How to Get a Cannabis Dispensary License in California?

In The News 15 mins

Applying for a Type 10 Retailer license in California is no small decision and presents multiple moving parts where mistakes can be costly at best and criminal at worst.

multiple moving parts where mistakes can be costly at best and criminal at worst. While assembling the required components of your application can be an exhaustive undertaking, we have streamlined the process into a winning order of operations:

  1. Plan the Strategy and Assemble the Team
  2. Write the Business Plan
  3. Secure Financing
  4. Lock Down the Proposed Site
  5. Acquire Supporting State Agency Approvals
  6. Win Local Approval
  7. Apply for State License

California is home to the world’s oldest medical marijuana market, legalized in 1996 with the Compassionate Use Act. Adult-use became legal with the passing of CA Proposition 64 in 2017.

Prop 64 also lead to the creation a new regulatory state agency, the Bureau of Cannabis Control (BCC), a branch of the California Department of Consumer Affairs.

The role of the BCC is to issue commercial marijuana cultivation, distribution, transport, microbusiness, and retail licenses and with the aid of supporting agencies, regulate and enforce the legislature surrounding commercial marijuana production, sale, and consumption in California.

In the California cannabis industry, the regulations are numerous, and the competition is fierce, so applicants are expected to go beyond the bare minimum requirements stipulated by the BCC regulations. Due diligence must be combined with innovation and creativity to create a winning application.

At GPS we have a roster of industry professionals who can help pave the path unique to your retail business. Following the steps above, we’ll guide you through every stage of the way, from local and state licensing through build-out of your facility, to grand opening.

1. Plan the Strategy and Assemble the Team

The license application process is lengthy and detailed with little room for error, so the very first step is to plan a business strategy.

GPS will conduct discovery calls to determine your vision for the business and refine your concept into an attainable goal. The business strategy acts as a roadmap, identifying gaps in infrastructure and allocating resources to priorities, to achieve your long-term business plan.

Based on the business strategy decided upon, the next critical step is assembling team members whose skills and insights would make valuable contributions to reviewing the business plan, developing the application components, and building out the operation.

Our principal team will determine the best strategy for success using experience from various cannabis-specific industry backgrounds: business and market strategy; commercial cannabis licensing; project management; compliance consulting; advocacy and lobbying; global security; sales and employee training; and SOP writing and implementation.

The commercial marijuana industry in California is an area of expertise for our cannabis consultants. GPS’ principal team can win over regulators by creating detailed standard operating procedures drawing from local and state regulations, best cannabis and relevant industry practices, and the latest in compliance technology and innovation.

Our strategic partnerships with industry professionals widen GPS’ scope of services.

Through our partners, we can also offer cannabis-specific law services familiar with all relevant city, municipal, and state laws; accounting and staffing services; commercial realty; facility design and engineering; professional development; banking and payment solutions; advertising, marketing, and media.

Our global extended network consists of carefully vetted businesses that provide products, services, and opportunities for collaboration in the cannabis industry. Our principal team will project manage the team as a whole for efficiency and seamless coordination to meet all milestones as scheduled.

At this point in the timeline, prospective properties should be surveyed, and you should be nearing the final decision for the proposed location of the business. Finding the perfect compliant location can be a painstaking task and will require time to explore multiple properties and research municipal zoning requirements.

Locations should be scouted for road and foot traffic that may draw new walk-in customers. Other considerations might be plans for future growth. Some spaces will immediately disqualify for certain license types.

Our consultants have experience with all California cannabis license types and will be able to identify property best suited for future vertical integration. Ideally, you’ll want to work with a realtor with cannabis space experience.

This will save valuable time and labor working with property owners who want nothing to do with cannabis. A realtor may also know of properties that already have needed infrastructure, like secured vault rooms. Through our extended network, GPS can help you partner with a knowledgeable realtor to find the perfect location for your dispensary.

2. Write the Business Plan

The business plan has three goals in mind: the first is to define the business and to drum up interest with potential investors; the second is to demonstrate to the local and state regulatory agencies comprehension of applicable regulations; and third, serve as a roadmap for the build-out and launch of the business.

Executive Summary

The business plan will open with the executive summary which introduces regulators to you and your principals are; your collective qualifications; and company mission, vision, and value statements. The overarching points of the business plan should be summarized.

Company Description

In more detail, describe your business, your goals, and your target demographic. Any past experience in the cannabis industry or any relevant industry should be highlighted.

Explain what your products and services are, how you intend to market them towards customers, and how they can improve quality of life for community stakeholders.

