How to Open a Dispensary in New Mexico

Discover the ultimate guide on launching a cannabis dispensary in New Mexico. Uncover legal requirements, market insights, and more.

Jul 11, 2023

Dispensary

Eric Schneider

Managing Director

New Mexico has been actively taking significant steps to legalize the medical and recreational use of cannabis. This has provided opportunities for individuals interested in entering the industry.

Opening a cannabis dispensary in New Mexico can be rewarding for aspiring entrepreneurs, but you must thoroughly know the whole process to remain compliant at every step. This comprehensive guide will help you navigate the rules and regulations better.

Overview of Cannabis in New Mexico

The cannabis industry in New Mexico waited for a long time to legalize cannabis for recreational use after the state patronized medical cannabis during the early 2000s.

Let’s look briefly into the history of cannabis legalization in New Mexico and the current state of the cannabis market in the state.

History of Cannabis Legalization in New Mexico

In 2007, New Mexico became the 12th state in the US to legalize medical cannabis. The Lynn and Erin Compassionate Use Act established a regulated medical cannabis program, allowing patients with qualifying conditions to obtain and use cannabis for therapeutic purposes.

Specifically, according to The Lynn and Erin Compassionate Use Act, patients and their caregivers were allowed to possess almost six ounces of usable cannabis. Further, the law allowed them to cultivate up to four mature plants and 12 seedlings after obtaining a separate permit.

As a result, in 2018, the New Mexico Government shortened the application process for patients looking for cannabis, making it more straightforward to apply. In the same year, the Government increased the medical cannabis cultivation limit from 450 to 2500 plants to reduce the supply shortages.

However, in April 2021, New Mexico legalized recreational cannabis by passing the Cannabis Regulation Act. This act allows adults aged 21 and older to possess and consume cannabis for recreational purposes.

The legal sales of adult-use cannabis started on April 1, 2022, and the market has seen a significant surge since then.

Current State of the Cannabis Market in New Mexico

Perhaps the best way to understand the current state of the cannabis market in New Mexico is referring to the Governor’s Press Release from April 2023, when adult-use cannabis sales celebrated one year of legalization.

New Mexico Governor Michelle Lujan Grisham announced that the state generated $300 million in adult-use cannabis sales in its first year, starting in April 2022.

Over 2,000 cannabis licenses were issued, including 633 retailers, 351 producers, 415 micro-producers, and 507 manufacturers.

Monthly sales remained consistent, with March 2023 recording the highest adult-use sales at $32.3 million.

The state collected over $27 million in cannabis excise taxes, benefiting the state general fund and local communities.

Apart from these significant numbers, the Governor also discussed how even smaller communities like Clovis, Farmington, and Ruidoso witness huge sales. Sunland Park near the Texas border recorded $19.4 million in adult-use sales.

Albuquerque, Las Cruces, and Santa Fe experienced the highest sales. Overall ensuring that the cannabis industry in New Mexico is reaching record highs.

Social Equity Programs for Cannabis in New Mexico

The State of New Mexico is implementing social equity programs to promote inclusivity and address the historical impacts of cannabis prohibition, just like every other state.

Social Equity Program from New Mexico’s Regulation and Licensing Department aims to provide opportunities for individuals belonging to communities disproportionately affected by cannabis criminalization to participate in the legal cannabis industry.

Note: Find out more about New Mexico’s Social Equity Definition and Programming.

Types of Dispensary Licenses in New Mexico

There are two types of licenses for dispensaries in New Mexico;

Adult-use retail dispensary license: This license allows the holder to sell adult-use cannabis products to New Mexicans who are 21 or older.
Medical retail dispensary license: This license allows the holder to sell medical cannabis products to patients who qualify for using marijuana, as per the New Mexico Department of Health.

The Regulation and Licensing Department (RLD) charges $2500 for retail licenses and $1000 on every licensed premise annually.

Note: Ensure that you follow the retailer application checklist when applying for either of the cannabis retail licenses.

Other Types of Cannabis Licenses in New Mexico

Cannabis Producer License
Cannabis Manufacturer License
Cannabis Producer Microbusiness License
Cannabis Research Laboratory License
Cannabis Courier License
Cannabis Consumption Area License
Vertically Integrated Cannabis Establishment License
Integrated Cannabis Microbusiness License
Cannabis Testing Laboratory License

Note: Every license has specific requirements regardings compliance and follows different fee structures. So, it’s best to keep the requirements of your desired licenses in check.

Understanding the Cannabis Market in New Mexico

The cannabis market in New Mexico stood at $300 million in adult-use sales in one year of legalization. This huge number shows that market research is crucial for entrepreneurs looking to enter the cannabis industry in New Mexico.

