Are you thinking about opening a recreational dispensary in Maryland? Congratulations!
With MD’s new adult-use legalization — in effect as of July 1, 2023 — now’s a great time to get in on the action.
This guide is designed to help prospective cannabis entrepreneurs understand the specifics of opening a dispensary, including key details like licensing, financing, real estate, security, staffing, compliance, inventory, tech stack, and more.
Scroll through for a step-by-step process for getting a dispensary open in Maryland, or use the links on the left to jump to what you need.
Before you start, take a moment to review Maryland’s cannabis laws. With new legislation, and the transition from medical marijuana only to adult-use, there are many changing laws that you need to be aware of.
Disclaimer: Always consult your lawyer, accountant, realtor, or other trusted consultants to help you navigate the complexities of opening a cannabis dispensary. The information provided herein is designed to illustrate and educate, but is not to be construed as legal or financial advice.
Plan your Maryland cannabis business
The first step in your dispensary ownership plan is to get your business affairs in order. This is where you understand your state’s cannabis laws, create your formal business entity, and prepare to submit your application.
Here are the key elements to this stage:
Form a business entity
If you don’t yet have a business formed, do that first. Work with an accountant and/or lawyer to ensure everything is correct, but at a minimum, you will need to decide on and create your business structure with the state of Maryland.
Can dispensaries use banks?
Then you will get tax ID numbers for the business, open a business bank account at a cannabis-friendly bank or credit union, and look into business insurance.
Write a business plan
Cannabis is a complicated industry, full of compliance and legal challenges. Having a rock-solid business plan can help you be prepared for whatever comes your way.
It may be tempting to skip this step, but take the time to document your plan: growth, partners, team, vision, etc.
Your dispensary business plan will go through the regulatory body for Maryland, called the Maryland Cannabis Administration (MCA). You are required to submit your dispensary business plan as part of the application process. The plan must “demonstrate a likelihood of success and sufficient ability and experience on the part of the applicant, and providing for appropriate employee working conditions…”
The MCA also requires a detailed operational plan for the “safe, secure, and effective operation of the business” and a detailed diversity plan.
A good business plan for MD dispensaries should include:
The physical location of your dispensary (if known)
Funding plan, or where your startup and ongoing capital will come from
Sourcing plan for procuring your cannabis products
Staffing plan, or who you’ll hire for what roles and your dispensary org chart
Diversity and equity plans
Environmental and/or community impact plan, or how you’ll minimize risk for those around you
Safety and security plan
Technology plan, including which cannabis point-of-sale and compliance software you’ll use to manage your dispensary
Any other relevant information you want to document
Note: The MCA used to be called the MMCC (Maryland Medical Cannabis Commission), but changed their name after recreational legalization to more accurately reflect.
Find a location
Your dispensary location is a critical piece of the puzzle, but not an easy one. You’ll need something in a visible location, with ample parking, and enough space.
Every state has specific regulations about where dispensaries can be located. In Maryland, your dispensary must not locate within 500 feet of:
Child care centers
Similarly, your Maryland dispensary cannot be within 1,000 feet of another dispensary under the same title.
And it needs to be a municipality that accepts cannabis businesses. Municipalities in Maryland have the authority to establish their own regulations, so you’ll need to be sure you know all applicable laws.
You don’t need to have a location chosen in order to apply for a dispensary license. The state has said that they may not require an applicant to possess or own property where they plan to operate their cannabis business at the time of application, but it’s good practice to include your location in your business plan, if possible.
Find a local real estate professional who specializes in cannabis real estate to help in your search. And use the public resources available to you, like city zoning and administration offices.
When looking for a location, focus on spaces that align with your business plan, are large enough to meet your needs, are in an appropriate location to serve foot traffic (and/or have enough parking), have opportunities for expansion/growth, and are within your budget. Don’t just look at monthly costs, but also factor in how much it’ll take to renovate or retrofit the space for your business needs. Finally, look at local competition (both existing and planned).
