How to Open a Dispensary in Washington

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How to Open a Dispensary in Washington in 2024

Any individual or entity who wishes to open a dispensary in Washington must apply for a cannabis retailer license whenever the state's Liquor and Cannabis Board announces an open application window. However, they must provide evidence of registration with the Secretary of State's office as a corporation or a Limited Liability Company (LLC) to have their retailer license application considered. An applicant must submit proof of holding a commercial general liability insurance policy with at least $1 million coverage as part of the license application process. Individuals disproportionately impacted by the enforcement of past marijuana prohibition laws in Washington can also apply for cannabis retail licenses under the state's Social Equity Program (SEP).

Why Open a Dispensary in Washington?

Washington has a multi-billion dollar marijuana industry, as evidenced by the tax revenues from marijuana sales over the past few years. In FY 2019, $390.4 million was generated as marijuana tax revenue compared to the $362 million collected in FY 2018. Washington generated $469.2 million as cannabis tax in FY 2020, and in FY 2021, the figure jumped to $555.4 million. This trend largely indicates increasing consumer demands.

The retail sales of cannabis in FY 2022 dropped by around 12% compared to FY 2021, with only $511.1 million collected as cannabis tax. Experts explain this dip as the impact of illegal market activities cutting into the sales of legitimate marijuana retailers. Despite this, the Washington marijuana market remains profitable for the industry players and attractive to individuals considering opening cannabis dispensaries in the state.

Types of Dispensary Licenses in Washington

Washington issues a cannabis retailer license as its only dispensary license. A cannabis retailer licensee can sell marijuana products to adults 21 years or older. However, cannabis retailers in the state may also apply for a medical marijuana endorsement, which enables them to sell medical marijuana products.

How to Get a Washington Dispensary License

  • If forming a limited liability company (LLC) or a corporation, register with the Washington Secretary of State's Office
  • Obtain any required permits from the municipality proposed for the dispensary location
  • Apply for a cannabis retailer license in a format advised by the Washington State Liquor and Cannabis Board (WSLCB), which is usually by mail
  • When the LCB receives the application, it will send the applicant an email containing the name and contact information of the licensing specialist assigned to their application
  • The assigned specialist will contact the applicant within two business days to schedule a phone interview
  • After the interview, the cannabis licensing specialist will send the applicant an email via DocuSign with electronic copies of all the required forms for them to complete. The email will also list the necessary documents the applicant needs to submit
  • The WSLCB will either deny or approve a dispensary license application based on the information gathered during the application process
  • If the application is approved, the applicant will receive an electronic billing statement requesting payment of the licensing fee
  • Once the WSLCB receives payment, it will send the applicant an approval letter, which serves as a 30-day cannabis license. Within these 30 days, the DOR Business Licensing Service issues the applicant their business license with the cannabis endorsement

The WSLCB will not issue an LLC or a corporation not registered with the SOS office a cannabis dispensary license. These entities must include the Unified Business Identifier (UBI) numbers issued by the SOS in their license applications and fillings. However, Washington is currently not accepting applications for cannabis retailer licenses. The WSLCB usually informs the general public on its website whenever it decides to open an application window for cannabis retail license applications. For further information on how to get a cannabis retailer license in Washington, contact the WSLCB by email or at (360) 664-1600

Information and Documents Required for a Dispensary License in Washington

Documents required by the Washington State Liquor and Cannabis Board to process a cannabis retailer license application include the following:

  • Business structure forms
  • Floor plans
  • Purchase agreements
  • Financial statements/source of funds
  • Operating plans
  • Fingerprint cards
  • Personal criminal history statement
  • Lease information
  • Affidavits
  • Copy of approved identification
  • Copy of tax returns and/or bank statements

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

An operating plan and a floor plan are some of the key documents required when applying for a cannabis retailer license in Washington. Prospective dispensary owners in the state are also encouraged to draft business plans because it will help them stay focused on achieving set goals. It will also give them a clear structure for the proposed dispensaries' operational, legal, and financial aspects.

An operating plan for a proposed dispensary in Washington should summarize and verify location requirements and activities. Dispensary license applicants need not create theirs as the WSLCB has a custom operating plan form, usually sent to applicants during the license application process.

