How to Open a Dispensary: Getting Started Guide
Whether you’re a first-time dispensary owner or experienced cannabis entrepreneur, there are a few things you need to know to get your dispensary up and running.
So you're planning to open a dispensary? Congratulations! We're excited for you, but we also want to be honest that there will probably be challenges, both in legal requirements and the day-to-day with opening a business.
This guide is designed to help current license-holders through some of the key factors to opening a dispensary, including inventory, compliance, and staffing.
The #1 challenge for new cannabis dispensaries is compliance. If you have a retail background, you will immediately notice that your ideas are hamstrung by compliance issues. You can’t do just anything you want to do in such a highly regulated industry.
On the other hand, if you don’t have retail experience, you’ll soon realize that there are many areas of business ownership you will need to learn quickly — finding a storefront or real estate, hiring employees, store layouts, marketing, inventory management, merchandising, logo/branding, accounting, and the list goes on.
In this guide to opening a cannabis dispensary, you will learn many of the key challenges to opening a marijuana business. If you have specific areas of concern, you can jump ahead to those sections.
Keep your dispensary compliant: State reporting
Every state with legal cannabis sales has an official seed-to-sale software tracking provider. The three key players are Metrc, BioTrackTHC, and MJ Freeway, though some states have opted to forego a track-and-trace system.
Metrc (Marijuana Enforcement Tracking Reporting Compliance) is a cannabis seed-to-sale tracking system developed by Franwell. States currently using Metc include: Alaska, California, Colorado, Washington, D.C., Louisiana, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, Ohio, and Oregon.
BioTrackTHC is a cannabis and hemp traceability system for tracking and reporting currently used in Arkansas, Delaware, Hawaii, Illinois, New Hampshire, New Mexico, New York, and North Dakota.
Leaf Data Systems | Powered by MJ Freeway is a seed-to-sale cannabis tracking solution currently used in Pennsylvania and Washington.
The following section will outline the specifics of working within Metrc. If you are in a BioTrack or Leaf Data Systems state, you can jump to the next section, store layouts!
Read this next
Compliance Checklist for First-time Dispensary Owners
Metrc is the standard seed-to-sale software tracking provider for most legal states, though not the only option.
Read on for how to report to Metrc, the difference between plant and package tags, making sense of Metrc receipts, and managing inventory in Metrc.
Reporting to Metrc
It’s your responsibility to ensure that your Metrc account is accurate and updated daily. Your POS should do this via application program interface (API).
Here's the high-level explanation of how Metrc works:
Before you receive a package in your store, that package must be registered in Metrc. As you sell through that package, your Metrc account must be updated each night with:
- Date and time of the transaction
- Customer type (For medical marijuana card holders, this is “Patient”)
- Patient ID
- Metrc package that the sale occurred from
- Units sold
- Unit of measurement
As you report sales of product, your Metrc inventory will be reduced by that amount. Your physical store inventory, POS inventory, and Metrc inventory should match. Make sure you have a way to track discrepancies (both identifying and resolving them).
Example Metrc receipt
In this example, let’s say package 1A400031266AFBV000083347 had 1000g of Blue Dream before this transaction. This transaction (highlighted above) was for 28g.
That means both your physical inventory and your POS inventory should now be 972 (1000g to start - 28g purchased).
When you push this sale to Metrc, 28g are deducted from the package in your Metrc inventory. Metrc now shows 972g in inventory as well.
For states that have 30-day purchase limits, those limits are updated based on this purchase.
Metrc plant tags and package tags
There are two main identifiers in Metrc: Plant tags and package tags.
Plant tags have the facility name, license number, application identifier (whether for medical or recreational use), tag order date, and unique plant identification number.
Recreational marijuana plant tags are blue, while medical marijuana plant tags are always yellow.
Package tags are similar: This is the physical sticker on every package. But instead of a plant number, it’s a 24-digit package number. Every package will have only one product in it.
In many states, there are cultivation licenses, manufacturing or processing licenses and dispensary licenses. Regardless of which portion of the seed-to-sale process you work in, Metrc reporting is required.
Accepting your first supply of cannabis products
Before you can bring physical inventory into your store, you must receive and review a manifest. The manifest is created by the supplier — the requirements are the same whether the supplier is you or another company.
The manifest is within Metrc. It includes the harvest, weight, unit of measure, cost, etc. of the product.
You are responsible for reviewing the manifest, and if everything is correct, accepting it. When the package comes in, you'll physically inspect the package, making sure it’s exactly as ordered.
You then accept it in Metrc, which means you’re telling Metrc that you are in legal possession of this inventory.
You are now ready to stock your shelves and sell the product.
