don’t make the mistake of only focusing on the parts your customers will see. If the back of house areas at your store aren’t designed with smooth operational flow in mind it will make it harder for your staff to serve customers quickly and deliver a great experience.

Front of House

• Consider how customers will flow through the store. From entry to exit, what steps will they take and how can you streamline them?
• Ensure staff quickly and efficiently retrieve products for walk-in customer orders
• Lay out your displays so that customers can move easily browse even if the store is quite busy

Back of House

• Designate enough space for receiving inventory
• Dedicated area for fulfilling ecommerce orders
• Consider how traffic between different areas of your store will flow, try to minimize the distance for high traffic paths
• How will you store inventoried product for easy identification and retrieval?

Operational Model

The operating model you select should align with your business goals, resources, and the local market context. Options range from the high-volume, low-margin approach of the "Liquor Store" model to the premium customer experience offered by the "Apple Store" model. Analyze your local market to determine which model suits your vision.

Operational Models for Cannabis Retail

Liquor Store

• Description
  • Drive demand through low prices and “good value for money”
  • Optimize for low margins and high sales volume (move a lot of product quickly)
  • Spend on ads over customer experience
  • Outsource everything you can (eg. use a 3rd party managed delivery service)
• Pros
  • Less work
  • Success is less dependent on local demographics like average income
  • More flexibility when choosing a location since experience matters less
  • Need fewer staff
• Cons
  • Less profit
  • Lower profit margins and operational reserves make it more vulnerable
  • Harder to change strategy based on market conditions
  • Limits to scale

Apple Store

• Description
  • Drive demand by curating highly desired products across pricepoints and offering a superior customer experience
  • Optimize for retention of high value customers
  • High end retail with strong branding and interior design
  • Investment in store experience + customer retention
  • Well trained, knowledageble staff
• Pros
  • More profit
  • Greater resiliency to market changes
  • Higher long term sustainability
  • Scalable
• Cons
  • More work
  • Higher startup costs
  • Staff training needs to be really good, need to Build in-house expertise + processes
  • Need more staff

Destination

• Description
  • Flashy stores where a unique in-store experience serves as the core draw
  • Best suited to high-tourism markets
• Pros
  • Potential for highly differentiated retail that stands out from the competition
  • Can become very large operations in the right market
• Cons
  • Very high buildout costs
  • Higher startup costs
  • Need to balance spending on marketing VS in-store experience
  • Need a constant stream of new customers
  • Vulnerable to changes in tourism trends

Selecting a Model

Local Market Analysis

When choosing an operating model for your dispensary, conducting a thorough analysis of the local market is essential. Key factors to consider:

• Population density
• Average income
• Nearby retail competition
• Legislation limits on the number of dispensaries
• Available audiences

First, consider the population density of the area. A higher population density might support models that rely on high foot traffic, such as the "Liquor Store" model, while areas with lower density might benefit from the "Apple Store" or "Destination" models that may motivate visitors to travel longer distances. At the same time there is a minimum population density required to support a high end retail experience.

Average income in the area is also a crucial factor. Models that offer value for money, such as the "Liquor Store," may be more successful in areas with lower average incomes, as they're less affected by the economic demographics of the surrounding area.

Understanding the common order methods, the types of deals offered, and the most popular brands among existing competitors can help you identify gaps in the market or opportunities to differentiate your dispensary.

Lastly, legislation regarding the number of retail outlets allowed in the area could impact your choice. Some models might be more adaptable to regulatory constraints and market saturation than others.

Audiences

Understanding your audience is key to selecting the right operating model for your dispensary. The main types of audiences you'll encounter are local residents, local cross-border shoppers, and tourists, each with distinct behaviors and needs.

Local residents make up the core of your customer base. These are the people living in your immediate area who might drop in for casual purchases. Your dispensary will directly compete with other local stores for their attention.

Local cross-border shoppers come from nearby states where adult-use cannabis might not be legal. They're willing to travel to your location, so your online presence and reputation are vital in attracting this audience. Since they are travelling further, you will need to consider your competition across a much larger area.

Tourists are visitors to the area, often seeking unique experiences. They rely heavily on online searches and marketing to find dispensaries, so ensuring your SEO and social media strategies are strong can help capture their interest. Creating a memorable shopping experience can turn tourists into advocates for your store, encouraging repeat visits and recommendations.

Catering to these audiences involves a deep understanding of their preferences and behaviors. By aligning your operating model with the needs of these diverse groups, you can optimize your marketing, product selection, and overall strategy to better serve and attract a wide range of customers.

Software

Technology underpins the operations of a modern dispensary. From Point of Sale (POS) systems to ecommerce platforms and mobile apps, selecting the right software is crucial for efficient operation. Consider how each piece of technology will fit into your overall customer experience and operational efficiency.

Checklist:

• Point of Sale
• Ecommerce
• Mobile Apps
• In-store Displays
• Marketing + Rewards
• Online Payments
• In-store Payments
• Payroll
• Accounting
• Scheduling
• Online file storage (eg. Google Drive)

Hardware

Hardware, including tablets for checkout, ID scanners, and label printers, supports your dispensary's daily operations. Ensure you have the right tools for each part of your business, from the sales floor to inventory management.

