5 Tips for Starting a Marijuana Delivery Service

Cannabis delivery feature

Editor's Note: This post was originally published in April 2020, and updated to reflect the current state of cannabis delivery.

With cannabis retail quickly evolving, dispensaries must adapt to newfound e-commerce options like delivery.

While it requires upfront work to implement, delivery can be a game-changer for dispensaries, especially for those limited by a smaller storefront or less opportune location.

In this post, we’ll outline five best practices for implementing or expanding delivery capabilities at your dispensary.

A dispensary employee sells marijuana

1. Develop a delivery strategy

Determining your delivery strategy doesn’t have to be daunting, but you must be thoughtful and comprehensive. These basic steps will help you get started:

Step 1: Do your research! Make sure that cannabis delivery is legal and feasible for your dispensary. Laws vary from state to state, region to region, and often town to town.

Step 2: Gather historical data of your sales, both in-store and online. If you see many online orders, you likely already have a customer base that will use delivery.

Then, look at the revenue generated from in-store sales. What are the profit margins on your most popular products, and would these profits outweigh the costs associated with delivery?

Step 3: Evaluate your dispensary’s customer demographics to understand who your customers are and whether delivery may be appropriate for them.

Millennials and Gen Z customers enjoy delivery options most, so offering delivery may increase your marketability to younger cannabis consumers. On the flip side, home-bound people (seniors or those with disabilities) are often limited to only utilizing cannabis delivery, so you may attract more of these customers as well.

Step 4: Determine the impact that offering delivery will have on your current dispensary operations. You will need to hire new employees, create new SOPs, and stock more products. Is your business ready to make these sorts of changes right now?

Step 5: Create your business plan for delivery. Make sure to include all costs associated (gas, vehicle, hardware, employees, etc.), as well as the potential revenue.

For some dispensaries, the costs of delivery will not outweigh the benefits. Be realistic about this, especially when you see others adopting delivery.

2. Set boundaries on your delivery radius

Once you’re ready to offer cannabis delivery and have identified a strategy to make it profitable, you must determine where you’ll draw the delivery boundary.

You might be tempted to go as far and as wide as possible to beat out the competition, but you must consider the other costs you will incur as travel distance increases, such as additional delivery staff, insurance, gas, and other expenses.

Note: You may also be limited in your delivery radius by local regulations, so learn the rules first!

Alternatively, you may have an opportunity to offer cannabis to areas that are farther away but desperate for quality cannabis products. The Fire Station in Michigan’s Upper Peninsula serves as an excellent example of this.

At The Fire Station, deliveries are made across the entire U.P, spanning 300 miles. All delivery orders are processed through one location, situated roughly in the middle of the region.

Especially up here in the UP, you run into a lot of accessibility issues. So for us to be able to deliver cannabis to people who live in the woods essentially, and can't get to us as easily, is a huge benefit. We love being able to offer that for people.

Sydney TFS headshot Sydney Miller, Manager at The Fire Station

They deliver every day to the local area and on certain days of the week to the remaining counties for orders placed ahead of time.

The Fire Station

While this strategy works for The Fire Station, it may not be the right fit for your dispensary.

If you’re struggling to figure out the right delivery distance, look at other industries in your area, such as pizza shops or other restaurants that offer delivery, and assess their delivery range.

You should also consider where other nearby dispensaries are located, their delivery radius, and where there is an opportunity for you to differentiate.

Once you’ve reviewed both the state and local cannabis delivery regulations, set firm delivery boundaries. You must strictly adhere to your delivery radius, as many localities prohibit delivery or have additional cannabis delivery restrictions in place.

3. Choose the right cannabis delivery partners

Delivery partners can make or break your delivery business. You must pick the best possible partner(s) to streamline workflow and maximize profits.

The ideal delivery partners integrate with each other to minimize manual work. Having a cannabis POS with API integrations to popular cannabis delivery services can help you manage delivery, stay in compliance, automate taxes, and provide a positive customer experience.

