How to
Open a Cannabis Dispensary

A step by step guide to cannabis retail.

There has been an explosion in Cannabis dispensaries opening across North America as over 95% of the U.S. population lives in an area where marijuana is legal to some degree, while Canada federally legalized recreational cannabis in 2018.

In this How to Open a Dispensary guide, we’ll walk you through the entire process of opening a dispensary step by step — we’ll cover everything from obtaining your initial funds to applying for your legal dispensary license, all the way through to opening your doors for business.

1. Research and Planning

Dispensary Research and Planning

Research and planning is critical before you even begin the process of writing your business plan and applying for a dispensary license. Most states and provinces actively maintain a checklist of sorts on their official websites that breaks down how the application process works, which you’ll want to look at in detail.

Generally speaking, however, the four areas you need to research and create a plan for are:

  • Local laws and regulations
  • Location
  • License
  • Financing

Local laws and regulations

Be sure to research your local laws and regulations, as we know that important details will vary from one state and province to the next, and local city bylaws can have a significant impact on your dispensary. Compliance will be a common theme throughout your planning and understanding the local laws and regulations will help set you up for success.


In most jurisdictions, in order to even fill out the paperwork related to your license application you’ll need to have a prospective physical location for the dispensary already secured. This means you’ll need to research the various municipalities you are considering operating in, paying particular attention to local demographics and possibly additional hurdles when it comes to compliance at the local level.

Section 6 of our guide is dedicated specifically to the challenges associated with finding the ideal location for your dispensary and addresses all the major considerations involved in greater detail.


Ultimately, not getting a license means not a dispensary, so this is an excellent place to begin your research. We recommend working with an attorney and performing an in-depth study of all federal, state, and municipal laws, along with licensing requirements. There are some helpful FAQ pages that cover cannabis laws and licensing in Canada, and the states of California, Colorado, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Oklahoma, Washington, and Alaska, with links to the official cannabis website portals. The two most important things to look out for are “must haves” and “red flags”; ‘must haves’ being requirements you must satisfy in order to obtain the license (such as residency, etc.), and ‘red flags’ being items which can cause an instant rejection of your application (such as possession of a criminal record).


Simply put, we know no bank is going to approve a business loan to open a cannabis dispensary. You can’t go to the Small Business Administration (SBA) either, since cannabis is still illegal under federal law. That means the two primary sources of funding and capital for most small businesses just aren’t available for dispensaries. Consequently, you’re going to have to put some additional work into coming up with a plan to raise the initial capital you will require; this may mean a significant personal investment, or bringing in other investors. Be mindful that in most states, even simple financial investors in any cannabis-related enterprise may also have additional legal compliance hurdles to deal with.

2. Estimating Dispensary Costs

Estimating Dispensary Cost

In terms of total cost, while no two dispensaries are created equal, you’re probably not going to be able to realistically make a go of things in any location with less than $150k, and in states with extensive capital requirements, you could easily need upwards of $2m or more.

Additionally, keep in mind that as a cannabis dispensary you are likely going to pay a significant premium over the regular market rate for all sorts of products and services. Sometimes this is because some entities don’t want to be involved with those in the cannabis industry at all, such as financial institutions. Other times this is because servicing your dispensary will require specialized knowledge above and beyond what a normal professional might know; for example, you’ll want legal and financial advisors that have cannabis-specific expertise.

Our, How Much Does it Cost to Open a Cannabis Dispensary, article provides a more detailed look at the costs involved in starting a dispensary but the major categories of dispensary startup costs for the average dispensary include the following:

  • Application & Dispensary Licensing Costs: $5k–$30k
  • Real Estate Costs: $25k–$100k annually
  • Financial Service Costs: $1–2k per month
  • Professional Fees: $50K
  • Personnel Costs: $250K annually
  • Capital Investments: $25k–$50k
  • Advertising/Marketing Costs: $25k–$100k
  • Product Costs: $1,300/lb–$1,500/lb
  • Capitalization Requirements: $50k–$300k

3. Writing Your Cannabis Dispensary Business Plan

Writing a Cannabis Business Plan

Your dispensary business plan is by far the most important document that you will need to draft; you will use it to help secure financing, and to demonstrate to the authorities that your operations plan satisfies their legal requirements, among other things. Your plan will cover finding and developing the location you intend to use, how you source your flower, the operations of your dispensary, your financing, how you intend to handle security, your planned contributions to the community such as a commitment to hire locally, wages to be paid, and all other essential strategic elements.

