How to Open a Dispensary in Michigan – 2024 Guide

Over the years, various states in the U.S. saw a dramatic shift in common perceptions and laws surrounding cannabis growth and consumption. The state allows for medical and adult-use cannabis sales today and has a growing cannabis market.

Note: In Michigan law, “marihuana” is the preferred spelling, but both “marijuana” and “marihuana” are acceptable. The spelling of “marijuana” has a long history in the U.S. For Michigan, this started from the spelling chosen for the Marihuana Tax Act of 1937. The state adopted the federal spelling “marihuana” in the Public Health Code’s statutory definition of the drug.

History of Cannabis Legalization in Michigan

Michigan legalized medical cannabis in 2008 with the passage of the Michigan Medical Marihuana Act. This program allowed professional caregivers and patients to grow twelve cannabis plants on their properties.

Eight years later, the state expanded this program, allowing residents to set up dispensaries and sell to MMJ (medical marijuana) patients, i.e., restricted to medical use only.

Soon after, the state legalized adult-use cannabis with the Michigan Regulation and Taxation of Marihuana Act in 2018 after a decisive victory at the polls. This legalization made Michigan the 10th U.S. state and the first Midwest state to legalize recreational cannabis usage.

The Act also established a financial framework for marijuana sales, adding a 10% excise tax to Michigan’s 6% sales tax. Cannabis sellers started selling to the general public in December 2019 after the legalization took effect in December 2018.

Current State of the Cannabis Market in Michigan

In 2022, Michigan achieved $128 million in annual recreational sales. The state displayed further promise in overall sales, with its marijuana stores generating over $200 million in February 2023 alone.

Michigan’s rapidly growing cannabis market reached a milestone of $3 billion in total sales for 2023, surpassing the projected goal of 2024. As of 2023, the state has over 2,170 licensed cannabis businesses in the adult-use market with most being growers. This also includes 751 licensed retailers, 250 processors, 46 marijuana event organizers, seven microbusinesses, and two designated consumption establishments.

In addition to the growth in sales and licensing, several key trends are shaping Michigan’s cannabis market:

• Sustained growth of adult-use cannabis sales
• Emergence of cannabis tourism
• Growing interest in CBD products and other non-psychoactive cannabinoids

The passage of the SAFER Banking Act by the Senate raises hopes that it will establish safe havens for banks operating in the marijuana industry. This legislation aims to grant legal cannabis businesses access to vital banking services, including bank accounts, credit cards, and checks. It seeks to minimize the risk for financial institutions, lenders, insurers, and others providing services to the industry by protecting them from penalties, despite federal restrictions on cannabis. While the problem isn’t specific to Michigan, it restricts businesses from accessing mainstream banking, which is noteworthy.

Social Equity Programs for Cannabis in Michigan

Michigan’s Social Equity Program is available under the Michigan Regulation and Taxation of Marihuana Act (MRTMA). This program aims to encourage people from communities that have been disproportionately impacted by marijuana prohibition and enforcement to participate in the state’s growing cannabis industry.

Under the overarching social equity program, Michigan also has the Joint Ventures Pathway Program (JVPP) and the Social Equity Grant Program.

The JVPP connects eligible social equity participants with adult-use licensees, potential adult-use licensees, and businesses that wish to work with social equity participants interested in pursuing partnerships. This includes joint business ventures, mentorships, incubator programs, and employment.

The Social Equity Grant Program, on the other hand, provides financial support to social equity businesses. The program funds may only be spent in one or more of the following:

• Employee education: An employee of an entity may take one or more classes or courses relevant to the business from an accredited institution.
• Business needs: The grant may be used towards compliance with licensing and regulatory requirements.
• Community investment: Funds spent on this area may be used to donate to organizations, non-profits, and/or charities that positively impact the community the entity is located.

To qualify for the Social Equity Grant Program, an entity must meet the following criteria: it should hold a valid adult-use license, have social equity program participants who own more than 50% of the business, and be a certified participant in the Cannabis Regulatory Agency’s (CRA) Social Equity All-Star Program.

The CRA encourages licensees to be proactive in their diversity, equity, and inclusion initiatives. By meeting the Social Equity Grant Program criteria, adult-use licensees not only qualify for the grant but are also eligible for recognition in the CRA Social Equity All-Star Program, which has three tiers:

• All-Star Gold Qualifiers
• All-Star Silver Qualifiers
• All-Star Bronze Qualifiers

To learn more about the specific qualifications to meet each of these tiers, check out the CRA’s website.

You can sell both medical and recreational cannabis across Michigan. However, you must apply through the state government for a Medical Marihuana Facilities License through the Department of Licensing and Regulatory Affairs.

