How to Open a Dispensary in Minnesota

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How to Open a Dispensary in Minnesota in 2024

You must obtain a cannabis retailer license or a medical cannabis retailer license to set up a dispensary in Minnesota. The state’s Office of Cannabis Management (OCM) issues both licenses, but the application window has yet to open. The OCM is expected to develop the regulatory framework for the legal recreational cannabis industry and establish processes and timelines to apply for licenses in the coming months.

Why Open a Dispensary in Minnesota?

The cannabis industry in Minnesota is set for rapid growth due to the recent legalization of adult-use cannabis in the state. The Minnesota Department of Revenue projects approximately $18 million in local and state revenues in 2024 and more than $128 million by 2027.

In addition, the state's medical cannabis program has experienced steady growth since its inception. By the end of 2022, there were 39,577 registered patients in the Minnesota medical cannabis patient registry, an approximate 50-fold increase in the number of patients registered in the program (837) in 2015. Furthermore, according to data from the Minnesota Department of Health, dispensary visits have increased in the past year.

Types of Dispensary Licenses in Minnesota

You can obtain either of the following licenses to open a dispensary in Minnesota:

• Cannabis Retailer License: A cannabis retailer license permits the licensee to purchase cannabis plant parts and cannabis products from licensed cannabis businesses for sale to consumers
• Medical Cannabis Retailer License: A medical cannabis retailer license permits the licensee to buy medical cannabis and medical cannabis products from licensed cannabis businesses in the state and sell these to registered medical cannabis patients at their dispensary location

How to Get a Minnesota Dispensary License

The Office of Cannabis Management will release instructions to apply for dispensary licenses in the coming months. Hence, persons seeking to obtain cannabis licenses must check for updates on the Minnesota cannabis website. Although medical marijuana dispensaries already exist in the state, the OCM plans to establish a new licensing structure for the medical marijuana businesses. Therefore, the new application regulations will impact both the adult-use and medical-use marijuana industry.

Information and Documents Required for a Dispensary License in Minnesota

With the Minnesota Office of Cannabis Management yet to release application guidelines for businesses intending to participate in the cannabis industry in the state, it is not yet clear what sort of documents will be required. However, the following documents and information may be required:

• Proof of business name registration
• Dispensary location description
• Disclosure of ownership and control
• Federal Employer Identification Number

What Plans Do You Need to Open a Dispensary in Minnesota?

Persons and entities looking to open a dispensary in Minnesota will not know the type of plans required for their applications until the Office of Cannabis Management establishes and publishes the application process. However, in accordance with HF 100, the OCM will award points for a dispensary license application in the following categories:

• Environmental plan
• Employee training plan
• Business plan
• Security and recordkeeping plan

Note that a business plan is recommended for all prospective dispensary licensees. A good business plan can help you attract investors to raise funds for your business. It will help you to focus on your goals, mitigate the risks, and track your progress. A business plan should include an executive summary, company descriptions, market analysis, operations plan, marketing and sales plan, and financial projections.

Are There Municipal Requirements for Opening a Cannabis Dispensary in Minnesota?

A municipality may not impose additional licensing requirements beyond those set by the OCM (Office of Cannabis Management). However, the OCM will refer applications to municipalities to verify if the proposed dispensary complies with local zoning regulations and, if applicable, state fire and building codes. Consequently, the OCM cannot issue a license to a cannabis business unless it adheres to local zoning and land use laws.

Furthermore, upon receiving a dispensary license application, the OCM will initiate contact with the municipality where the business intends to operate, giving the city a 30-day window to provide feedback on the application. This allows the municipality to share any pertinent information that may influence the OCM's decision to grant a license, including concerns about the proposed business location or public information about the applicant.

Before commencing retail sales, a dispensary must register with the city where it will be situated. Note that a municipality may, through local ordinance, establish a cap on the number of dispensaries that may operate within its city limits. Under state law, this cap may not fall below one registration for every 12,500 residents within the city's jurisdiction. Furthermore, if a county already maintains one active registration for every 12,500 residents, cities within that county are not allowed to issue additional registrations to cannabis dispensaries.

How Long Does It Take to Get a Minnesota Dispensary License?

According to HF 100, the Office of Cannabis Management will issue a dispensary license or send the applicant a notice of rejection outlining specific reasons that the OCM did not approve the application within 90 days of receiving a completed license application and the results of any required criminal history check.

Where Can You Locate a Cannabis Dispensary in Minnesota?

Although municipalities are not authorized to prohibit the establishment of cannabis dispensaries within their borders, HF 100 allows them to place reasonable restrictions on the time, place, and manner of dispensary business operations within their jurisdictions. Per HF 100, municipalities may prohibit the operation of dispensaries within 1,000 feet of schools, daycare facilities, and certain parks. It is recommended that you consult with local authorities to understand specific restrictions where you intend to set up a dispensary.

Can Licensees Have More Than One Dispensary Location in Minnesota?

Yes, per the statutes of HF 100, a cannabis retail licensee may operate in up to 5 locations in the state.

How Much Does It Cost to Open a Marijuana Dispensary in Minnesota?

