With the legalization of adult-use cannabis in May 2023, Minnesota has become the 23rd state in the US to end the prohibition of the drug.
Minnesota’s cannabis industry has huge potential for growth, and the legalization of recreational cannabis in the state has opened up many opportunities for budding entrepreneurs.
So read on as we tell you how you can open a dispensary in Minnesota and become one of the early players in the state’s cannabis market.
Overview of Cannabis in Minnesota
Cannabis in Minnesota is legal for both medical and recreational use, making it one of 23 states in the US to legalize it.
Since the legalization of adult-use cannabis in May 2023, the state has been working on creating an operational framework for marijuana businesses and establishing a legal cannabis market.
History of Cannabis Legalization in Minnesota
In May 2014, the state of Minnesota legalized the use of cannabis for specific medical purposes. This medical program was very restrictive, and patients only qualified if they had PTSD, cancer, and seizure disorders.
Under the medical program, patients could only purchase non-smokable forms of cannabis, which included oils, vaporizers, and pills.
In July 2022, the state made purchasing edibles and beverages infused with THC legal. However, the THC had to be less than 5 mg per dose and could only be derived from hemp.
Almost a decade after the legalization of medical marijuana, Minnesota passed a bill to legalize recreational cannabis in May 2023. This law will come into effect in July and after August 1, 2023, residents of the state will be able to possess and cultivate set amounts of cannabis at home.
It’s expected that a licensed commercial system will take around 12-18 months to set up.
As a result, under the 2023 bill, local jurisdictions can not completely ban cannabis dispensaries in their area. However, they will be able to create zoning rules and regulations and require additional registration fees from cannabis businesses.
Current State of the Cannabis Market in Minnesota
Minnesota’s medical cannabis industry is poised for growth, with over 20,000 patients and $100 million generated in sales annually despite the heavy regulations.
As a result, since the legalization of recreational cannabis in 2023, the industry has been poised for growth. It is expected that the annual cannabis sales will surpass $500 million by 2027.
Social Equity Programs for Cannabis in Minnesota
Under the new legislation, the state will be launching a Social Equity Program. This program will prioritize cannabis business licenses for people living in low-income areas which have been disproportionately impacted by cannabis prohibition.
Types of Dispensary Licenses in Minnesota
Under the new legislation, both recreational and medical cannabis can be used and possessed. Residents of the state can also grow up to 8 cannabis plants at home (with only 4 flowering at one time).
However, cannabis can only be sold commercially if you obtain a license granted by the state government.
Adult-Use Retail Dispensary License in Minnesota
If you’re planning on opening a dispensary, you need to get a Cannabis Retail License. This license will allow your cannabis business to purchase, repackage, transport, and sell cannabis products from other cannabis establishments to customers.
As a retailer, you can open a physical business and sell cannabis products to people aged 21 or older.
- Application Fee: $2,500
- Initial License Fee: $2,500
- Renewal License Fee: $5,000
If you want greater control over your dispensary’s operations, you can obtain a Cannabis Microbusiness License. This license allows you to cultivate, manufacture, and sell cannabis as part of your business operations.
- Application Fee: $500
- No Initial License: Free
- Renewal License Fee: $2,000
Other License Types for Cannabis in Minnesota
- Cannabis Cultivator
- Cannabis Manufacturer
- Cannabis Wholesaler
- Cannabis Transporter
- Cannabis Testing Facility
- Cannabis Event Organizer
- Cannabis Delivery Service
- Cannabis Mezo Business
- Lower-Potency Hemp Edible Manufacturer
- Lower-Potency Hemp Edible Retailer
- Medical Cannabis Cultivator
- Medical Cannabis Processor
- Medical Cannabis Retailer
- Medical Cannabis Combination Business
Note: The requirements and restrictions differ for each type of license. It’s important to do your research to understand which marijuana establishment license is best for your business.
Understanding the Cannabis Market in Minnesota
Application Process for a Dispensary License
Before opening a dispensary in Minnesota, you will have to obtain a cannabis retail license from the state government. For that, you have to follow some distinct steps and submit extensive documentation to the necessary authorities.