You may want to consider hiring a professional consultant to help you develop your business plan. In the next section, we’ll take a closer look at the individual components of a good dispensary business plan.

To keep things simple, we’ve identified five critical areas of focus that your plan should address:

  • Opportunity
  • Execution
  • Company
  • Financial Plan
  • Compliance & Security

For more detailed information on the business plan and these five critical areas, check out our article, How to Write a Cannabis Business Plan.

4. Applying for a Dispensary License


The steps for applying for a dispensary license are:

1. Research your state or province’s procedures

The first part of the licensing process is always researching your cannabis license procedures online. An overview of state regulations, including licensing requirements and links to relevant government websites can be found on our Cannabis Laws page.

2. Identify potential red flags

Next, you’ll want to check to see if there are any potential red flags within your business plan that may cause your dispensary application to be denied outright—these can include not meeting age or residency requirements or previous criminal convictions.

3. Complete all required paperwork and gather supporting documents

The next step in the process is actually filling out all of the forms and applications the state requires. This is usually fairly straightforward; ensure you are open and honest to the best of your ability, and double-check that you have every one of the required elements of the application. If you are in the US, this will include obtaining a FEIN from the IRS, along with your tax number and any required documentation relevant to your choice of corporate structure.

4. Investigation and consultation with the state licensing board or agency

Next, you’ll wait while the state licensing authority investigates your application and performs its due diligence. If any problems are turned up during the investigative portion of the process, the applicant will typically be notified and given an opportunity to respond.

After the investigation is complete, most states will then schedule an in-person consultation between the prospective owners and the licensing board. Everyone will have to attend, and assuming your application is approved, you will typically be expected to render payment at this time. There may be additional elements of legal compliance after initial approval as well, such as fingerprinting.

5. Complete any local licensing dispensary requirements

After the state/province approves your license, you may also be required to seek additional approval at the local level. Work with the specific municipality to ensure your licensed dispensary is fully compliant on the local level, as well as at state level. Local applications can often end up taking longer to process than state ones, so be sure to account for any extra time needed.

Licensing & Application Must-Haves

  • Business Plan - You aren’t getting anywhere without one.
  • Financing/Proof of Capitalization - Be able to clearly demonstrate possession of the appropriate amount of capital to the licensing authority. Application & dispensary licensing can costs from $5k to $30k
  • Full Team List - For background checks and fingerprinting purposes.
  • Location - Make sure your selected location is fully compliant with all state laws.
  • Security & Surveillance - Having a finalized security plan for your facility is a critical part of the licensing progress.

Additional Considerations for Licensing & Applications

Along with the must-haves, here’s two additional considerations that can boost your application.

1. Social Equity Programs

Many states are implementing cannabis social equity and diversity programs aimed at providing opportunities for individuals from communities disproportionately affected by the War on Drugs. These programs may offer benefits or advantages during the licensing process to applicants who meet specific criteria.

2. Sustainability and Environmental Practices

Sustainability and environmental practices are becoming increasingly important in the cannabis industry. Consider implementing environmentally friendly practices in your business, which may enhance your application and appeal to eco-conscious consumers.

5. Securing Financing and Funding


In terms of total cost, while no two dispensaries are created equal, you’re probably not going to be able to realistically start and run a cannabis dispensary in any location with less than $150k, and in states with extensive capital requirements, you could easily need upwards of $2m or more.

Now that we have some ballpark cost figures in hand, we’re going to discuss a few potential ways you can raise the capital to cover them.

Cannabusiness Funding Options

1. Self-Funding

Probably the most popular option for entrepreneurs in any industry. Especially important in the cannabis industry, due to the difficulty of securing financing from traditional channels.

2. Friends & Family

Another popular option for entrepreneurs in all industries, but again even more popular in canna-business. When banks won’t easily lend, funds have to be raised somewhere.

3. Business Loans

Until cannabis banking reform passes, no major U.S. bank will loan money to fund a cannabis dispensary. But it is now possible to get a loan through a credit union or cannabis-specific bank. In Canada, traditional banks such as BMO and TD will issue a bank loan for a dispensary, and cannabis entrepreneurs are now eligible for funding from the Business Development Bank of Canada.

