How to Open a Dispensary in New Jersey

So you're thinking about opening a recreational or adult-use dispensary in New Jersey? Congratulations!

The NJ market is rapidly changing and now’s a great time to get in on the action.

This guide is designed to help prospective dispensary entrepreneurs understand how to open a dispensary, including key elements like licensing, financing, store location, security, staffing, compliance, inventory, and tech stack.

Scroll through for a step-by-step process for getting a dispensary open in New Jersey, or use the links at left to jump to where you’re currently at in the process.

But before you start, take a moment to review New Jersey cannabis laws. Prospective dispensaries in NJ need to be deeply aware of all applicable laws governing their new business.

Research and plan your New Jersey cannabis business

The first step is your dispensary ownership plan. It's the least sexy, but most crucial. This is where you understand the New Jersey 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

You may already have a business formed, but if not, this is where you start. 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 New Jersey.

Then you will get tax ID numbers for your business, open a business bank account, and look into business insurance.

Write a business plan

The New Jersey Cannabis Regulation Commission (CRC) places significant weight on your planning process. Another unique component of the application process is you need to submit an in-depth dispensary business plan for your dispensary business.

This plan should include:

• The physical location of your cannabis business

• How the business will be funded, or where your startup and ongoing capital will come from

• Your inventory fulfillment plan, or how you will source your cannabis products

• Your revenue projections, before and after opening your store

• Your staffing plan, or who you will hire for what roles

• Your diversity and equity plans

• Your environmental and community impact plan, or how you will minimize risk for those around you

• How you will market your dispensary

• How you will keep your dispensary safe, or your security plan

• Your technology plan, including which cannabis point-of-sale and compliance software you’ll be using to manage your dispensary

• Any other relevant information to set your business apart

Find a location

In New Jersey, you must have a location secured—with municipality approval—before you apply for a dispensary license. But this isn’t an easy step.

Most cities and towns in New Jersey (more than 400 municipalities) have ordinances that don’t allow recreational use cannabis businesses, including cultivation facilities, manufacturers, distributors, delivery services, and dispensaries, so your options are already limited.

Plus, there are rules around zoning, and where a dispensary can be physically located. From there, you’ll need to find something within your budget (and if leasing, where the owner will rent to a cannabis business).

These are all significant hurdles.

Look to 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.

But 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.

Secure funding

Now that you have a business plan and a location, you can start to build a more clear budget for your new dispensary. But remember, the CRC requires you to show proof of funding with your application to obtain a cannabis business license, so not only do you need an accurate budget, you need a plan for funding now.

Your business expenses will generally fit into these buckets:

• Real estate and build-out - consider both initial costs and ongoing rent or mortgage expenses. You’ll probably also have initial renovation expenses.

• Licensing and application fees - the cost of getting (and annually renewing) your license.

• Operational costs - the day-to-day costs of utilities, business or professional fees, marketing, etc.

• Hardware, software, security, and other tech - many of these are monthly or annual subscriptions.

• Staffing costs - the real cost of hiring employees, beyond just salaries, but also including benefits, taxes, etc.

• Inventory costs - or the actual expense of sourcing and purchasing your cannabis products.

• Taxes - cannabis businesses are heavily taxed and don’t benefit from 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 securing funding:

• Self-funding - the easiest option is to already have access to capital through savings or other legal means.

• Friends and family - another easy way to meet dispensary capital requirements is through loans or investments from people in your network.

• Partners - many cannabis businesses are built on partnerships, where each partner contributes something meaningful. If you have the dream, vision, and want to be the active owner, consider looking for a silent, or financial-only, partner to help with the costs.

• Loans - depending on your personal financial details, you may be eligible for a personal loan to help with some of 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.

• 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. Though this option will decrease your ownership stake in your company.

• Crowdfunding - perhaps less popular, but another option is to look to the general population to support your business venture.

• Brokers - cannabis-specific brokerage companies can help you find funding for real estate, startup expenses, equipment, and more. FundCanna and Cannabis Business Resources are two options that serve New Jersey dispensary businesses.

What does it cost to open a dispensary in New Jersey?

Most sources say between $250,000 – $1 million. But that’s not all that helpful. Here’s a closer formula for you to fill in as you know your estimated expenses. This will get you started with some rough estimates based on a single recreational dispensary.

