How to Open a Dispensary in Washington

Known for its progressive stance on cannabis, Washington is a marijuana lover’s haven. With a mature marketplace and intense competition, starting a dispensary here promises lucrative opportunities.

Jun 01, 2023

Dispensary

Eric Schneider

Managing Director

Washington is a marijuana enthusiast’s ideal state. This jewel of the Pacific Northwest has led the way in the legalization of cannabis since the late 1990s.

Washington is one of the states with the most intense competition for young business people since it has one of the most established marijuana marketplaces in the country.

Given the high demand for marijuana in this state, starting a new dispensary would be lucrative. However, you should be aware of the current cannabis regulations in Washington if you’re considering opening a dispensary.

Before starting your Washington dispensary, let’s review all the information you need on the state’s pertinent laws, rules, and trends.

Overview and History of Cannabis in Washington

One of the sectors in Washington with the quickest growth has been the legal cannabis market. Washington State followed Colorado on December 6, 2012, becoming the second state to legalize marijuana for recreational use and the first to permit the sale of cannabis.

Being one of the first states to legalize medicinal marijuana in 1998, Washington has led the cannabis market for a long. Important results on developing Washington cannabis business were revealed in a report titled 2020 Contributions of the Washington Cannabis Sector.

In 2020, Washington’s cannabis industry contributed $1.85 billion to the state’s gross domestic product. Nearly 18,700 jobs were supported by the industry.

Between 2019 and 2020, retail sales increased by 21%. Marijuana excise taxes are the component of the state’s General & Selective Sales Taxes with the greatest growth rate.

Current State of the Cannabis Market in Washington

The cannabis industry in Washington is diversified and undergoing a rapid evolution in terms of price, goods, and structure.

In the fiscal year 2022, Washington State received $515.2 million in revenue from legal marijuana sales and license fees, which includes $4.1 million in cannabis license fees. The Liquor and Cannabis Control Board’s Annual Report for FY 2022 contains the statistics.

The MJBizFactbook predicts that adult-use cannabis sales through retail outlets will increase by around 50% to between a total of $2.3 billion and $2.5 billion by 2025.

Recently, the Washington State Liquor and Cannabis Board accepted an emergency rule suggestion on March 29, 2023, extending the deadline for submitting applications for Social Equity in Cannabis (SEIC) retail licenses till April 27, 2023.

Due to the Secretary of State’s office’s inability to examine new SEIC applicants and delayed processing of corporate filings, an extension was required.

Social Equity Programs for Cannabis in Washington

Through resource allocation and prioritization, social equality programs try to correct particular populations’ historical and current exclusion. An applicant must satisfy some requirements to be accepted into Washington State’s social equity program.

A minimum of 51% of the request must be held by one or more people who have resided in Washington State for the previous six months and who satisfy three of the following criteria:

Lived for a minimum of five years between 1980 and 2010 in a region of Washington State that was seriously impacted.

The applicant or a member of their close family has been detained or found guilty of a cannabis-related offense.

Family income is less than Washington State’s median ($82,400).

Types of Dispensary Licenses in Washington

For dispensaries, there are three basic licenses available. Every application has a different set of specifications.

License for Cannabis Retailers

A retailer licensee is allowed to sell cannabis to consumers who are under 21 years old exclusively in the form of consumable cannabis and cannabis concentrates, goods that have been infused with cannabis, cannabis accessories, and locked storage containers.
Fee for license: $1,381

Note: Washington’s social equity program has been accepting applications for licenses to sell cannabis to consumers since March 1, 2023.

Other License Types for Cannabis in California

License for Cannabis Producer

Growing, harvesting, and packaging cannabis into lots for wholesale distribution to other cannabis producers and cannabis processors is permitted for producer licensees.
Fee for license: $1,381

Note: Washington is not accepting applications for producer licenses for cannabis at present!

License for Cannabis Processor

Usable cannabis, cannabis concentrates, and products manufactured with cannabis can be processed, packaged, and labeled by a processor licensee for wholesale sales to other processors and cannabis merchants.
Fee for license: $1,381

Note: Currently, Washington is not accepting license applications to process cannabis!

License for Cannabis Transportation

Cannabis, cannabis concentrates, and products manufactured with cannabis can be delivered or transported by a transportation licensee from one Washington State-authorized cannabis company to another.
Application fee: $250; license fee: $1,300

License for Cannabis Research

Cannabis can be grown, processed, and kept for the restricted purpose of conducting research by a licensee.
Application fee: $250; license fee: $1,300

Understanding the Cannabis Market in Washington

There’s no denying that people in Washington are fond of cannabis. In fact, the market for marijuana plants, tinctures, and consumables has continued to grow beyond the wildest projections made by the local authorities.

