How to Open a Dispensary in Illinois

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How to Open a Dispensary in Illinois in 2024

Before opening a marijuana dispensary in Illinois, a person or entity must obtain the relevant dispensary license. However, getting a dispensary license in the state is an extensive process. Opening a dispensing organization in Illinois is easier when the enterprise is fully funded. The state runs a Social Equity Program (SEP) to assist individuals in certain disadvantaged groups seeking to participate in its marijuana business industry, including establishing marijuana dispensing organizations.

Why Open a Dispensary in Illinois?

Illinois's legal marijuana market is flourishing with reports showing that residents and visitors purchased cannabis worth over a billion dollars at state-licensed dispensaries in 2021, a year after full legalization. The FY 2022 Annual Cannabis Report revealed that Illinois-licensed dispensaries made total sales of over $406 million in 2020. The FY 2021 total dispensary sales stood at $1.19 billion, doubling the previous year's sale revenue, and in 2020, state-licensed dispensaries sold over $1.5 billion worth of marijuana products.

According to the 2022 annual cannabis report, Illinois dispensaries generated $435 million in tax revenue for FY 2022, compared to the $293 million and $49 million they did in FYs 2021 and 2020, respectively. As of June 2020, Illinois had approximately 122,000 registered medical marijuana patients, which grew to 161,059 by August 2021. These trends suggest the growing potential of the state's medical and recreational marijuana markets. Consequently, opening a marijuana dispensary now in Illinois is worth it.

Numbers from the 2022 Annual Cannabis Report also show that Illinois still falls short on social equity in weed dispensary ownership. As of 2022, Hispanics made up only 1% of cannabis dispensary owners in Illinois. Blacks also account for the same percentage of dispensary owners.

Types of Dispensary Licenses in Illinois

The Illinois Department of Financial and Professional Regulation (IDFPR) issues the following types of dispensary licenses:

  • Medical Cannabis Dispensing Organization License - Holders of this license can purchase marijuana from state-licensed medical marijuana cultivators and sell to registered qualifying medical cannabis patients
  • Conditional Adult-Use Dispensing Organization License - This is usually issued as a temporary license and does not authorize holders to sell recreational marijuana or open for business. It only enables holders to build out their dispensaries and prepares them for the transition into adult-use dispensing organization licensees
  • Adult-Use Dispensing Organization License - This license permits the sale of marijuana products to recreational cannabis consumers in Illinois

How to Get an Illinois Dispensary License

  • Register a business entity and prepare a business plan
  • Check zoning rules/regulations and obtain approval from the local municipality where the proposed dispensary will be situated
  • Undergo a background check
  • Apply for an Illinois cannabis dispensary license on the IDFPR Online Services Portal
  • Wait for approval

After reviewing applicants' requests, the Illinois Department of Financial and Professional Regulation (IDFPR) will issue cannabis dispensing organization licenses. However, Illinois has application periods, and the IDFPR is currently not accepting new applications for medical marijuana dispensary licenses.

Applying for an adult-use dispensing organization license is an extensive application process. Applicants are first issued conditional licenses, and after going through certain steps, they are given the adult-use dispensing organization's licenses. The conditional license is not an approval to sell recreational cannabis. It is only a phase intended to allow licensees to prepare for becoming fully operational. Contact the IDFPR by email for detailed inquiries on how to get an Illinois dispensary license.

Information and Documents Required for a Dispensary License in Illinois

The following documents must be submitted as part of the 15-36 Application Packet for an Illinois adult-use dispensing organization license:

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

Preparing business and security plans before opening a dispensing organization in Illinois is essential. A well-prepared business plan will help secure the dispensary's financial resources. Any Illinois dispensary business plan should, at a minimum, include the following:

  • Executive Summary:
  • Mission and vision statement
  • Products and services
  • Financial summary
  • Competition
  • Financial Plan:
  • Projected balance sheet
  • Projected profit and loss
  • Break-even analysis
  • Business ratios
  • Projected cash flow
  • Products and Services Description/Market Analysis:
  • Target market
  • Market trends
  • Sales plan
  • Company Summary:
  • Dispensary leadership/management team
  • Business structure
  • Description of the preferred Point of Sale (POS) system
  • Legal and administrative compliance strategy