Choose the right layout for your cannabis dispensary
Layout is more than just your store’s physical design. It’s the experience your customers have while shopping.
The challenge is balancing a secure store inventory (where it’s easy to track, audit, count and fill orders) with a beautiful layout and experience. Traditionally it’s been one or the other. But modern dispensaries are achieving both.
As a new dispensary business, you want your marijuana products to be seen and accessible, especially the flower. Customers should be able to sniff and explore your product offerings to make the best choice to solve their needs.
Here’s some things to consider about your retail store design and functionality:
- Flexibility: Can you add a terminal if needed on a busy day? Or is your store pretty small and limited?
- Growth: Given your space, do you have room for growth? Take the time to brainstorm about the future and how your current space could morph to handle your business as it grows or market as it changes.
- Future recreational opportunity: The current trend is for medical marijuana to be legalized first, followed by recreational after a couple years. That’s great because it opens up your customer base, but that may mean changing how your store looks or operates to handle both med and rec. Some dispensaries split the store in half, operating with separate licenses, separate tags, separate inventory, etc.
- Parking: Not everyone supports cannabis so increase in traffic, especially foot traffic, could lead to complaints. It’s also a better experience for customers to have a place to safely and easily park.
4 common dispensary layout models
We have identified four distinct ways to organize your store. The option you choose really depends on the workflow you’re looking for and the type of experience you want to create for customers. Some state laws mandate how you store and display your products, so make sure you understand those laws before choosing a layout.
Also consider your potential customers. Too much inventory for them to look at is overwhelming; not enough choices and they may not come back. Different customer types also have different consumption preferences (for example, medical patients often prefer higher CBD and methods that are easy to consume versus connoisseurs often have an affinity toward flower or concentrates).
Finally, consider whether you’re doing pre-packaged flower or deli style (where you weigh out with every transaction). All these considerations play a role in whether you choose the Bank model, Pharmacy model, Mobile model, or Kiosk model.
1. Bank model
This is the most traditional layout for medical cannabis dispensaries.
A customer checks in, waits in the waiting room, enters the secure room, then works with a budtender to complete the sale.
2. Pharmacy model
This is similar to the bank model in that customers enter a waiting room, go through the secure entrance and work with a budtender at a terminal.
But after the transaction, instead of giving you the product, they give you a receipt (and maybe labels) that you take to the inventory control room.
3. Mobile model
In this model, the customer enters the store, checks in and then walks around the store where products are displayed along walls and in secure glass cases throughout the space. Sales reps (or budtenders) are mobile, often carrying a tablet to record the order before walking over to a terminal to fulfill the order.
The sales associate may grab live product from secure cases, load it into a basket, and take it to a terminal to prepare your order.
4. Kiosk model
In this model, you check in and instead of walking to a terminal or being greeted, you go to a kiosk, where you can enter your own order/create your own basket, which is sent to a terminal where a budtender can fulfill the order.
As the industry continues to mature, we will start seeing more hybrid approaches and innovation around dispensary layouts.
Manage and audit inventory
To stay compliant and competitive in the marijuana industry, you need to excel at inventory management.
Here are 6 tips for keeping your inventory in tip-top shape:
- Build a reliable supplier network: New states joining the legal cannabis market won’t have a stable and reliable network immediately, but you will eventually. As you get started — and as things evolve — make sure you have all the information you need as you look for products and pricing. To help you create your shortlist, here are some of our trusted partners.
- Prioritize compliance: Compliance is the single biggest factor for dispensaries, so you have to get this right. Make sure you have an easy way to audit your inventory and you build a culture of compliance with your team.
- Standardize product naming conventions: To have good data, you need to have a naming convention to use across your systems. Make sure you have a global product catalog — and same naming convention — across all locations. Here’s a post on standardizing naming conventions to explain this further.
- Create layout and inventory compatibility: As you compare the four layout options described earlier, consider how compatible each is with your inventory. If all your flower is in bulk and weighed out rather than pre-portioned, do you have a layout to support or will you have bottlenecks? If you have many options for edibles, concentrates and topicals, do you have enough space for them all in your store design?
- Develop standard operating procedures: Make sure you have really strong SOPs and store processes. Have everything written down, and review and update them regularly to ensure everyone understands the process for everything. For the sake of inventory management and store compliance, document rules and then actually follow them.
- Incorporate integrations: If you want to offer digital menus, online ordering, delivery, etc. through services like Weedmaps or Leafly, make sure you understand how that works with your inventory. Look for integrations so your products showing online are based on the inventory you actually have, without having to do duplicate work.
Best practices for auditing your inventory
Auditing your inventory is critical to your retail operation. Here are a few best practices for developing and perfecting your audit processes.