But more people besides regular customers have expressed a strong interest in cannabis-related products. The WSLCB regularly receives considerably more requests for marijuana licenses than it can accept.

The fact that there is intense competition in Washington might be one of the disadvantages of launching a dispensary there.

Washington State has around 1005 authorized cannabis dispensaries (until 2021). The Seattle metropolitan region, which is highly populated, is home to over half of these dispensaries.

Application Process for a Dispensary License

The Washington Liquor and Cannabis Board is in charge of regulating the marijuana market in Washington.

Applying for a cannabis business license requires you to be at least 21 years old and have lived in Washington for at least six months. Additionally, licensing can be obtained by corporate and LLC business organizations.

Steps Involved in Obtaining a License

Inquiry- to verify the claim of party or parties of interest to the real and personal property, the source of the money used to start and purchase an existing business;

A background check– to determine the eligibility of the applicant.
A screening– to see if the applicant has complied with all license requirements.
A residency check– to validate Washington state residence since everyone looking for a cannabis license must have lived there for at least six months before applying.
A check for current tax liabilities– individually or as a portion of any corporation they control, to the Washington State Department of Revenue and other government agencies.
Social equity applicant checks– a person who fits the requirements can apply for a cannabis permit per the rules.

Required Documentation for a License

A marijuana inspector from the Board will get in touch with you after you register your application for a marijuana license to make sure you have provided the necessary documentation.

The Board must first obtain the following details before it may begin reviewing the application:

Information on the location and structure of your company, including floor layouts, lease details, and contract of sale.
Forms regarding your suggested corporate structure.
Information regarding your criminal records (if any)
Details confirming your identity. This contains a copy of your fingerprint cards and authorized identification.
Financial information, such as the source of funds statement, a duplicate of your tax returns, and earlier bank statements
Affidavits and sworn statements
A statement of intent at the time of basic application submission.

Timelines for Obtaining a License

The processing timeframes for the Board to process complete applications is within 60 days, with an additional time frame of a maximum of 30 days. However, the overall time for further paperwork and verification might be several months.

Applications for cannabis revisions and new transportation licenses must be filed 90 days before the project’s forecasted completion date.

Financing and Business Plan for a Dispensary

You need to create a business plan to start a business in Washington that sells cannabis for recreational purposes.

This plan should outline your financial strategy, market analysis, marketing strategy, operations strategy (including how and from whom you’ll get your products), and what will set your business apart from the competitors.

Types of Financing Available

Banks that typically provide commercial financing rarely let marijuana-related firms borrow funds.

The Washington State Liquor and Cannabis Board enacted a regulation in 2016 that permits non-residents to fund cannabis enterprises in Washington State. But strict rules apply to this policy.

Numerous businesses, including hedge funds and expert cannabis financing investors, are beginning to finance cannabis-related enterprises due to the rapidly growing cannabis industry in Washington State.

Even though marijuana shops are subject to strict laws in Washington, many marijuana-related businesses are allowed and actively encouraged there.

Importance of a Solid Business Plan

You should consider the following factors while writing a business plan for your cannabis dispensary to make the application stronger:

‍Market demands and prospects, competitor analysis
Forecasted finances, i.e., expenses and revenue
Process for requesting a license and the requirements
Brand recognition
Analysis of the target audience
Execution/operation plan
Services and products
Financial data
Employees/team.

Risk Management Plan

Theft, legal compliance, and negative publicity are some of the specific threats that cannabis firms must deal with. Every risk management strategy must incorporate the following;

Recognizing possible dangers
Detailed analysis
Assessment based on the seriousness of dangers
Monitoring the risk exposure of your business’s initiatives
Elimination using a successful risk management strategy

Market Research and Location for a Dispensary

Before starting a dispensary, conducting in-depth market research can help you select the best location for your enterprise.

Overview of the Washington Market for a Dispensary

Washington’s cannabis market is one of the country’s oldest and most mature markets. It is highly regulated, and anyone looking to open a dispensary in the state must comply with all applicable rules and regulations.

However, the state’s regulatory structure also provides a stable environment for businesses to operate, which can benefit new dispensaries.

Washington’s cannabis market offers various products, including flowers, edibles, concentrates, and more. The market is known for its high-quality cannabis products, and a significant customer base is looking for different products.

