How to Open a Dispensary in Delaware

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  2. How to Open a Dispensary in Delaware

Interested in starting a Cannabis business in Delaware?

How to Open a Dispensary in Delaware in 2024

Registering your business and creating a business plan are the initial steps required to open a dispensary in Delaware. Afterward, you can apply for a dispensary license from the Delaware Department of Health and Social Services (DHSS). It is crucial to confirm that cannabis businesses are allowed in the municipality where you intend to open and operate a marijuana dispensary. Delaware established a Social and Economic Equity (SEE) Program to redress the impact of cannabis prohibition on certain groups and encourage their participation in the state’s marijuana industry, including operating cannabis stores.

Why Open a Dispensary in Delaware?

As the state opens up its adult-use cannabis market more, demand for cannabis in Delaware will rise in the coming years. Hence, more dispensaries must be opened to meet consumers’ projected demand. An analysis by the Delaware State Auditor in 2021 estimated that Delaware's adult-use market was worth $215 million, with more than $43 million generated in taxes.

The number of medical marijuana cards issued in Delaware in 2022 was around 15,500, 23% up from the 12,600 issued in 2021. This indicates increased demand for medical cannabis products. The total amount of medical cannabis sales in the state in 2022 was $45.8 million, up from $27.7 million in 2020 and $37.3 million in 2021. According to cannabis experts, the development of a legal, regulated marijuana industry would effectively end Delaware's illegal marijuana market.

Types of Dispensary Licenses in Delaware

The following types of dispensary licenses are available in Delaware:

  • Retail marijuana store (compassion center) license: This license authorizes the sale of medical marijuana products to eligible patients
  • Social equity license: This retail license is issued to persons disproportionately impacted by the enforcement of marijuana prohibition laws at a discounted rate

How to Get a Delaware Dispensary License

To obtain a dispensary license in Delaware, an applicant must:

  • Create a legal business entity and register it with the state’s Division of Corporations

  • Prepare the necessary paperwork, including:

  • A comprehensive business plan

  • A proposed space lease agreement

  • Security plan

  • Financial plan

  • Provide all relevant information and submit a completed application to the Office of Medical Marijuana (OMM) for review. If the application is accepted, a provisional license will be issued to the applicant, who is required to pass a final inspection before being granted a full license

The Delaware Department of Health and Social Services is responsible for reviewing applications and issuing dispensary licenses. The state has an application window for those interested in applying for a compassion center license; new applicants will only be accepted during an open application period announced by the DHSS. Currently, the state is not accepting dispensary license applications. However, by May 2024, the state expects to make recreational dispensary license applications available. There is a limit set by the Delaware Medical Marijuana Act on the number of dispensaries that can open. The maximum is 30 dispensaries, and seven slots have been filled.

Information and Documents Required for a Dispensary License in Delaware

A dispensary license applicant in Delaware requires the following information and documentation:

  • Information on the proposed dispensary's location, including the nature of the applicant's stake in the property, whether owned or leased, as well as the floor plans and landlord information for leased buildings Copies of the premises certificates of occupancy, rental agreements, proposed deeds, leases, interior designs, building leasing details, and purchase agreement will also be required
  • A business plan
  • Plans for staffing, safety, and security
  • The criminal background information of the applicant for the past 10 years, typically determined by fingerprinting

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

A prospective marijuana dispensary owner in Delaware should carefully review the cost implications and prepare a business plan before beginning the license application process. Such a business plan should include the following:

  • Market research, describing techniques used to identify demand in the market and identify target consumers in the proposed dispensary location
  • Long-term financial projections, such as variable costs, operational costs, and net profit and strategies for achieving them
  • Information about the competition, including its weaknesses and strengths and how the company plans to overcome them
  • Information on the legal and administrative prerequisites for running the proposed dispensary
  • A description of cannabis goods and/or strains and how the business owner expects to obtain them
  • Detailed budget, business financing source, and projected annual revenue
  • Main players in the management team, along with their backgrounds and skills

Delaware also requires a cannabis dispensary license applicant to submit a site plan and a security plan when applying for a license. Site plans for potential marijuana dispensaries in Delaware must include the following information:

  • The location of the authorized business location
  • The size of the perimeter
  • Locations of the proposed dispensary's bathrooms
  • Proof that the facility complies with state regulations
  • Details about all property boundaries, including highways, bodies of water, and physical boundaries; entrances and exits, including emergency exits, to the licensed premises and the dispensary facility

A description of the steps the dispensary owner(s) will take to guarantee the following should be included in a security plan:

  • Secure all entries to the dispensing facility to prevent unauthorized people from entering or loitering on the property, especially people who have no business there
  • Ensure everyone's safety while on the licensed premises
  • Protect cash, including its storage and transportation to banks
  • Provide enough lighting to enable surveillance inside and outside the dispensary facility and a fully functional alarm and surveillance system that includes 24-hour recording and monitoring

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

There are municipal requirements for opening a cannabis dispensary in Delaware. In most counties, villages, or cities that permit marijuana enterprises, anyone who wants to start a retail dispensary must inform the municipality of their plans. Additionally, they must follow all prevailing local regulations. Municipalities in Delaware have the right to express their support or opposition to recreational dispensary license approval. The Office of Medicinal Marijuana (OMM) may use the application record and the municipality's opinion to decide whether to grant or deny licensing requests made by potential cannabis business owners.