However, the tradeoff to working with a third-party fleet service is that it can be harder to turn a profit once you factor in the additional fees.

Partners like Onfleet and CannaHauler help with:

  • Digital Metrc manifests

  • Driver navigation

  • Customer communication

  • Driver tracking

  • Performance tracking and data management

Additionally, partners like Jane and Dutchie help with:

  • Menu integrations

  • Real-time menu updates

  • Product reviews

  • Branded product photos

  • Order placement

  • Driver dispatch

4. Configure your store layout and inventory

If you’re changing your business model to include delivery, you might need to change your in-store layout as well. Consider creating a dedicated line (or lines) for pick-up customers and separate terminals for processing delivery transactions. This will keep operations flowing for in-store consumers while eliminating confusion for budtenders.

If your dispensary design follows the bank model, you could have one terminal — and its associated inventory — dedicated solely to pick-up or delivery orders. This would provide the most clarity to inventory management.

Budtender fulfilling a cannabis delivery order

You must also consider what other in-store configurations, staffing, or technology automation will boost both efficiency and accuracy so you can quickly fill orders and meet the projected delivery timeframe.

5. Select the right delivery model

It’s important to implement a delivery business model that will maximize the number of deliveries you can make in a set time period.

However, state and local regulations can often restrict workflows, so make sure to consult with compliance experts before making any decisions.

Some common cannabis delivery models are pizza shop, ice cream truck, and hybrid workflows.

Note: the ice cream truck delivery model is exclusively legal in California.

Pizza-style delivery: The pizza shop delivery setup looks and functions essentially the same as your traditional pizza spot. You have a central location (your brick-and-mortar dispensary) where you receive, package, label, and dispatch the cannabis products.

Deliveries are made one transaction at a time. In some states, you have the option to take multiple orders at a time to cut back on delivery time, but all orders must be processed and packaged before leaving the dispensary. Check your state and local regulations for clarification.

Ice-cream truck delivery: An alternative to the pizza setup is the ice cream model (in California), where a driver carries inventory in their vehicle and makes multiple deliveries at a time.

Just like your neighborhood ice-cream truck, cannabis drivers are allowed to receive and process orders within the vehicle and oversee inventory management, driving, and selling. This is also called “dynamic delivery” or “warehouse on wheels.”

Hybrid delivery: The hybrid model mixes aspects of the pizza shop and ice cream truck workflows to best fit your dispensary’s needs.

Some states only allow a certain amount of product to be carried in vehicles, which will limit your delivery reach as well as your profits and may limit your choice of delivery models.

California Delivery Options

The more consolidated trips a driver can make, the more efficient and time-effective you can be. Remember, a higher volume of deliveries is where you’ll start seeing a return on investment.

You will also need to pay close attention to regulations regarding delivery drivers and their vehicles, such as who can deliver products, what vehicles can be used, whether you can include branding on the delivery vehicle, required insurance, and what kind of GPS tracking is necessary.

Final thoughts

Delivery isn’t the right choice for every dispensary. Your consumers may be itching for cannabis delivery in your market, but you must take a cautious and data-driven approach before diving right in.

The most important things to look at before starting delivery are state and local laws and regulations. Speak with a cannabis compliance specialist or lawyer to find the best way to approach launching a delivery service in your area.

You also must have the proper infrastructure and technology in place before you begin, or else you run the risk of falling out of compliance or losing customers due to a poor delivery experience.

Check this out next!

Free, editable delivery SOP template

Cannabis delivery is a great way to increase dispensary revenue, but to see a return on investment, you must do it thoughtfully.

To learn how Flowhub can help you enable legal cannabis delivery at your dispensary, schedule a demo.

Nick Headshot

Nick Rudy

Nick joined Flowhub in January 2020 with a passion for cultivating a safe, legal cannabis community and supporting the industry as it grows. Nick advocates for the retail cannabis community through content and social media efforts.