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How to Open a Cannabis Dispensary in Illinois: Key Steps and Tips

How to Open a Cannabis Dispensary in Illinois: Key Steps and Tips

Introduction

 

 Are you looking to start a cannabis retail business in Illinois? Learn How to Open a Cannabis Dispensary in Illinois! With the recent legalization of consumption lounges and additional dispensary licenses, there’s never been a better time to get started. But before diving in headfirst, take a look at this guide on how to open a dispensary in Illinois.

It’s essential to understand the application process and the costs involved. In this step-by-step guide, we’ll cover everything you need to know about opening a dispensary in Illinois.

Historical Context

Illinois blazed a trail for cannabis reform in the Midwest, decriminalizing small amounts in 1978, the first state in the region to do so. This paved the way for the Compassionate Use of Medical Cannabis Pilot Program Act in 2013, granting access to medical cannabis for patients with specific conditions.

Fast forward to 2019, Illinois became a national leader by legalizing recreational cannabis for adults 21 and over through the Cannabis Regulation and Tax Act, marking the 11th state and the first to do so via legislative action. Sales officially commenced in 2020, with the program expanding in 2021 to include more qualifying conditions and increase the plant count for medical patients. Illinois’ commitment to social justice was further demonstrated in 2023 with the passage of legislation expunging records for certain cannabis-related convictions.

Illinois issued 185 conditional cannabis dispensaries in the summer of 2022, with applications made available from October 2019.

Current Status of Recreational Marijuana in Illinois

Today, the state boasts a thriving cannabis industry with over 110 licensed dispensaries and 550 cultivation centers. Tax revenue from cannabis sales has surpassed $1 billion, highlighting the significant economic impact. Ongoing efforts address social equity concerns and promote a fairer system by expunging records and supporting minority-owned businesses. Looking ahead, Illinois is poised for continued growth in the cannabis industry, with potential reforms including increased licenses and expanded qualifying conditions for medical cannabis.

Since the legalization of recreational cannabis in Illinois, December has emerged as the clear champion of sales, consistently topping the charts year after year. This trend continued in 2022, with December witnessing the highest number of products sold and total revenue generated. An impressive 3.45 million cannabis products were purchased, translating to a staggering $143.9 million in sales, cementing December’s dominance as the most popular month for adult-use cannabis in Illinois.

Step-by-Step Guide: How to Open a Cannabis Dispensary in Illinois

On March 2023, the Social Equity Lottery program, outlined in 68 IAC 1291.400, reserved 55 application slots specifically for individuals meeting certain criteria. This initiative aimed to promote social equity within the burgeoning cannabis industry by prioritizing applicants who:

  • Have lived in a disproportionately impacted area for at least five of the past ten years.
  • Have been arrested, convicted, or adjudicated delinquent for a cannabis-related offense that is eligible for expungement, such as possession of up to 500 grams of cannabis or intent to deliver up to 30 grams of cannabis.
  • Have a parent, child, or spouse who has been arrested, convicted, or adjudicated delinquent for a cannabis-related offense that is eligible for expungement, such as possession of up to 500 grams of cannabis or intent to deliver up to 30 grams of cannabis.

These three key criteria ensure that the Illinois social equity lottery program prioritizes individuals who have faced systemic and personal challenges, allowing them to meaningfully participate in the growing cannabis industry.

Requirements:

  • Application Form: Complete the form with crucial details about the applicant and proposed dispensary.
  • Filing Fee: Pay the full application fee of $250 for processing.
  • Submission Checklist: Use the checklist to ensure all essential materials are included in your application package.
  • Redacted Schedules: Sensitive information in certain schedules must be redacted before submission.
  • Redacted Addenda: Redact sensitive information in any addenda attached to the application.
  • Unredacted Hard Copy: Submit an unredacted hard copy of the entire application package in a sealed envelope.
  • Redacted & Unredacted PDFs: Include a USB drive containing both redacted and unredacted versions of the application in PDF format.

Documents Needed:

  • Proof of Social Equity Eligibility. (Acceptable Documents Guide)
  • A Solid Business Plan and Operating Plan – This entails how you plan to run the dispensary and the unique aspects about it. Try to be as specific as possible.
  • Suitability of Proposed Dispensary (Subject for Zoning Inspection)
  • Security Plan
  • Recordkeeping and Inventory Plan
  • Financial Disclosures – This section can be quite daunting. It involves formulating a clear and concise budget. You should include a long-term (say 5 years) financial forecast that includes operational expenses, net profit and projected annual revenue.

Obtaining a Dispensary License in Illinois

Securing a cannabis dispensary license in Illinois can be a complex and competitive endeavor. The state utilizes a lottery and point system, favoring social equity applicants and restricting the number of available licenses. To increase your odds of success, follow these steps:

  1. Conduct Thorough Industry Research:

Gaining a solid understanding of the Illinois cannabis market, regulations, and potential business models is crucial before beginning your application journey. Immerse yourself in research to navigate the complexities of the industry.

  1. Early Action is Key:

Don’t delay! The application process can be lengthy, involving months of preparation and documentation. Starting early ensures you have ample time to gather all necessary materials and address any potential roadblocks.

  1. Assemble Essential Documentation:

Be prepared to provide a comprehensive set of documents, including:

  • Criminal Background Check: Demonstrating clean records is crucial for approval.
  • Financial Statements: Financial stability is essential for running a successful cannabis business.
  • Operations Plan: A detailed plan outlining your business operations and procedures.
  1. Seek Expert Guidance from Thomas Howard:

Partnering with a cannabis lawyer or consultant can significantly increase your chances of success. Their expertise in navigating the application process and securing licenses can be invaluable.

