How to Open a Dispensary in Michigan

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How to Open a Dispensary in Michigan in 2024

You may only set up a dispensary in Michigan upon obtaining a provisioning center or marijuana retailer license from the Department of Licensing and Regulatory Affairs of the Cannabis Regulatory Agency. The CRA has established a two-step process for eligible applicants, which includes obtaining municipal approval. Applications may be completed on the LARA Accela portal. Some applicants may qualify for license fee reductions if they meet the Michigan Social Equity Program requirements.

Why Open a Dispensary in Michigan?

Michigan's cannabis sector is growing at a fast pace, with $1.1 billion generated in recreational cannabis sales for fiscal year 2021, more than $1.8 billion for fiscal year 2022, and $3 billion estimated in annual revenue by 2024. Furthermore, according to a study, the state generated over $340 million in tax revenue in 2022, nearly $300 million more than it did in 2020. Another study estimated that over $500 million in sales tax revenue may be generated in 2024.

The growth in the cannabis sector in the state is not limited to the recreational cannabis market. According to data from the MMMP (Michigan Medical Marijuana Program), there are currently more than 170,000 registered patients in the state, accounting for a growing share of the annual cannabis sales. Considering the growth in both cannabis sectors, setting up a dispensary in Michigan continues to be a profitable business opportunity.

Types of Dispensary Licenses in Michigan

Although the state does not issue a license specifically called a dispensary license, persons or entities seeking to establish a cannabis dispensary in the state must obtain one of the following licenses:

  • Provisioning center license
  • Marijuana retailer license

A provisioning center license authorizes the licensee to purchase or transfer marijuana only from a marijuana process or grower and sell or transfer to only registered patients or registered primary caregivers. A marijuana license authorizes the licensee to sell recreational cannabis to adults aged 21 or older.

How to Get a Michigan Dispensary License

The Michigan Cannabis Regulatory Agency (CRA) has established a 2-step process for persons looking to obtain a dispensary license in the state. However, before initiating the two-step process, you must verify that you fulfill the eligibility requirements for a cannabis license in the state and create a CRA Accela user account. To be eligible to apply for a cannabis dispensary license in Michigan, you must:

  • Must be at least 21
  • Have no conviction for a felony offense in the last 10 years
  • Have no misdemeanors related to a controlled substance within the previous 5 years
  • Have no local ordinance violations within the last 5 years
  • Not have an issue with law enforcement or legal violations except for traffic violations

Step 1 - Prequalification Stage

The first part of the 2-step process is called the prequalification stage. Here, the main applicant and supplemental applicants must submit to a full background check process. The background investigation process may take up to 30 business days to be completed.

A main applicant is anyone seeking a marijuana license in their name. The main applicant may be an individual (sole proprietor) or an entity, such as a limited liability company, partnership, corporation, or trust. Supplemental applicants depend on the ownership structure of the main applicants. For more information on who qualifies as a supplemental applicant, see the links below:

If the information provided by the applicant is incomplete, the CRA will issue a notice of deficiency citing missing or incomplete information and provide a timeframe of 5 business days to provide the information.

Before prequalification materials may be reviewed, the main applicant must pay the $3,000 application fee. Notifications for where fingerprints can be taken will be sent to the applicant. Note that the CRA does not accept fingerprint records completed prior to the notification to undergo a background check will not be accepted. Also, local law enforcement agencies are not authorized to collect fingerprints for the CRA.

For further information on the prequalification process, see the online application resources page of the CRA website.

Step 2 - Facility Licensing

At the second stage of the application process, the applicant must submit specific information related to the physical location of the dispensary. In order to ensure that the information provided regarding the dispensary facility is in its final form and accurate, stage two may not be initiated more than 60 days before the dispensary facility is ready for inspection.

After receiving the final approval for a state operation license from the CRA, the applicant must pay the assessment fee for the dispensary license within 10 days of approval. See the marijuana retailer application instructions guide for more information on completing the facility licensing stage of the application process.