4. Partners

With no shortage of people looking to break into the cannabis industry, there are likely several potentially compatible parties that may be interested in developing a partnership. Not only is this a great potential source of investment capital, but their skill sets can often supplement yours as well.

5. Cannabis-specific Investment Groups

In the private market, there are investors eagerly looking to support marijuana-specific businesses and operations. This group is only expected to grow as legalization takes hold across the states. While these types of investors make finding funding more feasible, understand that these financiers often lend at higher interest rates, for short-term periods, and sometimes come under the condition of “convertible debt,” where the lender can convert a loan into an equity stake in the company.

Check out companies like:

6. Capital Brokers

Getting in touch with a capital broker specializing in the cannabis industry is another fantastic way to find investors. It’s their job to locate and qualify potential investors from all over the world who are looking to invest in marijuana.

Securing funding for a marijuana dispensary was initially harder than raising funds for nearly any other traditional type of business. Still, the past few years have demonstrated the potential for profit, and changed the minds of many investors and financial institutions. The COVID-19 pandemic has only accelerated the shift in confidence, with cannabis businesses being deemed essential, and the industry showing resilience in the face of recession. It’s inspiring many investors to adjust their policies and get into the game. However, you need to realize that money comes at a cost, which very often ends up being an ownership stake.

Watch for even more changes over the next several years, including the potential entrance of major financial institutions into the market, once some of the legal questions hanging over the industry have been adequately resolved.

Read more about some innovative funding solutions here.

6. Finding the Ideal Location


Before you fill out a single form or consider a single location, you first need to check that cannabis retail and/or dispensary licenses are currently being issued in your state. Many states have put a cap on the number of available retail licenses, while others only accept new dispensary applications during specified windows or when patient rolls reach a certain level.

A quick search for your state’s cannabis regulatory agency should reveal whether applying for a retail license is even an option for you at this time.

New Market Dispensary Location Guide

1. Ensure legality in your proposed location

The next thing to consider is that although cannabis may be legal in your state, that doesn’t necessarily mean it’s legal where you live — or where you want to establish your retail business. Most states that have legalized cannabis have left it up to local governments, either at the county or municipal level, to decide whether they’ll allow cannabis businesses to operate within their jurisdictions.

So, if you’re planning on launching a cannabis retail store, you’ll need to verify that it’s allowed in the county, city, or town in which you want to do business.

2. Learn your local zoning code

Once you’ve verified license availability and business opportunity, the hunt is on for your perfect dispensary location. The best place to begin your search is your local jurisdiction’s zoning code, which you should be able to find through your county, city, or town’s planning and zoning department.

The zoning code will show you the areas that are designated for specific uses, such as commercial, industrial, residential, and so on. This will help you focus your location search by showing you exactly where a cannabis business can legally be located in your jurisdiction.

3. Conduct market research

Market research includes answering questions like: Which areas are closest to or most easily accessible by your target customer base? Is the community in which you’re looking cannabis-friendly, or would opening a dispensary be considered a blight by the locals? This research will help you further narrow your search as you hone in on the perfect location.

4. Level with your landlord

Unless you have the capital to purchase or build, chances are you’ll be renting or leasing a commercial location for your dispensary. And, just because cannabis is legal in your state and jurisdiction, that doesn’t mean your potential landlord is necessarily OK with a cannabis business operating on their property.

It’s important to be straightforward with your potential landlord about your intention to run a cannabis retail shop. The last thing you want is to sign a contract only to find out that he or she is opposed to the idea, for whatever reason.

5. State-Specific Dispensary Location Requirements

Of course, each state has specific guidelines regarding exactly where a cannabis retail store may be located. Again, you’ll want to double-check your local ordinances as well, as they may have additional requirements or restrictions.

Below are the state-level dispensary location requirements for three of the newest U.S. cannabis markets.

Where Can a Cannabis Dispensary be Located in Missouri?

Missouri’s medical marijuana law states that dispensaries may not be located within 1,000 feet of an elementary or secondary school, daycare, or church. However, local governments may increase or decrease the allowed proximities to schools, daycares, and churches.

Where Can a Cannabis Dispensary be Located in Michigan?