Marketing Plan

Our principals will provide market analysis to best inform and structure your Marketing Plan. In a highly competitive market, an investment in advertising and marketing will earn you customers with brand loyalty.

With limited numbers of licenses available in Californian municipalities, a competitive analysis will reveal how your business can stand out, whether it be a focus on quality and education, a streamlined online ordering and delivery system, design aesthetics and branding, or appealing to a broader demographic.

Our advertising and marketing partners can utilize social listening tools to monitor mentions of your brand. Advertising cannabis is strictly regulated in California and limited to billboards, so your business will need a strong digital presence, whether it be social media or a website.

Digital presence for a marijuana business presents its own legal challenges that our team knows how to work with.

Financial Plan

Your Financial Plan will prove to the local governments that you have the means to run a successful and compliant business in their jurisdiction. A five-year financial forecast, including projected annual revenue, operating expenses, costs, and net profit, will help determine the Financial Plan.

GPS’s marijuana market analysts will create supporting financial models that factor source of capital; cost of production; capital expenditure; estimated initial capital requirements; wholesale/retail marijuana price projections; sales projections; and profitability timelines.

Parts of this section will be dedicated to operational planning and budgeting, and a plan to constantly monitor and evaluate progress using key performance indicators. If further capital raising is required, you will also need to detail how much is required and the intended use of these funds.

Proposed Property Plan

Include a detailed description of the proposed property and the building, your plans for improvements, and of how building and planning codes will be upheld, including ADA compliance for building entrances, hallways, bathrooms, and parking lots.

Conduct and submit a site analysis for the property and neighborhood context maps. Using data from the two, a conceptual development plan is drawn up to illustrate the proposed site’s strengths and constraints.

Our dispensary design partners will create site and floor plans, and 3D renderings of the dispensary to be submitted with the license application.

Local Approvals Plan

In addition to the BCC regulations, this section must demonstrate an understanding of other pertinent regulations, including city standards, land use restrictions, building codes, operator permits, and public safety codes.

List all regulations you will encounter and your plan to comply with each one. Each city or county will have their codes, so it is of utmost importance to have someone on your team with understanding and experience with regulations on a local and state level, so that nothing slips through the cracks and costs the license.

Some local governments have nuisance odor ordinances, like the City of San Luis Obispo and Sonoma County. In this case, a consultation with an HVAC contractor can review different types of carbon filtration systems to mitigate cannabis odor.

Community Outreach Plan

Developing a relationship of mutual benefit and respect with residents is not just good for your business, but good for the health, safety, and economy of the community. Speaking with community stakeholders can get a sense of their attitude towards your business.

Working with community demographics, designers can determine what kind of storefront and space residents want to see as part of their community.

Communities that do not favor the growth of cannabis business will reflect this in their legislature by adding more compliance burden. We can provide advocacy through our partners to champion your business, attend city council meetings, and speak with the community to understand and address their concerns.

Through community outreach, you will discover how your business can be a welcome force for good. For example, communities that have been particularly hard hit by the opioid crisis would benefit from the dispensary hosting educational classes on cannabis as an opioid alternative.

Most importantly, the local community will be your customer base, and so to gain the trust of the residents you will need to provide assurance that all safety, security, and compliance concerns will be met.

GPS can help optimize safety in the surrounding neighborhoods with the right setup of surveillance systems and security personnel. Diversion preventative tactics built into company SOPs ensure that cannabis product does not fall into the hands of minors.

Operational Plan

Next, you will want to describe your operations plan, including basic organizational structure and day-to-day operations.

We’ll address areas of compliance concern: Hours of operation, age restrictions, restricted access to retailer premises, limited-access areas, marijuana displays, marijuana packaging and labeling, and observing daily limits.

Procurement Procedures

Briefly describe how you intend on initially supplying products to customers until the business has established its own vendor network.

Using our network of licensed California marijuana producers, we’ll connect your business with the brands that will fit your brand aesthetic and target demographic perfectly.

Technology

Through our extended network, GPS can make strategic partnerships between technology and software firms and your dispensary to streamline day-to-day operations.

An ID card reader can quickly verify a customer’s age before allowing them onto the sales floor, making customer service and compliance easy. Sign-in tablets allow new customers to sign up easily without any paperwork, and for returning customers to enter with ease and apply for loyalty points, leading to an enhanced customer experience.

Using a sales tablet, the budtender can dedicate their focus on the customer and be able to conduct quick research into any inquiries about the product. After completion, the order will be electronically sent to be processed.

Investing in an integrated cannabis business POS platform that can easily check-in customers, place orders, and complete transactions will lead to increased customer satisfaction.

