How to Open a Dispensary in Montana – 2024 Guide

Montana has witnessed a slow but steady shift when it comes to the legalization of cannabis in the state. Today, both medical and recreational usage of marijuana is legal in the state, which makes Montana’s cannabis market a lucrative target for entrepreneurs.

History of Cannabis Legalization in Montana

The journey toward cannabis legalization in Montana began with the passage of the Montana Medical Marijuana Act (I-148) in 2004. While this allowed patients with qualifying conditions to access cannabis for therapeutic purposes, the regulations were relatively strict, and the cannabis industry had a limited scope.

In 2016, Montana’s Senate Bill 423 introduced more stringent regulations for the medical marijuana program. It limited the number of patients each retailer could serve and imposed more challenging requirements on the medical professionals involved.

Fast forward to November 2020, Montana took a significant step forward by passing Initiative 190 (Montana I-190) and Initiative 118 (Montana CI-118), which legalized the recreational use of cannabis for adults aged 21 and older.

Since then, legalization of both medical and recreational usage played a pivotal role in the state’s cannabis market, opening up new opportunities for all entrepreneurs.

Current State of the Cannabis Market in Montana

Today, the cannabis market in Montana is experiencing rapid growth and development. The demand for cannabis and cannabis-related products has surged and created opportunities for entrepreneurs to enter the industry and establish successful businesses.

As the industry expands, regulations and licensing requirements evolve to ensure compliance, consumer safety, and fair competition. The state’s government is actively developing a robust regulatory framework, including licensing processes, product testing, taxation, and consumer protection.

Sales and Revenue

In 2022, the first year of recreational cannabis sales, total revenue exceeded $303 million. This amount was surpassed in the following year, 2023 when total sales reached $319 million. Additionally, in 2023, recreational cannabis sales significantly outperformed medical cannabis sales, with over $258 million generated from recreational sales compared to $60.9 million from medical sales.

According to the Montana Department of Revenue, the medical sales for April 2023 were $5.4 million, while adult-use sales made $20.3 million in April 2023. The demand for both medical and recreational products is expected to grow as the market matures.

With Montana’s population of over 1.1 million, 75% of which are 21 or older, the state presents a lucrative yet promising market for recreational cannabis sellers.

Market Research

Before starting your cannabis business, it is essential to conduct thorough market research to understand the demand, competition, and consumer preferences. Making sense of the market dynamics helps potential entrepreneurs develop relevant strategies for success.

Effective market research focuses on the following factors:

• Consumer demographics
• Preferences
• Purchasing patterns

Know your target audience, assess local competition, and understand the regulatory landscape to ensure compliance and a competitive edge.

In Montana, two distinct dispensary licenses are available based on the intended operation and target market. These license types include:

• Medical License: This license type allows entrepreneurs to sell marijuana and marijuana products to registered medical marijuana patients (or cardholders) in compliance with the Montana Medical Marijuana Program.
• Adult-Use Dispensary License: Also known as a “recreational dispensary” license, this allows businesses to sell cannabis products to either registered cardholders or adult-use consumers.

If you are looking to invest in other areas of the cannabis industry, the following are a few types of cannabis business licenses for you to consider:

• Cultivator licenses: Allows a licensee to cultivate marijuana for medical or adult use.
• Manufacturer licenses: Allows a licensee to convert or compound marijuana into marijuana products, concentrates, or extracts, and to package, repackage, label, and relabel products.
• Transporter licenses: Allows a business to transport marijuana and marijuana products between licensed marijuana facilities, including testing laboratories, or to medical registered cardholders. Transporters are not allowed to deliver to adult-use consumers.
• Testing Lab licenses: Allows a marijuana testing laboratory to provide testing of representative samples of marijuana and marijuana products and to provide information on its chemical composition.
• Combined Use licenses: These are special licenses specifically for Montana’s 8 federally recognized tribes and/or entities majority owned by one of those tribes.

Each type of license has specific application requirements, procedures, and fees. Check the requirements for your desired license type to ensure a smooth application process.

Entities interested in obtaining a dispensary license must apply through Montana’s TransAction Portal. Below are the general steps in the application process:

1. Preparing the Application: Gather all necessary documentation and information required for the application, such as business plans, financial records, security plans, and ownership information. Ensure that you’re compliant with all General Licensee Requirements and Additional Application Requirements for cannabis dispensaries, as outlined by the Montana Department of Revenue and other relevant authorities.
2. Submission of Application: A well-drafted application is accurate, detailed, and provides all necessary information. Remember that a completed application will elevate your chances of getting the license and reduce waiting time.
3. Background Checks: Applicants and key individuals associated with the dispensary will undergo thorough background checks to ensure compliance with state regulations. This includes consent to fingerprint, documentation of residency, documentation of Date of Birth (DOB), and documentation of property ownership or owner permission, etc.
4. Site Inspections: Since a business can only apply for one dispensary license but choose several locations for multiple dispensaries, the Montana Department of Revenue must inspect and approve all locations before business operations begin.
5. Approval and Licensing: If the application meets all requirements and passes the necessary checks and inspections, the Montana Department of Revenue then issues the dispensary license.