Under Michigan law, cannabis retail businesses may not be located in areas zoned exclusively for residential use or within 1,000 feet of any school for grades K-12. Local municipalities are allowed to reduce the distance requirement or impose additional location requirements for cannabis retailers.

Where Can a Cannabis Dispensary be Located in Illinois?

The dispensary laws in Illinois are a little different. The state government opted to divide the available cannabis retail licenses between the 17 regions identified by the Bureau of Labor Statistics (BLS). This means that you must locate your dispensary within the BLS region noted on your cannabis retail license application.

Once you’ve been approved for a retail license, you will have 180 days to find a location for your dispensary. The location must:

  • Be suitable for public access
  • Have a layout that promotes the safe dispensing of cannabis
  • Be sufficient in size, power allocation, lighting, and parking
  • Have handicapped accessible parking spaces, entry, and exits as required by the Americans with Disabilities Act
  • Have sufficient room for product handling and storage
  • Not be located within 1,500 feet of another cannabis retail location

7. Building Your Dream Team


When it comes to the personnel you’ll need to open and run a successful cannabis retail store, they can be broken down into two groups: professional services, and your day-to-day staff.

4 Key Dispensary Consultants For Cannabis Retailers:

1. Legal Advice

Probably the single most important relationship a cannabis entrepreneur has is with their attorney. There are two specific areas of legal expertise you’ll want covered. First, you need to have access to someone familiar with the licensing, application, and compliance processes of your province. Next, you’ll want to make sure you’ve got the best representation possible, just in case something ever goes wrong.

2. CPA

Few would argue that the relationship with your accountant is only slightly less important than that with your lawyer. Staying on top of your taxes and understanding everything you are responsible for from an accounting point of view is critical. Accounting is one place where expertise can be invaluable.

3. Compliance Officer

Every province has created its own system of regulation and compliance. A full-time compliance officer should definitely be one of the very first hires you consider. They will help you manage and document all aspects of your business, as well as handle any administrative reporting mandated by the province. Most retailers will train their office manager into this role over time, though during startup you may require additional assistance from someone with more experience.

4. Security Consultant

Most provinces require you to detail your adherence to their security and surveillance guidelines as part of the licensing and application process, so you’ll want to begin working with someone to help you design your security system as soon as possible. You’re going to need a 24/7/365 security presence including live personnel, transport planning, alarms, cameras, and recording equipment at the bare minimum.

Now let’s take a look at the basic categories of employees you’ll need to hire as day-to-day staff.

4 Key Dispensary Employees for Cannabis Retailers:

1. Security Officers

While not legally mandated in every state/province, it is still a very good idea to consider hiring well-trained security personnel to protect your operation from theft and other issues. Cannabis retailers are attractive targets for both employee theft as well as outside criminal activity, and you need to protect yourself against both.

2. Budtenders

Your budtenders are the front-line troops of your retail store; their performance can literally make or break you. Mistakes like selling to an underage customer can quickly result in the loss of your license, so make sure to train them extensively. They should also be trained to function as real ambassadors for your brand — empower them with information to help customers select the best strains of flower for their needs, and educate them as much as possible. Think of them like waiters in a restaurant: no matter how good your product is, their performance is going to define your customer experience to most visitors.

3. Inventory Manager

With so much riding on the accuracy of your inventory, it’s critical to hire a dedicated inventory manager whose sole job is to conduct daily inventory audits and reconciliations and handle any inventory reports or inspections by governing or regulating agencies. With so much riding on the accuracy of your inventory, it’s critical to hire a dedicated inventory manager whose sole job is to conduct daily inventory audits and reconciliations and handle any inventory reports or inspections by governing or regulating agencies. Your inventory manager should monitor stock level and ensure popular products are on the shelf and ready to sell. Beyond organizational skills and attention to detail, your inventory manager should also possess good communication skills, since they’ll also manage the relationship with your suppliers.

4. Store Management

Perhaps most importantly of all, you’ll need to retain an experienced retail store manager. This person can assist you during the initial set-up of the store, advise on best practices, help evaluate suppliers, recommend potential employees, and provide a great deal of general assistance in running your storefront — they can even be empowered as a secondary point of contact for regulatory and law enforcement agencies. An Inventory Manager is also usually a smart idea; in smaller operations, this function is usually filled by the Store Manager, but larger stores often employ a separate person specifically for this purpose.