Note: This estimate is for a standard business. Microbusinesses have significantly reduced CRC fees. This also assumes standard annual submission, approval, and licensing fees, not the rates for “conditional” applications.

Application and licensing fees in New Jersey = $10,000

• Submission fee = $400

  • Due when the application is submitted to the CRC.

• Approval fee = $1,600

  • Due upon Commission approval for licensure to operate.

• Licensing Fee for Class 5 Cannabis Retailer = $10,000

  • Due upon application approval and each year thereafter when submitting a renewal application. Note: The first year’s licensing fee is reduced by the amount already paid in application and submission fees, so $10,000 is the maximum amount new dispensary businesses will pay.

*If you are planning to offer a marijuana delivery service, you’ll also have to apply for a Class 6 Delivery License.

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 upfront, but this will stabilize over time

Employee salaries = $300,000

Your store size and operating processes will determine your staffing numbers, but plan for at least six employees to start (probably a manager, a couple of budtenders, and an inventory specialist) at an average of $20/hour, plus overtime, benefits, etc.

Professional fees and services = $50,000

This may decrease in future years, but to start, plan to pay for legal, financial, insurance, and other professional consulting fees to get your business off the ground.

Security, hardware, and software = $100,000

A security system that is compliant with New Jersey cannabis regulations could cost up to $100,000, plus you’ll have additional costs in computers, TVs, printers, scanners, internet, and other software to run your business, including 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 dispensary, this factors in one full-time marketing staff person (or agency costs per year), plus costs for your website, ads, printing, etc. to promote your business.

Cannabis products = $1,500 per pound

The overall costs of products for opening day (plus ongoing stocking) will vary greatly based on your store size, number of SKUs you carry, stock on hand, and rates with suppliers, but plan for an average of $1,500 per pound of cannabis products, including flower, edibles, tincture, beverages, prerolls, etc.

GRAND TOTAL = $685,000 (not including cannabis product inventory)

*Disclaimer: This is a rough estimate of the upfront and first-year costs of opening a dispensary in New Jersey. 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 New Jersey dispensary license

In many states, the application process comes first, but in New Jersey, since your application to join the adult-use cannabis program requires budget, location, and more details, now is when you’ll actually apply.

The New Jersey Cannabis Regulatory Commission (CRC) has extensive criteria. Take time to read through the regulations and understand what resources are available to you.

The state also published this 160-page report of the rules and regulations that may provide more guidance.

The basics of applying for a dispensary license in NJ

• To open a dispensary in New Jersey, you need a Class 5 Cannabis Retail License.

• You will need to submit proof of real estate, articles of incorporation, approval from the local municipality, security plans, detailed business plan, and more. Many applications run hundreds (or even thousands) of pages.

• The CRC is accepting applications and reviews cannabis retail licenses on a rolling basis, meaning you can currently apply at any time. There are no stated limits to the number of licenses that can be issued.

• If you’re planning to operate a small operation—10 or fewer employees—you may be eligible for a microbusiness license instead of the Class 5. To be eligible, you must be a New Jersey resident who has lived within the state for the past two years, and more than half the business staff must live in or in the city next to where the business is physically located.

• Social equity opportunities also exist for people who have lived in an Economically Disadvantaged Area. Social Equity applicants must submit the Social Equity Business Certification on the CRC’s website, along with proof of qualification for the Social Equity Business designation.

• The CRC wants to see your operating, environment, and safety/security plan. This is a significant criteria so take the time to develop a solid plan, and show that you’ve considered every factor.

• If you plan to apply for a delivery license, be aware that anyone delivering cannabis will be required to have a GPS tracking system on their vehicle and other compliance steps are required, such as Metrc manifests. Learn more about cannabis delivery.

New Jersey cannabis license types and cost

• Class 1 Cultivator License – Up to $50,000; allows for the cultivation of cannabis plants

• Class 2 Manufacturer License – Up to $30,000; allows for the manufacturing of cannabis products

• Class 3 Wholesaler License – Allows you to store, sell, and transfer recreational cannabis between retailers

• Class 4 Distributor License – Allows you to transport bulk quantities of cannabis products between other entities

• Class 5 Retailer License – $10,000; allows you to purchase inventory from licensed entities and sell them in a retail store

• Class 6 Delivery License – Allow you to transport cannabis purchases from the retailer to the purchasing consumer

How to get a Class 5 Retailer license in New Jersey

1. Determine your license type (see list above). Note: Depending on your marijuana business, you may need more than one license.