The cost of opening a dispensary in Minnesota varies depending on the size of the business and the scope of operations. However, application fees and annual licensing fees are fixed. The following costs are associated with setting up a Minnesota cannabis dispensary:

• Application fee: $2,500 (cannabis retailer) or $250 (medical cannabis retailer)
• Initial license fee: $2,500 (cannabis retailer). No initial license fee is required for a medical cannabis retailer
• License renewal fee: $5,000 (cannabis retailer). No renewal fee is required for medical cannabis retailer
• Startup costs: $150,000 - $2,000,000 (includes legal, real estate, business incorporation, equipment, inventory, and marketing costs)
• Operating costs: $30,000 - $100,000 (includes security, inventory, staffing, POS, insurance, and marketing costs)
• Taxes: 6.875% sales tax, 10% excise tax, and any other local tax imposed by the municipality where the dispensary is located

Do You Need an Insurance Policy for a Cannabis Dispensary in Minnesota?

Since the Minnesota Office of Cannabis Management has not released the final application procedure, it is not yet clear whether specific insurance policies will be required of cannabis businesses. However, it is recommended that dispensaries hold the following:

• General Liability Insurance: This policy protects the dispensary from financial losses that may be due to third-party claims of bodily injury or property damage
• Product Liability Insurance: A product liability insurance protects the dispensary from claims arising from bodily injury or property damage caused by products sold in the store
• Workers' Compensation Insurance: This insurance covers medical expenses and lost wages for dispensary employees injured on the job
• Property Insurance: Property insurance protects businesses from losses caused by fire, theft, and other disasters

How to Get a Grant to Open a Dispensary in Minnesota

The start-up costs for a dispensary, such as costs related to licensing, equipment, inventory, and insurance, can be significant. Therefore, you may need to raise funds to be able to open your dispensary business. A grant or loan can help you cover the start-up costs of your dispensary and reduce your reliance on debt. To raise funds for your business, you may consider any of the following options:

• Self-funding: This involves using your own personal savings and investments to finance your dispensary startup
• Family and friends: You may also be able to raise money from family and friends via gifts and donations
• Equity funding: This involves selling shares of your business to investors in exchange for money. While using this option can help you raise a large amount of funds, it also gives investors a stake in your business
• Crowdfunding: Crowdfunding allows you to raise capital by collecting relatively small amounts of money from several people, typically via online platforms
• Cannabis-specific brokers and lenders: Some lenders specialize in financing cannabis businesses. Applying for a loan from them may be a viable option if you are having difficulty obtaining a loan from traditional lending institutions
• Government programs: Under the Minnesota Social Equity Program, you can obtain startup financing grants for your business if you meet the criteria for inclusion in the program

Does Minnesota Have a Social Equity Program for Cannabis Dispensaries?

Yes. Under HF 100, the State of Minnesota provided for a Social Equity Program to be administered by the Division of Social Equity in the Office of Cannabis Management. The SEP will prioritize applications for cannabis retail licenses from individuals living in low-income areas that have experienced a disproportionate impact from marijuana prohibition and for veterans (military) who lost honorable status due to a cannabis-related crime. The Minnesota SEP also allows persons convicted of cannabis-related offenses before the effective date of the Cannabis SEP legislation.

To qualify as a SEP applicant for a dispensary license, you must fulfill one or more of the following conditions:

• Be convicted of a crime involving the possession or sale of cannabis before May 1, 2023
• Have a parent, guardian, spouse, child, or dependent convicted of a crime involving the sale or possession of cannabis before May 1, 2023
• Be a dependent of an individual convicted of a crime related to the sale or possession of cannabis before May 1, 2023
• Be a service-disabled veteran, former or current member of the National Guard, or any military veteran or former or current member of the National Guard who lost honorable status as a result of an offense related to the sale or possession of marijuana
• Have been a resident for the last 5 years of one or more subareas, including census tracts or neighborhoods, that experienced a disproportionately significant amount of cannabis enforcement as determined by the OCM according to Section 342.04 (b) of HF 100 and reported in the preliminary report, final report, or both
• Be an emerging farmer as defined in Section 17.055 (1) of HF 100
• Have been a resident for the last 5 years of one or more census tracts where, as detailed in the most recently completed decennial census published by the U.S. Bureau of the Census, either:
• The poverty rate was 20% or higher; or
• The median family income was below 80% of the statewide median family (SMF) income or, if in a metropolitan area, did not go higher than the greater of 80% of the SMF income or 80% of the median family income for that area

Note that these qualifications apply to each individual applicant or, if a business entity, every manager, cooperative member or director, and general partner of the business entity

Participants in the Minnesota SEP can enjoy the following benefits:

• Grants of up to $20,000 to pursue a training program suited to a career in the cannabis industry
• Priority application review
• At least 20% of the total available points for having a social equity applicant status
• Technical assistance grants
• Loan financing grants

Application procedure for social equity applicants will be published on the Minnesota cannabis website once the OCM establishes final licensing rules.

Does Minnesota Tax Marijuana Dispensaries?

Cannabis dispensaries pay a 10% cannabis tax on gross receipts from retail sales of taxable cannabis products. This tax is in addition to the state’s 6.875% sales tax and other locally imposed sales taxes. However, local governments are not authorized to collect additional cannabis-specific tax.

Note that no gross receipts tax, state sales tax, or any local sales taxes may be charged on medical marijuana sales. The Minnesota Department of Revenue administers tax on cannabis.