New York was the 15th of the 24 states to date that have legalized recreational (“adult-use”) cannabis but here, like in most states, its use is closely regulated.

The opportunities are plentiful for growers, product manufacturers, retailers, and distributors of cannabis, with an entirely new industry emerging in the state since full legalization in 2021.

If you plan to sell cannabis in New York, you’re in good company, there are already well over 100 licensed retail dispensaries in the state and over 40 in NYC alone. The number of unlicensed dispensaries is more than 10 times these numbers, according to some sources.

To join the growing band of cannabis retail stores, you’ll need to apply for an adult-use retail dispensary license—and provide considerable supporting documentation. Here’s what to expect if you want to start a cannabis dispensary in New York…

Step-by-step guide to starting a cannabis dispensary in NY

Application windows for all cannabis business licenses in New York open and close throughout the year. If you missed the last window, you may need to wait a few months before it opens again.

Adult-use retail dispensary license applications in New York are processed by the Office of Cannabis Management (OCM). Research the laws and requirements and prepare the necessary paperwork, taking the following steps into account:

• Form a business entity

One of the first steps is to form an appropriate business entity:

1. Sole Proprietorship: if you want to own and operate the business alone.
2. Partnership: a business with multiple partners and taxes paid from personal income returns.
3. LLC: this protects partners from certain financial liabilities.
4. Corporation: where taxes are paid through the corporation.

File your business entity with the state of New York. Then obtain tax ID numbers from the IRS and open a business bank account at a cannabis-friendly bank or credit union (not all banks will accept cannabis dispensaries because cannabis is illegal federally).

You’ll also need to evaluate your business insurance needs and arrange the right policies, including general liability insurance, property insurance, workers’ compensation insurance, and product liability insurance before you can think about opening for business.

• Write a business plan

A business plan details the key components of a cannabis retail business. It is an essential step that you can’t ignore—even if it sounds like hard work.

Writing a business plan is not as challenging as it might seem. Templates can help you include all of the right information. The finished document (which needn’t be too long) can act as your roadmap and, as long as it is updated regularly, be your reference for the years ahead.

Define your business’s goals, target market, and mission. Then detail how you intend to get there, answering the following key questions:

• How will you structure your company?
• Where will your dispensary be located?
• What are the main products you’ll be selling?
• How will you secure a dispensary license?
• How will you obtain the products (cultivation/suppliers)?
• Who will buy your products?
• How will you operate?
• How will the dispensary be financed?
• How will you meet the strict environmental, safety, inventory control, security, and social equity requirements? 
• Who will do what in your dispensary and how will you hire these people?
• What are the main financial goals for the first year, second year, third year, etc.?
• How will you market the business?
• What contingency plans do you have?

• Source a dispensary location and building 

Around half of New York’s 1,520 municipalities opted out of dispensaries (and even more denied on-site consumption) so you’ll need to find one that permits the retail of cannabis.

Location is critical to your potential success—and to securing a license—but cannabis dispensaries face additional challenges to standard retail businesses when searching.

You’ll not only need an accessible location with parking and enough space to run your operation but also abide by the exclusion zones around schools, religious buildings, and community centers. 

The dispensary must be accessible from the street and located well away from other dispensaries. In municipalities with a population of 20,000 or more, the radius is 1,000 feet and if the population is under 20,000, the required radius is 2,000 feet.

If you decide to lease rather than buy a building, there may be restrictions on the usage of the property that render setting up a cannabis dispensary impossible.

Refer back to your business plan and seek professional assistance from a cannabis license lawyer if you are unsure about where to locate your dispensary.

• Document your dispensary plan

New York dispensaries must submit a dispensary site plan and operating plan before a retail license will be granted.

This is more specific than the business plan and needs to cover the entire retail process from start to finish. You’ll need to include:

• Where is the store located?
• What are the dimensions of all areas?
• Where are the entrances and exits?
• Where are the property edges (physical boundaries, roads, etc.)?
• What happens in all parts of the dispensary?
• Where are sanitation facilities located?
• How does your dispensary meet the municipality’s location rules
• What is the outdoor signage?
• How will the business impact the local environment?

You’ll also need to include detailed health, security, compliance, and safety information and create a detailed employee handbook.

• Address funding 

Dispensaries are not cheap to open and most rough estimates suggest around $250,000 to $1 million+ is required. The funds need to cover real estate/build, licensing/application fees, operational costs (including staffing), hardware and software costs, inventory, and taxes.

To obtain a license, you’ll need to provide proof of capitalization and enough liquid cash available to run a viable business. However, many banks will refuse loans to cannabis-related businesses in New York so you’ll need to get more creative with funding.

Some dispensaries self-fund or secure funding from friends and family. However, you may need to try to source funding from partners, credit union loans, brokers or even crowdfunding.

• Get the right team of professionals in place

Your cannabis dispensary team should be carefully assembled to provide the right blend of cannabis knowledge, business/financial nous, sales and marketing insight, and retail experience.

Many cannabis entrepreneurs have a large circle of contacts from which to draw relevant experience but the industry is already becoming highly competitive so finding the right people may not be easy.

• Apply for a cannabis dispensary license and permits

You’ll need an appropriate dispensary license and permits before opening—and this may involve an extensive waiting period, depending on whether the “window” for applications is open.

If you’ve navigated the above steps and are satisfied that your proposed cannabis dispensary business meets all of the eligibility criteria (at the state and municipal levels), you are ready to submit the relevant documentation to the OCM in New York. 

To avoid disappointment or unnecessary delays, check with a suitably qualified cannabis license lawyer before acting.

• Market your cannabis dispensary and begin sales

With many cost-effective digital marketing options readily available (SEO, social media, local search, Google Ads, Facebook Ads, etc.) it makes sense to focus your business marketing online but remember that online sales of cannabis can be challenging.

Cannabis is illegal at a federal level so accepting payments through the credit card system and using federal carriers like the United States Postal Service to send cannabis across state borders is extremely risky. Consult with a cannabis lawyer to find out what your options are with online sales. 

For informed advice about setting up a cannabis dispensary anywhere in the U.S., call 866-329-0729 for a consultation at Cannabis Law Solutions.