Last year, Michigan did $1.4 billion dollars in recreational marijuana sales. The Wolverine State continues to see its cannabis industry expand. From Q1 of 2020 to Q4 of 2021, the amount of marijuana flower sold grew from $48 million to $223 million.
There are now nearly 500 recreational dispensaries in Michigan. And with the tax revenue that marijuana sales bring to local and state governments, there are likely to be more licenses issued in the near future.
Cannabis retail can be a highly lucrative business, but it comes with plenty of details to keep in mind. This includes capitalization, real estate, licensing, security, merchandising, and much more. Below is a guide detailing exactly how to open a dispensary in Michigan.
Table of Contents
- Michigan Dispensary Licensing
- Business Plan For A Cannabis Dispensary In Michigan
- Real Estate For Cannabis Stores In Michigan
- Michigan Dispensary Security Requirements
- Acquiring Financing
- Staffing Your Dispensary In Michigan
- Stocking Cannabis Products
- Vertical Integration and Microbusinesses In Michigan
- Michigan And Metrc
- Marketing Your Marijuana Retail Shop
- KORONA POS For Dispensaries
Michigan’s cannabis sector is overseen by the Cannabis Regulatory Agency (CRA). Most of the state’s laws and regulations stem from the 2018 Michigan Regulation And Taxation Of Marijuana Act, which legalized marijuana for recreational consumption
To start the application process, fill out a pre-certification to determine whether you’re eligible for consideration. If you’re a social equity applicant, you must apply separately with Michigan’s Social Equity Program prior to completing the general application. For this initial pre-qualification application, a $3,000 non-refundable fee is required. Fortunately, on the CRA website, there are dozens of different types of marijuana establishments being approved each month, including plenty of retail-only licensees.
The first step of pre-qualification consists of a background check on the applicants. The second step focuses more on your actual facility. Michigan’s CRA also requires that you have a thorough business plan to show them exactly how you plan on staying in line with their regulations. This includes a review and submission of all necessary paperwork:
- Certificate of Use and Occupancy
- Deed or lease agreement
- Proof of financial responsibility (e.g., insurance policy, constant value bond)
- Marijuana business location plan
- Floor plan
- Business plan, including but not limited to technology, marketing, staffing, inventory, and record-keeping plans
- DBA documentation from your county (if applicable)
- Certificate of Assumed Name obtained from LARA Corporations Division (if applicable)
While applying for a license is certainly a painstaking, competitive ordeal, there are some positives. The whole process is done digitally, allowing you to upload documents right onto the state’s portal. Also, the state guarantees a ninety-day return time to either approve or deny your application.
Still, some marijuana retailers will choose to hire consultants or law firms to handle their application and compliance. To be fair, there is plenty of paperwork and compliance know-how to deal with. A simple Google search will offer several options for attorneys that specialize in cannabis-related businesses in Michigan.
Michigan Cannabis Licensing Fees
After the non-refundable $3,000 dollar application fee, there is an initial/annual cannabis establishment licensure fee. For retail dispensary licenses in Michigan, this fee is $15,000. As far as state licensing fees go, this is on the higher end.
Like starting any company, you must have a business plan before you start applying for a dispensary license. In fact, it’s even more imperative since it’s required in the application process. This includes a summary and succinct pitch describing what your business will do and what niche it will fill. Be sure to include details about the structure of your company, from the ownership down to managers and budtenders.
Think about how your store will be different from others. You must figure out your niche audience, local competitors, and neighborhood clientele, which typically requires focused market research. Include supply chain details about how you plan to stock your store. You should also establish strong relationships with wholesalers.
It’s crucial to thoroughly and honestly detail all of your real and potential costs. Make an annotated budget list with sections for license fees, real estate, construction, insurance, acquiring stock, security systems, wages for employees, and more (Remember that many states have legal requirements regarding security, insurance, and structural integrity).
Finally, how do you plan on financing all of these upfront and overhead costs? Opening a dispensary is expensive. Your business plan should include particulars regarding loans and repayment.
Michigan gives municipalities the vote to decide whether they want to allow cannabis enterprises in their borders. Unfortunately, 80% of these localities chose to keep marijuana businesses out. While this certainly limits the overall spread of cannabis retail locations in the state, there are still plenty of opportunities.
Some places go above and beyond trying to lure in cannabis businesses. For example, Bay City’s rules allow for fifty retail locations despite having a smaller population of 33,000 people.