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

Obtaining a dispensary license in Delaware takes about 8 months.

Where Can You Locate a Cannabis Dispensary in Delaware?

A cannabis dispensary may be located in any space designated for commercial purposes in Delaware. The location of a marijuana dispensary must be approved by the DHSS as part of its site plan.

  • Unless specifically permitted by the DHSS, it is illegal for a dispensary to be situated close to another establishment that has a dispensary license in any Delaware municipality
  • In Delaware, a retail dispensary may not be situated on the same street as or closer than 1,000 feet from a building that is used for school, church, or other facilities for commercial functions

Can Licensees Have More Than One Dispensary Location in Delaware?

No. A dispensary licensee can only operate one dispensary location in Delaware.

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

The cost of opening a marijuana dispensary in Delaware can range from $500,000 to $1 million or more, depending on its location and size. The typical costs a business owner may incur while starting a dispensary in the state are as follows:

  • Lease: Depending on size and location, the typical monthly rent for a dispensary in Delaware is between $2,500 and $7,000
  • Application fee:
  • A $5,000 biannual, non-refundable license application fee for all establishments ($1,000 for social equity and $3,000 for microbusiness)
  • A $40,000 license fee is to be paid every 2 years
  • Operational costs: An average of $110,000 to $120,000 per year
  • Inventory costs: These will vary depending on stock and store size. The costs of inventory may range from $50,000 to $100,000
  • Marketing and advertising costs: Depending on the channels adopted, the price of marketing and advertising might range from $5,000 to $20,000
  • Security: Depending on the size of your dispensary, security system costs can range from $10,000 to $50,000
  • Staffing expenses: Depending on the number of personnel required, wage costs can range from $100,000 to $200,000 annually
  • Miscellaneous costs: These are additional costs associated with running a dispensary, including insurance, legal fees, tax, accounting services, and utility costs. Budgeting for these costs is crucial because they can vary depending on location and business requirements

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

Currently, there are no insurance requirements for marijuana dispensaries in Delaware. However, it is advised to obtain coverage to safeguard a dispensary against unforeseen losses. The following insurance policies are ideal for Delaware cannabis dispensaries:

  • Professional liability insurance: Also referred to as errors and omissions insurance, this protects the company in the event that a third party files a lawsuit due to mistakes made by dispensary employees
  • Product liability insurance: Pays legal fees in the event that a customer sues the dispensary over harm caused by a marijuana product purchased at the dispensary
  • Workers' compensation insurance: Pays for replacement costs for lost or stolen wages
  • Commercial property insurance: Covers the cost of replacing stolen inventories

A Delaware cannabis dispensary's insurance premium will vary depending on a number of factors, including the following:

  • The size of the dispensary
  • The required coverage
  • The policy limits
  • The dispensary’s location

How to Get a Grant to Open a Dispensary in Delaware

Prospective marijuana dispensary owners in Delaware can raise funds to start their dispensaries using one or more of the following methods:

  • Equipment financing: This is a type of lease or loan used to acquire equipment required for processing cannabis and other dispensing activities
  • Loans from friends and family: This involves borrowing from friends and family members, which may come with lower interest rates
  • Equity Financing: This entails selling a portion of a company’s equity to investors in return for capital
  • Purchase order financing: This is borrowing money to fulfill marijuana orders already placed by customers and paying back the lender once customers have paid for their marijuana purchases
  • Home equity loans: This is a line of credit offered with a house serving as collateral
  • Social Equity Investment: This is a financial investment that promotes equal access and opportunity for all, especially people adversely affected by enforced marijuana prohibitions

Does Delaware Have a Social Equity Program for Cannabis Dispensaries?

Delaware’s recreational marijuana law makes provisions for a Social Equity Program (SEP) for certain classes of cannabis dispensary applicants. A sizable number of licenses, discounted application fees ($1,000), licensing fees (40%), and a technical assistance program are reserved for social equity applicants. However, certain requirements must be met to be eligible for the state's SEP. These include 51% ownership by one or more people:

  • Who have lived in areas with disproportionately high marijuana use for at least five of the previous 10 years
  • Who have been convicted of marijuana-related offenses, married to, or the children of individuals who have been convicted of cannabis offenses

In Delaware, the following groups of people are eligible for the SEEP:

  • Community members who were severely harmed by the implementation of a previous marijuana ban
  • Applicants who were convicted of marijuana-related offenses (or had family relatives who were) prior to the state's new cannabis laws going into effect

Does Delaware Tax Marijuana Dispensaries?

A 15% tax will be levied on recreational marijuana retail sales. However, medical cannabis sales are not subject to taxes in Delaware. Cannabis taxes are collected by marijuana dispensaries and remitted to the Delaware Department of Finance.

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