Steps Involved in Obtaining a License
- Understand the cannabis regulations for your city
- Determine the partners and structure of your business
- Create a business plan for your dispensary
- Secure financing for your business
- Fill in the forms and submit the application
- Pay local registration fees
- Pay application fee
- Obtain License
- Commence Operations
Required Documentation for a License
Minnesota’s Office for Cannabis Management will require extensive documentation before granting a license. This includes:
- Disclosure of ownership and control
- The address and legal property description of the business
- A general description of the location
- A copy of the security plan
- Proof of trade name registration
- A copy of the applicant’s business plan
- An attestation signed by a bona fide labor organization stating that the applicant has entered into a labor peace agreement;
- Certification that the applicant will comply with the requirements of state law
You have to submit all the required documentation to the Office of Cannabis Management. If the office finds a deficiency in documentation or requires additional information, they will issue a notice.
You can learn more about the required documentation once the state finalizes requirements for cannabis dispensaries.
Timelines for Obtaining a License
The timeline for obtaining a license can vary according to the type of license. However, under the new bill, the government has stated that a license will be granted within 90 days of receiving a complete application.
Financing and Business Plan for a Dispensary
Before opening a dispensary, it’s important to come up with a comprehensive plan on how you will operate and finance your business.
Types of Financing Available
Before starting your dispensary, it’s important to secure funding for your business or create a solid plan for how you will finance your operations.
Finding adequate funding for your cannabis business can be challenging. Due to the controversial nature of the industry and the illegal status of cannabis on the federal level, many traditional lending institutions, such as banks, may be unwilling to give loans.
Fortunately, there are many other ways you can finance your cannabis dispensary. These include:
- Personal Savings
- Private loans from friends and family
- Angel Investors
- Cannabis Financing Investors
- Equity financing
Importance of a Solid Business Plan
A comprehensive business plan acts as a roadmap for your cannabis business, guiding you on how you can start, run and grow your dispensary.
Not only is a solid business plan required in your application for a license, but it can also aid you in getting investors, cultivating partnerships, and establishing relationships with your suppliers.
Your business plan should include key elements such as:
- Company Description and Brand
- Management and Organization.
- Product Line
- Financial Projections
- Market and Competitor Analysis
- Sales and Marketing Strategy
A solid business plan will allow your dispensary to set meaningful goals, make informed decisions, and set your business up for growth and success.
Risk Management Plan
Cannabis is an inherently risky industry. With the prohibition of cannabis on the federal level and changing rules and regulations on the local and state level, it’s essential to have a risk management plan in place.
Your risk management plan will help you mitigate potential risks such as non-compliance, security issues, and product liability.
An effective risk management plan should enable you to:
- Identify and analyze potential risks
- Evaluate the severity of the risks
- Monitor the company’s risk exposure
- Create risk management strategies that lower your risk
Market Research and Location for a Dispensary
Once Minnesota’s recreational cannabis industry is established, there will be high competition as a huge number of businesses open their dispensaries.
So far, the state hasn’t announced a limitation for the total number of licenses, encouraging more people to join the industry. However, the Office of Cannabis Management may limit the number of licenses one entity can hold.
Location Requirements for a Dispensary
Finding the perfect location for your cannabis dispensary is hard, especially when you factor in the extensive location requirements set by the state and local governments.
To open a dispensary in Minnesota, you must comply with the reasonable restrictions of time, place and manner of operation. Your dispensary can’t be located
- Within 1000 feet of a school
- Within 500 feet of a daycare or residential treatment facility
- As an attraction within a public park that is regularly used by minors (i.e playground, athletic field)
Local governments may have additional, more restrictive location requirements. For this reason, It’s best to consult a local expert before deciding on your cannabis dispensary location to ensure that you’re in compliance with local regulations.
Insurance Requirements for a Dispensary
To clarify, although cannabis insurance is not mandatory in Minnesota, a comprehensive insurance policy can help you protect your business from potential risks.
Types of Policies Required
General Liability Insurance
General liability offers broad protection against some of the most fundamental risks cannabis companies face. This policy covers personal or property damage and bodily injury on business premises.
Product Liability Insurance
Product liability insurance covers defense fees and settlements and is particularly critical in the cannabis space, as testing and manufacturing aren’t regulated at the federal level.
