How to Open a Dispensary in New York

In March of 2021, the Empire State became the 15th in the nation to legalize recreational marijuana. New York state previously legalized only medical marijuana, and marijuana regulation was strict. With this landmark legislation came a wave of people wanting to cash in and learn how to open a dispensary in New York.

The regulations that apply to recreational cannabis in New York are contained in the Marihuana Regulation and Taxation Act (MRTA). It includes instructions on how to get a dispensary license in New York and information about the 11 different types of marijuana dispensary licenses available for New York entrepreneurs.

The market for recreational marijuana in New York is estimated to average $4.2 billion annually; while the first wave of licenses has already been issued, there is still plenty of room for business owners who wish to know how to open a weed dispensary in NY.

How Big Could the New York Cannabis Market Be?

Many financial experts agree that New York could be one of the fastest-growing marijuana markets in the country. The New York Comptroller estimates that the state stands to make over $3 billion, while the Chicago research firm Brightfield Group notes that New York could make $2.2 billion by 2023.

The sheer size of New York’s population, the favorable perception of marijuana in the culture, and the amount that the average person has for discretionary spending contribute to the tremendous growth potential of recreational and medical cannabis.

Who Is Eligible to Apply for a Cannabis Dispensary License in New York?

The first step in how to get a recreational dispensary license in New York is determining eligibility for a Conditional Adult-Use Retail Dispensary License (CAURD) to dispense medical cannabis.

Licenses are issued through the Office of Cannabis Management (OCM). Its Cannabis Control Board reviews applications.

The Office of Cannabis Management has received thousands of applications; not all will be approved. A New York business attorney can help you create a strong application.

Applicants denied a license from the Office of Cannabis Management may be eligible for a different license or may apply for an adult-use marijuana license later. New York offers several licenses, including:

• Retail dispensary
• Medical cannabis dispensatory
• Distribution
• On-site consumption
• Cultivation
• Processing

There are two sets of eligibility requirements for a CAURD license:

• Qualifying business criteria
• Qualifying nonprofit criteria

Justice-Involved Requirements

A justice-involved person is one involved in the justice system (or their relative) who has a recreational cannabis-related conviction prior to March 31, 2021, or was arrested for a marijuana-related offense prior to that date.

Residency Requirement

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The majority ownership of the applying entity must have spent more than 180 days of the last year or 540 days of the last three years in New York.

Business Requirements

At least 30% of the business must be owned by an individual who:

• Is justice-involved
• Has qualifying business experience
• Is the sole control of the applicant

The applicant must be majority owned by justice-involved persons who provide the Cannabis Control Board with appropriate documentation.

To qualify under nonprofit criteria, parties must be at least 30% owned by a nonprofit entity as defined under New York regulations. In addition, the applicant must:

• Have a history of creating work opportunities for justice-involved individuals or formerly incarcerated individuals;
• Have a history of intentionally serving justice-involved individuals;
• Have one board member or governing committee member who is a justice-involved individual;
• Have at least five full-time employees;
• Have functioned for at least two years as a social enterprise with new profit or assets;
• Be under the sole control of the applicant;
• Have a significant presence in the state of New York.

Business and nonprofit applicants must be over 21 years old and U.S. citizens or legal permanent residents.

Ownership Percentages

The entity with sole control of the applicant must meet residency requirements and have at least 30% ownership interest. At least 51% of the ownership interest must meet conviction and residency requirements.

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

The cost of a CAURD license is $2,000, but that’s just the beginning. Anticipate a budget of anywhere from $400,00 to over $1 million, depending on the location you plan to operate and the square footage of the establishment.

You’ll also need to budget for furnishing and fixtures, plus adequate stock of cannabis products and related accessories.

The cost of leasing retail space for the cannabis dispensary ranges from $3,500 per month to upwards of $10,000, depending on location. If you need to renovate the facility, then consider the costs of construction to meet municipal regulatory standards.

Costs could range from $350,000 to $500,000 for a small facility, with larger dispensaries requiring $750,000 worth of renovation and construction work.

Other considerations are the initial cost of your stock and business fixtures like point-of-sales systems. The labor outlay can also be considerable — you’ll be onboarding a full staff at once, and each hire will need training to ensure that your new dispensary complies with New York regulations.

A New York lawyer for business can guide you through the permitting requirements and other legal matters that go along with starting any new business venture.

How to Get a Dispensary License in New York

The first batch of applications has already been issued by the Office of Cannabis Management (OCM), but it anticipates issuing additional licenses in the future.

The first 100 to 200 licenses were required to have a justice-involved individual in a key position at the entity. The number of additional retail licenses issued will depend on market demand after the first wave of licensees establishes operations.

Other individuals, businesses, and nonprofits may apply for a New York cannabis retail license if they fit qualifying requirements and receive aid from the state in getting a loan to open the dispensary or assistance to identify and obtain the dispensary site.

Conditional adult-use dispensary licenses are valid for four years, with a renewal period after two years. To convert the license to a standard license, the license holder must submit that application before the expiration of the conditional license, as per OCM license rules:

1. Submit applications online
2. Create an account with NY.gov
3. Monitor progress online
4. Meet requirements for a standard license, as noted above

Applications closed in September 2022.  Updates from the OCM will address the next application period.