There are several types of dispensary licenses for businesses in Michigan. Depending on intended operations and the level of experience you have in the cannabis industry, the following are licenses to consider:

Adult-Use Retailer License

This license allows businesses to sell recreational cannabis to adults 21 years or older. This license allows for the sale of cannabis products and related accessories but may not permit the sale of medical cannabis.

• Initial license fee: $15,000
• Annual renewal fee: $15,000

Microbusiness License

This license permits small businesses to cultivate up to 150 cannabis plants, process cannabis into products, and sell those to adults 21 or older.

This license allows for vertical integration, allowing the business to handle every process stage, from cultivation to sale.

• Initial license fee: $8,300 to $18,600
• Annual renewal fee: $8,300 to $18,600

Designated Consumption Establishment License

This license legalizes businesses that want to provide a space for adults 21 years or older to consume cannabis products on-site.

• Initial license fee: $1,000
• Annual renewal fee: $1,000

Event Organizer License

This license allows businesses to host events where cannabis products are consumed on-site.

• Initial license fee: $1,000
• Annual renewal fee: $1,000

Other License Types

• Marihuana Secure Transporter
• Marihuana Safety Compliance Facility
• Class A,B,C Marihuana Growers

Check out the CRA’s website for the full list of licenses and their corresponding fees. Keep in mind there is a non-refundable $3,000 application fee for prequalification, and costs may vary based on the size and location of your business. Additionally, some Michigan communities prohibit the sale of cannabis, so it’s best to consult someone with specialized cannabis knowledge before moving forward.

Acquiring a cannabis business license in Michigan may be daunting but it’s a lucrative opportunity. Let’s briefly understand the application process for a dispensary license in Michigan in 2024.

Application Process

The application process for a dispensary license requires several steps and documents which are discussed below:

1. Determine eligibility: Applicants aged 21 or more are eligible. The person must be a Michigan resident or represented by an agent who is.
2. Step 1 – Prequalification: Before applying for a license, applicants must submit a prequalification application, which includes criminal history, financial information, and other relevant information. The cost for this application is $3000 (non-refundable).
3. Step 2 – Application: Once qualified, you can apply for the specific license and pay the corresponding application fee.
4. Review and investigation: The Michigan Department of Licensing and Regulatory Affairs will review the application and investigate to determine if the applicant meets all legal and regulatory requirements. This process includes an inspection by the CRA done within 60 days of submission of a completed application. Applicants are advised not to submit their Step 2 applications unless they are ready to pass all pre-licensure inspections within 60 days.

Required Documentation for a License

The Marihuana licensing process for dispensaries requires several documents including, but not limited to;

1. Attestations

1. a Attestation 2-A – Acknowledgment & Consent to Investigations, Statute & Rule Compliance
2. Attestation 2-B – Interest & Experience Attestation
3. Attestation 2-C – Confirmation of Section 6 Compliance
4. Attestation 2-D – Confirmation of Insurance
5. License Application Acknowledgment of Attestations

2. Business Specifications

1. Copy of Certificate of Use and Occupancy
2. Copy of deed or lease agreement
3. Copy of proof of financial responsibility (e.g., insurance policy)
4. Copy of marijuana business location plan
5. Copy of floor plan
6. Copy of business plan, including (but not limited to), your technology, marketing, staffing, and inventory and recordkeeping plan.
7. DBA documentation (if applicable)
8. Certificate of Assumed Name (if applicable)

Timelines for Obtaining a License

The timeline for obtaining a license varies owing to several factors, including;

• the type of license,
• the completeness of the application,
• The volume of applications being processed.

However, the CRA is required to approve or deny adult-use establishment license applications and issue a license or denial within 90 days of receiving a complete application. Applicants with incomplete applications may expect longer timelines.

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 includes your goals in establishing your business and 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
• 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 Michigan dispensary laws and do not include anything that goes against the rules and regulations.

Types of Financing Available

The general types of financing used by startups throughout the country are;

• Personal savings/investments
• Loans from banks and credit unions
• Private loans from investors or friends and family
• Crowdfunding
• Business grants
• Equity financing

Location Requirements for a Dispensary

Michigan is an “opt-out” state, which means that different districts may deny the presence of provisional centers. Before choosing a location, remember that your chosen area doesn’t fall into this category.

Dispensary locations must also meet certain requirements, including zoning and distance requirements. The location must be at least 1,000 feet from schools and other provisional centers. Last, you can only establish a dispensary in a residential area if the municipality permits you.

