How to Open a Dispensary in Colorado

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How to Open a Dispensary in Colorado in 2024

To open a dispensary in Colorado, you must obtain a Regulated Marijuana Business License from the Marijuana Enforcement Division. Dispensary licenses take up to six months to be approved in the state. Municipalities in Colorado must also issue the appropriate permits to dispensaries looking to operate within their jurisdictions.

Why Open a Dispensary in Colorado?

As one of the first states to legalize marijuana, Colorado boasts a strong history of reception to marijuana. This is reflected in the number of marijuana sales recorded by the state each year. According to a Marijuana Sales Report published by the Colorado Department of Revenue, Colorado-licensed dispensaries made over $920 million in sales from January to July 2023, making it the state with the second-highest marijuana sales in the U.S.

Colorado also has a large and thriving medical marijuana industry. Reports from the Colorado Medical Marijuana Registry show that the state has 66,611 registered medical marijuana patients as of August 2023. The Colorado legal cannabis market has even more potential for growth with several reports forecasting a compound annual growth rate of over 16% from 2023 to reach a market size of $2.9 billion in 2030. Clearly, there is great potential ahead in the Colorado marijuana market, making it an attractive place to open a cannabis dispensary.

Types of Dispensary Licenses in Colorado

Colorado issues two types of dispensary licenses. These are:

  • Medical Marijuana Store License - This license allows the licensee to operate a business that sells medical marijuana to Colorado Medical Marijuana Registry Patients and Transporting Caregivers
  • Retail Marijuana Store license - This allows a license holder to operate a business that sells retail marijuana to adults aged 21 years or older

How to Get a Colorado Dispensary License

Before submitting an application to the Marijuana Enforcement Division, a person seeking to acquire a Colorado dispensary license must have already:

  • Established a business entity with the Colorado Secretary of State
  • Received a Federal taxpayer’s ID
  • Entered into relevant corporate governance documents such as bylaws, articles of incorporation, and shareholder agreement
  • Created an organizational chart setting forth ownership percentage
  • Acquired proof of possession and a description of the real estate where the business will operate

Upon completing these initial steps, the applicant can follow the steps below to apply for a dispensary license from the Colorado Marijuana Enforcement Division:

Applicants must submit their application either by mail, online, through an earlier scheduled in-person appointment, or physically at the MED’s Lakewood Office Drop Box located at:

Marijuana Enforcement Division 1697 Cole Blvd., Suite 200 Lakewood, CO 80401

The Marijuana Enforcement Division (MED) of the Colorado Department of Revenue is the state agency responsible for reviewing applications and issuing marijuana dispensary licenses in Colorado. As of 2023, Colorado is still accepting dispensary license applications and there is no application window for new dispensary licenses in the state.

Information and Documents Required for a Dispensary License in Colorado

To apply for a dispensary license in Colorado, the following documents are required:

  • A copy of the local license application, if required
  • Certificate of good standing from the jurisdiction in which the entity was formed
  • If the applicant is an entity, the identity and physical address of its registered agent in the state of Colorado
  • Organizational Documents
  • Articles of incorporation, bylaws, and any shareholder agreement for a corporation
  • Articles of organization and operating agreement for a limited liability company
  • Partnership agreement for a partnership
  • Corporate governance documents for publicly traded corporations
  • Proof of ownership of the proposed premise to be used as a dispensary
  • Facility diagram for proposed dispensary premise including the following:
  • Site plan
  • Security plan
  • All required findings of suitability
  • Publicly traded corporations should include the following:
  • Documents establishing that the publicly traded corporation qualifies to hold a Regulated Marijuana Business License
  • Divestiture plan for any Controlling Beneficial Owner that is a person prohibited by the Marijuana Code, has had their license revoked, or has been found unsuitable
  • Financial statements
  • Tax Documents
  • Local licensing/approval

What Plans Do You Need to Open a Dispensary in Colorado?

Developing a business plan is important for entrepreneurs looking to apply for a dispensary license in Colorado. Besides being an essential requirement in the licensing, it can also help the proposed business attract investors and other key members of the management team. In addition, being precise about every detail in the business plan will enhance the chances of getting approved by the Marijuana Enforcement Division for a cannabis dispensary license.

While preparing a Colorado dispensary’s business plan, it is important to note the following key points that must be covered in the business plan:

  • Executive summary and company overview
  • Product offerings containing a description of the cannabis goods and strains to be offered by the business and how the business owner expects to obtain them
  • Market research and competitor analysis
  • Execution plan
  • Financial highlights detailing projected expenses and potential revenue.
  • Customer analysis addressing the demographic profile of the target market and customer segmentation
  • License application requirements
  • A brief description of members of the management and leadership team, including their background and skills

The following should be included in the site plan for a marijuana dispensary in Colorado:

  • The location of the dispensary
  • Perimeter dimensions
  • Documentation certifying that the proposed dispensary premises meet the state's requirements
  • Description of the proposed activities in each area of the licensed premises
  • Details of all property boundaries, including roads, water, and physical boundaries

The security plan for a marijuana dispensary in Colorado should include measures that the business owner would employ to ensure the safety of customers and the dispensary. Security measures which can be considered and covered in the security plan include the following:

  • Extra lock on all storage spaces
  • Video surveillance
  • Intrusion alarms
  • Background checks on employees
  • Provision of perimeter alarm and video camera surveillance
  • Ensuring that the facility is well illuminated to facilitate surveillance in and outside the dispensary facility

Are There Municipal Requirements for Opening a Cannabis Dispensary in Colorado?

Yes. There are municipal requirements for opening cannabis dispensaries in Colorado. A dispensary has to be licensed by both the state and their local jurisdiction before being allowed to operate. Also, Amendment 64 allows each county, city, and town in Colorado to decide whether they want cannabis dispensaries within their borders or not.