Note: New applications for Cultivators, Dispensaries, and Manufacturers will not be accepted until July 1, 2025.

Required Documentation for a License

The following documents are required for a dispensary license application in Montana:

• Documentation of Montana Residency
• Documentation of Date of Birth
• Consent to Fingerprint
• Documentation of Property Ownership or Property Owner Permission
• Business Organization Chart
• Business Structure Form
• Source of Funding Verification
• Building Inspection Report
• Fire Inspection Report
• City and County Approval

Visit the Montana Department of Revenue website to learn more about each of these documents and relevant forms.

Timelines for Obtaining a License

While the Montana cannabis authorities haven’t specified a period for getting a cannabis dispensary license, on average it takes several months between initial application and final license issuance.

The timelines can vary according to several factors, such as the completeness of the application, the efficiency of the licensing process, and any potential delays in background checks or site inspections.

Please note that new applications for cultivators, dispensaries, and manufacturers will not be accepted until July 1, 2025. Meanwhile, renewal applications for cannabis business licenses are available 75 days before expiration. Applications must be submitted 60 days before expiration to allow for necessary inspection and processing.

Financing and Business Plan for a Dispensary

The crucial step in getting a cannabis dispensary license is to develop a business plan, which will be used to secure the necessary financial resources. A solid business plan is one of the most essential tools in an entrepreneur’s toolkit. In general, your cannabis business plan should include the following:

• The physical location of your dispensary
• Funding plan, or the source of your startup and ongoing capital
• Sourcing plan for procuring cannabis products
• Revenue projections
• Estimate or actual number of employees
• Diversity and equity plans
• Marketing plan
• Safety and security plan
• Technology plan
• The insurance company you will be opting for
• Business organization chart
• Business structure form
• Other relevant information you want to document

A well-crafted business plan is essential for the success of your business. It contains all the necessary information to present to potential investors and lenders, outlining the steps you will take to start and expand your business. Agencies like the Small Business Administration (SBA) can help you find funding sources from private companies or banks if you need help getting it.

Overall, while developing your business plan, ensure that you follow Montana dispensary laws and do not include anything that goes against the rules and regulations.

Types of Financing Available

Securing the right financing is a crucial step in opening a dispensary, and aspiring owners in Montana have several options to consider:

• Self-funding
• Traditional business loans
• Private investors
• Cannabis-specific lenders

Risk Management Plan

A risk management plan is crucial for a dispensary to identify and mitigate potential risks and uncertainties. It assesses regulatory compliance, security vulnerabilities, market competition, and operational risks. It also outlines strategies to minimize these risks, such as contingency plans, insurance coverage, robust security measures, and compliance protocols.

A well-developed risk management plan enhances business resilience and safeguards against potential setbacks or liabilities. Here are some key elements that should be included in a risk management plan for opening a dispensary in Montana:

When working on your business, make sure to purchase specialized cannabis insurance, which can safeguard you against potential financial or reputational losses. By investing in cannabis insurance, you demonstrate a commitment to growing your business and show that you prioritize your customers’ interests.

Location Requirements for a Dispensary

As demonstrated by sales figures from April 2023, Montana is a lucrative state for recreational cannabis. However, before starting your cannabis business, it’s essential to consider several factors, including population demographics, proximity to your target customers, accessibility, and zoning regulations.

Every state has different zoning laws to ensure public safety, and Montana is no exception. Choose a location that falls within a jurisdiction that permits medical and recreational cannabis activities.

It’s important to note that, in Montana, dispensaries cannot be situated in any city, town, or county that prohibits medical marijuana use, nor can they be located within 500 feet of any place of worship, school, or post-secondary institution.

Insurance Requirements for a Dispensary in Montana

Opening a dispensary involves inherent risks, such as theft, property damage, product liability, and employee injury. Insurance policies are necessary to protect your dispensary against these risks and ensure your business can recover financially from unexpected events, legal claims, or operational disruptions.

Types of Policies Recommended

• General Liability Insurance
• Product Liability Insurance
• Property Insurance
• Workers’ Compensation Insurance
• Cyber Liability Insurance
• Directors and Officers Liability Insurance

Some licenses may require entrepreneurs to obtain specific insurance, so remember to stay compliant before initiating the application process.

