how to open a dispensary in arizona


How to Open a Dispensary in Arizona

Arizona Cannabis Laws

Arizona legalized medical marijuana in 2010. It legalized recreational cannabis in November 2020.

Keep in mind that just because something is legal at the state level doesn’t mean it is at the city level. Scottsdale, for one, has already preemptively banned new recreational dispensaries, though it will allow existing medical marijuana dispensaries to transition to recreational or dual-use dispensaries.

Recreational sales are taxed at a rate of 16% in addition to local sales taxes between 6% and 9%. Medical marijuana, in contrast, has a 6.6% state tax and a 2-3% municipal tax.

The total number of dispensaries in the state are capped at about 130, or one dispensary for every 10 pharmacies in the state. Adults in Arizona are allowed to possess up to 2.5 oz in medical cannabis and 1 oz of recreational cannabis.

Can I open a recreational dispensary in Arizona right now?

Not currently.

On June 1, 2021, Arizona announced some of the details of its social equity program that will make available 26 additional dispensary licenses. They plan to start accepting applications in December 2021 and to select winning applicants by random selection in Spring 2022.

Social equity programs are designed to right the alleged wrongs of the past drug enforcement efforts by giving priority and assistance to applicants disproportionately affected by the War on Drugs. To be eligible for a social equity dispensary license in Arizona, 51% of your company’s ownership must satisfy three of the following four conditions:

  • Household income lower than 400% of the federal poverty level in at least 3 of the last 5 years
  • Has been convicted of a crime related to marijuana in Arizona
  • Is closely related to someone convicted of a crime related to marijuana in Arizona
  • Has lived at least 3 of the last 5 years in an area disproportionately effected by enforcement of marijuana laws in Arizona (these areas to be identified by the state in September 2021

You are not eligible to apply for a social equity license if have been convicted of any violent felony or have violated state or federal controlled substance laws that would not have been legal under the new state law and completed your sentence within the last ten years.

Can I open a medical dispensary in Arizona right now?

Unfortunately, no, Arizona isn’t accepting applications for new medical dispensaries at this time.

Who received licenses from the new recreational cannabis law passed in 2023?

In Arizona, six new marijuana dispensaries will be permitted to open. Applications were submitted through the ADHS Licensing Management System Facility Licensing Portal from December 16 through December 30, 2022. The applicant, along with all other individuals who will hold positions of responsibility within the organization, must obtain a valid marijuana facility agent license.

There are presently 131 active nonprofit medical marijuana dispensary registration certificates in Arizona, while there are 1,340 open pharmacies.

Are there nearby states that have more opportunities for opening cannabis dispensaries at the moment?

Yes, two established states that you can try are California and Colorado. New Mexico will be accepting applications for new dispensaries soon as well.

Arizona Cannabis Market

Last updated 11/2020

The Arizona cannabis market is currently tough to get into due to caps on total licenses and stiff competition from large Multi-State Operators (MSOs). But it’s also a market with a strong existing revenue base and lots of growth and potential.

According to the Cannabiz Media license database, there are currently 143 active dispensaries in Arizona. Seventy-three of these, are located in Phoenix.

Cannabis taxes fetched Arizona $196.4 million in the first nine months of 2022. This implies that Arizona authorities have received nearly $22 million in cannabis excise taxes in only one month!

MJBizDaily notes that large Multi-State Operators (MSOs) control 30% of the dispensaries in the state, with two – Harvest Health & Recreation and Curaleaf – controlling 1/6 of all stores.

As of April 2022, there are more than 276,370 qualified medical marijuana patients in the state.

On the recreational side, an independent fiscal analysis of the legalization of recreational weed estimated that the recreational market would reach over $1.04 billion in three years, based on the $137 average recreational spending per capita in states where it’s been legalized.

Cost Of Opening A Dispensary In Arizona

It is expensive to start a dispensary in Arizona. The state charges a non-refundable application cost for a dispensary license of $25,000 per location, or $5,000 for social justice applicants. In order to comply with state regulations, Arizona dispensaries must renew their licenses every year or biannually. Additional applications, license fees, and regulations may be applicable if you intend to run a dual operation that is also permitted to grow cannabis. As a rule, a qualified doctor must be employed by medical marijuana dispensaries

The cost to open a dispensary also includes real estate acquisition, whether it be through purchase, construction, or leasing in locations with approved zoning. Then take into account the store’s interior design, which includes furnishings, racking, displays, safe zones, signage, etc. A dispensary’s continuing expenses also include those for purchasing inventory, hiring and paying staff, insurance, legal services, marketing, and all other standard expenses associated with operating a retail business.

How to Open a Dispensary in Arizona

1) Establish Your Business

Start by establishing your business as a legal entity in Arizona. If you’re a medical marijuana dispensary you have to incorporate as a non-profit. Recreational dispensaries can be either for-profit or non-profit.

In general, non-profits are more heavily regulated and require more overhead and oversight, though they offer tax benefits such as the lower state tax of 6% (if you’re a medical marijuana dispensary) versus 16% for for-profit recreational dispensaries.

You can incorporate variously as a/an:

  • Individual
  • Corporation
  • Partnership
  • Limited liability company
  • Association or cooperative
  • Joint venture

Be sure to register with your state and federal tax authorities.

