As the legal cannabis industry continues to grow, many cannabis businesses are looking to expand their operations beyond their current states. Becoming a multistate operator (MSO) offers several advantages, including diversifying revenue streams and achieving economies of scale. Choosing the right states to expand into is crucial for success. This article explores the best states for MSOs to open a dispensary and discusses the benefits of being an MSO.
Should You Open a Dispensary in a New State?
Operating a successful cannabis business can be a challenging task, especially when it comes to expanding to new markets. For cannabis businesses looking to expand their operations, becoming a multistate operator (MSO) offers several benefits.
One significant advantage of being an MSO is being able to diversify your revenue streams across multiple states. By opening dispensaries in different states, you can spread your business risk and avoid relying on one market. Being an MSO can provide economies of scale, enabling you to streamline operations, reduce costs and increase profitability.
Top 11 States to Expand Your Dispensary Locations
Choosing the right states to expand into is crucial an MSO’s success. Some states have more favorable cannabis regulations, a larger consumer base and less competition than others.
California
California is one of the most popular states for cannabis businesses because of its large consumer base and favorable regulations. With a population of nearly 40 million people, California has a massive market for cannabis products.
- Application fee: $5,000
- Excise tax: 15%.
- Price per ounce: Ranges from $200 to $300
Colorado
Colorado was the first state to legalize recreational cannabis and has a well-established market. The cannabis industry in Colorado has experienced significant and steady growth over the years, making it a top state for MSOs.
Colorado also boasts a large number of licensed cannabis retailers and cultivators, providing convenient access to a variety of products for consumers throughout the state. Companies can apply for licenses quickly and efficiently through the streamlined application process.
- Application fee: $4,500
- Excise tax: 15%
- Price per ounce: Around $230.
Oregon
Oregon is known for having lenient marijuana laws compared to other states and has seen some of the highest growth in tax revenues from cannabis sales. This makes it a good option for dispensary owners who want to capitalize on this growing industry. The state also offers significant marketing opportunities because of its unique climate and culture, which draw people from across the country.
- Application fee: $4,750
- Excise tax: 17%
- Price per ounce: $200
Washington
Washington has been at the forefront of cannabis legalization since it was one of the first states to pass legislation allowing for recreational marijuana sales. The state offers high foot traffic with vibrant retail districts that can help attract customers from all over the region. Taxes associated with cannabis operations are relatively low compared to many other states, making it a prime location for multistate operators opening dispensaries.
- Application fee: $1,480
- Excise tax: 37%
- Price per ounce: Around $200
Nevada
Nevada is another popular state among multistate operators looking to open dispensaries because of its population density and strong tourism industry, which helps provide a steady flow of customers. Taxes associated with cannabis operations are also lower than in most other states, giving businesses an advantage when considering potential profits. Nevada has recently made efforts to expand its medical marijuana program, which could create even more opportunities for business owners in the industry.
- Application fee: $5,000
- Excise tax: Wholesale marijuana is 15% and retail 10%
- Price per ounce: Around $300
Massachusetts
Massachusetts has some of the most lenient marijuana laws in the country, which makes it an appealing option for those looking to set up a retail shop. In addition to having fewer restrictions than many other states when it comes to running a dispensary, Massachusetts boasts vibrant communities full of innovative entrepreneurs, making it a great place for businesses trying out new products or services related to cannabis operations.
- Application fee: $3,000
- Excise tax: 10.75%
- Price per ounce: Around $350
Michigan
Michigan’s legalization of recreational marijuana makes it an ideal destination for multistate operators wanting to open a dispensary. The state is desirable for owners because of its dense population and growing demand for recreational cannabis in its major cities such as Detroit and Grand Rapids.
Michigan’s relatively low tax rate on cannabis operations compared to other areas makes it more attractive financially.
- Application fee: $6,000
- Excise tax: 10%
- Price per ounce: Around $300
Illinois
Illinois recently passed sweeping legislation allowing the recreational use and sale of marijuana products. As a result, opportunities abound when it comes to MSOs opening up shop. Also worth noting is that Illinois doesn't have statewide taxes on cannabis transactions. This allows for potentially higher profit margins because of significantly reduced overhead costs.
- Application fee: $5,000
- Excise tax: 10- 25% depending on the product
- Price per ounce: Around $350
Arizona
Expanding into Arizona as an MSO is a smart move because the state offers significant opportunities for new entrants to establish themselves in the market. Though Arizona has seen a surge in dispensaries in recent years, there is still room for newcomers and incumbents alike to make their mark.
Existing laws prohibiting vertical integration have been relaxed over time, allowing companies to more easily integrate operations such as cultivation and manufacturing into their operations.
- Application fee: $25,000.
- Excise tax: 16%
- Price per ounce: Around $280
Alaska
Alaska was one of the first states to legalize recreational marijuana years ago. Since then, the industry has seen significant growth, making it an attractive option for cannabis business owners who want to expand their operations across state lines.
Although Alaska's cold climate might seem like a challenge, it can actually work in favor of cannabis cultivation. The unique conditions can yield high-quality products, including CBD edibles and other derivatives. With the right strategy and approach, Alaska's climate can be an asset for cannabis entrepreneurs.
- Application fee: $5,000.
- Excise tax: $50-per-ounce tax (It's the highest weight-based tax rate in the United States.)
- Price per ounce: Around $350.
New Jersey
The legalization of marijuana is still a relatively new concept in New Jersey. While medical marijuana has been legal for several years, recreational use was only legalized in 2022. Regulations around the commercial sales market have yet to be fully established, which means that recreational cannabis is not yet available for retail purchase in the state. Despite the limited options currently available, New Jersey presents a promising opportunity for cannabis businesses looking to get in early in a newly legalized market.
- Application fee: Around $200 to apply, but approval fees and expansion fees are much higher
- Excise tax: 6.63% (plus a tax rate of $10 per ounce is imposed on cultivators for cannabis flower, while $40 per ounce is imposed on cannabis concentrate.)
- Price per ounce: $300 to $400.
Considerations for Multistate Operators Expanding Their Dispensary Locations
Expanding your dispensary locations as a multistate operator is a significant step in growing your business, but it's crucial to do your due diligence in identifying the states that offer the most promising opportunities. Each state has a unique set of regulations, taxes and market dynamics that should be carefully considered before making any investment decisions. By comparing the pros and cons of each state and assessing the ease of opening a dispensary, MSOs can make informed decisions that will lead to long-term success.
Frequently Asked Questions
Can you own a dispensary in multiple states?
That depends on the state’s laws and regulations. Some states may require separate licenses for each dispensary, while others may allow a person to own multiple dispensaries under the same license. It’s important to research the local laws before attempting to open a dispensary in multiple states.
What is the most profitable state to own a dispensary?
The most profitable state for owning a dispensary depends on the local market dynamics and demand for cannabis products. Generally speaking, markets with higher levels of customer demand tend to be more lucrative, so researching local trends to identify potential areas of growth can help dispensary owners maximize their profits.
Can you get loans for opening a dispensary?
Yes, it is possible for entrepreneurs to obtain loans for opening a cannabis dispensary. But obtaining financing can be difficult because marijuana is still federally illegal. You’ll need a specialized cannabis lender.