By conducting thorough market research, businesses can leverage their understanding of the market landscape. This in turn allows entrepreneurs to make informed decisions, develop effective business strategies, and increase their chances of long-term success.

Application Process for a Dispensary License

Here’s a general step-by-step process for crafting a perfect application for a dispensary license;

Determine eligibility as outlined by New Mexico Regulation and Licensing Department to ensure that you meet all requirements.
Prepare required documentation, such as business plans, financial statements, security plans, proof of compliance with local zoning regulations, etcetera.
Create an account on the online licensing portal provided by the New Mexico Regulation and Licensing Department to access and submit the necessary forms and documents.
Fill out the application forms provided by the New Mexico Regulation and Licensing Department accurately and thoroughly.
Once all forms and documents are completed, submit your application through the online licensing portal. Be sure to pay any required fees associated with the application.
The New Mexico Regulation and Licensing Department will review your application, including conducting background checks on key personnel and verifying compliance with all regulations.
If your application is deemed complete and meets the initial requirements, a site inspection may be conducted. This is to assess your proposed dispensary location for compliance with security and safety regulations.
Once your application is approved, you will receive a cannabis dispensary license from the New Mexico Regulation and Licensing Department, authorizing you to operate legally in the State.

Required Documentation for a License

You can find the exact information regarding the documents you require for a specific license on RLD’s official website. However, here are the documents you generally need;

A Social And Economic Equity Plan: This document outlines how you plan to promote social and economic equity in your cannabis business.
Proof Of Age: Birth certificates, driver’s licenses, or passports showing that each person with direct control over the business is at least 21 years old.
A Criminal History Screening: A document that shows that all entities involved in the business haven’t been convicted of a felony or other disqualifying offense. This document is usually issued by the Department of Public Safety.
Premises Diagram Attestation: This document shows the layout of your dispensary, cultivation facility, manufacturing unit, etc.
Funds To Cover Application Fees: The amount of money that the applicant needs to pay in order to apply for a cannabis license.

For updated information regarding documents, check out application checklists available at the Regulation and Licensing Department’s official website.

Timelines for Obtaining a License

While timelines for obtaining a license may vary, the Regulation and Licensing Department of New Mexico is supposed to issue their decision to the applicant 90 days after you submit an application.

Annual licenses and annual location fees are subject to renewal with respect to the dates of issuance. It is best to keep reminders regarding license renewals at least 15-30 days prior to expiry unless the State obligates otherwise.

Financing and Business Plan for a Dispensary

There are two things you need to lay the cornerstone of a long-lasting, sustainable business; a solid business plan and a secure financing solution. Let’s look into how you can ensure both for your cannabis dispensary in New Mexico;

Types of Financing Available

Self-Funding
Traditional Business Loans
Private Investors
Cannabis-Specific Lenders

While it is hard to secure financing for cannabis businesses throughout the United States, thanks to New Mexico Finance Authority, who solved this problem for New Mexican entrepreneurs. As per New Mexico Finance Authority orders, public financing for cannabis businesses with loans of up to $250,000 will be granted to qualified small businesses.

Importance of a Solid Business Plan

A business plan holds great significance as it offers a roadmap to success. Your investors or lenders need to know how carefully you’ve observed and studied the cannabis market for opportunities and challenges before investing in your business; a business plan includes that.

Not only can you attract financing through an efficient business plan, but you can also employ it for strategic decision-making, operational efficiency, adaptability, and growth with the market conditions as years go by.

Risk Management Plan

A business plan is incomplete without risk management. Especially when conducting business in an extremely volatile and fluctuating market like cannabis, you need to ensure that your business plan is accompanied by a strong risk management plan.

A risk management plan helps you to identify risks, stay compliant with the changing laws, enhance security, and ensure financial stability. While you’re crafting a risk management plan, don’t forget to partner with specialized insurance providers who have in-depth knowledge of the unique threats associated with the cannabis industry.

Market Research and Location for a Dispensary

For any business to succeed, it is important that you conduct a thorough market research. If you’re opening a recreational-use cannabis dispensary, you’d want to know which area has the most adults interested in cannabis.

Consumer demographics, market trends, and preferences are all part of the market research you conduct before deciding on the scope and location of your cannabis business.

Location Requirements for a Dispensary

When applying for a license, you’re required to fill out a Location Attestation form and attach it in the Premises section. It’s because the Cannabis Control Division has set in place multiple location requirements to ensure that every New Mexican consumes cannabis safely and conveniently.

Here are a few location requirements for a cannabis dispensary;

Dispensaries must be located at least 1,000 feet away from schools, churches, and other sensitive areas.
Dispensaries must be located in areas zoned for commercial or industrial use.
Dispensaries must have adequate parking and access to public transportation.
Dispensaries must be located in a safe and secure area.