2) Start Planning

Planning ahead not only makes good business sense, you’re going to need it for the next steps – getting funding and applying for a license.

You’ll need the following documents just for your state licensing application:

  • Your company’s by-laws
  • Policies and procedures for inventory control, patient recordkeeping, security, and patient education and support
  • A business plan with:
    • Projected expenditures, both before and after the dispensary is operational
    • Revenue projections
    • Site and floor plans
    • Job descriptions

Hire a consultant or bring in an experienced cannabis entrepreneur if you need help with this phase.

3) Get Funding

Federal law prevents many mainstream banks and investment firms from funding cannabis dispensaries, but there are plenty of investment firms that specialize in raising funding for cannabis firms, including the most prominent ones listed here:

Private investment from family and friends is another option.

4) Find a Home

At the moment getting a license is more difficult than locking down real estate for your dispensary, so make sure you have a decent chance of getting one before investing in anything.

You need to own or be renting a qualified space before you submit your license application. You’ll need proof that your dispensary complies with local zoning laws and state restrictions, such as ones that prevent you from being located too close to schools or day care centers.

Keep in mind that Arizona prioritizes applications based on:

  • The distance between your preferred location and the next licensed dispensary must be at least 25 miles.
  • Must be situated in an area that has previously been registered to serve as a non-profit medicinal marijuana dispensary.
  • If more than one application comes from the same location, the one that serves the most patients within a five-mile radius will be given precedence for a license.

So, be sure to do your research and select your store location carefully.

5) Get Your Licenses

Most available medical marijuana dispensary licenses in Arizona are already taken.

The state will be accepting applications for recreational dispensaries from January 19, 2021, to March 19, 2021, with priority given to existing medical marijuana dispensaries that want to switch to recreational or a dual medical/recreational model.

In some cases your best bet may be to buy an existing license and adapt the business how you want.

If more medical marijuana dispensary licenses are made available, you’ll have to submit an application that includes:

  • Information about all your top directors and investors
  • The documents listed in the planning section of this blog post
  • Proof that you own the intended dispensary property

Registering a new dispensary costs $5,000.

In addition to your business license, you’ll also need to register all of your employees (submitting all their info and agreeing to background checks), at a cost of $500 per ID card.

6) Set Up Shop

You’ve got your licenses, real estate, and ingenious plans, now you need:

  • Employees (if you haven’t lined them up already)
  • A well-designed interior
  • Products
  • A professionally-designed and -installed tech and security system

If you don’t have people with experience in these areas on your team, it’s time to bring in some outside experts. This includes interior designers, general contractors, veteran cannabis buyers, and an IT company with a background in cannabis and/or retail.

On the IT end, this is where Cure8 can help. We’ve helped dispensaries throughout North America to design, build, and manage the IT for their stores, including their POS and seed-to-sale systems, surveillance systems, networks, and back office IT. Let us know if you need assistance.

In addition, check out our e-commerce site for curated cannabis hardware at affordable prices.

7) Launch

Ok, you’re ready to get started. It’s time to get the word out.

Arizona doesn’t put too many limits on marketing and advertising. At least with Prop 207, it only stipulates that you have to put your dispensary’s name and license number in all your ads, and avoid designs and messaging that would appeal to people under 21.

Post-launch is another area where Cure8 can help. We can manage your tech and security for you, making sure:

  • Your POS system stays up even during your busiest times
  • You stay compliant when it comes to records retention and the operation of your surveillance systems
  • Your networks are protected from hackers and ransomware 24/7

How Much Does It Cost to Open a Dispensary in Arizona?

Opening a cannabis dispensary in Arizona is expensive. According to the Phoenix New Times, purchasing an existing license before the legalization of adult-use cannabis could cost you $5-$10 million dollars.

Now after the Proposition 207 the cost is expected to be “worth many times their previous value.”

If you meet the requirements, your best bet would be apply for one of Prop 207’s 26 social equity licenses. Details on eligibility for social equity licenses should be released soon, but generally these licenses are given to members of communities that were disproportionately affected by the nation’s harsh drug laws in the past.

Starting a Cannabis Delivery Service in Arizona

Arizona allows medical marijuana dispensaries to deliver cannabis to patients. You have to do the delivery:

  • In an unmarked car
  • With no marijuana products visible
  • “A means of communication with the dispensary”

And also create and carry a detailed “trip plan” document with you that describes the products you have, who you’re delivering them to, and where.

On the retail side, Prop 207 says that regulators have to allow cannabis delivery and lay out delivery rules no sooner than January 1, 2023, and no later January 1, 2025. Only dispensaries with a physical store will be allowed to do deliveries, and all deliveries must be:

  • Logged
  • Limited to a certain amount of cannabis
  • Performed in unmarked vehicles with GPS tracking, video surveillance, and locked compartments for cannabis products

Need Help With Anything?

As mentioned, Cure8 can help you with any aspect of your dispensary’s tech and security, from planning to installation to management.

We can also swoop in to help in emergencies – like POS and network outages, and dispensary POS systems that need to be installed in just a few days.

Outside of tech, even if we don’t have the answer to your question, we’ll be happy to connect you to the people that do. We have connections with people and companies up and down the cannabis supply chain, from business and grow consultants to financing experts.

Drop us a line at any time.

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