8. Designing Your Dispensary Experience


Designing your cannabis retail experience goes beyond your physical blueprint. It includes how you create your brand and shape your customer experience. Bringing in an architect and interior designer to consult with you on the final design, aesthetic, and layout of your dispensary is smart; cannabis stores have unique features that differ from other retail operations, so configuring your space to deal with these ahead of time will increase your efficiency and save funds in the long run. An experienced professional can help, but you need to supply the vision. Here are the most important factors you should consider related to your overall design:

  • Public versus Private Space
  • Medical versus Recreational
  • Traffic Flow Patterns
  • Décor & Aesthetic

For more detailed information on the business plan and these five critical areas, check out our article, Cannabis Dispensary Design Best Practices and Examples.

How To Create A Brand Experience

A final and vital consideration for your store is what really defines your brand—the type of experience you want to deliver. The 3 key areas in which dispensary owners should focus their efforts when creating a memorable cannabis shopping experience for customers are:

1. Create a Great Atmosphere

Long gone are the days of the classic headshop where a little incense and some Bob Marley were all that was needed to create a vibe. Now, every decision a cannabis retail owner makes – from the way the shop is decorated and organized, to how staff engages with customers – ultimately helps shape an atmosphere that must be able to appeal to clients while also staying authentic to your brand.

2. Use Technology to Streamline Your Operations

Slower processes mean your clients are spending more time in line than they are perusing the merchandise or being served by staff. A good quality POS system helps nurture a pleasant shopping experience by enabling your shop to run more smoothly. The right cannabis POS solution puts product and consumer information at every budtender’s fingertips – no need to rely on a single terminal or overstuffed binder to access strain details or a client’s order history. And your dispensary’s POS software is only the beginning; there are plenty of tools that can help your staff address customers’ needs quickly and accurately.

3. Provide Stellar Customer Service

Customer service is critical to the success of any retail operation. Cannabis retailers have a little more to contend with than operators in traditional industries because there’s a huge educational component. When it comes to customer service, retail owners also have to be prepared for anything. Dispensaries are already major focal points in their communities because of the industry’s prohibition history and the nature of the products being sold. Making sure staff is skilled enough to clarify misinformation, serve impatient customers, or deal with intoxicated clients as professionally as possible helps demonstrate your shop’s ongoing commitment to customer service.

Read more about how to create great experiences in every touchpoint in this article.

Product Merchandising

Strategically merchandising your cannabis product not only enhances the dispensary customer experience but also maximizes sales. Thanks to consumer psychology studies, we know that your dispensary sales floor layout and product arrangement have a definite impact on your bottom line. It makes sense – customers traversing a store that is cluttered and unorganized are unlikely to have a great shopping experience. And if they can’t find what they’re looking for, well, they’re probably going to go elsewhere.

Follow these simple principles of dispensary merchandising and see how your customers respond – they just may thank you by becoming loyal shoppers.

9. Choosing the Right Dispensary Technology


The average cannabis shop is a far more complex retail environment than you might think. Not only do you face the same performance burdens as other businesses, but you have to deal with significant legal and compliance requirements. Choosing the right technology infrastructure for your store can go a long way toward mitigating these challenges. At a very basic level, you’ll need a Wi-Fi network, computer, and POS and Inventory management system to run your store. To make sure that customers can find you, you’ll also need a website and if you want to offer the ability to order online, deliver, and display live menus, you would need an eCommerce website. For more details about the technology you need when you open a retail dispensary, you can read more here.

Whether you start with just the essential technology, such as a POS or inventory management system, or opt for a full retail ecosystem (CRM, ERP, HR, Menu Boards, etc), here are the key areas of consideration:


The number one concern for retailers is ensuring they always stay 100% compliant with federal, provincial, and local regulations. A cannabis retail POS can help you accomplish this by preventing your budtenders from making sales outside store hours, helping them monitor daily sales limits and inventory levels, and storing your reporting data according to requirements. It backs this up with a robust reporting suite that includes the ability to run a full audit history on your business at any time.