An Illinois dispensing organization security plan should contain the descriptions of the following:

  • Physical security measures, including security personnel and alarm systems
  • Cash and inventory tracking management system
  • Electronic surveillance and facility access control
  • Employee emergency protocols and training

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

In Illinois, municipalities may enact local ordinances to prohibit or significantly limit marijuana businesses, including cannabis dispensaries, within their borders. However, such ordinances, which may include time, minimum distance limitation to other places, and number of dispensary operations, must not conflict with state law. Cities and counties may also pass reasonable zoning restrictions concerning licensed dispensing organizations. Hence, Illinois marijuana dispensary license applicants must consider local regulations and zoning requirements when planning to site their businesses in any part of the state. They must check with the local authorities and obtain approval for the specific locations where they intend to open their shops.

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

The processing time for an Illinois dispensary license varies from one application to another and may take several months. Typically, an applicant should get their conditional use license within three months of submitting their application.

Where Can You Locate a Cannabis Dispensary in Illinois?

Once the IDFPR issues an applicant a conditional adult-use dispensing organization license, the licensee has up to 180 days to find a location for their proposed dispensary. Any Illinois dispensary location must meet the following requirements:

  • It must not be situated within a certain distance of a school, religious building, public park, or residential zone, as set by the local municipal authority
  • It must not be located within 1,500 feet of another licensed marijuana dispensary
  • It must be safe and suitable for public access
  • It must have sufficient space for cannabis product storage and handling
  • It must be in one of the assigned Bureau of Labour Statistics (BLS) regions of the state

Can Licensees Have More Than One Dispensary Location in Illinois?

Yes, a person or business entity may have and operate multiple marijuana dispensary locations in Illinois. However, the operation of each dispensary location is subject to state and local-specific regulations.

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

The initial/upfront cost of opening a dispensing organization in Illinois can vary but will largely be between $80,000 and $200,000, depending on the size and location. On average, anyone opening an adult-use dispensing organization in the state should expect to incur the following startup costs:

  • License application fee - $60,000 for a non-social equity applicant or $30,000 for a social equity applicant for a 2-year license
  • Real estate construction/renovation cost - $25,000 to $80,000
  • Security Equipment and surveillance system - $15,000 to $30,000
  • Inventory cost - This will vary by the size of the dispensing facility

The business owner should also plan for the following operating costs, which may range from $30,000 to $80,000 every month:

  • Staff expenses/wages for at least four employees - $15,000 to $20,000
  • 1 Manager or supervisor - $2,700 at $17 to $20 per hour
  • 1 HR/marketing manager - $3,500 to $5,500 at $22 to $33 per hour
  • 1 Budtender - $2,100 at $14 to $15 per hour
  • 1 Inventory manager - $3,500 to $5,500 at $22 to $33 per hour
  • Professional fees, for instance, attorney costs - $2,500 to $4,300
  • Marketing costs - $1,200 to $3,500
  • Lease - $2,800 to $21,000
  • Miscellaneous business costs - $1,500 to $5,000
  • Tax - Depends on the amount of marijuana products sold

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

Insurance is not mandatory for marijuana dispensaries in Illinois, but the state's Department of Financial and Professional Regulation (IDFPR) requires them to carry a $50,000 surety bond for each dispensing location. However, it is often recommended that cannabis dispensaries have insurance policies to protect their businesses from expensive lawsuits and unexpected liabilities. Generally, marijuana dispensary owners in Illinois should consider getting the following types of insurance policies:

  • Product Liability Insurance - This covers a cannabis dispensary in the event that a customer files a claim that the marijuana product bought from them caused some damages or injuries
  • Workers' Compensation Insurance - This provides coverage if any dispensary employee is injured on the business premises and unable to work. It typically covers compensation for permanent injuries, medical costs, and replacement income
  • Commercial property Insurance - This pays a dispensary for damaged or lost business property, including covering the cost of renovating a dispensing facility after a fire incident and replacing stolen inventory
  • Inland Marine Insurance - This helps to protect a dispensary's property, including inventory kept off-site or those in transit
  • Business Interruption Insurance - This pays unexpected costs in the event that a covered risk forces a dispensary to close temporarily
  • Commercial Auto Insurance - This protects a dispensary from high expenses that may stem from damaged vehicle parts in the event of an accident for a dispensary that uses commercial vehicles for transport. It may also cover medical costs for those involved in the accident
  • Product Recall Insurance - This protects a dispensary from financial crises and reputation brand damage that may arise from a cannabis product recall process

While insurance is recommended for Illinois-licensed dispensing organizations, it often comes at a cost. This cost varies depending on several factors, including the following:

  • The insurance provider
  • Type of policy
  • The required coverage limit
  • Past insurance claims
  • The size of the dispensary and the number of dispensary licenses held by the owner
  • The dispensary owner's experience in the marijuana industry
  • The dispensary location

How to Get a Grant to Open a Dispensary in Illinois

  • Equity Financing - This involves selling a certain percentage or shares of the proposed dispensary to investors in exchange for funds to open the business
  • Self-financing - A person may raise capital for their dispensary business from personal savings built over the years
  • Friends and Family - Raising funds from friends and family is advised as they often comes at low interest rates
  • Venture Capital - This works like equity funding, where investors fund a start-up dispensary with an agreement to earn considerable returns on investment (ROI) when the dispensary starts posting profits
  • Marijuana-specific Investment Lenders - This involves getting funding from investors who are cannabis legalization enthusiasts and always looking to support and grow marijuana businesses. However, they often lend for short-term periods and at high-interest rates
  • Commercial Loans - While commercial banks may not be able to lend to a cannabis dispensary in Illinois at the moment, approaching credit unions is an alternative to getting a loan to fund a dispensary
  • Social Equity Investment - The Illinois Social Equity Program offers low-interest loans for qualified persons who want to start and operate marijuana dispensaries within the state's boundaries

Does Illinois Have a Social Equity Program for Cannabis Dispensaries?

Yes. Illinois has an Adult-Use Cannabis Social Equity Program (SEP), developed primarily to provide financial aid to individuals and communities that have been historically affected by arrests and imprisonment for marijuana offenses. A social equity applicant in the state is any cannabis license applicant who is an Illinois resident and meets one of the following requirements:

  • An applicant with no less than 51% ownership and control by one or more persons who:
  • Have been arrested for and convicted of any offense eligible for expungement under the CI Act
  • Have lived in a disproportionately impacted area for at least five of the preceding 10 years before their application for an Illinois dispensary license
  • Are members of a family impacted by arrests and convictions for marijuana offenses
  • An applicant who has a minimum of 10 full-time employees with at least 51% of their current employees who satisfies one of the following:
  • Are members of an impacted family or have been arrested for and convicted for any offense eligible for expungement under the CI Act
  • Currently live in a disproportionately impacted area of the state

In Illinois, social equity applicants can expect to enjoy technical assistance from the SEP for licensing and legal services while applying for dispensary licenses. They also pay reduced dispensary application and license fees and can access low-interest loans to help them start and operate their dispensing organizations.

Does Illinois Tax Marijuana Dispensaries?

Illinois imposes the cannabis purchaser excise tax on consumers for the privilege of using marijuana products. State-licensed marijuana dispensaries are expected to collect and remit this tax at the following rates to the Illinois Department of Revenue (IDOR):

  • 25% of the purchase price from a cannabis dispensary of a recreational marijuana product with an adjusted THC level over 35%
  • 10% of the purchase price for a marijuana retailer of an adult-use cannabis product with an adjusted THC at 35% or less
  • 20% of the purchase price from a cannabis dispensary of recreational marijuana-infused products

Additionally, locally-imposed sales tax applies to recreational marijuana sales in Illinois. For instance, municipalities may impose a municipal cannabis retailer's occupation tax, which may not exceed 3%. Also, counties may levy a county cannabis retailers' occupation tax, which may not exceed 3% in a municipality located in the county and 3.75% in unincorporated areas of the county.

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