How to Open a Dispensary in Arizona: Operating & Marketing in AZ

Posted on May 5th, 2022 to Dispensary Marketing

The Grand Canyon State was one of the first to welcome medical cannabis dispensaries but didn’t pass measures for adult-use cannabis until late in 2020. Nevertheless, AZ was the fastest in going from getting a passing vote to actually allowing adult-use applications. And, the state has one of the least complicated collections of cannabis laws, right down to marketing your dispensary.

Just the same, if you intend to open a dispensary in AZ, be prepared for a few challenges. The state only allows a limited number of cannabis dispensaries, not all cities allow recreational cannabis, and the costs involved can get pretty intense. Below is a closer look at how to open a dispensary in Arizona.

How much does it cost to open a dispensary in Arizona?

First, let’s cover the cost…

  • Arizona Application fee: $5,000 ($1,000 of which is refundable if unsuccessful in the application process)
  • Annual registration renewal fee: $1,000

Additionally, medical dispensaries converting to adult-use will be required to pay a $25,000 licensing fee. Read more here.

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How to Open a Dispensary in Arizona

In AZ, the Arizona Department of Health Services (ADHS) is in charge of overseeing the retail of cannabis, whether for recreational or medical purposes. The state issues a limited number of licenses for new dispensaries, and the endeavor can require that you have proof of capital and a well-laid-out business plan in advance. Below is a closer look at what steps should be taken to open a dispensary in AZ.

1. Research AZ cannabis laws

Take the time to get really familiar with the cannabis laws in the state of AZ. These laws dictate a number of things about how and where a dispensary operates, as well as who can qualify for a license. AZ’s cannabis laws are relatively well-established, even though the recreational side of the business is just getting started. The AZ cannabis laws may affect things like:

  • Who will be considered when applications for new establishments are open
  • Where the dispensary can be located
  • How you can legally market and advertise the new dispensary
  • How inventory should be tracked and managed
  • The physical requirements of the dispensary
  • How state sales taxes must be handled

Keep in mind, AZ has legalized cannabis for both recreation and medical purposes, but not every city is on board. Be sure to look at your local cannabis laws before getting started to determine if you can open a dispensary in a given area.

2. Create a business plan for the new dispensary

In AZ, anyone looking to open a cannabis dispensary must have a well-detailed business plan in place. This plan will be necessary when you file your initial application, and the state clearly defines that certain objectives and attributes must be outlined. Your business plan should include:

  • A detailed overview of the cannabis business
  • Information about where the dispensary will be located
  • How the new dispensary will be financed
  • A detailed site plan for the new dispensary, including detailed drawings
  • Information about sourcing and maintaining inventory
  • Information about projected expenses and potential revenue

3. Raise capital for the business

Opening a dispensary in Arizona is quite an expensive endeavor, more so than in some other states. The application fee alone is substantial at $25,000, but the state also requires applicants to show documentation that proves they have hundreds of thousands of dollars in liquid assets—more on that below. With that being said, it is critical that you have the ability to secure funding and already have the funding on hand for at least 30 days before you apply.

Options for capital can be limited with cannabis business endeavors. A lot of federally-backed and public financial institutions won’t offer funding. Most newcomers will rely on personal funds, angel investors, or private venture capital options.

4. Apply for a cannabis dispensary license

Arizona’s rules for accepting cannabis dispensary applications are a bit different from those in other states. AZ initially started out allowing a set number of dispensaries. More specifically, the state allowed one retail dispensary for every 10 registered medical cannabis dispensaries. Those same rules apply, so, periodically, the state has opened up a lottery of sorts to accept new applications for recreational retailers. For example, in 2021, the state had 13 new recreational licenses open, so they held a lottery drawing for more than 370 applicants.

Aiming to bring social equality into the cannabis industry, the ADHS opened for new applications again in 2022 to find 26 new licensees. However, the qualifications for applicants were built around giving opportunities to those most affected by prior cannabis legislation. For example, the state gave a list of 87 zip codes that had been affected most negatively by cannabis regulation, and all applicants had to have resided in those areas for at least three of the past five years. The social equity application period closed in April 2022.

With all this in mind, applications are not always open for acceptance in AZ. Therefore, it is best to keep a close watch on local cannabis news to find out when new licensing applications will be accepted. And, the more prepared you are to submit an application, the more likely you can get your name in the lineup in the event of a lottery or otherwise.

