How to Open a Dispensary in New Jersey

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How to Open a Dispensary in New Jersey in 2024

Before opening a dispensary in New Jersey, it is essential to understand the laws and regulations governing retail cannabis businesses in the state. It is also crucial for a person to understand the local ordinances of the city where they intend to locate their dispensary. Any individual or entity entering the cannabis industry must first register their business and prepare a business plan. Afterward, they can apply to the New Jersey Cannabis Regulatory Commission (NJ-CRC) for a dispensary license. Minority groups and marginalized neighborhoods in New Jersey can explore the NJ-CRC’s Social Equity Program (SEP) to receive start-up funding and enjoy priority application processing for their dispensary licenses.

Why Open a Dispensary in New Jersey?

The New Jersey Cannabis Regulatory Commission (NJ-CRC) reports recreational marijuana sales totalling over $305 million within the first six months of 2023. In addition, sales tax revenue and Social Equity Excise fees in that period were $18 million and $1 million respectively. Medical marijuana sales in this period hit $66m. Cannabis sales are expected to rise throughout 2023, and in the coming years, in New Jersey. The New Jersey Cannabis Trade Association (NJCTA) projects that cannabis sales could bring in over $38 million in taxes for 2023.

With over 98,000 patients registered in the state’s medical cannabis program, the 23 licensed medical cannabis dispensaries cannot adequately cater for the needs of medical cannabis patients. In addition, the 37 licensed recreational marijuana dispensaries in the state cannot meet its growing demand for adult-use marijuana. Therefore, those interested in establishing cannabis dispensaries can take advantage of this market gap to meet growing consumer demand.

Types of Dispensary Licenses in New Jersey

The following are dispensary licenses available in New Jersey:

  • Recreational Use License
  • Class 5 Cannabis Retailer License: Holders of this license can purchase adult-use cannabis from licensed manufacturers, cultivators, or wholesalers and sell to customers in their dispensary stores
  • Microbusiness License: The NJ-CRC issues this license to recreational dispensaries planning to operate small cannabis retail stores with less than 10 employees and less than 2,500 square feet of operation space
  • Alternate Treatment Center (ATC) Permit: Holders of this license are authorized to procure, grow, manufacture, or dispense medical cannabis to qualifying patients
  • Recreational use or ATC licenses may be conditional or permanent licenses

How to Get a New Jersey Dispensary License

The NJ-CRC is responsible for reviewing applications for cannabis dispensaries. If an application is satisfactory, the NJ-CRC will issue dispensary licenses pending a final review and inspection of the cannabis dispensary. Presently, there are no restrictions on when to apply for recreational cannabis dispensary licenses, as the NJ-CRC accepts and processes applications on an ongoing basis. There is no cap on the number of adult-use cannabis dispensary licenses available statewide. Conversely, the NJ-CRC is not accepting applications for Alternative Treatment Centers licenses - medicinal cannabis dispensary businesses. However, the Commission issued a Request for Application (RFA) in 2019, awarding 30 medical cannabis dispensary licenses.

Information and Documents Required for a Dispensary License in New Jersey

  • Business plan
  • Business registration certificate
  • Federal and state tax identification numbers - Social Security Number in lieu of Federal or State tax ID for sole proprietorships
  • Primary contact, including address and contact details
  • Disclosure of all entities of interest
  • Legal name, including existing trade names and alternate names
  • Address - primary and mailing
  • Entity disclosure form
  • Sworn affidavit
  • Formation documents
  • Disclosure of all persons of Interest
  • Legal name
  • Federal Employer Identification Number (FEIN)
  • Contact information
  • Persona history disclosure
  • Resume
  • Government-issued identification
  • Federal and state tax returns
  • Preceding year adjusted gross income
  • Criminal history background check
  • Contact information for the proposed facility landlord
  • Personal history disclosure forms
  • Liability insurance coverage plan
  • Management service contracts
  • Financial sources agreements - executed or proposed
  • Vendor-Contractor agreements
  • Signed affidavits, waivers, and releases

What Plans Do You Need to Open a Dispensary in New Jersey?

Business plans outline how entrepreneurs intend to achieve their business objectives. The NJ-CRC requires cannabis dispensary license applicants to submit site, operating, security, and business plans with their applications.