There are many factors that go into finding the perfect location for your dispensary. Take the time necessary to secure the best possible space to help ensure your success.
Now that you have a plan for your cannabis business, you can start to build a more clear budget for your new dispensary.
Your business expenses will generally fit into these categories:
Real estate and build-out - consider both initial costs and ongoing rent or mortgage expenses. You’ll probably also have initial renovation expenses.
Licensing/application fees - the cost of getting your license in the state of Maryland. Maryland doesn’t do annual licensing fees, instead they have a 5-year renewal process.
Operational costs - the day-to-day expenses including utilities, business or professional fees, marketing, etc.
Hardware, software, security, and other tech - many of these are monthly or annual subscriptions.
Staffing costs - the cost of hiring employees, including salaries, benefits, taxes, etc.
Inventory costs - or the actual expense of sourcing and purchasing your cannabis products.
Taxes - cannabis businesses are heavily taxed and can’t participate in normal business write-offs like 280E, so plan ahead for your quarterly tax payments.
Where will all that money come from? As a cannabis business owner, you have a few options for funding:
Self-funding - the easiest option is to already have capital from savings or other legal means.
Friends and family - another easy way to meet dispensary capital requirements is through loans or investment from family and/or friends.
Partners - many cannabis businesses are partnerships, where each partner contributes something meaningful. If you have the dream, vision, and want to be the active owner, consider finding a financial partner to help with the costs.
Loans - depending on your personal financial situation, you may be eligible for a personal loan for the upfront costs of opening a dispensary. You may also be able to secure a dispensary business loan, but be honest with your lender in how the funds will be used; not all financial institutions will work with cannabis businesses.
State programs - the Maryland Department of Commerce has the Cannabis Business Assistance Loan/Grant Fund (CBAF) to “provide grants and loans for small businesses, including small, minority-owned and small women-owned businesses entering the adult-use cannabis industry.”
Private funds - whether it’s private equity, angel investors, or venture capital, you may have to look to outside investors to fund your cannabis business. This option will decrease your ownership stake in your company.
Crowdfunding - another less-popular option is to look to the general population to support your business venture.
What does it cost to open a dispensary in Maryland?
Most sources suggest having between $250,000 – $1 million to open a dispensary in Maryland. But that’s not all that helpful. Here’s a closer formula for you to fill in as you know your estimated expenses, but we’ll get you started with some rough estimates based on a single recreational dispensary.
Note: This estimate is for a standard business. Micro businesses have significantly reduced fees.
Application and licensing fees in Maryland = $10,000
- Application fee = $5,000
Due when the application is submitted to the MCA.
Note: Micro license application fees are $1,000.
- Renewal Fee for Dispensaries = $25,000 over five years
Note: The previous medical marijuana dispensary fee was $40,000 annually. With legalization of adult-use, they reduced it to $25,000 over five years (a $35,000 annual reduction in licensing fees).
Real estate fees = $125,000
Includes annual rent or mortgage premiums, plus upfront design costs
Could be higher in more expensive cities, or for larger remodels.
Plan for high costs up-front, but will stabilize over time.
Employee salaries = $300,000
Your store size and operating procedures will determine your staffing needs, but plan for around six employees to start, including a manager, several budtenders, and an inventory specialist. This figure includes an average of $20/hour, plus overtime, benefits, etc.
Professional fees and services = $50,000
This may decrease in future years, but to start, expect to pay for legal, financial, insurance, and other professional consulting fees to get your business started.
Security, hardware, and software = $50,000
This covers all network, security, hardware, and software for your business, including computers, TVs, printers, scanners, internet, and other software like POS, ecommerce, payments, etc.
After your initial investment, plan for at least $2,000 per month in recurring software expenses.
Marketing expenses = $100,000
Perhaps the most variable of your costs when opening a cannabis business, this factors in one full-time marketing staff person (or agency costs per year), plus costs for your website, ads, printing, etc. to promote the dispensary.