  1. Identify the Ideal Dispensary Location:

Illinois divides its recreational licenses into 17 BLS regions. Choose your desired region and ensure your application specifies your intended area. Applying for multiple regions requires separate applications.

  1. Secure Your Location within 180 Days:

Once you acquire a Conditional Adult Use Dispensing Organization License, you have 180 days to secure a physical location for your dispensary within your chosen BLS region.

  1. Cultivate a Culture of Compliance:

Remember, obtaining a license is only the beginning. Long-term success requires consistent adherence to Illinois cannabis regulations and license conditions. This builds trust with customers and minimizes risks of penalties or license revocation.

By following these steps and prioritizing legal compliance, you’ll navigate the Illinois cannabis licensing process with greater confidence and increase your chances of establishing a thriving business in this competitive market.

Once your license has been approved, you will only have 6 months (180 days) to select a physical location for your dispensary storefront.

The location has to meet certain requirements. They are detailed below:

  • Has to be suitable for access by the public
  • Must have a layout that facilitates safe dispensation of cannabis
  • Has to be sufficient in size, lighting, power allocation, product handling and storage
  • Must have adequate parking and handicapped-accessible entry and exit spaces.
  • Should not be located within 1,000 feet of another dispensary, school, residential zone or place of worship.

Given these requirements, developing a complaint dispensary can cost anywhere from $500,000 to $2.5 million depending on size, layout and complexity.

It is also essential to ensure that the owner of the property where your dispensary will be located is okay with the business venture.

Some property owners may not support a cannabis-related business due to federal illegality, potential liabilities or pressure from law enforcement.

There are three stages of licenses under the dispenser’s category. The three include;

  1. Early Approval Adult Use Dispensing Organization License – Proving the documentations that you submitted, fingerprinting/background checks.
  2. Conditional Adult Use Dispensing Organization License – Locating a suitable location for the Dispensary
  3. Adult Use Dispensing Organization License is commonly referred to as just a Dispensary License – Start of retail operations. This is where all the money comes in from the sales.

Guidelines for an Adult Use Dispensing Organization License

How to Open a dispensary in illinoisThis is the license that has all interested parties excited. The license will allow associated businesses to buy cannabis from craft growers, cultivation centers, processing organizations or other dispensaries. With this kind of license dispensaries have the green light to sell cannabis and infused products, paraphernalia, seeds to other suppliers or purchasers. These will also have the go ahead to sell to patients using cannabis to treat medical conditions.

The Cannabis Regulation & Tax Act specifies the type of client a marijuana dispensary will be allowed to attend to. Illinois residents will be able to buy marijuana for recreational purposes but with the following stipulations;

  • 1. Show proof of age before purchase.
  • 2. The sell, transferring or distribution of marijuana to minors shall remain a punishable offense.
  • 3. Driving under the influence of cannabis shall remain illegal.
  • 4. Cannabis sale shall be conducted in a legitimate manner by taxpaying citizens.
  • 5. Cannabis shall be tested and appropriately labelled for the user’s benefit.
  • 6. Buyers will be furnished by all the information available about any established negative effects of cannabis use backed by evidence-based research.

Opportunities in Illinois’ Cannabis Industry

Another round of licenses for Social Equity Applicants is coming on 2024.

With the revenue generated by cannabis dispensaries in the billions of dollars and rising, these developments present a very lucrative opportunity.

However, opening and running a dispensary is a challenging business venture.

  • Opening a dispensary requires a lot of considerations, compliance with numerous regulations and a significant amount of capital.
  • Costs to open your doors in Illinois could run from $500,000 upwards of millions depending on real estate costs.
  • Many cannabis dispensaries are selling millions of dollars of product a month
  • Competition for new dispensaries licenses is fierce.

Conclusion

With the right motivation and access to necessary resources, this guide can help you successfully secure a permit and start a profitable cannabis dispensary. It is important to note that this process takes time even when you have the resources.

Given the licensure steps, finding a suitable location, and developing your storefront to meet the state requirements, it may take well over a year to open your dispensary even after being awarded a license.

Frequently Asked Questions

How much does it cost to apply for a cannabis license in Illinois?

If you’re a Social Equity Applicant. It’s $250.

Is there a License cap for dispensaries in Illinois?

According to the Board, the cap is 500.

How long does it take to get a cannabis license in Illinois?

The application process can take several months. The Illinois Department of Financial and Professional Regulation (IDFPR) has 180 days to review applications and make a decision.

What are the 17 BLS regions in Illinois?

The 17 such regions in Illinois are: Bloomington, Cape Girardeau, Carbondale-Marion, Champaign-Urbana, Chicago-Naperville-Elgin, Danville, Davenport-Moline-Rock Island, Decatur, Kankakee, Peoria, Rockford, St. Louis, Springfield, Northwest Illinois nonmetropolitan area, West Central Illinois nonmetropolitan area, East Central Illinois nonmetropolitan area, and South Illinois nonmetropolitan area.

What are the different regions in Illinois for cannabis licenses?

Illinois has divided its recreational cannabis retail licenses into 17 regions. You must specify the region you are applying for on your application.

About the Author

Tom Howard, Cannabis Industry Lawyer and Consultant has practiced commercial law since 2008 when he graduated law school and got his Series 7 & 66 Securities licenses. He pivoted to practicing litigation for financial institutions before helping cannabis teams form, capitalized and get licensed. He has concentrated in cannabis business since Illinois legalized in 2019. He won licenses for clients in Illinois, Connecticut, New Jersey, New Mexico, Massachusetts, Missouri and has gotten into lotteries in Ohio, Maryland and Maine. He became a Certified Ganjier in 2021. He chairs the ISBA’s section council for Cannabis Law in 2023.

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