Employee Roles & Responsibilities

Important roles must be filled by experienced professionals to ensure the safety and compliance of the operation. Compliance Manager, Security Manager, and General Manager are critical roles that should be filled after winning a license so that they can be involved in the build-out of the business. GPS has a partnership with a staffing agency that can provide experienced executives and general managers on contract.

General Manager (GM)

The GM will be responsible for managing all aspects of dispensary operations, product procurement, and staff management. A GM with experience in the industry can also bring in a fresh, best industry practice perspective.

Compliance Manager (CM)

In this role, the CM will ensure that all operations are following all relevant regulations, especially METRC track-and-trace reporting, inventory control, and QA/QC management. They would act as the liaison between the business and the Bureau and be responsible for reporting to the state.

The CM would lead inventory hard count audits and reconciliation, lead employee training on regulatory knowledge, and be responsible for informing management of new updates from the BCC. 

Security Manager (SM)

This role will have an extensive security and surveillance background. The SM should already well-versed in or can be trained in California commercial cannabis compliance by the CM.

The SM will oversee security training for all employees including the Security Guards.

In the application, you must attest that you will employ within a year of renewal, one supervisor, and one employee will have completed the 30-hour general industry course offered by the OSHA Training Institute Education Center.

This can be a role assigned to the Compliance and General Managers. This ensures that workplace safety compliance is also being followed.

Other Roles

Shift Manager

Upon completion of the build-out, Shift Managers should be hired to handle the day-to-day operations under the General Manager.

Receptionist

The Receptionist is the gatekeeper between customers in the lobby and the limited-access sales floor. Age verification and documentation of non-employee visitors are important compliance procedures.

Budtenders

Budtenders are not only sales associates but customer educators. They must be extensively trained in product knowledge, customer service, and compliance.

Processors

When a customer’s order is placed, processors with limited-access area access to the inventory physically fulfill the electronic order for sale. Processors would also assist the Compliance Manager in conducting hard counts for inventory audits.

Cashiers

Cashiers process and complete customer transactions. They are also responsible for ensuring the product leaves in compliant exit packaging and informing the customer of laws against opening it until they leave the premises.

Delivery Drivers

Delivery Drivers, should your local jurisdiction allow it and your business decide to provide this service, can either be a staff member cross-trained in delivery or hired specifically for this role.

Delivery Drivers would receive additional compliance training for the transport of cannabis goods. Some municipalities require a third party delivery service, so knowing the local laws is important.

Security Guards

Security Guards will be hired to implement safety and security measures under the direction of the Security Manager. They will also offer security support to the Receptionist in the lobby.

Business Plan Checklist:

  • Executive Summary
    • Introduction to the business, team, and vision
  • Company Description
    • Details about the business and target demographics
    • Products and services provided
    • Goals
  • Marketing Plan
    • Marketing and advertising
      • Competitive analysis
      • Compliant methods of marketing and advertising
  • Financial Plan
    • Market analysis
    • Financial models 
      • Five-year forecast
    • Cash flow statements
  • Proposed Property Plan
    • Physical location of proposed facility 
      • Zoning laws
      • Building permits
      • Site analysis and neighborhood context maps
      • Conceptual development plan
  • Local Approval Plan
    • All pertinent city, municipal, state/provincial permits, ordinances, regulations, and laws 
    • How they are going to be upheld
  • Community Outreach Plan
    • Appealing to community stakeholders
    • Giving back to the community
  • Operational Plan
    • Compliance concerns
      • Hours of operation, restricted and limited-access areas, age restrictions, daily limits, waste management, packaging and labeling verification
    • Procurement 
      • Partner with trusted licensed vendors in GPS extended network
    • Technology 
      • Technology and software platforms that can streamline daily operations
      • Compliance and security
    • Employee Roles & Responsibilities
      • Management
        • Compliance Manager
          • Inventory control, METRC, QA/QC, compliance
        • General Manager
          • All aspects of dispensary operations, product procurement and staff management
        • Security Manager
          • Oversees all aspects of dispensary security and surveillance, including Security Officers and training employees
      • Staff
        • Shift Manager
        • Receptionist
        • Budtender
        • Fulfillment
        • Cashier
        • Security Guard

3. Secure Financing

With the business plan complete with a better understanding of the financial requirements of running this business, the next step is to complete capital raising.

The exorbitant costs of the licensing fees and operational costs of a cannabis business is a financial barrier to entry into the industry for many.

Most marijuana businesses experience the additional challenges of being a startup, especially in a market that is resistant to newcomers.

US cannabis entrepreneurs face challenges in finding and raising capital. Traditional channels of capital usually available to other businesses are unavailable to Plant-Touching Businesses, the businesses that directly handle marijuana, including retailers.