A business plan submitted to the NJ-CRC demonstrates the applicant's ability to operate cannabis dispensaries in New Jersey. It should contain the following:

  • Value proposition: A statement summarizing why the dispensary’s cannabis products suits the need of the target market
  • Market analysis: A detailed assessment of the cannabis market in New Jersey, including its size, value, and potential customers
  • Pricing plans: Set the best prices for your cannabis products
  • Budget: Identify the cannabis dispensary’s capital and estimated spending. It should include details of the estimated revenue and expenses
  • Proposed financing: Describe how the cannabis dispensary intends to achieve its financial goals. This should include information on income, cash flow, and expenses
  • Compliance plan: Give an overview of how the cannabis dispensary intends to comply with established NJ-CRC regulations

The NJ-CRC also requires persons and entities intending to open cannabis dispensaries in the state to submit site and operation plans. Applicants must submit the following documentation with their site plan:

  • Floor plan
  • Description of the suitability of the proposed location, which must include architectural plans, renderings, or engineering plans

A cannabis retailer license application in New Jersey must also include an operating plan. Such plans must comprise the applicant's qualifications and experience in the following areas:

  • Sale of cannabis products to consumers
  • Cannabis product evaluation procedures
  • Recalls
  • Packaging and labeling
  • Inventory control
  • Point-of-sale software for the sale of cannabis products
  • Waste disposal
  • Odor mitigation practices
  • Onsite and offsite recordkeeping
  • Routes of administration, varieties, strains, and cannabinoid profiles of cannabis and cannabis products
  • Compliance with applicable laws and regulations

Prospective dispensary retailers must include an overview of compliance with the NJ-CRC safety and security requirements through their security plans showing the following:

  • Use of security personnel, such as contractors
  • The experience and qualifications of security personnel and proposed contractors
  • Security and surveillance features, including description of the video surveillance systems, access and visitors management systems, panic buttons, and alarm systems
  • Drawings identifying the proposed locations for surveillance cameras
  • Plans for the storage of cannabis and cannabis products, such as safes, climate control systems, and vaults
  • Security plan for protection against cannabis product theft and diversion
  • Backup system
  • Security measures preventing unauthorized access

Are There Municipal Requirements for Opening a Cannabis Dispensary in New Jersey?

Yes. The deadline for cities and counties to restrict or prohibit cannabis business operations, including marijuana retail dispensaries, was August 21, 2021. The CREAMM Act allows municipalities to adopt ordinances or regulations to determine the class of cannabis businesses, including retail dispensaries, permitted within their borders.

New Jersey municipalities must approve marijuana retail dispensaries looking to operate within their borders. Where a marijuana retail dispensary applicant is in violation of a municipal code or ordinance, the NJ-CRC will not issue a license. Under the CREAMM Act, prospective individuals and entities must include the following in their application to the NJ-CRC:

  • The municipal zoning approval for the proposed location
  • Proof of local support for the proposed business location

Again, ATCs seeking to expand into the recreational cannabis retailer businesses must receive written approval from the municipality where their ATC is located before commencing operations. Some municipalities in New Jersey require applicants to submit the following documentation:

  • Waste disposal plan
  • Business signage
  • Operational changes
  • Dispensary emergency services
  • Parking
  • Construction codes

Typically, New Jersey municipalities do not charge local fees for approval to open cannabis dispensaries within their boundaries. However, where a municipality does, the amount must be reasonable and comply with the NJ-CRC rules.

How Long Does It Take to Get a New Jersey Dispensary License?

The NJ-CRC reviews and issues annual cannabis dispensary licenses within 90 days. Conditional licenses are approved within 30 days.

Where Can You Locate a Cannabis Dispensary in New Jersey?

The NJ-CRC has strict guidelines on where retail cannabis dispensaries may establish their businesses within the state. Per state law, the following location requirements must be observed for cannabis dispensaries in New Jersey:

  • Dispensaries cannot locate their businesses within 1,000 feet of any property accommodating public or private elementary schools, secondary schools, child daycare facilities, vocational institutions, public or private colleges, or universities
  • Cannabis dispensaries cannot be located in any premises operating as grocery stores, indoor food markets, or delicatessens. In addition, they cannot situate their facilities near stores carrying on business as food or alcoholic beverages retailers
  • It is illegal to set up cannabis dispensaries within 1,000 feet of a housing facility owned by a public housing authority
  • Opening cannabis dispensaries within 1,000 feet of places used exclusively for worship, including churches, temples, or mosques, is prohibited in New Jersey
  • Cannabis dispensaries cannot be located in homes, townhouses, apartments, condominiums, or mixed-use buildings

Can Licensees Have More Than One Dispensary Location in New Jersey?

Yes. Licensed cannabis dispensaries in New Jersey can open and operate in more than one location within the state. However, there must be a separate license for each additional dispensary location.