Audit every single product in your store weekly. Some stores do every product daily, which may be overkill. Others do everything monthly, which isn’t nearly frequently enough. The key is to be consistent with when you audit and how.
Most successful dispensaries approach their weekly audits in one of two ways:
- Close your store and keep all your employees for 6+ hours every week to tag-team the auditing process.
- Break it up into easier chunks, with 2-3 people responsible for completing the audit of each chunk every week. For example, Mondays you audit edibles, Tuesdays you do flower, Wednesdays are concentrates, etc. Or you could split up by front-of-house and back-of-house or by room.
Develop processes to ensure auditing is done the same way every week. The amount of time spent on auditing is amazing, so make sure you have a staff member either with the sole responsibility of auditing/inventory, or allotting several hours to manage inventory in addition to other roles. Many new stores — especially in the first year — spend 3-5 hours per day on auditing and inventory management.
Look to streamline. Having a laptop or hand-held auditing device like Stash™ will save you time and reduce the risk of errors.
Create checks and balances. Have two people auditing so you always have someone to check the other. Theft is common, so make sure if one employee creates a fake inventory discrepancy, another employee has to review/approve that discrepancy.
Read this next
4 Tips for Effectively Managing Cannabis Inventory
Hire and retain qualified dispensary employees
The success of your medical marijuana dispensary or recreational retail store hinges on your team. It’s not uncommon to have turnover in the first few months after opening your dispensary.
Ideally you’ll have the following staff on your team:
- Budtender/sales associate: These people are the face of your dispensary. This is the least appreciated but most necessary role for the success of your business. Make sure budtenders have a love of cannabis and helping people, but also are educated in laws and compliance. The average tenure of budtenders is four months, so it’s important to consider employee retention. Make sure you have good people, treat them well, and discourage turnover.
- General manager: This person oversees the daily operations of your store, hires and trains staff, and ensures state reporting compliance.
- Greeter/receptionist: This person is the first impression of your dispensary, checking IDs, verifying age and welcoming customers.
- Security: This person is there to protect your dispensary, your staff and your customers, and may be the same person as the greeter role. Many people aren’t used to seeing security in stores, so make sure this person is friendly and warm.
- Inventory manager: Inventory is so important because of the regulations around cannabis, that this is likely a role of its own. This person is responsible for auditing and inventory management.
- Compliance manager: This person ensures all regulations are followed. They’ll be paying attention to regulations and making sure the staff are trained and your operation is in compliance, even as things change.
- Purchasing/vendor manager: You’ll have multiple suppliers, so it helps to have someone responsible for vendor contracts and negotiations, inventory from vendors, etc. Sometimes this is its own role, or sometimes managed by the general manager.
- Software/IT manager: If you don’t understand software, find someone who does, even if it’s a consultant. This is a digital business, so you need to have the know-how to fix errors, like printers, hardware, integrations, etc., especially when you first open your dispensary.
The common theme for all roles is compliance. Every member of your dispensary team needs to understand marijuana laws, like purchase limits, and the importance of compliance. Cannabis is a highly regulated industry and failing to abide by these rules will put your business and livelihood at stake.
The key to dispensary employee retention is treating them well. And paying fairly. As the business owner, you should also consider benefits — most dispensaries at least offer medical insurance — but others are paying for dental, vision, and 401k or stock options.
Other benefits you could offer include bonuses, paid parking, commuter benefits, employee discounts, paid vacation, paid training opportunities, etc. This is a career for many people and benefits are part of that. If your staff feel like they are cared for, compensated appropriately, and have opportunity for growth, they will stick around.
How much to pay dispensary employees
Here are average payscales for budtenders, general managers, and compliance professionals provided by Vangst, a cannabis recruiting platform.
You’ll notice the pay scales vary on location, or high growth areas, but also on experience. The challenge is in finding experienced people when you open in a new market. If you can find someone who moved to your state with cannabis retail experience, hire them.
Read this next
Dispensary Hiring Guide: Must-have Cannabis Retail Staff
Consider your network, hardware, and cannabis tech stack
Having a beautiful store and great employees is important, but to get your cannabis dispensary open, you need to consider your network, hardware, and technology partners.
It’s common to assume your wifi will always work, but the reality is an outage could be catastrophic for our business. The first step is to make sure you get the best coverage available in your area and hardline as many components as possible, like printers. That way if your wifi goes down, you can still print labels.
Just like any business, there are many upfront costs you’ll incur. It may be tempting to cut corners or delay expenses until your dispensary is up and running, but hardware is definitely not one of those areas to compromise. Don’t go cheap on your store hardware. Make sure your computers have solid RAM, which will ensure a much faster transaction. Read our dispensary hardware recommendations for more information on choosing the right hardware for your store.