Cannabis products = $1,500 per pound
Your cost of products for opening day (plus ongoing stocking) will vary greatly based on your store size, number of SKUs, stock on hand, and supplier rates, but plan for an average of $1,500 per pound of cannabis products, including flower, edibles, vape cartridges, tinctures, topicals, lotions, capsules, beverages, prerolls, etc.
GRAND TOTAL = $635,000 (not including cannabis product inventory)
*Disclaimer: This is a rough estimate of the upfront and first-year costs of opening a dispensary in Maryland. It is to be used for informational and illustrative purposes only as every market, location, and business will have unique startup costs.
Apply for a Maryland recreational dispensary license
Update: The dispensary application timeline is as follows:
- We expect the application to be published by September 13, 2023
- The window to begin submitting applications is November 13, 2023
- Applications will be due for submission on December 12, 2023
Since Maryland’s recreational legalization is still so new, there is limited information available on the application process and expectations. Here’s a run-down of what we know.
On the first day of adult-use retail, on July 1, 2023, 94 out of 100 existing medical cannabis dispensaries switched to serve adult-use customers. They were charged a conversion fee in order to transition their licenses and legally sell both medical and recreational cannabis products.
The state published this report of the rules and regulations that may provide more guidance.
The basics of applying for a dispensary license in MD
To open a dispensary in Maryland, you need a dispensary license. The MCA only plans to approve 300 dispensary licenses in the state.
You will need to submit an application, detailed operational plan, business plan, and detailed diversity plan.
The MCA is awarding licenses in rounds as part of the transition from medical to recreational use. Round 1, starting in Fall 2023, will be limited to social equity applicants, in a first-of-its-kind approach to licensing.
If you’re planning to operate a small operation, you may be eligible for a microbusiness license, which limits the amount of cannabis a business can grow or possess.
Social equity opportunities also exist for people who have lived in a Disproportionately Impacted Area, defined as an area that had above 150% of the state's 10-year average for cannabis possession charges.
Key dates of interest to get a Maryland recreational license
July 1, 2023 - Existing Maryland medical cannabis businesses who chose to convert were authorized to cultivate, manufacture, or dispense cannabis or cannabis products for consumers 21 years of age or older.
July-August 2023 - The new Maryland Cannabis Administration (MCA) to conduct outreach, training, and guidance on the application process for individuals interested in obtaining a new cannabis license.
Fall 2023 - Round 1 application window. This 30-day application period is for individuals and businesses interested in applying for a standard or micro cannabis license. In Round 1, MCA may award up to the following number of licenses in each category:
- For standard licenses:
20 grower licenses
40 processor licenses
80 dispensary licenses
- For micro licenses:
30 grower licenses
30 processor licenses
10 dispensary licenses
10 incubator space licenses
Fall 2023 - MCA reviews application submissions, and conducts outreach to submitted applicants as necessary to complete the review. MCA conducts a lottery for Round 1 applicants and begins to select applicants for award.
January 1, 2024 - MCA begins to notify selected Round 1 applicants of award.
May 2024 or later - MCA announces Round 2 for standard and micro cannabis licenses, including on-site consumption licenses.
How to get a dispensary license in Maryland
The licensing process is still being finalized, but here’s the basics of what to expect:
1. Determine your eligibility. For Round 1, all applicants must qualify as a social equity applicant. A social equity applicant is defined as an applicant that has at least 65% ownership and control held by one or more individuals who:
Lived in a disproportionately impacted area for at least five of the past 10 years; or
Attended a public school in a disproportionately impacted area for at least 5 years; or
Attended, for at least two years, a 4-year institution of higher education in the State where at least 40% of the individuals who attended the institution are eligible for a Pell grant.
2. Compile your application materials, including operational plan, business plan, and diversity plan.
3. Submit your application.
4. Pay all necessary fees. For dispensary licenses, it will cost $5,000 to submit the application ($1,000 if you’re submitting a micro business license).
5. You will then wait for approval or further communication from the MCA.
Note: Getting a medical cannabis license in Maryland is a separate process, and may or may not have similar steps to the above.