Dispensary Location Rules
To be sure, having jurisdictions outright ban dispensaries means that there are less overall locations available. This limited inventory can cause retail prices to balloon. And finding a landlord willing to rent out to, what they perceive as, “risky” businesses isn’t easy.
Still, this is not a reason to be dissuaded from entering the industry. It just takes a bit more work and preparation. Familiarize yourself with Michigan’s cannabis zoning laws, which establish which locations actually allow marijuana-related businesses to operate. Michigan’s statutes on this are similar to other states:
“the property where the proposed marijuana establishment is to be located is not within an area zoned exclusively for residential use and is not within 1,000 feet of a pre-existing public or private school providing education in kindergarten or any of grades 1 through 12, unless a municipality adopts an ordinance that reduces this distance requirement”
Cities can adjust these requirements however they see fit. For example, Detroit adds limits for marijuana businesses to open “on a zoning lot that is located less than ‘1,000 radial feet from a zoning lot occupied by any religious institution identified as exempt by the City Assessor.’” It’s essential to understand each individual town’s zoning laws while searching for a brick-and-mortar retail location.
At the end of the day, keep in mind that, like most retail businesses, location is a key factor for dispensaries. If you’re in a town center, will your shop be easily accessible on foot? If you’re in a more rural area, do you have a parking lot to accommodate an excess number of cars?
Every state that allows for marijuana retail establishments has written regulations for security requirements. Michigan is no exception. Obviously, they require that all points of entry be locked, with access to products and cash secured.
Their statute also has specific rules for camera surveillance, including coverage of every part of the dispensary facility as well as storage of digital video files. Your security plan must be submitted as part of your application process.
Interestingly, Michigan does not have written law regarding security personnel. Dispensaries handle a ton of cash, which at times presents an opportunity for criminal larceny. Depending on the size of your operation, it could still be wise to reach out to a marijuana business security company and see what options they offer for armed or unarmed guards.
With cannabis still federally illegal and its trade not insured by the FDIC, legacy banks and lenders won’t work with dispensaries. And while Michigan has seen an increase in banks and credit unions that allow cash deposits from marijuana-related businesses, they do not offer financing.
Therefore, most dispensary owners rely on working with either cannabis-specific financial institutions or private equity and venture capitalists. For non-dilutive financing, check out Waterford, Michigan-based lender Copper Street Capital. They offer many different types of cannabis business loans, including real estate loans. Another option is Seed To Sale Funding which has lent $70 million worth of loans to cannabis companies.
See Related: Getting a Loan to Open a Dispensary
Venture Capital And Private Equity
There is also always the option to reach out to either individual “angel” investors or private equity firms. These financiers could potentially offer increased connections and expertise in the business world. However, you will have to give up significant equity in your company if you choose to go with this option.
While merchandising, branding, and marketing are critical, your budtenders are the front line of what makes your dispensary great. They will be the ones interacting with your guests and making suggestions on a day-to-day basis. Budtenders in Michigan are paid roughly $14/hour for entry-level positions and up to $20 for experienced dispensary workers. Remember, having knowledgeable budtenders can go a long way in running a successful cannabis retail shop.
For dispensaries that are of higher volume, you will want to consider hiring a compliance officer to ensure that your dispensary is following all regulations completely. In addition, a floor manager to oversee and troubleshoot all day-to-day operations will help maintain proper procedures and efficiency. While these types of supervisors demand higher salaries, they are important for keeping your store in line with legality, compliance, and profitability.
Michigan does not have a cap on the number of growers’ licenses that the state can issue. It actually has some of the lowest wholesale cannabis prices in the country due to high supply and low demand. This means that a pound of cannabis flower is available to retailers for as low as $1,000. However, it also means that the retail price has plummeted for the consumer.
To be sure, Michigan’s recreational market is rocky and still stabilizing from recent legalization. And it’s likely to keep changing in the future. Keep an eye on competitor pricing and sales volume when thinking about profitability and margins.
One way that marijuana entrepreneurs have recommended remaining profitable and immune to price fluctuations is by vertically integrating your cannabis enterprise. Vertical integration means that you are essentially “stacking” licenses to be able to carry out multiple types of entities under the same business. For example, you would grow, process, and sell cannabis all under the same ownership.
Acquiring multiple licenses, as well as setting up grow operations, production sites, distribution channels, and retail shops, obviously requires significant capital investment. Thus, it is not an easy or realistic goal for all entrepreneurs to attempt.