In Washington, cannabis retailers' floor plans are drawings used to verify that marijuana locations satisfy licensing and security requirements. A floor plan must identify the locations of the following spots in any proposed dispensary facility:

  • Points of entry and exit
  • Cannabis product displays/cases
  • Controlled access areas (must not be open to the general public)
  • North arrow direction indicator
  • Secured surveillance system
  • Point of sale areas
  • All alarms and cameras, including the types of alarms and camera coverage and direction
  • All interior and exterior doors
  • All interior and exterior windows

When preparing a Washington cannabis dispensary's business plan, ensure to include the following items:

  • Company description
  • Target market
  • Competitor analysis
  • Product and services
  • Compliance and security
  • Financial information/projections
  • Marketing and sales plan
  • Funding request
  • Team/employees

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

Local municipalities in Washington have the power to prohibit marijuana businesses, including cannabis retailers, from operating within their jurisdictions. Furthermore, in certain locations, there may be zoning restrictions in jurisdictions where establishing retail dispensaries is permitted. Local authorities can further add certain limitations, including the number of dispensaries allowed in their municipalities.

A prospective dispensary owner in Washington may need additional local permits or permissions based on the proposed municipality’s requirements. A person or entity needs to understand the specific requirements of the city or county where they intend to open their dispensing facility. The Washington State Liquor and Cannabis Board (WSLCB) must notify the local authority in that municipality of the applicant's request/application for a cannabis license. Each city or county in Washington has its own zoning and permitting requirements, and prospective marijuana dispensary owners are encouraged to contact them directly for such information.

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

The Washington State Liquor and Cannabis Board typically completes a cannabis dispensary application process within 60 days. The Board has a buildout timeframe of a max of 30 days.

Where Can You Locate a Cannabis Dispensary in Washington?

In Washington, a cannabis dispensary must not be located on federal land or within another business and may not be connected to a residence. Similarly, the location of a licensed dispensary must be accessible by law enforcement. Per Section 69.50.331(8) of the Revised Code of Washington, marijuana dispensaries may not be located within 1,000 feet of the following facilities:

  • Playground
  • Secondary or elementary school
  • Library
  • Child care center
  • Public transit center
  • Game arcade
  • Recreation center
  • Public park

Except for schools and playgrounds, local municipalities may, however, reduce the buffer zones of the premises of these facilities to 100 feet. Prospective cannabis dispensary owners are advised to contact the local authorities directly for information regarding the required allowances in their proposed dispensary jurisdictions.

Can Licensees Have More Than One Dispensary Location in Washington?

While a cannabis retailer licensee in Washington may hold up to five retailer licenses, no one license can operate multiple locations within the state. It is one license per retail location. Typically, the WSLCB uses the estimated population data and consumption data obtained from the Office of Financial Management (OFM) to determine the distribution of marijuana retail locations in each county.

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

Some of the major costs anyone should consider to open a retail cannabis dispensary in Washington are listed below:

  • License and application costs - A non-refundable $250 application fee and a $1,000 license fee after approval
  • Real estate cost or rent - Monthly rent for a dispensary facility can range between $50,000 and $150,000 annually, depending on the location and size. Building a dispensary from scratch may cost between $400,000 and $1 million or over
  • Staff cost - Employees' wages should be between $150,00 and $250,000 on average, depending on staff size
  • Startup inventory cost - This amount depends on the size of the stock. Typically, a pound of marijuana costs about $1,500
  • Dispensary equipment - Between $40,000 and $55,000
  • Cost of installing security and surveillance systems - On average, this will cost between $50,000 and $70,000
  • Marketing and advertising cost - Between $30,000 and $80,000
  • Insurance - Between $10,000 and $20,000 annually

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

Yes. Insurance protects a marijuana dispensary from financial loss in the event of a covered risk, such as theft, fires, disasters, or errors. Cannabis retailer licensees in Washington must carry commercial general liability insurance with no less than $1 million coverage. General liability insurance covers legal claims filed by customers and others outside the dispensary due to common risks like advertising injury and customer injury or property damage.

Typically, before the WSLCB can issue a dispensary license, the applicant must provide an insurance certificate as proof of insurance at the end of the application process. They may only purchase insurance from an insurance company with a rating of A - Class VII or better authorized to operate in Washington. Any insurance policy certificate presented for a marijuana dispensary license application in the state must be in the name of the applicant entity and must reference the proposed location address of the dispensary.