Risk Management Plan

An efficient risk management plan can only be obtained from complete market research. You must study the trends in the cannabis industry in Michigan to outline all potential risks and how you can walk your business through those threats.

A risk management plan must also include strategies for managing financial, legal, operational, and regulatory risks. It should also include contingency plans against any unforeseen problems.

However, even with the most thorough planning, some risks can be difficult to predict or control. That’s why having comprehensive cannabis business insurance is crucial. It adds a layer of protection, helping you mitigate the financial impact of unexpected events and ensuring your business remains resilient in the face of challenges.

Insurance Requirements for a Dispensary in Michigan

The Government regulates several businesses to buy specific coverages before they are issued a license or start operating. Common types of insurance that dispensaries may require include:

• General liability insurance
• Product liability insurance(with a min. $100,000 bodily damage)
• Property insurance
• Workers’ compensation insurance
• Cyber liability insurance
• Directors and officers’ liability insurance

Different insurance providers charge various premiums for their coverage. Always buy an insurance policy after you understand the coverage limits. Ask questions, check with multiple insurers to compare quotes, and make an informed decision calibrated to your business!

Costs of Opening and Running a Dispensary in Michigan

License and Permit Fees:

According to the Michigan Department of Licensing and Regulatory Affairs (LARA), the fee for a standard adult-use marijuana retail license is $15,000 while the fee for a microbusiness license can range from $8,300 to $18,600.

However, local municipalities can impose additional fees, which can significantly increase the total cost of the license and permit fees.

Startup Costs:

The total cost of opening a dispensary in Michigan could be between $47,000 and $136,000. This includes real estate, construction, equipment, inventory, marketing, and legal fees.

Ongoing Costs:

The ongoing costs for a dispensary in Michigan can include rent or mortgage payments, utilities, payroll, marketing and advertising, inventory, security, and insurance. The state’s bargain real estate and lower staffing costs help keep ongoing costs between $24,000 and $48,000 monthly. However, this can vary depending on the size and scope of the business.

Taxes and Fees:

Marijuana businesses in Michigan are subject to several taxes and fees, including a 6% sales tax and a 10% excise tax on adult-use sales. Both of these taxes are administered by the Department of Treasury.

• Michigan Small Business Development Center
• Michigan Cannabis Industry Association
• Cannabis Legal Group

Industry Experts in Michigan

• Rick Thompson, Editor-In-Chief of Michigan Cannabis Industries Report
• Barton Morris, Attorney, and Cannabis Law Specialist

What Are the Qualifications for a Dispensary License?

To qualify for an Adult-Use Retail Dispensary license in Michigan, you must be at least 21 years old, a resident of Michigan for at least two years, and have no felony convictions within the past ten years.

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

The cost of a startup and operational costs in Michigan may vary depending on the business size, license type, number of employees, etc. However, it is generally between $47,000-$136,000.

What Are the Location Requirements for a Dispensary?

In Michigan, your dispensary must be located in a district that permits the sale of cannabis. It must also be at least 1000 feet away from another dispensary or a K-12 school. Additionally, you can only open a dispensary in residential areas if you have permission from the municipality.

What Types of Insurance Policies Are Required for a Dispensary?

• General liability insurance
• Product liability insurance with a minimum of $100,000 in bodily damage
• D&O insurance
• Workers’ compensation insurance

How Long Does It Take To Obtain a Dispensary License?

The timeline varies majorly based on how complete your license applications are. However, if your application is complete, you’ll receive an answer from LARA within 90 days.

What Are the Regulations for Advertising a Dispensary?

Dispensaries in Michigan face strict advertising regulations, including restricting advertising to minors, false or misleading advertising, and advertising promoting overconsumption. The state also requires the advertisements to include a disclaimer that the product is for medical or recreational use only and may be harmful in case of overconsumption.

Can I Have More Than One Dispensary Location?

No. The entity applying for the license cannot hold more than one license of the same type. Each entity and individual is only allowed to own all or part of one adult-use retailer, one microbusiness (which typically allows smaller-scale operations), and one consumption establishment (where cannabis can be consumed on-site).

Opening a cannabis dispensary in Michigan presents both challenges and opportunities. While the state’s licensing process may seem complex, the growing market—coupled with supportive social equity programs and clear guidelines—makes Michigan an appealing landscape for entrepreneurs ready to navigate the industry. With careful planning and the right resources, your Michigan dispensary can thrive amidst the state’s expanding cannabis economy.

While you’re at it, look for specialized cannabis insurers, attorneys, and other resources helpful for startups to understand the technicalities of the USA’s booming cannabis industry. Best of luck with your ventures!

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