The overall reliability of your technical infrastructure is another primary concern for retail owners. A system crash can quickly land you out of compliance when it comes to regulations, disrupt your supply chain, and end up costing you thousands of dollars in lost sales — and unfortunately, many operators learned this the hard way when one of the biggest cannabis tech companies suffered a service disruption, leaving their clients to either suspend business altogether or record sales by hand. Invest in a solution that can document its uptime, has numerous redundancies, a sophisticated cloud-based data repository, and an offline processing mode, and you will be fully prepared to continue operations even on your busiest days or while dealing with technical issues.

Improved Retail Experience

With the average lifetime value of a retail customer being so high, it only makes sense to do as much as you can to improve the customer experience your store offers. An integrated POS that provides product details at the touch of a button can turn all of your budtenders into experts to help guide customers through their purchasing journey – customers return to stores they trust. You can also build brand recognition and loyalty by allowing customers to order online and pick up the product in-store or using a tool such as an interactive app that allows customers to learn about the product at their own pace, along with digital signage and menus that help improve and streamline the retail experience for users. You can read our case study here about a successful retailer’s vision for a unique customer experience.

Ease of Use

Software can often create more problems than it solves. Dealing with a heavier burden when it comes to training time for your staff (particularly important given the relatively high turnover in the industry), and the increased human error that results from using an overly complex technology platform will definitely impact your profit margins and slow down your sales times. A POS designed specifically for dispensaries can help alleviate these issues, allowing you to sell more products in less time.

Computers & Other Digital Equipment

Finally, you’re going to need to evaluate your need for computer equipment throughout your operation. At the bare minimum, you’ll need one set up at reception for processing intake, and one in the back for tracking inventory. You may choose to supplement this with tablet devices for a self-serve experience, and you’ll also need a variety of accessories, such as barcode scanners and receipt printers.


You’ll definitely need to set up Wi-Fi at your store, and you’ll also need a point-of-sale system to complete and track all your transactions, manage your inventory, and keep your data safe and secure for reporting purposes.

Data Privacy

Regulators take the security and privacy of consumer data very seriously. In Canada, you’ll want to ensure that your system is fully compliant with the requirements of PIPEDA — the Personal Information Protection and Electronic Documents Act. Of chief concern here is your customers’ personal information, such as their names, ages, and ID numbers. U.S. regulations can differ from state to state but consistently require you to use a system that keeps personal data secure.

Having the right technology in your store can significantly improve efficiency and increase profits. It also requires a lot of investment, so it pays to get it right the first time.

10. Creating a Dispensary Security Plan


The primary purpose of a cannabis dispensary security plan (DSP) is to provide a safe and secure environment for the store’s employees, customers, and visitors while abiding by all legal requirements. Let’s take a look at the three most important components of any retail shop security plan.

Dispensary Security Plan Considerations

1. Facility Security

The physical site security of a cannabis retail store is typically composed of a camera system, an alarm system, and an access control system, bolstered with active security personnel. You’ll also need a system to archive and store your security system footage for the appropriate period mandated by law. You may want to consider hiring an external security service to monitor your alarms and handle the camera footage storage requirements.

When evaluating surveillance system providers, check out A Complete Guide to Cannibis Dispensary Security Systems.

Download a Free Operations & Security Plan Template

2. Product Security

Securing both your cannabis and your cash receipts is another primary concern for retailers. You’re going to need a ton of locked safes and secure product storage. You’ll want to have a main vault for flower storage, and controlled security cases for areas where it is displayed to help prevent shoplifting by overly curious customers. Consider investing in shatter-resistant glass as well. To handle your cash, you’ll want at least one more heavy-duty safe. At the end of the day, your entire stock of cannabis, edibles, concentrates, seeds, and everything else you offer must come off the floor and into a locked space (double-check that you’ve designed your safe room with adequate space to accommodate this). Consider segregating employee access based on job duties; budtenders don’t need to do anything with cash other than receive it, so they don’t need safe access. On the other hand, your bookkeeper does need safe access but does not need access to the inventory or product storage areas of your facility.

Learn some useful tips to detect and prevent theft and fraud in a cannabis dispensary.

3. Policies & Procedures

Developing a comprehensive set of security-related policies and procedures to follow is of critical importance for cannabis business retailers. All employees should receive extensive training in this regard. The most important thing to develop is an extensive auditing procedure that can track and account for every gram of cannabis that passes through your facility and tie it either directly to inventory or to a receipt. Usually, retailers will audit their sales floor inventory on a daily basis, supplemented with a whole-store check once per month or so. Work with your attorney and security consultant to flesh out these documents and ensure your security operations are in compliance with all laws for your state/province and municipality.