Checklist:

• Computers
  • At each register
  • Back of house for ecommerce fulfillment, inventory management etc.
  • Receptionist
• ID Scanners
• Product scanners
• Debit terminals
• Printers
  • Barcode printers
  • Receipt Printers
  • Label Printers
  • Regular Printers
• Smart TVs for in-store menus
• Cash Recycler
• Cash Counter

Marketing and Brand Building

Develop a comprehensive marketing strategy that includes both print collateral (e.g., store signs, exit bags, and budtender referral cards) and digital efforts (e.g., SEO, website, and MMS marketing). Effective marketing will help you build a brand, attract customers, and retain them.

Marketing Deliverables

• Well documented brand guidelines
• Print
  • Store exterior signs
  • Exit bags that comply with state regulations
  • In-bag flyers
  • Ecommerce/rewards signup instore signs
  • Curbside checkin signs
  • Promo calendars
  • Budtender review/referral cards (Customer scans a QR code and can leave a review on Yelp/Google)
• Digital
  • Website
  • MMS Marketing images
  • Instore TV images + menus
• Advertising strategy
  • Paid Ads (physical or digital)
  • SEO

Inventory Management and Purchasing

Managing inventory effectively is vital to your dispensary's success. Be aware of common pitfalls such as underestimating processing time or overordering. Establish strong relationships with vendors to support your store's needs and promotions.

Your First Product Order

The biggest mistake new dispensaries make when close to opening is underestimating the resources required to properly process inventory. It will take longer than you expect, and you will find holes in plans you thought were bulletproof.

You should plan to open 2 weeks after receiving your first order

If that seems like too long, here are the real life consequences we have seen for dispensaries that rushed this stage of the opening process:

• Customers stuck at checkout because they products they want to buy won’t scan in the POS
• Online inventory doesn’t reflect real availability, leading to cancelled ecommerce orders and a bad first impression
• Inventory issues stick around for days because the inventory team is at max bandwidth finishing product intake and has no time to diagnose and fix problems
• Broken processes become a habit because no one has the time to fix them
• Basic supply purchases are overlooked and jury-rigged solutions further drag down operational efficiency

Preparing The Right Way

Before your first order arrives make sure you have the right infrastructure in place.

• Basic supplies like highlighters, pens, box cutters, printers, ink/toner
• Storage
  • Inventory bins for storing product, preferrably clear plastic so that contents are visible
  • Shelving that matches the dimensions of your bins to optimize storage efficiency
  • Labels and label printers
• Sufficient staff to process orders
• An intentionally designed, clearly documented and well enforced intake process
• Anticipating vendor errors and have a process in place to look for:
  • Incorrect test results
  • Missing paperwork
  • Incorrect paperwork
  • Incorrect counts
  • Incorrect products
  • Manifests that don’t match invoices
• Not overordering. Its tempting to try and make sure you have way more product than you need, but this will actually put additional stress on your inventory team and could delay your opening.
• Knowing the required compliance process
  • Keep all paperwork for every order
  • Ensure every order has a manifest
  • Match the Certificate of Authenticity to the batch you’re receiving
• Always count product as part of intake, and have those counts verified by a different person than the one who made the initial count.

Staff Roles

Your staff is the backbone of your dispensary. From budtenders to inventory managers, each role is critical to providing excellent customer service and maintaining operational efficiency. Implement comprehensive training programs and ensure compliance with state regulations.

Critical Responsibilities

Depending on the size and stage of your operation you may combine some of these responsibilities together.

• General Manager
• Assistant General Manager
• Inventory manager
• Sales floor managers
• Marketing Manager
• Budtender
• Delivery driver
• Inventory Packager (barcodes and counts product, does intake)
• Inventory Admin (Inputs test results, product photos and other computer work)
• Training manager
• 3rd party compliance officer

Training Staff and Documenting Processes

You will have to prepare standard operating procedures (SOPs) for all processes as part of your licensing. These SOPs are important but will not be sufficient documentation for your employees. You will also need to create training manuals for each role.

SOPs VS Training Manuals

SOPs outline business processes at a high level. An SOP will use generic terms like “the employee” or “the dispensary” and may use more abstract or technical language.

Training manuals provide specific instructions for tasks. They should be written in layman’s terms and will provide detailed step-by-step instructions, including references to specific interface elements in a required piece of software (eg. “Click the red button that says Cancel”).

Important Processes to Document

• Inventory
  • Storage
  • Intake
  • Audits
  • Management of bulk product (if any)
  • Waste destruction
• Order fulfillment
  • Walk-in customers
  • Express pickup
  • Curbside pickup
  • Delivery
  • Drivethru
• Customer Support
  • How to handle angry customers
  • How to handle complaints

Conclusion

Opening a new dispensary involves careful planning and attention to detail across various aspects of the business. This guide has introduced the key areas you need to consider. Stay tuned for more in-depth content on each topic, designed to help you navigate the complexities of the cannabis industry and build a successful dispensary.