Then legal sales of recreational cannabis started in New Mexico in April 2022, sparking a new level of interest in opening cannabis dispensaries.
Setting up a cannabis dispensary involves considerable pre-planning and knowledge of the legal hurdles — not to mention a clear understanding of the associated costs.
You not only have the initial licensing and capital requirements, real estate costs, taxes, marketing and employee salaries to consider, but you may incur construction, infrastructure, and technology costs too.
To be a successful cannabis dispensary business owner, it’s important to go in with your eyes open to the potential financial commitment and be ready for it in your business plan.
How to open a dispensary in New Mexico?
The recreational cannabis industry in New Mexico will evolve from where it is today but we can all bank on one thing: it is sure to be tightly regulated. Nobody is going to make it easy for you.
Therefore, before we drill down into the costs involved, it’s a good idea to remind ourselves of the steps required to open a cannabis dispensary here:
- Understand the laws/eligibility requirements: you probably won’t have the patience to read through them all but if you hire a cannabis business lawyer, everything can easily be explained.
- Create a business plan: this should cover where you intend to locate your dispensary, who’s going to run/manage it, market analysis, how you intend to be profitable, how you will finance the business, etc.
- Secure funding for your startup: once you have an understanding of the costs, you may need to secure funding if you don’t have the savings to cover everything required.
- Confirm local approval: before your license can be approved you need to provide proof from your local municipality that your cannabis dispensary business location doesn’t contravene zoning laws (e.g., at least 300 feet from schools, etc.)
- Submit your dispensary license application: you’ll need considerable documentation, including proof of identity/age, financial information, a plan to encourage economic and social diversity in employment, and a site plan.
- Set up and launch: if your license is approved, you’re ready to go — bearing in mind that you will need to follow the compliance regulations regarding POS selection, security requirements, etc.
How much does it cost to open a Cannabis dispensary in New Mexico?
When you apply for your dispensary licenses with the Cannabis Control Division in New Mexico, it will cost $2,500 annually plus $1,000 for each additional licensed premises.
Under the state’s social equity provisions, discounts may be offered on license fees to applicants from a community disproportionately impacted by cannabis prohibition.
The license application fees for opening a cannabis dispensary are just the tip of the iceberg. As you have seen from the steps above, considerable work must be done even before you get to the license application stage.
In addition to the licensing costs, you are also likely to incur the following (and more):
- Legal fees
- Real estate costs
- Construction costs
- Interior design costs
- IT setup costs
- Marketing costs
- Product costs (wholesale)
Even a small dispensary is going to cost in excess of $100,000 in startup costs.
Initial capital requirements and banking fees
The capital requirements for cannabis dispensary businesses are higher than for other types of retail businesses, raising the bar of entry for many entrepreneurs looking to break into the industry.
It also raises the risk for businesses. As part of the license approval process, you may be asked for financial statements to prove that you have sufficient liquid assets to keep your business running during the first few years, which is notoriously difficult for many new businesses.
In addition to the upfront expenses already covered, you may also run into some high banking fees because cannabis is still illegal federally. Many national banks are wary of taking on cannabis business clients.
Some small private banks will charge astronomical fees for their services – up to $2,000 a month. You may need to seek a local credit union to work with instead of a traditional bank.
Real estate costs
Unless you are planning on purchasing land and constructing your own place, you will likely lease retail space for your cannabis dispensary.
As with any retail business, good visibility and plenty of passing traffic are important but cannabis dispensaries face some challenges that other retail spaces do not encounter (zoning restrictions).
That said, you should plan on paying anywhere between $20/sqft and $40/sqft annually, depending on the location. As a guideline, small retail spaces can be anywhere between 1,000 sqft and 10,000 sqft in size.
You may also meet some reluctance from rental space landlords to house a cannabis dispensary, depending on their attitudes. This could lead to a premium being paid.
So, everywhere you look, there are potential extra costs for cannabis business owners!
The cannabis industry is set to become increasingly competitive in New Mexico. As more dispensaries find their way onto our streets, it will become harder to procure a license and become established.
At Legal Solutions of New Mexico in Albuquerque, our experienced cannabis business lawyers can help you understand the costs of setting up a dispensary and navigate the legal hurdles. Call (505) 445-4444 for a free consultation with a knowledgeable cannabis lawyer.