Illinois cannabis dispensary

How to Open a Cannabis Dispensary in Illinois

Recreational cannabis sales in Illinois will start on January 1, 2020 under the state’s Cannabis Regulation and Tax Act. That means the state will need more dispensaries to meet the demand of more than 12 million people in Illinois, which is more than twice the population of Colorado and more than the combined population of Oregon and Washington.

The adult-use marijuana market in Illinois has the potential to grow very big and very quickly. Here’s what you should know if you want to open a cannabis dispensary in Illinois and take advantage of the opportunity to join the industry in the Land of Lincoln.

Regulatory Agencies You Should Know

There are three agencies in Illinois that regulate and oversee the state’s cannabis licensing program:

Illinois Department of Financial and Professional Regulation (IDFPR): IDFPR is responsible for cannabis licensing operations.

Illinois Department of Agriculture: The state’s Department of Agriculture is responsible for licensing and regulating cannabis cultivators.

Illinois Department of Public Health (IDPH): IDPH is responsible for ensuring license holders are conforming to safety regulations.

Existing Cannabis Dispensaries in Illinois

With the passing of the Cannabis Regulation and Tax Act on June 25, 2019, all 55 licensed medical marijuana dispensaries in Illinois were given the opportunity to apply for an Early Approval Adult-Use Dispensing Organization License so they can start selling recreational cannabis in their current dispensary locations on January 1, 2020.

In addition, each of the 55 current dispensary license holders can apply for a second adult-use retail license to open a separate recreational cannabis retail location. If all 55 current license holders obtain two adult-use retail licenses, there would be 110 possible locations for Illinois consumers to purchase recreational marijuana at the start of 2020.

Opening a Cannabis Dispensary in Illinois

Between now and 2025, there will be a maximum of 390 adult-use cannabis dispensary licenses up for grabs (not including the 110 licenses allocated to existing medical cannabis dispensaries). Here’s what you should know if you want to get one:

Timing

Licenses will be granted in four waves:

  1. Existing dispensaries in current locations: Sales to begin on January 1, 2020
  2. Existing dispensaries in new locations: Sales to begin on January 1, 2020
  3. New dispensaries – conditional licenses: Up to 75 licenses issued by May 1, 2020
  4. New dispensaries – adult-use licenses: Up to 110 licenses issued by December 21, 2021

For people who want to open a new cannabis dispensary in Illinois, the state will issue up to 75 conditional adult-use licenses by May 1, 2020 to top scoring applicants. These licenses will be divided based on population between the U.S. Bureau of Labor Statistics’ 17 identified regions for Illinois. That means the Chicago area will get 47 of the 75 licenses. The breakdown by BLS is as follows:

  • Bloomington: 1
  • Cape Girardeau: 1
  • Carbondale-Marion: 1
  • Champaign-Urbana: 1
  • Chicago-Naperville, Elgin: 47
  • Danville: 1
  • Davenport-Moline-Rock Island: 1
  • Decatur: 1
  • Kankakee: 1
  • Peoria: 3
  • Rockford: 2
  • Louis: 4
  • Springfield: 1
  • Northwest Illinois Nonmetropolitan Area: 3
  • West Central Illinois Nonmetropolitan Area: 3
  • East Central Illinois Nonmetropolitan Area: 2
  • South Illinois Nonmetropolitan Area: 2

The first Adult Use Dispensing Organization License Application will be available by October 1, 2019, and the application submission window will close on January 1, 2020. Winners will each get a Conditional Adult Use Dispensing Organization License Application and will have 180 days to identify a dispensary location.

An additional 110 Adult Use Dispensing Organization Licenses are expected to be issued by December 21, 2021. The number of licensed retail stores could reach a maximum of 500 in Illinois by 2025.

Fees

Applying for a cannabis dispensary license isn’t cheap. Following are the fees for the four licensing waves.

Early Approval Adult-Use Dispensing Organization License (Current Location): Fees that existing cannabis dispensary license holders have to pay to apply for an adult-use dispensary license for a current location are as follows:

  • Non-refundable application fee of $30,000
  • Non-refundable business development fee of 3% of total sales from June 1, 2018 to June 1, 2019 or $100,000, whichever is lower

Early Approval Adult-Use Dispensing Organization License (New Location): Existing cannabis dispensary license holders that apply for a second license to sell recreational marijuana in another location must pay the following application-related fees:

Conditional Adult Use Dispensing Organization License: New cannabis dispensary applicants that apply for a Conditional Adult Use Dispensing Organization License Application are required to pay the following fees:

  • Non-refundable application fee of $5,000
  • License fee of $60,000 for a 2-year license if license is awarded

Adult Use Dispensing Organization License:

  • Non-refundable application fee of $30,000
  • Annual renewal fee of $60,000 if license is awarded

Taxes

It’s important to note that the fees mentioned above are just some of the factors applicants should consider. There are also hefty state taxes, sales taxes, and possibly local taxes to think about as you develop your license application, business plan, and financial projections.

In addition to the Illinois state sales tax, which is currently 6.25%, and local taxes of up to 3.5%, the state will charge a tax at the retail level based on the THC concentration in each product purchased as follows:

  • 10% tax on cannabis products or flower with less than 35% THC
  • 20% tax on products infused with cannabis (including edibles)
  • 25% tax on products with a more than 35% THC

When you add in the 7% tax levied at the wholesale level, consumers will pay between 19.55% and 34.75% in retail tax.

Other Considerations

Applicants for recreational retail licenses will be evaluated on a wide variety of criteria, and they can earn extra points for being veterans, Illinois residents, diverse, environmentally-focused, community organizers, or union organized.

Additionally, Social Equity Applicants earn extra points and pay lower application and license fees than non-Social Equity Applicants (e.g., half the application and license fees for Conditional Adult Use Dispensing Organization Licenses).

The IDFPR will rank applicants and award licenses based on the following scoring system with 250 points being the maximum score an applicant can achieve:

  • Business plan, financials, operating plan, and floor plan: 65 points
  • Security and record keeping: 65 points
  • Status as a Social Equity Applicant: 50 points
  • Knowledge and experience in cannabis or related fields: 30 points
  • Suitability of employee training plan: 15 points
  • Labor and employment practices: 5 points
  • Environmental plan: 5 points
  • Illinois owner: 5 points
  • Diversity plan: 5 points
  • Veteran status: 5 points

Keep in mind, these rules could change in the future as Illinois implements its adult-use cannabis program, so applicants need to be prepared to develop agile business models that can adapt to those changes.

Key Takeaways to Open a Cannabis Dispensary in Illinois

Opening a cannabis dispensary in Illinois is an exciting venture, but it takes hard work to prepare a winning application and operate a successful business if you get a license. Attend Leafy Green Agency’s cannabis industry certification seminars to learn how to break into the cannabis industry, how to operate a cannabis dispensary in Illinois, and much more!

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