How Long Does It Take to Get a Colorado Dispensary License?

It takes up to six months to get a Colorado dispensary license. Upon application, the Marijuana Enforcement Division has 45 to 90 days to respond to an application. If approved, the application is forwarded to the municipality in which the dispensary is to be located for further approval. The response period, in this instance, varies by the municipality.

Where Can You Locate a Cannabis Dispensary in Colorado?

There are no specific location requirements for marijuana dispensaries enforced by the MED. However, municipalities are also allowed to set their own specific zoning requirements and may have location requirements that must be met. Generally, dispensaries in Colorado are prohibited from being located in the following areas:

  • Neighborhood of undue concentration
  • 1,000 feet of a school, childcare establishment, any other retail marijuana hospitality and sales business, or alcohol or drug treatment facility
  • Residential zones

Can Licensees Have More Than One Dispensary Location in Colorado?

Colorado does not allow dispensary licensees to open more than one location. However, a medical marijuana dispensary can share the same premises with a recreational marijuana dispensary and vice versa, as long as they operate on separate licenses.

How Much Does It Cost to Open a Marijuana Dispensary in Colorado?

Opening a dispensary in Colorado costs anywhere between $450,000 and $1.5 million. This cost range depends on a number of factors, from the location of the dispensary to its size. The following are average costs a dispensary owner may expect to incur to open a marijuana dispensary in Colorado:

  • Cost of leasing a retail space - Between $3,500 and $10,500 per month, depending on size and location
  • License application fee - $7,000
  • Cost of renovating the facility - This varies depending on the kind of building bought or leased for use as the dispensary facility. On average, renovation costs will be anywhere from $320,000 to $800,000, depending on the size of the property
  • Operational costs - An average of $100,000 to $150,000 per year
  • Inventory supply costs - Stocking high-quality products is important for the dispensary. Typically, an estimate of $1,500 per pound of marijuana products is expected
  • Staffing costs - Employee wages are around $250,000 to $350,000 per annum for a dispensary with an average of 5 employees
  • Taxes - Taxes are paid to both the state and municipalities in Colorado. The amount of taxes to be paid by the dispensary depends on the cannabis sale amount

Do You Need an Insurance Policy for a Cannabis Dispensary in Colorado?

Colorado does not mandate marijuana dispensaries to have insurance coverage. However, insuring a dispensary is beneficial as it provides a financial safety net against unexpected adversities like theft, fires, and injuries.

While there are no mandatory insurance requirements for cannabis dispensaries in Colorado, it is still a good idea for dispensary owners to consider the following insurance policies:

  • Product liability insurance - This covers legal costs if a customer sues for harm caused by a product sold in a dispensary
  • Commercial property insurance - This helps to cover the cost of damage done to business property
  • Business interruption insurance - This policy comes into play when an unforeseen circumstance, for instance, damage to key business property, forces the business to close temporarily
  • Inland marine insurance - This covers business property in transit or ones stored off-site

The following factors may affect a Colorado-licensed dispensary’s insurance premium:

  • The type of insurance coverage sought
  • Coverage limits
  • Location of the dispensary
  • Size of the dispensary

How to Get a Grant to Open a Dispensary in Colorado

The following ways can be used to raise the funds needed to open a cannabis dispensary in Colorado:

  • Self-funding - This option is probably the most popular for entrepreneurs in the cannabis industry. Individuals or businesses with adequate capital can fund their cannabis dispensary on their own without resorting to loans or equity funding
  • Family and friends - Friends and family are also a good source of little or no interest funding for business owners looking to open a dispensary
  • Loans - Loans are also a viable source of funding for dispensaries and are of different types. Examples of loans include real estate loans, inventory financing loans, and term loans
  • Equity funding - In the private market, there are investors interested in supporting marijuana-centered businesses and operations like dispensaries. In exchange for a loan of money, these investors require an equity stake in the company
  • Equipment financing - This is a type of loan used to acquire equipment to be used for processing and dispensing cannabis
  • Cannabis-specific brokers and lenders - Although major U.S banks desist from lending to dispensaries, some private lenders specialize in lending to cannabis businesses
  • Social equity investments - These are types of loans designed to bring equal opportunities and an inclusive atmosphere into the cannabis industry. They are usually in place for marginalized groups such as Latinos, Blacks, and LGBTQ+ communities

Does Colorado Have a Social Equity Program for Cannabis Dispensaries?

Yes. Colorado has a social equity program for cannabis dispensaries known as the Cannabis Business Grant. To qualify for this grant, eligible cannabis businesses must:

  • Have 51% of the business owned by a Social Equity Licensees) from the Colorado Marijuana Enforcement Division (beginning at the time of application and for 24 months after award disbursement)
  • Have been awarded or started an application for a Regulated Business License from the Colorado Marijuana Enforcement Division and the local licensing authority where the business intends to operate
  • Be in good standing with the Colorado Secretary of State

The grant offers up to a $25,000 award for recipients of its “Foundational Category” and up to a $50,000 award for recipients of its “Growth Category”. The application window for this grant is, however, currently closed.

Does Colorado Tax Marijuana Dispensaries?

Yes. In Colorado, marijuana dispensaries are subject to a sales tax of 15% and a 2.9% state sales tax, as well as local government sales tax. In addition to this, recreational marijuana dispensaries also pay an excise tax valued at 15% of the Average Market Rate of retail marijuana. This tax is not usually imposed on medical marijuana dispensaries.

The state agency responsible for collecting cannabis taxes in Colorado is the Taxation Division of the Colorado Department of Revenue. Municipalities in Colorado are also authorized to collect taxes from dispensaries located in their jurisdictions.

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