Design your Maryland dispensary
Dispensary design isn’t just about where your dispensary is, or what it looks like. It’s how your shoppers experience your brand.
Here’s a short list of your considerations in store design and layout:
How customers will move throughout the store
Whether they will pay at a terminal, handheld device, or kiosk
Whether there’s different pathways for in-store vs. online orders
How your products will be display/showcased
Your brand elements and design
Use of entry or waiting room space
Security concerns of doorways
Where secure inventory is stored (both on the floor, if applicable, and in a vault)
Where staff will stand and work
Breakroom or safe staff area
Note: According to state law, dispensaries must provide qualified medical marijuana patients (and caregivers) either exclusive access to the premises for at least one hour per day or a dedicated service line for the duration of operating hours. These accommodations will factor into your design.
Maryland also has a few particular requirements that may impact how your dispensary looks and functions:
Dispensaries cannot be open for business more than 12 hours a day. They also cannot open before 8:00 a.m. or operate after 10 p.m.
Dispensaries may be required to prominently display valid proof of licensure.
Dispensaries must display consumer education safety information provided by the relevant authority.
Dispensaries must clearly display minimum purchase age and identification requirements
🤔🏬 Take the Store Layouts Quiz to find the perfect layout for your dispensary.
Create a safe and secure Maryland dispensary
Maryland state regulations have strict security requirements for licensed dispensaries. You must ensure the safe storage and dispensing of cannabis, while preventing unauthorized access. The comprehensive measures include your physical building, alarm systems, video surveillance, zone division, and access control.
Here’s the basics:
Premises construction and secure room
The dispensary must be constructed in a way that effectively prevents unauthorized entry.
- A secure room within the dispensary is mandatory for storing cannabis inventory. It must fulfill these specifications:
Constructed using concrete or similarly robust building material
Placement adjacent to an exterior wall is prohibited.
- Contain a single entrance door that meets commercial security standards, and:
Is equipped with a cipher or chip-activated keyed lock
Is not visible from public areas of the premises
All cannabis inventory must be stored exclusively within the secure room, except during business hours (and a specified window before and after).
Lighting and surveillance
Lighting fixtures should be strategically designed and installed to facilitate proper surveillance.
- A security alarm system is required to cover all entry points, windows, and portals along the premises’ perimeter, and must include:
Continuous monitoring for real-time awareness of security breaches
Detection capabilities for smoke, fire, and power loss.
Panic alarm devices positioned at convenient locations and accessible for immediate use.
- A separate, independent alarm system is required to safeguard:
On-site records storage location
Off-site records storage location
Secure room containing cannabis products
Security alarm systems must remain operational as long as cannabis is present on the premises, and be equipped with auxiliary power to sustain operation for at least 48 hours.
- The dispensary must maintain a motion-activated video surveillance recording system at all times, which meets the following criteria:
High-quality and high-resolution imaging, capable of clearly capturing facial details.
Continuous operation, 24/7, throughout the entire year.
Accurate date and time stamp for each recorded frame.
Notice of video surveillance must be visibly posted for visitors.
Cameras should cover main areas including exits, entrances, storage, and dispensing areas.
- Video surveillance recordings should be:
Protected by an independent security alarm system.
Easily accessible for investigative purposes.
Retained for a minimum of 90 calendar days.
Security video surveillance recordings must be promptly — within 48 hours — provided to the Commission or law enforcement.
Zone division and access control
- Dispensaries must be divided into two distinct zones: public and operations.
A waiting area that’s open to the general public.
A service area for consulting with patients and caregivers and dispensing medical cannabis [for medical dispensaries].
Restricted access to the service area.
Display of business hours at the entrance to the public zone.
- Operations: (any business activity outside of consultation and dispensing)
Segmented for storage, preparing, and packaging, staff breaks, and changing areas.
Movement to and from the operations zone should be documented using tamper-evident log books or electronic identification.
Clear signage must mark the different zones.
Access points between zones should be securely controlled, including security alarm systems and video surveillance.