Besides general liability insurance policy, other insurance policies to consider when opening a marijuana dispensary in Washington include the following:

  • Product Liability Insurance - This is required as part of a dispensary's general liability policy. It covers liability from the consumption of cannabis products sold by the dispensary
  • Business Interruption Insurance - Protects a dispensary against financial loss when a covered event forces the dispensary to close operations temporarily
  • Commercial Property Insurance - Covers the cost of lost or damaged dispensary property
  • Inland Marine Insurance - This policy protects any property belonging to a dispensary kept off-site or in transit
  • Workers' Compensation Insurance - Covers lost wages and medical expenses when dispensary staff sustain work-related injuries

The following factors determine how much a Washington cannabis dispensary will pay as insurance premium:

  • Policy coverage/limits
  • Dispensing facility size
  • Dispensary location
  • The insurance company
  • Insurance coverage type
  • Years in the cannabis industry (experience)
  • Risk management measures in place
  • Claims history

How to Get a Grant to Open a Dispensary in Washington

  • Friends and Family - Raising funds from family and friends to open a dispensary can come at no or little interest rate
  • Self-funding - Taking funds from one's personal savings to invest in a cannabis dispensary business
  • Business Partners - Raising capital from investors with compatible interests. This borrowing is usually backed with certain terms
  • Personal Loans - A prospective dispensary owner in Washington can take a personal loan and use it to finance a dispensary business
  • Business Loans - While major commercial banks cannot legally lend to any cannabis business, prospective cannabis retailers in Washington may borrow from credit unions to realize their dreams of opening cannabis dispensaries
  • Marijuana-specific Brokers - Using the services of capital brokers who largely play in the cannabis industry can help locate potential partners and investors. Such brokers often request ownership stakes in a dispensary in exchange for their services
  • Equity Funding - A prospective marijuana dispensary owner in Washington can issue shares (a certain percentage of the business) in exchange for capital to open their dispensary
  • Social Equity Funding - Cannabis retailer license applicants can get some financial and technical assistance under the Washington social equity program
  • Inventory Financing - Involves borrowing on a short-term or revolving basis to acquire cannabis products and sell them in the future

Does Washington Have a Social Equity Program for Cannabis Dispensaries?

Yes, Washington has a cannabis Social Equity Program (SEP) for cannabis retailers. In response to a policy priority identified by the Washington State Liquor and Cannabis Board (WSLCB) in 2020, the state established the SEP. The WSLCB recognizes that marijuana prohibition laws in the state were disproportionately enforced for many years and that the cumulative impact remains to date.

This program offers the WSLCB a chance to provide a limited number (44) of cannabis retail licenses to persons disproportionately impacted by the enforcement of the past marijuana ban in Washington. The SEP also offers technical and financial assistance to these affected individuals interested in starting marijuana businesses, including cannabis dispensaries. Under the SEP, the annual issuance, re-issuance, or renewal fees for cannabis retail license is waived through July 1, 2032.

A cannabis retailer license applicant who has no less than 51% control and ownership by one or more persons who meets at least two of the following requirements qualifies for the cannabis social equity program in Washington:

  • Has been arrested or sentenced for a marijuana offense or has a relative who has been arrested or convicted of a marijuana offense
  • Resided in a disproportionately affected area in the state for at least five years between 1980 and 2010
  • Is economically and socially disadvantaged as described by the Office of Minority and Women's Business Enterprises under Chapter 39.19 of the Revised Code of Washington
  • Had a household income that was less than the state's median household income in the year before submitting their application for a retailer license

The WSLCB opened the application period for social equity cannabis retail licenses between March 1, 2023, and March 30, 2023. In addition to a Social Equity Plan, social equity applicants are required to provide the following documentation for social equity licenses:

  • Residency verification,
  • Identification verification
  • Household income verification
  • Arrest and/or conviction information
  • Business ownership verification

Does Washington Tax Marijuana Dispensaries?

Yes. In addition to the state and local sales tax levied on cannabis sales (6.5%), Washington imposes a 37% cannabis excise tax on consumers' marijuana purchases. The marijuana excise tax is collected by retail dispensaries and remitted to the Washington State Liquor and Cannabis Board.

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