Also, think about aesthetics. If you build a beautiful store, make sure your hardware aligns with that visually. Also make sure you choose a POS that works with the hardware you want — some cannabis POS software requires specific hardware, so switching down the line could mean huge capital expenses or you could limit the software you can use if you choose the hardware first.
Printing seems like a simple consideration — we all know how to print. But for retail cannabis businesses, printing a label or receipt is highly specific and comes with a list of requirements.
Every unit you sell has its own label. It’s best to have a dedicated space to label all products, both as new product packages come into the store and as you sell product to customers. And also keep a separate printer for every terminal so you decrease risk in labeling the wrong product. Don’t skimp on this.
This refers to all the different software you’ll be using. You’ll have a POS specific to the cannabis industry, that’s a given. But what other tech do you want in your store? Digital menus? Interactive kiosks? Loyalty programs? Order ahead or delivery?
These other capabilities can add to the aesthetic of your store, build your brand/image, increase customer experience and can build loyalty and revenues. There are many cannabis-specific technology partners to consider. Make sure they all work with your hardware and point of sale software.
Choose a cannabis retail POS system for your dispensary
As you enter this part of the process of opening your dispensary, be honest with yourself: How well do you understand technology?
If you don’t, find a trusted advisor to help you sift through the noise and choose the tech stack and partners to fit your business needs.
What to look for in a cannabis POS:
- State compliance tracking: Metrc (and the other state reporting systems) is why software is so important. Dispensary staff used to have to record every sale and manually deduct inventory. Now, having an API integration that manages this all seamlessly is paramount to save you time and provide peace of mind that you’re staying compliant.
- Hardware compatibility: As mentioned above, make sure the software and hardware you choose are compatible. Pick a cloud-based software that doesn’t have hardware requirements so that you don’t incur any additional hardware costs or have to change hardware if you change POS later.
- Customer support: Your ability to get up and running quickly is important, but getting your questions answered long-term is just as necessary. As you demo different software, ask about the ongoing support process and level of support you’ll receive throughout your time with that vendor.
- Ease of use: Software that fuels your retail business must be easy and intuitive. Staff need to be able to learn it quickly. As you demo different POS systems, pay attention to how the system functions and whether you think it’ll make your staff more productive.
- Inventory management: Strong inventory capabilities will keep you compliant and competitive. Similarly, look for software that makes auditing easy, like having a mobile app. The right software will save you time and money in the long run.
- Built-in compliance: Software isn’t just important for compliance related to state reporting (like Metrc), it also should help you stay compliant with state regulations, such as purchase limits. Make sure the software you choose has built in safeguards that address your market needs.
- Discrepancy reporting: Your Metrc inventory, physical inventory, and POS inventory should always be aligned. If there is a discrepancy, you need to know about it and how to resolve it. Your software should include built-in tools to help you identify and resolve inventory discrepancies.
- Activity tracking: In an industry with more loss and theft than the average, it’s important that you can see who has done what activity at your store. This allows you to see what employee made what actions, and when those actions occurred, like making a sale, opening a drawer, moving inventory, etc.
- Open API and integrations: Is the software compatible with other vendors? It’s important to consider integrations, especially if you’re interested in online menus, delivery, loyalty programs or other technology offered by partners.
- Room to grow: As you grow, maybe into multiple locations, your software must easily grow with you. Look for software that allows for transferring inventory between stores and seamless reporting at one store or multiple.
- Vendor company history and values: Many POS companies entered the cannabis space to capitalize on the growing market. But their systems weren’t made with your success in mind. Make sure the software you consider is made with your business in mind, is poised to handle future changes to the industry, and that you ultimately trust them with your livelihood.
- Specialization: Consider the best software for each part of your business. If you have marijuana cultivation facilities, manufacturing facilities, and retail cannabis operations, it’ll be tempting to pick one software for it all. Better visibility is tempting — you can’t deny that — but all software is best at one thing. If you choose one for all, it means you’ll be putting the other two parts of your business at a disadvantage. Instead, look for vendors who integrate seamlessly.
Now you're ready to dive into the exciting world of legal cannabis!
If you have any questions about getting your dispensary up and running, contact us at (844) FLOWHUB.
To see how Flowhub can help you streamline your workflows, aid in inventory, and ensure state reporting compliance, request a demo.
Disclaimer: Flowhub is not in any manner providing legal services or legal advice. You are solely responsible for consulting with legal counsel to ensure your business complies with all applicable laws, and we recommend you do so.