Only registered dispensary agents are authorized to handle inventory within display cares of other dispensary areas until dispensed.
Learn the basics of dispensary security
Read the Dispensary Security Guide to find out where most dispensaries are at risk, then take action with best practices for both physical security and cybersecurity.
Hire and retain qualified dispensary employees
Now that you’re getting closer to opening day, it’s time to hire and train your dispensary employees. This team is vital to the success of your dispensary.
First, create your dispensary org chart. Based on your business plan, location, store design, and vision, what role are you going to play in the day-to-day operations and what additional staff do you need? What is the hierarchy? What benefits will you offer? And do you have the funds to pay your staff appropriately?
As a starting point, you’ll need someone to manage your store, budtenders or cannabis sales associates to serve customers and fulfill orders, someone to greet your shoppers (and secure the entryway), security, and someone to manage inventory and/or compliance. Based on the size and complexity of your business, you might need more or fewer people on your team.
Be sure to understand Maryland laws around hiring and staffing and follow all requirements, both specific to cannabis brands, and general hiring/staffing rules. These could include procuring cannabis employment IDs, age requirements, background checks, and mandating attendance of certification training, payroll taxes, at-will parameters, and more.
How to create a dispensary org chart
At this point, you should understand Maryland cannabis laws and what you need to do to keep your dispensary compliant.
As a reminder, here are the purchase limits for Maryland:
Adults 21+ can purchase 1.5 ounces of cannabis and 12 grams of cannabis concentrates from licensed dispensaries.
Adults over the age of 21 can possess up to 1.5 ounces of flower, 12 grams of vape cartridges, or cannabis products containing up to 750 milligrams of Delta-9-THC. Limits across categories are combined.
Dispensaries must not knowingly dispense more than the personal use amount of cannabis to an individual in a single day.
The Seed to Sale Tracking program chosen by the MCA is Metrc. Metrc offers a wealth of education and training for new and prospective dispensary owners. We recommend attending those trainings and taking advantage of the Maryland-specific resources provided by Metrc.
To learn more about Metrc, including how to report to Metrc, the difference between plant and package tags, making sense of Metrc receipts, managing inventory, and more, consult these resources:
Source and intake cannabis products
Now’s when things really start getting fun: ordering and receiving your product! If you’re not a vertically-integrated company, or only have a dispensary license, you’ll need to find cannabis growers, manufacturers, and/or distributors to supply your store.
As you’re looking for suppliers, here’s a few things to consider:
What products they carry (think about your product mix)
The taste and quality of the products
Fulfillment (how do they get products to you and when)
Prices (and ability to negotiate bulk discounts)
Testing processes and results
Reliability (will they run out suddenly, stop communicating, etc.)
Process for placing orders and overall organization
But Maryland regulations also add a few sourcing considerations:
High-potency products should be reserved for medical patients and dispensaries must ensure an adequate supply of medical cannabis products.
Concentrated products (with more than 10mg THC per serving or 100mg per package) are limited to qualified patients and registered caregivers only.
Adult-use dispensaries must make a good faith effort to reserve at least 25% of shelf space for cannabis brands and products from social equity licensees and growers/processors not sharing common ownership with the dispensary.
Once your cannabis products arrive, you must “intake” them into your store in a specific way to remain compliant with Metrc. Before you can bring physical inventory into your store, you must receive and review a manifest. The manifest is created by the supplier — which will either be you or other cannabis companies.
The manifest includes the harvest, weight, unit of measure, cost, etc. of the product.
You must review the manifest, and if everything is correct, accept it. When the package comes in, you'll physically inspect the package, and make sure it’s exactly as ordered.
You then accept it in Metrc, which tells Metrc that you are in legal possession of this inventory.
Now you can stock your shelves and sell the product. But you’ll also need to develop SOPs for intaking and auditing your inventory.
Note: Don’t forget that all your inventory must be stored in a secure room except while the dispensary is open for business and 1 hour before and 1 hour after being open.