Both stages of the application process will be completed online on your account on the Accela portal. For more information on dispensary facility licensing, contact the CRA by calling (517) 284-8599.

Information and Documents Required for a Dispensary License in Michigan

The following documents and information will be required when applying for a marijuana retail license in Michigan:

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

You must submit a business plan to set up a dispensary in Michigan. A business plan helps you define your goals and objectives and how to achieve them. It is also an important document when sourcing funds for the dispensary startup. According to the Cannabis Regulatory Agency in Michigan, the business plan must include, but not be limited to, the following sections: technology plan, staffing plan, inventory and recordkeeping plan, and marketing plan. Other plans required for licensing by the CRA include a floor plan and a marijuana business location plan.

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

Since obtaining municipal approval is critical to getting a cannabis license, researching the local cannabis rules and regulations where you plan to locate your dispensary is recommended before applying for a cannabis retail license. Michigan allows its dispensaries to ban, restrict, cap license numbers, and set additional requirements for individuals or entities seeking cannabis licenses. These restrictions vary from municipality to municipality. For instance, in Detroit, before you apply for a cannabis license, you must complete the Buildings, Safety, Engineering and Environmental Department (BSEED) Zoning and Building Permit Process.

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

The amount of time it takes to obtain a Michigan cannabis retail license varies depending on several factors, including the completeness of your application and the current workload of the Michigan Cannabis Regulatory Agency (CRA).

However, in general, the licensing process may take between 3 and 6 months, as indicated below:

  • Pre-qualification: 3-6 weeks
  • Application: 6-12 weeks
  • License review and approval: 6-12 weeks
  • Inspection: 2-4 weeks

Where Can You Locate a Cannabis Dispensary in Michigan?

Since not all municipalities allow cannabis businesses within their borders, you must determine if a dispensary business is permitted in the town or city where you intend to set up a marijuana store. For more information on municipalities where you can set up a dispensary, see the communities that have opted in and those that have opted out of permitting cannabis businesses in their jurisdictions on the Michigan CRA website.

Also, per state law/mileg.aspx?page=getObject&objectName=mcl-333-27959&highlight=regulation%20AND%20marihuana), unless you have obtained municipal approval, you cannot locate a marijuana dispensary within an area zoned exclusively for residential use or within 1,000 feet of a school providing education in kindergarten or any of grades 1-12. Additionally, cities in Michigan, such as Detroit, may have other zoning restrictions, like not allowing marijuana businesses within 1,000 radial feet of a religious institution identified as exempt by the City Assessor. Therefore, it is recommended that you research and understand the specific zoning laws and regulations of the town or city where you plan to establish your dispensary.

Can Licensees Have More Than One Dispensary Location in Michigan?

Yes, in Michigan, licensees can have multiple dispensary locations, but they must obtain separate licenses for each location.

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

The following are the costs associated with opening a marijuana dispensary in Michigan:

  • Prequalification application fee: $3,000
  • Initial and annual licensing fee: $15,000 (marijuana retailer) or $2,813 (provisioning center)
  • Real estate fees: $50,000 - $100,000
  • Employee salaries: $150,000 - $350,000
  • Professional fees and services: $50,000 - $75,000 (includes the fee for insurance, financial, legal, and consulting fees)
  • Hardware, security, and software: $50,000 (covers costs for internet, POS, scanners, computers, TVs, and printers)
  • Marketing costs: $30,000 - $100,000
  • Inventory costs: $1,000 - $1,500 per pound of cannabis products, including edibles, flower, tinctures, vape cartridges, topicals, lotions, beverages, capsules, and prerolls
  • Taxes: 6% sales tax, a 10% excise tax on adult-use sales

Note that other fees may apply, such as for medical marijuana dispensaries and when obtaining municipal approval to establish your dispensary. Such fees vary per municipality.

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

Senate Bill 461 mandates cannabis dispensaries to have product liability insurance coverage. The bill provides that a dispensary licensee must file with the state’s cannabis regulatory agency proof of financial responsibility of a minimum of $100,000 per license for liability for bodily injury arising from the sale of adulterated marijuana or marijuana products.