Due to the federal classification of marijuana as a Schedule I substance and the federal regulation of banks, retailers can’t open accounts or access lines of credit. 

With years of principal experience in financial analysis, GPS will review the business plan to increase its chances of attracting investors. 

Working with investor clients ourselves, we know what investors in the cannabis space are looking for.

4. Lock Down the Proposed Site

A physical premises location for the business needs to be locked down at the time of applying for the license. Choosing the right location is critical for success. Factors to take into consideration include local zoning laws and ordinances, neighborhood attitudes, and existing infrastructure.

The location must also be within proper “green” zones, and not within a 600 ft radius of a school, daycare center, or youth center.

Certain municipalities consider that the bare minimum and have additional constraints, including distance from “sensitive” areas like drug rehabilitation centers and religious centers. The building must also have the right type of use classification.

Our dispensary design partners can work with input from our security and compliance experts to create a space that has an uninterrupted workflow, building design that secures restricted and limited-access areas, camera mounts in required locations, and relates the aesthetic to the brand, among many other considerations.

A detailed Premises Diagram is required to be submitted with the license application. It must be in accordance with the BCC regulations: Drawn to scale, clearly show all boundaries, dimensions, walls, doorways, windows, entrances, and exits.

A brief statement should describe the activity to occur in each room. Areas where cannabis-touching activities occur storage, order fulfillment, customer sales, and receiving inventory need to be clearly marked and labeled.

Common areas such as bathrooms, breakrooms, and offices must also be labeled. Our security and compliance experts will determine where on the diagram surveillance cameras are required to be mounted, all of which must be numbered and identified on the diagram.

Sensitive areas under video surveillance will be labeled, like limited-access areas, security rooms, point-of-sales areas, anywhere cannabis product or cash is handled.

5. Attain Supporting State Agency Approvals

There are two major state agencies to go through: the California Department of Tax and Fee Administration (CDTFA) and California Secretary of State (SOS). The dispensary should also be formed as a legal business entity to increase the chances of winning the license.

After choosing an entity type for your business, you will need to register the business with the Secretary of State. You may register as a Limited Liability Corporation (LLC), For-Profit Corporation (S-Corp, C-Corp), or Mutual Benefit Nonprofit Corporation (MBNPC).

The CDTFA handles all marijuana taxation for the state and to apply for the license you must also register your business with the department to receive your seller’s permit. Your business needs to be recognized and registered with the CDTFA and SOS before starting the application.

All business formation documents, including all documents filed with the SOS, need to be uploaded with your application. Foreign corporations must include a copy of the Certificate of Qualification from the SOS.

6. Obtain Local Approvals

Choosing the right location for your dispensary needs to take into account the multitudes of factors that can make or break the business. Depending on where the property is located, it may be subject to additional regulations or a lengthy approval process.

California has 482 cities and 58 counties with differing attitudes on cannabis businesses reflected in their local regulations.

Take the city of Los Angeles, California, as an example of this multi-tier jurisdiction complexity. The city has a lead regulatory agency, the City of Los Angeles Department of Cannabis Regulation (DCR), which administers LA’s commercial cannabis licensing and regulatory program as established by the City Council.

The DCR processes license applications and runs the social equity program. After review of the license application, the DCR will provide a mailed public notice for all residents and property within a 500-foot radius of the proposed facility.

The closest neighborhood council, business improvement district, and the City Council District will also receive written notices about the complete application.

An audience before the nearest closest neighborhood council is then held to answer questions and assuage concerns about the application.

Retail licenses require the additional step of DCR calling for a community meeting in the regional area of Area Planning Commission and will receive written and oral testimony from the public concerning the proposed business.

DCR will inspect the premises to determine if it is compliant with both local and state requirements. DCR works with the Los Angeles Fire Department ‘s Cannabis Unit to determine fire code compliance.

After the pre-license inspection, DCR reviews the application again. If DCR recommends the issuance of a license, the LA Cannabis Regulation Commission must hold another public hearing to make the final decision.

It is only with the city approval can a licensee then apply for a State license.

Each city and county process will differ, but a fundamental step is to apply for a discretionary conditional land use permit (CUP) from the county’s Department of Regional Planning.

A CUP allows the property owner to use the building in other ways than intended by zoning laws.

There is often an audience before the city’s zoning board or planning commission and you will need to understand local objections and prepare a strong argument to allow this deviance in property use.

7. Apply for State Cannabis License

At this point, we have all required paperwork to submit to the BCC. The application can be filled out through the BCC Online Licensing System with supporting documents uploaded.