2. Determine whether you’re ready to apply for the annual license, or whether you need to apply for a conditional license (more on that below).

3. Compile your application materials. The state of NJ put together an Application Guide to help. Walk through the guide and collect all your materials before you start your formal application.

4. Register your account on the CRC website.

5. Complete all required steps within the CRC portal and upload all required documents and forms. Refer to the Application Guide to ensure you’re submitting everything you need, in the way the state representatives require. Do not skip any steps or omit any information; part of the judging process looks at completeness.

6. Pay all necessary fees. For Class 5 Retailer Licenses, it will cost $400 to submit the application ($200 if you are submitting a conditional license).

7. Review that everything is correct, and submit.

8. You will then wait for approval or further communication from the CRC. General guidance is to plan for 90 days for dispensary license approval or denial for the full license, or 30 days for conditional license applications.

Note: Opening a medical cannabis dispensary in New Jersey requires additional steps. Find more information about Alternative Treatment Centers (ATCs) and how to apply here.

Conditional vs. permanent licenses

Conditional licenses serve as temporary licenses and may be given to applicants who don’t yet have control of a location or municipal approval. Under a conditional license, dispensary owners can begin building out operations while working toward satisfying the remaining requirements for permanent licensure.

Business owners have 120 days to meet the requirements for an annual license. If they don’t meet the time requirement, the conditional license will expire.

The application fee is $200 for conditional licenses, and $800 upon approval. You’ll then have to pay to convert your conditional to permanent annual (another $200 upon conversion submission and $800 upon conversion approval), plus pay the annual licensing fee. The fees are the same whether you do conditional or permanent, just assessed differently. See the full fee schedule.

Permanent, or annual, licenses are the approval issued by the commissioner to operate a cannabis business in New Jersey. These licenses expire after one year, and must be renewed to stay in compliance.

Design your New Jersey dispensary

As previously mentioned, New Jersey has regulations about where dispensaries can be located. At this phase of the process, you would have already found, selected, and received approval from the municipality for your location.

But now that you have your approval—either conditional or annual—it’s time to do the work to build the dispensary of your dreams.

Dispensary design isn’t just what your dispensary looks like. It’s how your shoppers experience your brand.

Here’s a short list of your considerations for 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 displayed/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

• Bathrooms

Note: New Jersey dispensaries are required to keep odors from escaping the premises. This factors into your design.

🤔🏬 Take the Store Layouts Quiz to find the perfect layout for your dispensary.

Create a safe and secure New Jersey dispensary

Security plans are important in every market, but New Jersey has specific and stringent requirements. Your dispensary is required to maintain a security surveillance system or risk having your NJ marijuana license revoked for lack of compliance.

At a minimum, your dispensary security plan should include:

• Security alarm systems that alert staff and police officers of an emergency (plus a back-up system that activates immediately).

• Appropriate safety measures to deter and prevent unauthorized access to areas containing cannabis products.

• Security measures to protect the premises, consumers, staff, and products.

• Protocols for testing and maintaining the security system and alarms.

• Maintenance inspections and tests at least every 30 days.

• Measures to minimize access from outside the premises and processes for controlling that access.

• Electronic monitoring, video cameras, and panic buttons for personnel.

• 24-hour-a-day monitoring of video surveillance (monitoring can be conducted off-site).

• Proper lighting of the outside and perimeter areas of your location, particularly any entry or exit points of the building.

• New Jersey law enforcement and neighbors within 100 feet of your cannabis business must be provided with the name and contact information of a staff member who can be notified at all times of any problems.

Hire and retain qualified dispensary employees

Now that you’re getting close to opening, it’s time to hire and train the lifeblood of your brand: your dispensary employees.

First, we recommend sitting down and drafting your dispensary org chart. Based on your business plan, location, store design, and vision, what role do you intend to play in the day-to-day and what additional staff do you need to hire? What is the hierarchy?

To get started, 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.

Start by identifying your need, defining your staff budget, determining what benefits you’ll offer, and starting the recruitment and hiring process.

Be sure to understand New Jersey laws around staff and follow all requirements, including procuring cannabis employment IDs, adhering to age requirements, handling background checks, and mandating attendance of certification training.