Also, Public Act 55 requires dispensaries to maintain insurance coverage provided by a licensed or admitted insurance organization in Michigan of at least $50,000 for actions brought under Section 11a of the Michigan Regulation and Taxation of Marijuana Act (MRTMA). A licensed or admitted insurance company in Michigan has submitted its forms and rates for approval by the state Department of Insurance and Financial Services and may not deviate without permission.

In addition, a cannabis dispensary should also have workers' compensation insurance, crime insurance, and property insurance. Workers compensation insurance is required for all businesses in the state. It provides coverage for dispensary employees who fall ill or become injured in the course of dispensary operations. A crime insurance policy protects the dispensary against computer fraud, dishonest employees, forgery, and other related crimes. Property insurance covers various types of business-related damage to properties in the dispensary.

How to Get a Grant to Open a Dispensary in Michigan

Due to federal cannabis prohibition and the lack of federal insurance coverage for cannabis-related transactions, traditional banks and lenders refrain from granting loans to cannabis businesses, including dispensaries. Hence, dispensaries must try alternative sources of funding for their operations. Some of the available options include:

  • Equity financing: Opting for these financiers might provide valuable connections and industry expertise. Nonetheless, be prepared to relinquish a substantial portion of equity in your company if you decide to pursue this route
  • Friends and Family: You can raise funds for your startup by asking friends and family members for private donations
  • Self-funding: This involves using your own money to finance the dispensary business. This can include using investments, personal savings, or credit cards
  • Crowdfunding: This involves receiving donations from the general public or a community to fund the dispensary
  • Cannabis-specific lenders: Cannabis-specific lenders understand the unique challenges and opportunities of the cannabis industry and are able to lend money to businesses that may not be able to qualify for traditional financing, such as dispensaries
  • Social equity programs: If you are eligible to participate in the Michigan Social Equity Program, you may receive a discount on the dispensary licensing fee

Does Michigan Have a Social Equity Program for Cannabis Dispensaries?

Yes. The Michigan Social Equity Program, established as a provision under MRTMA, aims to foster and incentivize engagement in the cannabis industry by people who live in the 184 Michigan communities identified to have been disproportionately impacted by marijuana prohibition and enforcement.

In order to be eligible under the SEP, you must meet one of the following conditions:

  • You have resided in a disproportionately impacted community for a minimum of 5 cumulative years. This qualifies for a 25% reduction in licensing fee
  • You must have a misdemeanor or felony conviction for a marijuana-related offense. If you have a misdemeanor conviction, you qualify for a 25% reduction in licensing fee. If you have a felony conviction, you are eligible for a 40% reduction in licensing fee
  • You have valid registration as a primary caregiver under the Michigan Medical Marijuana Act for a minimum of 2 years in the last 5 years. This qualifies you for a 10% reduction in licensing fee

Once eligible for the program, a dispensary must meet one of the following qualifying criteria:

  • Eligible social equity participants planning to operate a marijuana establishment within one of the identified disproportionately impacted communities will receive a fee reduction on all adult-use dispensary licensing fees
  • Eligible social equity participants planning to operate a marijuana establishment outside of one of the identified disproportionately impacted communities will receive an extended fee reduction for only 2 years following adult-use dispensary licensure

For instructions on how to apply as a social equity applicant, see the SEP online application and instructions page or the SEP forms and paper application page of the Michigan CRA website. The equity program offers free assistance with adult-use dispensary license applications to individuals eligible for the SEP. After getting an eligibility letter for the program, you will receive further instructions for sign-up options and guidance documents outlining the necessary information for Step 1 of the licensing application process. Upon your request to sign up, a social equity representative will reach out to you to assist in completing the registration process.

Does Michigan Tax Marijuana Dispensaries?

Per state law, Michigan dispensaries must include a 6% sales tax on medical and recreational marijuana sales and another 10% marijuana retailer excise tax on recreational marijuana sales. Both taxes are remitted to the Michigan Department of Treasury.

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