Costs of Opening and Running a Dispensary in Montana

Opening and running a dispensary in Montana incur various costs, including the following;

License and Permit Fees:

The dispensary license fee is $5,000 per location. If you have more than one location, you’ll pay for them separately. Licenses are granted for one-year periods and must be renewed annually which will cost you $5,000 per year per location.

Additionally, applications require a processing fee of 20% of the license fee. This is non-refundable, regardless of the outcome.

Startup Costs:

Startup costs include real estate, security systems, inventory costs, equipment costs, and up-front renovation costs.

It’s tough to quote the exact startup costs for a cannabis business in Montana, but most sources suggest having between $250,000 and $1 million to open a dispensary. Here are some estimated costs to keep in mind:

*This is just a rough estimate of the upfront and first-year costs of a cannabis dispensary in Montana. Every market, location, and business will have its unique startup costs.

Ongoing Costs:

Ongoing costs for running a dispensary typically include rent or mortgage payments, utilities (estimated at $2,000 to $5,000 per month), inventory replenishment, employee wages (averaging $30,000 to $60,000 per year per employee), marketing and advertising expenses (varies widely), insurance premiums, security system maintenance, compliance and licensing fees, and taxes.

Taxes and Fees:

There are two types of taxes placed on marijuana: state and local. Both taxes are applied only at the retail level during end-user purchases. State taxes are established by the Montana Legislature, while local-option taxes can be enacted at the discretion of individual counties.

The state tax rate is 4% for medical marijuana and 20% for adult-use sales.

Local-option tax rates, which are in addition to state taxes, are determined by counties and can be set up to a maximum of 3% on either medical marijuana, adult-use marijuana, or both.

Entrepreneurs looking to open a dispensary in Montana can find valuable resources and guidance from industry experts and organizations. Notable resources include:

1. The Montana Department of Revenue is an official Montana government website that provides information on licensing requirements, regulations, and application processes for cannabis businesses in the state.
2. Montana Cannabis Industry Association is a platform that offers networking opportunities, educational resources, and advocacy for the cannabis industry.
3. Small Business Development Center Network provides several useful resources for small businesses and entrepreneurs.

Industry Experts in Montana

Connect with industry experts in Montana who can provide valuable insights and guidance on opening and operating a dispensary. Some notable industry experts may include:

1. Higher Yields Consulting
2. Point Seven Group
3. Quantum 9

Engaging with these organizations provides a wealth of information to help you navigate the complex regulatory landscape and increase your chances of success in the Montana cannabis market.

What Are the Qualifications for a Card License?

For an adult-use dispensary license, you must meet all the dispensary license requirements set by the Montana Department of Revenue. Requirements include but aren’t limited to, choosing a location that’s approved by the government, a work permit before starting operation, and a satisfactory background check.

How Much Does It Cost to Open and Run a Dispensary?

The cost to open and run a dispensary depends upon the size of the dispensary, license types, inventory, etc. However, most sources suggest having between $250,000 and $1 million.

What Are the Location Requirements for a Dispensary?

Montana dispensaries cannot be situated in any city, town, or county that prohibits medical marijuana use, nor can they be located within 500 feet of any place of worship, school, or post-secondary institution.

What Types of Insurance Policies Are Required for a Dispensary?

The most common types of insurance policies every cannabis business must have include general liability insurance, property insurance, D&O insurance, product liability insurance, workers’ compensation insurance, etc.

Can I Apply for a Dispensary License if I Don’t Meet the Qualifications for a License?

You can apply for a medical-use dispensary license that allows you to sell marijuana products for medical use only if you don’t meet the qualifications of an adult-use license.

How Long Does It Take To Obtain a Dispensary License?

Typically, it takes around 2-3 months to obtain a dispensary license. However, the timelines can fluctuate due to unforeseen circumstances. The best way to ensure the shortest waiting period from your end is to submit a complete application.

What Are the Regulations for Advertising a Dispensary?

The Department of Revenue in Montana distinguishes marijuana products and marijuana brands. Dispensaries lie in the marijuana brand category, which means they can advertise themselves but can’t promote marijuana products except in electronic advertisements.

Can I Have More Than One Dispensary Location?

Yes, you can have multiple dispensary locations in Montana without having multiple licenses. For example, a person can run more than one adult-use dispensary in Montana on the basis of a single adult-use license.

Opening a cannabis dispensary in Montana requires careful planning, regulatory knowledge, and financial investment. With total monthly sales reaching as high as $29.7 million, the market shows significant potential for ambitious entrepreneurs.

By crafting a solid business plan, adhering to Montana’s regulations, and conducting detailed market research to understand local trends and preferences, you’ll be well-positioned to build a profitable dispensary in this promising industry.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or to learn more about your cannabis insurance options.