Workers’ Compensation Insurance
Workers’ compensation policy covers medical costs and lost wages when employees sustain work-related injuries, protecting employees while keeping cannabis companies running smoothly.
Property Insurance policy reimburses cannabis companies for any direct property loss they may face (i.e. fire, vandalism, or natural disasters) This is a first-party insurance policy that covers real property, business personal property and cannabis inventory.
Directors and Officers (D&O) insurance protects the cannabis company’s executives and directors, and their assets, from any lawsuits that arise from their decisions and actions.
Associated costs with insurance differ from business to business, depending on
- Size of business
- Coverage limits
- Types of insurance you need
- Your level of experience
- Claims history
- Number of cannabis licenses/ businesses you have
Costs of Opening and Running a Dispensary
Opening and running a dispensary can be quite costly. General costs include license fees, startup costs, and day-to-day operational costs.
License and Permit Fees
License fees for a cannabis retail license in Minnesota include:
- Application fee: $2,500
- Initial license fee: $2,500
- Fee for renewal of license: $5,000
You may also need to pay local registration fees depending on your local government which include:
- Initial retail registration fee: $500 to $1250
- Renewal retail registration fee: $1000 to $2500
Local fees are subject to change and depend on the location of your dispensary.
Startup costs for opening your dispensary can range from $150,000 to $2 million. This figure can increase or decrease depending on your location and the size of your business.
Typical startup costs generally cover
- Business incorporation fees
- Legal fees
- Real estate costs
- Marketing costs
- Inventory Costs
- Equipment costs
Furthermore, operating a dispensary can be quite costly. Generally, you will have high ongoing costs
- Security costs
- Inventory Costs
- Advertising and Marketing
- Staffing Costs
- Electronics and POS- systems
- Cannabis Insurance
You can expect to spend around $40,000 per month (or more) on your business operations.
Taxes and Fees.
In addition, cannabis dispensaries in Minnesota will be subject to several taxes and fees. Taxes include the 6.875% state sales tax, a 10% excise tax, as well as any other applicable local taxes.
Resources for Potential Entrepreneurs in Minnesota
FAQ – Opening a Dispensary
How Much Does It Cost to Open and Run a Dispensary?
Opening and running a dispensary in Minnesota includes licensing costs, startup costs, and ongoing costs. Licensing costs for a dispensary are $5000, with an annual renewal cost of $5000. Startup costs for opening a dispensary in Minnesota can range from $150,000 to $2 million, and you can expect to pay around $40,000 per month on business operations.
What Are the Location Requirements for a Dispensary?
Your dispensary has to be at least 1000 feet away from a school and at least 500 feet away from daycares and residential treatment centers. Your dispensary also can’t be located inside a public park that is frequented by minors.
What Types of Insurance Policies Are Required for a Dispensary?
Although cannabis businesses are not required to have insurance in Minnesota, it’s recommended that you invest in a comprehensive policy to manage your risks.
We recommend getting General Liability Insurance, Product Liability Insurance, Workers’ Compensation Insurance, and Property Insurance to protect your cannabis business and mitigate your risk.
How Long Does It Take To Obtain a Dispensary License?
A dispensary license in Minnesota can take up to 90 days after a complete application has been submitted. Within this time period, the state will let you know whether you have been accepted or rejected for a license.
What Are the Regulations for Advertising a Dispensary?
You can’t publish advertisements for your business or cannabis products in print publications, radio, television, or any medium where 30% or more of the audience is expected to be individuals under 21 years of age. In addition, you’re also prohibited from using unsolicited pop-up advertisements on the internet, communicating individually to anyone under 21 years of age, or using advertisements directed toward location-based devices (i.e. cell phones) if the owners are under 21.
Can I Have More Than One Dispensary Location?
Yes. Cannabis retailers i11n Minnesota can operate up to five retail locations in the state with a single license.
Finally, Minnesota has a vast untapped cannabis industry, making it a great choice for opening a dispensary. However, as the state rolls out a holistic commercial cannabis system, it’s important to understand how you can become an early part of the cannabis market.
Keep an eye out for new regulations issued by the state’s cannabis management office, and get ready to open the dispensary of your dreams!