Several forms must be completed with the application, including four detailed forms with several questions about operating procedures for inventory control, quality control, security, and delivery procedures, if applicable.

Integrating best industry practices and the requirements outlined in local and BCC regulations into these answers show the regulators that your operation will be run compliantly.

Inventory Procedures Form

You will need to submit a diagram, labeling limited-access areas where cannabis goods will be stored. Logistics involving limited-access area access and security, storage, training, recordkeeping, inventory control, and must meet the Bureau’s satisfaction.

Procedures for QA/QC, inventory reconciliation, and receiving new inventory are opportunities not just to demonstrate knowledge of regulatory requirements, but also to call upon our technology partners for the tools to build upon them.

METRC onboarding will be a critical first step in implementing inventory control procedures. Subsequent employee training and SOP implementation will cement these procedures into the business’ operations.

Non-Laboratory Quality Control Procedures

California has strict regulations on packaging and labeling. A batch’s Certificate of Analysis lends assurance of the product’s potency and purity, and its batch number can account for the marijuana product since it was a plant.

As of January, it is required that all cannabis be packaged in tamper-evident, child-resistant, and resealable exit packaging. Labels also warn customers of the product’s psychoactive nature and to keep out of reach of minors and pets.

Here you need to detail procedures for verifying that packaging and labeling on cannabis products are accurate before it is sold to a customer. Drawing upon regulations and best industry practices, GPS can create procedures and checklists for verifying incoming shipment packaging for BCC compliance.

Connecting and creating partnerships with trusted, licensed distributors mitigates the risk of non-compliant packaging and labeling errors. Maintaining quality control involves utilizing proper pest control, environmental controls, maintenance, and cleaning services to prevent the degradation of the product.

Procedures for handling returns will require a waste management plan. For retailers that would generally be a third-party waste management company that would render and dispose of cannabis waste legally.

Security Procedures

These security procedures will provide the basis of your security SOPs and employee training if awarded the license. Our principal security specialists will be invaluable to providing input in creating protocols to keep products, customers, employees, and the neighborhood all safe.

Security Procedures on allowing access onto the premises and limited-access areas, issuing and retiring employee badges, and maintaining and monitoring video surveillance will be asked for in detail.

The video surveillance system and onsite security personnel needs to be described in detail. The BCC regulations list minimum requirements for locks, doors, video surveillance and recording storage.

Additional precautions for security that would in turn increase the safety of the surrounding neighborhood also increase the chances of winning a license. This would be the opportunity to use innovative new technology to deter diversion.

RFID tracing technology integrated into the video surveillance system would keep track of cannabis products on the premises at all times.

Delivery Procedures

If it’s allowed in the municipality and you plan to offer delivery service, you must be prepared with a list of vehicles with details about their make and model and a list of the employees of legal age who will be conducting deliveries.

License Application Checklist:

  • Cannabis Retailer License Application
  • Owner Submittal
    • For all owners as defined by the BCC 
      • Copy of government-issued ID
      • Submit Live Scan fingerprint images to the Department of Justice
      • The United States Armed Forces Priority Request for the expedition will need evidence of honorable discharge, if applicable
  • Financial Information Form
  • Premises Diagram Form    
  • Inventory Procedures Form
  • Security Procedures Form
  • Non-laboratory Quality Control Procedures Form
  • Delivery Procedures (if applicable)
  • Transport Procedures Form (if microbusiness)
  • Licensee Bond Form
    • Proof of surety bond in the amount of $5,000, payable to the State of California
  • Required attached documents
    • Evidence of legal right to occupy and use the proposed premises location
    • Business formation documents, including all documents filed with the CA Secretary of State (SOS).
      • Foreign corporations must include a copy of the Certificate of Qualification from the SOS
    • Evidence of premises compliance with local jurisdiction if the proposed premises is within 600 feet of a school, daycare, or youth center.
    • Limited sovereign immunity waiver, if you are a federally recognized tribe or other sovereign entity.
    • Evidence of exemption from, or compliance with, the California Environmental Quality Act
    • Notarized statement and copy of the signature page of the labor peace agreement for businesses with more than 20 employees

Once the license is won, the work has only begun. The next phase is the facility build-out. During this time procurement, METRC onboarding, inventory control, advertising and marketing, staff training, and SOP implementation will be the main focus of the operation.

At Gateway Proven Strategies (GPS), our years of collective experience and expertise have refined our processes, including how to get a California dispensary license.

At GPS we’ll provide project management throughout build-out, utilize all our areas of principal expertise, and call upon our partners and an extensive network of experts to further develop concepts to operate a successful cannabis dispensary in California.