Let’s dive into opening a dispensary in Arizona. Do you want to learn how to open an Arizona dispensary? Arizona has one of the most robust medical cannabis markets in the nation, despite relatively restrictive regulations. Now that recreational cannabis is legal, too, the total amount of cannabis sold has doubled in the state.
Arizona is not accepting medical cannabis license applications at the moment. Recreational cannabis licenses have already been issued to existing medical dispensaries, although there are 26 social equity applicant licenses to be granted.
While most business licenses in Arizona may already be taken, the state is due for a new round of medical cannabis license applications. Prepare for the next round of medical and recreational licenses in Arizona with our guide on how to open an Arizona dispensary. Let’s learn all about opening a dispensary in Arizona.
State of Arizona’s Cannabis Market
The state’s medical cannabis market has taken off like a rocket since its start in late 2012. In 2019, the industry saw a gain of 21 percent in sales. That resulted in a total market value of $709 million. During the same year, the state had 15,059 full-time cannabis jobs.
Voters passed the state’s medical cannabis act in 2010. The law allows patients to buy, possess, and consume medical cannabis. The Department of Health Services (DHS) operates the medical program. Under the law, the number of licenses available is one for every 10 state pharmacies. Local governments can pass zoning restrictions for retail shops.
In 2019, Governor Ducey signed Senate Bill 1494 to reform the medical cannabis program. The bill requires all shops to test their products for purity and potency. Independent labs will perform analytical testing for microbial contamination, heavy metals, residual solvents, pesticides, fungicides, and potency.
The law took effect on November 1, 2020. This increases the overhead costs associated with running an Arizona dispensary.
Proposition 207, the Smart and Safe Act, was passed by Arizona voters in November 2020 to legalize recreational cannabis use. Cannabis possession of up to one ounce of cannabis and home cultivation of up to six plants (up to 12 plants per household) became legal on November 30, 2020 and retail sales started on January 22, 2021.
The measure directs the DHS to create a regulatory framework for the adult-use cannabis market and establishes a 16% excise tax on cannabis products (not applicable to medical cannabis sales). Arizona recreational dispensaries can sell cannabis to adults over the age of 21.
Available Cannabis Business License Types
Currently, the department is not accepting new cannabis business license applications. It is important to know the difference between the types of business licenses available. It can prepare you for the next round of licenses. Both medical and recreational retail cannabis dispensaries are vertically-integrated in the state. That means dispensaries are responsible for the cultivation, manufacturing, and sale of cannabis products.
A dual Arizona dispensary license is a business that holds both a nonprofit medical cannabis dispensary registration certificate and a marijuana establishment license. A dual licensee may run a single retail location where medical cannabis is sold to qualified patients and cannabis is sold to adults over 21 years of age.
Steps to Qualify for a Cannabis License
Medical Cannabis Licenses
Right now, you cannot apply for a medical cannabis business license in the state. The DHS will release new medical cannabis licenses in the future. The process may be different from the previous two licensing rounds.
During the first round of applications in 2012, the state issued licenses on a lottery system. Applicants must have met the state requirements first. Each district, of the 131 in the state, had a separate lottery drawing.
During the second round of licenses, there was not a lottery. The Arizona DHS picked a winner based on their proposed location. The winner had to have a location in an area that had the most patients in a 10-mile radius. For the next round of licenses, the process may change yet again. The changes will include the allocation of social equity applicant licenses.
Recreational Cannabis Licenses
The application window for the first round of adult-use cannabis licenses was from January 19th to March 9th, 2021 but only for “early applicants.” According to Arizona dispensary laws, early applicants are existing dispensaries or applicants who plan to open a dispensary in a county that has less than two dispensaries.
123 medical cannabis dispensaries got the first chance to apply for these licenses. The state plans to issue 26 social equity licenses.
When the DHS issues licenses to qualified early applicants and social equity applicants, the DHS may not issue more than one marijuana establishment license for every 10 registered pharmacies in Arizona.
Social Equity Program
On June 1, 2021, the DHS released some guidelines on the social equity program that is set to provide 26 social equity dispensary licenses. They plan to accept applications for these licenses in December 2021. Eligible social equity applicants must meet the following conditions:
- Household income lower than 400% of the federal poverty level for at least three of the previous 5 years
- Has been adversely affected by the enforcement of previous cannabis laws because the individual is eligible and has petitioned for expungement, or was convicted in Arizona of a violation of the federal or state law related to cannabis or cannabis paraphernalia and does not have an excluded felony offense.
- Has been adversely affected by the enforcement of previous cannabis laws because the individual is related, as one of the following, to another individual who was convicted in Arizona for cannabis or cannabis paraphernalia crimes:
- Surviving spouse
- Legal guardian
- Has a physical address and has lived for at least three of the previous five years at the physical address in a community that has been identified by the DHS as disproportionately affected by the enforcement of Arizona cannabis laws.
Application Packet: What to Expect
Here is what you can expect based on prior medical cannabis dispensary application requirements. A medical cannabis license application fee is $5,000. A license renewal fee is $1,000. Dispensaries must pay a $150 fee for every dispensary agent registration.
All principal officers, board members, and employees must be registered. The main principal officer of the entity must have $150,000 in a financial institution.
The application must include specific information about your business. This includes the name and address for the cannabis store and grow site. Both locations must be at least 500 feet away from public or private schools. You must provide the name, address, and date of birth of each dispensary agent.
You will need to submit the dispensary’s standard operating procedures and ensure they are consistent with the department’s rules. These include record-keeping and security measures. Is your location in a city with zoning rules? You must get a sworn statement certifying your shop is compliant with the zoning rules.
You can add a cannabis cultivation site location when submitting an application. A cultivation site can be changed or added for a $2,500 fee. Up to one site can be added per shop. You must submit the facility and operating plans of the grow site. In order to open an Arizona dispensary that cultivates cannabis this step is imperative.
If you plan on producing edibles of any kind, you need to complete an Infusion Kitchen Application. You must submit facility and operating plans including the store’s intended menu. You must submit the expected volume of food to be stored, prepared, and sold.
If your kitchen is under construction, you need to submit a few things. This includes a layout of your area, mechanical schematics, and finish schedules. The kitchen equipment must be certified by an accredited sanitation certification program. You must provide standard operating procedures that meet the state rules.
The Future of the Arizona Cannabis Market
On the 2020 November ballot, residents voted to pass legal weed. The adult-use program is a vertical-integrated system, just like the state’s medical cannabis program. The adult-use law allows for the adoption of rules to regulate recreational cannabis delivery starting on January 1, 2023 and adopt those regulations by January 1, 2025.
Adult-use licenses were issued to existing medical cannabis dispensaries. The DHS also issued 13 licenses to companies who plan to open a dispensary in a county with less than two medical dispensaries.
Multi-state operators (MSOs) account for 30 percent of the total medical cannabis dispensaries in the state. Harvest Health & Recreation and Curaleaf, together, account for one-sixth of all medical cannabis dispensaries in the state.
It is all a waiting game for now. Preparing for the next round of applications is critical.
Online Cannabis Business Training
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Our curriculum covers cannabis laws in the U.S. and Canada (and around the world), how to start your own cannabis business, how to create a business plan and pitch deck, how to get funding, and more.
Our cannabis business courses can teach you how to start a dispensary in Arizona and prepare you for a smooth transition into the competitive cannabis market. Opening a dispensary in Arizona is possible with the right education and online training from the leading marijuana university.