Understand compliance

At this point, you should be well-versed in New Jersey cannabis laws and what you need to do to keep your dispensary compliant.

As a reminder, here are the purchase limits for New Jersey:

• Shoppers can purchase 1 ounce of cannabis or its equivalent in products such as vape oil, resin, or edibles per dispensary visit. There are no limitations on how many times a customer can return in a given day.

• Customers cannot legally possess more than 6 ounces of cannabis products (or the equivalent) at any one time.

The seed to sale Tracking program chosen by the CRC is Metrc. Newly licensed New Jersey cannabis dispensaries have access to a new business training provided by Metrc. We recommend attending that training and taking advantage of the New Jersey-specific resources provided by Metrc.

Source and intake cannabis products

Now’s when things really start to take shape: ordering and receiving your product! If you’re not a vertically-integrated company, or only have a Class 5 Retail License, like most New Jersey dispensaries, you’ll need to find cannabis cultivators, manufacturers, and/or distributors to supply your store.

As you’re looking for suppliers, here are 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

Packaging and labels for cannabis products

New Jersey law dictates how you package cannabis products. Here’s the basics:

• Fully-enclosed, child-resistant packaging is required.

• Labels must include:

  • Information and any warnings required by law

  • A summary of product testing results (including potency)

  • Ingredients used in cultivation or production of the product

  • Serving size

  • For flower, weather it’s high-, moderate-, or low-THC

  • Health warnings

• Packaging and labels cannot contain any false or misleading statements or images that could be attractive to kids.

• Labels will contain a universal warning symbol designed by the commission.

Inventory intake

Once your products arrive, you must “intake” it into your store in a specific way that is 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 — the requirements are the same whether the supplier is you or other cannabis companies.

The manifest 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.

Now you can stock your shelves and sell the product. But you’ll need to create and follow a strict process for intaking every product into your store.

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 required 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 your short list of technology to consider for your dispensary:

• Network

• Hardware

  • Printers (both letter-sized and receipts)

  • TVs

  • Cash drawers

  • Computers (for staff work, like inventory)

  • Tablets or terminals

  • Barcode scanners

• Software

  • POS

  • Ecommerce

  • Payment provider for non-cash transactions

  • Digital menus

  • Kiosks

  • Loyalty programs

  • CRM

  • HR/Payroll tools

  • Accounting software

  • Analytics tools

  • Social media management and monitoring

  • Website

You don’t need every tool, but make sure you’re investing in technology 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

You’re almost there. Your store is ready, the team is trained, and technology is in place. Now you need to get the word out that opening day is around the corner.

Dispensaries notoriously have more challenges with marketing than traditional businesses because of stigma, regulations, and the federal illegality of the cannabis industry. But there are many tried-and-true tactics you can use to promote your business.

First, develop a beautiful, functional dispensary website. And enabling online ordering through your website is a great way to appeal to digital-friendly shoppers.

Beyond website, fine-tune your social media presence (though be careful with what you post!), develop a rewarding loyalty program, focus on product-based SEO, and consider events to attract new customers into your store.

Thinking about other forms of advertising? New Jersey adult-use cannabis dispensaries are allowed to advertise, but with restrictions:

• Outdoor (or external) signage can only include the dispensary name, no advertising of cannabis or cannabis brands.

• Prices can only be advertised in a printed catalog or list inside the dispensary or on the dispensary website

• Advertising is limited to mediums where the audience is determined to be primarily over the age of 21.

• TV and radio ads will only be allowed by 10:00 PM and 6:00 AM

• Advertisers will be restricted from promoting overconsumption or making any claims not supported by credible research.

• You can’t use location-based advertising or send messages to cell phones.

The following warning must be included in ads:

"This product contains cannabis. For use only by adults 21 years of age or older. Keep out of the reach of children. There may be health risks associated with the consumption of this product, including for women who are pregnant, breastfeeding, or planning on becoming pregnant. Do not drive a motor vehicle or operate heavy machinery while using this product.”

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.

Here are 10 tips for choosing marijuana retail software.

What to look for in a cannabis POS:

1. 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.

2. 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.

3. 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 your providers.

4. 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.

5. 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.

6. 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 needs.

7. 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.

8. 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.

9. 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.

10. 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 New Jersey is quite the feat. And if you’ve made it this far, you’re in great company!

If you have any remaining questions about opening a dispensary in New Jersey, 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!