For more information regarding location protocol, you can visit CCD’s website.

Insurance Requirements for a Dispensary in New Mexico

While the New Mexico Regulation and Licensing Division might not obligate specific insurance for cannabis businesses, it is still best to stay protected with the following coverages;

Costs of Opening and Running a Dispensary in New Mexico

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

License and Permit Fees

The license and permit fees in New Mexico vary according to the type of license you’re applying for. Some common licenses are;

Retail dispensary license: $2,500 annually, and an additional $1,000 annual fee for each licensed premises.
Integrated cannabis microbusiness license: $2,500 annually, and an additional $500 annual fee for every licensed premise.
Producer license: $2,500 annually, plus an additional $1,000 annual fee per licensed premise.
Processor license: $2,500 annually, plus an additional $1,000 annual fee per licensed premise.

For medical-use licenses, these costs are cut by half as per the State’s regulations.

Startup Costs

Once you’ve chosen your favorite location, you’ll face costs of real estate, security systems, inventory costs, equipment costs, and up-front renovation costs. So, you would want to have at least $100,000 as startup costs.

Ongoing Costs

Ongoing costs include rent/mortgage payments, salaries, inventory, utility bills, etcetera. Plus, marketing and advertising costs are also included in ongoing costs.

On average, a typical cannabis dispensary pays almost $100,000 in yearly rent.

Inventory management would require you to buy products in bulk. High-quality cannabis products can cost almost $1500 per pound.

Plus, a team of professional budtenders, a supervisor, and a store manager could cost you around $200,000 annually in New Mexico.

On marketing/advertising, you can expect to spend around 10% of your sales revenue yearly.

Taxes and Fees

The Cannabis Excise Tax, 12%, is applied to the sale of all adult-use cannabis products, including flowers, concentrates, and edibles. This tax is collected by the New Mexico Taxation and Revenue Department (TRD).

The Gross Receipts Tax varies depending on the county. For example, the gross receipts tax rate in Bernalillo County is 6.31%, while the gross receipts tax rate in Santa Fe County is 8.3%.

Plus, the Local Sales Tax, is paid to municipalities. This tax also varies from one municipality to another.

Resources for Potential Entrepreneurs in New Mexico

Industry Experts in New Mexico

Connect with industry experts in New Mexico to gain valuable insights and guidance on running a cannabis dispensary. Some notable industry experts are:

FAQ about Opening a Dispensary

What Are the Qualifications for a Cuard License?

For an adult-use dispensary, you must qualify in the following areas; a social and economic equity plan, proof of age, a criminal history screening, premises diagram attestation, and proof of funds to cover application fees. For more info, check with New Mexico’s Regulation and Licensing Department.

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

The average cost of opening and running a dispensary in the US is about $2 million. You can expect around $100,000 as startup costs, paired with average yearly rent of $100,000, 10% of sales revenue for marketing, and a cannabis excise tax of 12% throughout the State.

What Are the Location Requirements for a Dispensary?

Dispensaries must be located at least 1,000 feet away from schools, churches, and other sensitive areas. Furthermore, in areas zoned for commercial or industrial use, have adequate parking and access to public transportation, and must be located in a safe and secure area.

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, 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 Cuard License?

Yes, 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?

You can ensure shorter delivery times by submitting a completed application for a license and meeting all the requirements of your chosen license. Generally, the regulators in New Mexico take around 90 days to respond after the submission of an application.

What Are the Regulations for Advertising a Dispensary?

In New Mexico, advertising must be directed to adults 21 years of age or older. This means cannabis businesses cannot advertise on television or radio shows that are popular with minors, and they cannot place billboards near schools or parks. Plus, cannabis businesses can’t make any false or misleading claims about their products or services.

Can I Have More Than One Dispensary Location?

Yes, you can have different locations for dispensaries after getting separate licenses for every location. The State charges a $1000 fee for every location annually.

Final Thoughts

To open a dispensary in New Mexico, carefully plan, follow regulations, and have a comprehensive understanding of the cannabis industry.

While the state’s cannabis market offers potential for business owners, there are also difficulties. For example, understanding the licensing procedure, managing operational costs, and adhering to insurance and advertising restrictions.

To ensure long-term success, prospective dispensary operators should keep up with market developments, rivalry, and social equality initiatives.

You may find it helpful to use resources like cannabis insurance and get advice from industry professionals as you go along.

Aspiring dispensary owners can set themselves up for success in New Mexico’s expanding cannabis market. By approaching their business with commitment, compliance, and a focus on offering high-quality goods and services.

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