Trends and Competition in the Washington Cannabis Industry

Several noteworthy trends are influencing the market as the sector continues to grow. The rising popularity of edibles and extracts has overtaken the Washington cannabis market.

Even while the flower is still the most often used product, edibles and concentrates have grown significantly in demand in recent years. Many dispensaries are increasing their product selection to keep up with demand.

There is fierce competition in the Washington cannabis market since the state is home to numerous dispensaries.

Here are just a few of Washington State’s most influential dispensaries:

Location Requirements for a Dispensary

Dispensaries are prohibited from being inside 1,000 feet of these particular locations per Washington State law:

Both primary and secondary schools.
Public playgrounds and green spaces.
Public transport stops.
Library System.
Recreational facilities.
Childcare centers.
Arcades or video gaming centers.

Insurance Requirements for a Dispensary

To safeguard the cannabis business from possible financial harm, Washington State law (leg.wa.gov) requires that you get insurance. The Washington State Liquor and Cannabis Board requires a license from all marijuana (or cannabis) companies.

Required Policy Types

Your insurance must cover the following in Washington State (leg.wa.gov):

Commercial general liability insurance: To protect business owners from claims resulting from a property or physical harm sustained while conducting business.
A-Class VII or higher insurance carrier rating: The insurer must have high ratings for claims processing, client satisfaction, and monetary stability.
Additional coverage: To protect the state and its staff, agents, and volunteers from irresponsible incidents on behalf of your business, you must include them in your insurance policy.

Coverage Limits

Your insurance provider could cover the liabilities and property of your firm but not marijuana goods. This is a result of the conflicting federal and state cannabis laws.

Some cannabis entrepreneurs operate their companies out of their private residences. Be aware that some homeowner insurance policies exclude coverage for running a marijuana business out of your house.

Costs Associated with Insurance

Insurance companies charge differently for insuring various cannabis products, so it’s good to comparison-shop and find a balance between cost and coverage.

Compared to other states, Washington State offers more affordable startup costs.

Cost	Expected Amount
The non-refundable application fee	$250
The licensing fee	ranges from $1000-$1,500.
Taxes and fees	excise sales tax of 37% of sales revenue.
Ongoing and startup costs	under $150,000 (may vary depending on the opening of your dispensary)

Important: Keep in mind that capitalization needs and indirect costs may arise while starting a business. Marijuana Business News reports that these prices vary from $43,900 to $135,000.

Resources for Potential Entrepreneurs in Washington

Additional Resources and Links for Opening a Dispensary in Washington

Rules and regulations regarding Washington cannabis companies are quite rigid and keep changing. Here are a few official links that’ll help you stay updated:

FAQs

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

The licensing cost is less than $1,500, while the application fee is merely $250. Other startup costs may vary depending on when your dispensary is ready to launch because the market is expanding rapidly. To start a dispensary in Washington State, budget at least $150,000.

What Are the Location Requirements for a Dispensary?

The distance between your cannabis business and any elementary or secondary school, playground, recreation area, daycare facility, public park, public transportation hub, library, or gaming arcade must be at least 1000 feet.

What Types of Insurance Policies Are Required for a Dispensary?

Washington requires you to have commercial general liability insurance from an insurance provider with a rating of at least A—Class VII. All of your general liability, umbrella, and excess insurance plans must include the WSLCB as an extra insured.

How Long Does It Take To Obtain a Dispensary License?

Applications must be processed and filled out within 60 days, with a 30-day maximum buildout period. Applications for cannabis revisions and new transportation licenses must be filed 90 days before the projected completion date. Overall it takes a few months to one year.

What Are the Regulations for Advertising a Dispensary?

In the state of Washington, none of the cannabis advertising or product labeling for edibles or anything infused with cannabis is allowed to make any claim or use an image that:

Is false or misleading;
Favors excessive consumption;
Demonstrates that using cannabis has medicinal or healing benefits;

Can I Have More Than One Dispensary Location?

In Washington, DC, neither a person nor a business may operate more than one cannabis dispensary. Each applicant may only own and run one dispensary location as per the District of Columbia’s existing laws.

In a Nutshell

Washington State legalized marijuana for use by adults ten years ago. Since then, the sector has had success; however, not for everyone.

It could be difficult to gather the required documentation and confirm that you have complied with all legal requirements due to Washington’s rigorous supervision of the cannabis industry.

Our team of experts will give you all the necessary information for the cannabis business in Washington so that it’s simple for you to break into this intricate industry and maintain compliance with state regulations simultaneously.

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