11. Sourcing Your Cannabis Flower


Sourcing cannabis in Canada and in the United States are slightly different processes. In Canada, you can generally only purchase cannabis wholesale from the provincial government, which distributes products sourced from licensed producers. In the United States, some regions allow retailers to have vertically integrated operations and grow their own products. Below, we’ll explain the differences in more detail by country and province.

Sourcing Your Cannabis in the US

In the US, options for dispensaries largely boil down to one of two: either grow your own flower or purchase it from an authorized supplier. For the most part, recreational dispensaries tend not to grow their own flower, while it is more common in the medical arena (and actually mandated in some states, like Colorado). However, even stores that do host their own grow operations will not be able to grow all the strains they would like to sell or even all of the most popular strains – meaning virtually all dispensaries turn to licensed growers at some point. Here’s some of the considerations you should keep in mind when selecting the right choice for your operation:

Extracts, Concentrates, and Edibles

While cannabis flower prices are up and overall firm (though fluctuating in certain markets) as mentioned earlier, profit margins on extracts, concentrates, & edibles have actually slightly risen in recent years, making them attractive offerings for dispensaries. Manufacturing these products yourself is probably out of reach for most dispensaries, due to prohibitive cost. Flower prices tend to fluctuate throughout the year; in some states like Colorado, they actually set average marker prices on a bi-annual basis in order to properly set the rate of excise tax on wholesale orders.

Buying Wholesale

In some ways, vertical integration makes sense; however, it also precludes specialization to some extent – the best cannabis salespeople probably aren’t the best cannabis growers. Growing also takes things to a whole new level financially – it is usually a million-dollar-plus endeavor, which is out of reach for many operations, making wholesale purchasing even more attractive. When the time comes to evaluate potential providers, look for wholesalers with an established reputation in the industry, and those who grow the specific strains you’re most interested in marketing. You’ll also want to verify that they can produce the quantities you’ll need and that they are in good standing as far as their own licensing status with the state.

Legal Considerations

In some states, dispensaries are expressly prohibited from being involved in cultivation. In others, they are highly encouraged to do so. In Colorado, all medical dispensary owners must grow at least 70% of their on-hand inventory. The list of approved cultivators is usually publically available with a quick search.

In-house Expertise

If you’re interested and able to cultivate your own flower, you’ll also want to honestly consider whether you have the expertise to do so cost-effectively. Commercial-scale cultivation of cannabis requires a very specific skill set, which may require hiring new staff you did not originally anticipate. Errors or mistakes during the cultivation process can result in the loss of entire crops of cannabis, causing substantial expense, not to mention severe disruptions to your supply chain.

Sourcing Cannabis in Canada

In all provinces except Saskatchewan, the wholesale and distribution of non-medical cannabis is government-operated. Most provinces have modified the purview of their liquor and gaming authorities to include cannabis, and they work directly with licensed producers to procure the supply for retailers. Here is a breakdown of each province’s supply chain:

British Columbia

In BC, licensed retailers order cannabis products for their stores from the Liquor Distribution Branch.


The Alberta Gaming and Liquor Commission (AGLC) buys products from federally licensed producers and distributes them to licensed private retailers.


Saskatchewan is the only province in which retailers may purchase cannabis products directly from licensed producers or other retailers. You may also purchase directly from permitted wholesalers, retailers, and licensed producers from other provinces, so long as they are registered with the Saskatchewan Liquor and Gaming Authority and the product has a Saskatchewan excise stamp.


Manitoba retailers purchase products directly from the Manitoba Liquor and Lotteries Corporation.


The Ontario Cannabis Store Wholesale is the exclusive distributor of recreational cannabis to licensed retailers in the province.

Newfoundland and Labrador

CannabisNL, a division of the Newfoundland and Labrador Liquor Corporation (NLC) is responsible for regulating the possession, sale, and delivery of non-medical cannabis. They buy from licensed producers and are the sole seller of cannabis online in the province, and wholesale distributor to private retailers.

Get the Latest Updates from Cova

Get updates & insights on cannabis retail regulations, trends, and technology.