Pro tip: Use this 📝 Inventory Intake SOP to document your processes!
Choose your network, hardware, and cannabis tech stack
Your technology stack is crucial to success as a cannabis business owner. Some are must-haves for compliance, like your security system and cannabis point-of-sale, while others are vital to a pleasant and seamless customer shopping experience.
Here is a short list of technology solutions to consider for your dispensary:
Printers (both letter-sized and receipts)
Computers (for staff work, like inventory)
Tablets or terminals
Payment provider for non-cash transactions
Social media management and monitoring
You don’t need to invest in every cannabis-specific technology solution, but make sure you’re investing in tools that will help you stay compliant, and enable you to better reach and satisfy modern shoppers.
📖 Read the Guide to Cannabis Tech Software for a complete list of top cannabis companies for your dispensary tech stack.
Market your dispensary
Ok, your store is ready, the team is trained, and technology is purchased and onboarded. Now you need to get the word out that opening day is coming.
Dispensaries notoriously have more challenges with marketing than traditional businesses because of stigma, regulations, and the federal illegality of the cannabis market. But there are still many marketing tactics you can use to promote your new dispensary.
Fine-tune your social media presence (though be careful with what you post!).
Develop a rewarding loyalty program.
Consider events to attract new customers into your store.
Thinking about other forms of advertising? Maryland defines advertisement as “any form of communication intended to promote the sale of cannabis or cannabis-related products or services, including auditory, visual, digital, or or written matter.”
Cannabis or cannabis-related advertisements in Maryland must not:
Make false or misleading statements
Violate specific commercial Maryland law articles
Directly or indirectly target individuals under the age of 21
Contain designs, illustrations, pictures, or representations that target or are attractive to minors, display cannabis use, encourage or promote cannabis for intoxication, or are obscene
Engage in advertising on television, radio, internet, mobile applications, social media, or other electronic communication, or print publication
Place advertisements on the side of buildings or other publicly visible locations, including signs, posters, placards, devices, graphic displays, outdoor billboards, or freestanding signboards
Allow the use of their trademark, brands, names, locations, or other distinguishing characteristics for third-party advertisements that are not compliant
Maryland law also has requirements for cannabis-related websites. Here are the basics:
Cannabis-related websites must employ a neutral age-screening mechanism to verify that visitors are at least 21 years old before accessing or viewing any content or before collecting personal information.
Websites appropriate for qualifying patients under the age of 21 must provide an alternative screening mechanism for these patients.
All content on social media or mobile applications must include a notification that individuals must be at least 21 years old to view.
Note: Maryland law also prohibits offering cannabis or cannabis-related products as prizes, premiums, or consideration for lotteries, contents, games of chance, games of skills, or competitions.
How to choose a cannabis retail POS system
Deciding which point of sale system to work with is critical for both your success and sanity in the long run.
Why? Because every POS is different and yours has to work with your business.
What to look for in a cannabis POS:
State compliance tracking: Metrc (and the other state reporting systems) is why software is so important. 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 restrict hardware options so that you don’t incur any additional hardware costs or have to change hardware if you change point of sale systems later.
Customer support: Your ability to get up and running quickly is important, but getting your questions answered long-term is just as vital. As you demo different software, ask about the ongoing support process and level of support you’ll receive.
Ease of use: Software that fuels your medical marijuana or adult-use retail stores 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 marijuana laws, such as purchase limits. Make sure the software you choose has built in safeguards that address your market-specific needs.
Discrepancy reporting: Your Metrc inventory, physical inventory, and point of sale 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.
Specialization: Consider the best software for each part of your business. If you have marijuana cultivation facilities, manufacturing facilities, and cannabis retail 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.
Need help opening your dispensary?
Opening a dispensary in Maryland is quite an accomplishment. You’ll be in great company as the state’s recreational marijuana program gains steam.
If you have any remaining questions about opening a dispensary in Maryland, our team of cannabis retail experts would be happy to share what we know and connect you with others if we don’t.
Book a meeting with Flowhub to chat!