New York Cannabis Dispensary Application Requirements

Potential dispensary owners must have a business plan to begin operations. Your New York business attorney can help you draft a business plan for establishing your dispensary. Business plans consist of:

• Description of the product, how you plan to operate the dispensary, the strains of cannabis you will sell, and how you plan to source them.
• Market research, detailing methods used to identify a need in the market and your methods of identifying target customers, ideally with concrete, third-party acquired numbers.
• Competition, including details of other similar businesses, their respective strengths and weaknesses, and how you will separate yourself.
• Your leadership team and a summary of your respective qualifications and business experience.
• Financials, including a clear, detailed, concise budget; a long-term fiscal forecast, including fixed and variable operations costs, projected annual revenue, and net profit.

In addition to the elements of a typical business plan, NY marijuana dispensaries must also list all sources of business financing. The New York cannabis regulations have specific disclosure requirements for applications, which can be complex. It’s part of the reason that the application fees are so high. Your business lawyer can help you understand your disclosure requirements.

How to Fund a Dispensary in New York

With the explosion of cannabis dispensaries in New York also comes an increase in the availability of financing for business owners. These marijuana funding companies offer a catalog of services for new cannabis businesses, with services like the following:

• Commercial real estate financing to help new business owners secure a lease or purchase land, warehouses, and other physical sites.
• Working capital to cover overhead costs like payroll or inventory if you don’t have enough cash flow.
• Equipment financing for processing, growing, distributing, or other business purposes.
• Merchant cash advances provided for consumer-facing dispensary businesses, repayable with a fee.
• Line of credit or AR/invoice credit, in which a grower or other cannabis-related business can sell outstanding invoices to a factoring company.
• Purchase order financing, borrowing money to fulfill already-placed customer orders, payable back to the lender once the customer pays you.

Each type of financing has its own benefits and drawbacks; you may choose to use a mixture of these to get your new cannabis business off the ground.

Many cannabis entrepreneurs may apply for a business loan. You will need:

• A well-established credit history and good personal credit — at least 3 years
• No bankruptcies
• A business bank account
• At least one year of experience in the cannabis business (or related industry)
• Valid U.S. residency

If you don’t qualify for a business loan, there are other means to obtain start-up financing for your dispensary, such as:

• A business line of credit, revolving credit offered by a bank, credit union, or another lender.
• Crowdfunding raises money from multiple smaller investors in exchange for equity or other considerations; investors may contribute up to $2,200 to a small business in exchange for an ownership share.
• Private equity funding, short-term, high-interest loans from private equity firms provided in exchange for a significant business share.
• Real estate loan to purchase land or buildings for your enterprise.
• Venture capitalist investments — wealthy investors may contribute to a small business in exchange for equity in the business.
• “Angel” investors, similar to venture capitalists but contributing smaller sums; usually investors at the initial stage of the enterprise.
• Home equity loan, a line of credit with a house as collateral.
• A personal loan if you have a good credit history but don’t meet the other business loan requirements.  

New York cannabis business regulations may limit what type of funding you use to start your cannabis dispensary business. You may not be able to use a home equity loan on your own private residence, for example, unless you meet certain requirements.

Some forms of borrowing may turn out to be poor choices in the long run if you end up distributing larger equity shares of your business than you wanted or if you end up owing loans with very high interest rates.

New business owners may wish to consult with a seasoned New York lawyer for advice about the best financing options for their enterprise.

How Will the Marijuana Business Benefit New York?  

There are real profits to be had in the New York cannabis business. By 2024, recreational cannabis distributors are expected to clear a collective net profit of $300 million in tax revenue.

Out of the tax revenue collected from marijuana distributors, 40% will go to communities harmed by the war on drugs in the form of social programs designed to facilitate business development in the community.

Fee exemptions or reductions, low- or no-interest business loans, assistance drafting business plans and licensing applications, and advice for successfully running a business are part of the intended mission of these social programs.

The idea is to create an environment for microbusinesses in New York to flourish, including regulations prohibiting vertical integration of these new firms, excepting existing MMJ businesses.

As part of these measures, social equity licensees are prohibited from selling or otherwise transferring their licenses for the first three years of their issuance.

Social equity applicants are:

• Persons from communities impacted by the drug war
• Minority or women business owners
• Disabled veterans
• Financially challenged farmers

New York has yet to release detailed guidelines; check our site for updates as they are released.

The tax revenue from legalized marijuana sales creates an environment for small businesses to flourish in areas previously ravaged by the enforcement of illegal marijuana trade and use.

Regulating the sale and transfer of these licenses is a measure intended to prohibit monopolies of marijuana distribution that could stifle the growth of micro-businesses in economically depressed communities.

Get the Help You Need

New York is unique among the states that have legalized marijuana in that it’s taking extra precautions about regulations of the recently legalized cannabis industry.

While the laws could change in the future, if and whether they do likely depends on the success of the social programs aimed at improving drug war-impacted communities. The application process is long and complex and is currently closed.

But just because the OCM has paused taking applications for dispensaries doesn’t mean that someone cannot break into the legalized cannabis industry in New York. There are opportunities for investing in start-up dispensaries or becoming a business partner with an existing enterprise.

The law is constantly changing, and the application availability could reopen soon. Navigating the new statutes surrounding legal cannabis and the license application process can be tricky without savvy legal advice. Contact a Cannabis Lawyer today to learn more about your options for opening a marijuana dispensary.

Lawyer For Business can help you complete the application, gather the necessary documentation, and draft a business plan. We also complete legal contracts, protecting you if you choose to work with business investors.