Some things the ADHS requires during the application process include:

  • Proof of at least $500,000 in liquid assets for the prior 30 days
  • A site plan of the retail establishment, including a floor plan
  • A full business plan for the new dispensary

It should also be noted that obtaining your license for operating a retail establishment is $25,000 with a $5,000 annual license renewal fee.

Ready to get the word out about your AZ dispensary?

Without question, getting your foot into the cannabis door in AZ can be a little tough. However, getting through the door is the beginning step toward a lot of profit potential. Your digital marketing strategy will be a major component in the process. If you need help getting the word out about your new AZ dispensary, CannaPlanners can help.

From developing a comprehensive email marketing plan to getting your website discovered with dispensary SEO, we work through the tough stuff so you can do what you do best. Ready to get the ball rolling? Let’s talk.

Marketing Your Dispensary in Arizona

By all rights, Arizona’s legal cannabis industry is staged to become a booming one. Even with limits in place on how many recreational dispensaries can be opened, the Phoenix News Times reported in 2022 that the industry generated $1.9 billion in total cannabis sales in 2021. This is a huge number for a state that just started with recreational cannabis in 2021, even though medical marijuana has been in place since 2010.

The beauty about stepping into such an emerging cannabis market is the opportunities for growth are endless. Marketing your dispensary in Arizona is a huge part of growth. However, just like other surrounding states, AZ does have a few rules when it comes to marketing. Below is a closer look at some of what you need to know as you forge ahead with your cannabusiness in The Grand Canyon State.

Rules for Marketing Your Dispensary in Arizona

The recreational cannabis program, much like the medical marijuana program, is overseen by the Arizona Department of Health Services (ADHS). Therefore, the ADHS is responsible for implementing the retail sale of cannabis in the state. One thing that makes AZ unique is the fact that it has taken a pretty lax approach to regulations regarding marketing. The specifics are laid out in Proposition 207 with only a few specific regulations mentioned that apply to dispensary marketing.

1. Advertising Must Be Identifiably Associated with the Establishment

Any advertisements that are produced by a cannabis dispensary of business in Arizona must be clearly associated with the establishment that creates the ad. The laws state that any advertising must clearly and legibly identify the dispensary that created the content, as well as that business’s license number or registration number. The laws state that any advertising platform must be mindful of these rules as well and ensure the proper attribution is visible before hosting any form of advertisement.

2. No Third-Party Order Solicitation for Retail Cannabis

Even though AZ is relatively lenient with advertising and marketing, there are rules outlining how dispensaries can solicit orders for their establishment. Specifically, AZ states that no individual or entity that is not the licensed cannabis establishment can solicit orders for the business. The laws also state that they cannot create a listing service that is related to the delivery or sale of the establishment’s products. This is normally not an issue for most dispensary owners but is something important to keep in mind. In general terms, this means you are not allowed to have someone accept orders or solicit orders for your products that are not you.

3. Age-Affirmation and Verification Regulations

Any type of direct, individualized communication must involve some level of age verification to ensure the recipient is 21 years of age or older. Individual dialogue or direct communication may be in the form of targeted marketing efforts or even in terms of website access. Age affirmation can come from simple confirmation or simple birth date disclosure.

In general, it is important to make sure all advertising efforts are not targeted toward or appealing to people under the age of 21. This can include using certain characters, people, products, or even terminology in advertising that would be appealing to people under the age of 21.

In 2021, lawmakers in AZ tried to pass HB 2809, which sought to make changes to how cannabis could be advertised on billboards. Lawmakers wanted to make it illegal to post a cannabis billboard within 1000 feet of child care centers, public parks, or schools. The lawmakers also wanted a ban on cannabis brands sponsoring athletic, artistic, or social and cultural events. However, this measure did not pass due to the fact that alcohol businesses don’t face the same regulations.

Get to Know the City Ordinances in AZ

Even though AZ has legalized adult-use cannabis, every city has the liberty to implement its own sets of rules and regulations. These rules and regulations can affect everything from whether you can open a dispensary to how you market that establishment. So be sure to get to know the specifics set forth by the governing entities in your specific location.

Need help marketing your dispensary in AZ?

In an industry growing at such a steady pace, you are bound to have your fair share of competition as you open your Arizona dispensary. Our team works through all the nuances of digital marketing for cannabis dispensaries, so you don’t have to. From helping you with dispensary SEO on your website to pulling together a stellar email marketing campaign, CannaPlanners can help. Let’s talk!

VP Digital Marketing, CMO

This post was written by Zach Santarsiero.

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