Microbusiness Licenses in Michigan
For smaller operators who want to run an integrated marijuana enterprise, there is the microbusiness option. Michigan’s marijuana microbusinesses are vertically consolidated companies that require specific criteria for applicants. For example, they must be state residents, run an operation that has a small number of employees, and cultivate fewer total plants, among other things. There are actually two types of microbusiness licenses in Michigan.
The original marijuana microbusiness license allows the following:
- Cultivate not more than 150 plants
- Process and package marijuana in-house
- Can only sell or transfer cannabis to individuals 21 or over
- Complete all compliance testing at a third-party facility
- Licensing fees cost $8,300 annually
The updated Class A microbusiness license increases allowances to permit businesses to:
- Cultivate not more than 300 plants
- Package their own cannabis products
- Purchase concentrate and infused products from a licensed marijuana processor
- Only sell or transfer cannabis to individuals 21 or over
- Complete all compliance testing at a third-party facility
- Licensing Fees Cost $18,600
The point of these microbusinesses is to bring local, artisanal, in-house, craft marijuana to the market. In this regard, they are similar to vineyards and microbreweries.
Because of their reduced licensing fees, they offer a lower barrier to entry for cannabis entrepreneurs that wish to run a vertically-integrated business. While there are only a handful of companies operating under Michigan’s microbusiness licenses, this type of enterprise is worth looking into as a viable option for cannabis retail longevity.
Michigan uses Metrc for its track-and-trace software to monitor marijuana products. Metrc is a Florida-based technology company that uses databases and proprietary tags to track every cannabis item that is sold in the state, from seed-to-sale.
Before you get your dispensary up and running, you will need to complete registration and training through their website portal. In addition, every employee that you hire will need to complete certification before they start working at your cannabis retail store.
Point Of Sale Integration
All of your sales and inventory must be reported to Metrc. There are no exceptions! Luckily, KORONA POS seamlessly integrates with the track-and-trace system so that you can automatically push all of your sales reports right onto their database. Metrc’s open API works in conjunction with KORONA POS so that your workflow will be effortlessly compliant, taking away the burden of having to manually upload any sales data. This smart integration reduces regulation stress on all of your employees and yourself as the owner.
While marijuana products’ profit margin floats between 10 and 20 percent, succeeding in this crowded and competitive space is no easy feat. Hence, it’s important that you take steps to help make your dispensary stand out.
Marijuana And Social Media
Using social media can be a great way to drive followers toward your eCommerce or brick-and-mortar stores. Through Instagram, you can display your staff’s personality, featured products, and educational information on marijuana health. Just be sure to stay compliant and clearly note that you are NOT making sales through the platform.
Cannabis Delivery And Maps
Open up your dispensary to as many channels as possible. This goes for searchability as well as fulfillment. Apps like Eaze and Weedmaps will allow cannabis consumers to easily find your shop and see what you have to offer on your menu. Best of all, they will be able to order deliveries directly from the app!
Dispensary Targeted Marketing And Rewards
KORONA POS integrates with cannabis marketing and CRM platform springbig. Utilize your point of sale data to implement targeted text message campaigns, loyalty programs that keep your clientele coming back, and promotional emails around holidays and birthdays. As an industry leader, springbig offers proven increases in customer retention. And best of all, they guarantee cannabis marketing compliance.
Running your track-and-trace program, enhancing loyalty marketing, and getting the most out of your customer data are all made possible with a smart, robust point of sale. KORONA POS offers the best dispensary point of sale system in the industry.
Keep your lines moving fast with our state-of-the-art technology and hands-on customer service team. Reach out today to schedule a demo!
FAQs: Opening A Dispensary in Michigan
Getting a recreational dispensary license in Michigan is a two-step process. First, you have to apply for pre-qualification through the Cannabis Regulatory Board. Next, get all of your paperwork, business plans, and real estate in order to apply for a State Operating License.
Michigan’s Cannabis Regulatory Board guarantees that you get a response within ninety days of submission for pre-qualification. Keep in mind that you also need to follow up on that first step with a second application for the establishment. Six months is the minimum time it would take to get a dispensary license, but that number could potentially be way longer depending on several factors.
A dispensary license in Michigan costs $15,000 per year. Add to that, an initial pre-qualification application fee of $3,000. In addition, there are two microbusiness licenses that have fee costs of $8,300 and $18,600, depending on which type of certification you desire.
Eighty percent of Michigan’s localities have opted out of having cannabis related businesses in their jurisdiction. Still, there are now 62 municipalities that allow for marijuana entities. This number promises to grow as increased tax dollars has become a clear advantage for participating communities.