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

The costs cannabis dispensary licensees incur when establishing their dispensaries include the following:

  • Application and License Fees: License application fees can be as high as $1,000 for microbusinesses and $2,000 for standard retail licenses. In addition, cannabis retailer licensing fees cost $10,000 yearly for standard business licenses and $1,000 annually for micro businesses. Medical cannabis dispensaries seeking to expand into the recreational marijuana market pay an expansion fee of $100,000
  • Real Estate Costs: Leasing retail spaces in New Jersey with good visibility, high traffic, and easy access to target customers can cost up to $100,000 annually. In addition, there are costs associated with renovations and design to meet regulatory requirements. These costs can get as high as $30,000, depending on the size of the facility
  • Inventory Costs: Stocking up marijuana products could cost up to $1,500 per pound of cannabis
  • Operation Costs: Expect to spend up to $30,000 on marketing, advertising, and day-to-day costs
  • Technology and Security Costs: These can cost as much as $145,000
  • Employee Costs: Budtender salaries may account for up to $43,000 annually, while dispensary specialist salaries can get up to $170,000. Generally, depending on the number of employees, the annual payroll of marijuana dispensaries can be as high as $400,000
  • Taxes: New Jersey levies state taxes on cannabis sales. In addition, municipals can ley additional taxes for cannabis business transactions within their jurisdiction

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

The NJ-CRC does not require cannabis dispensaries to obtain insurance policies to conduct business legally in New Jersey. However, it does require prospective marijuana retailers to submit a brief plan for getting liability insurance alongside their business plan. General Liability Insurance covers the risks of third-party claims arising from accidents, customer injuries, customer property damage, and advertising injuries. It also covers mishaps arising from the use of dispensary cannabis products.

Other recommended insurance policies for cannabis dispensaries in New Jersey include:

  • Professional Liability Insurance: It covers costs for third-party claims arising from cannabis dispensaries' errors, which may result in financial loss. In such instances, court costs, settlements, attorney fees, and judgment are paid for by this policy
  • Commercial Property Insurance: It provides financial protection for a dispensary’s property and cannabis inventory. It covers losses from theft, natural disaster damages, fires, and vandalism on the business property
  • Workers’ Compensation Insurance: It protects the dispensary when employees become ill or get injured on the job. This insurance covers medical bills, salaries, and death benefits
  • Inland Marine Insurance: It provides compensation for cannabis products destroyed, lost, or stolen in transit or at a location other than the dispensary registered address

Generally, whatever policies a New Jersey cannabis dispensary chooses, the amount payable as premiums would be determined by the following factors:

  • Size of retail dispensary operation
  • The amount of inventory
  • The complexity of the store
  • The dispensary location

How to Get a Grant to Open a Dispensary in New Jersey

Individuals and entities entering into marijuana dispensary businesses in New Jersey can obtain funding from the following sources:

  • Self Funding: It is financing start-up costs of cannabis dispensaries from personal savings
  • Family and Friends: Establishing cannabis dispensaries from loans received from family and friends
  • Personal Loans: A good credit score can help prospective cannabis dispensary owners access loans from individuals or private loan companies
  • Commercial Cannabis Real Estate Funding: This helps to finance construction projects or secure the lease for a cannabis dispensary facility
  • Equity Funding: It is exchanging marijuana dispensaries' shares for capital
  • Cannabis Equipment Financing: Loans obtained and used to acquire equipment critical to the growth of the dispensary
  • Social Equity Grant Program: The government assists cannabis dispensaries with funding to start and expand their businesses. Generally, the Social Equity Grant Program seeks to remove entry barriers into the cannabis industry by persons in communities disproportionately affected by the war on drugs

Does New Jersey Have a Social Equity Program for Cannabis Dispensaries?

Yes. New Jersey has a Social Equity Program (SEP) for minority groups in the cannabis dispensary businesses and is prioritizing their applications to ensure diversity in the marijuana industry. In 2022, the state approved $10m in an initial pilot program as state funding to private businesses in the cannabis industry. Out of this amount, 60% would be available to qualifying social equity applicants. The state estimates that such applicants can receive up to $250,000 to augment their start-up capital.

Three types of cannabis dispensary businesses qualify to apply for New Jersey’s SEP:

  • Social Equity Businesses: These are cannabis dispensaries owned by persons who have lived in economically disadvantaged areas in the state or persons who have been convicted of cannabis-related offenses, whether expunged or not
  • Diversely Owned Businesses: They are women-owned, disabled veteran-owned, or minority-owned businesses set up to dispense cannabis in New Jersey. However, the New Jersey Department of Treasury must certify an entity to qualify as a diversely owned business
  • Impact Zone Businesses: These are dispensaries located in impact zones, dispensaries employing residents of impact zones, or cannabis dispensaries owned by persons from impact zones

The NJ-CRC prioritizes dispensary license applications from social equity businesses, diverse-owned businesses, and impact zone businesses. In addition, SEP dispensary license applicants enjoy fee waivers and reductions with microbusinesses given up to 50% discount on application and licensing fees.

Do New Jersey Tax Marijuana Dispensaries?

While ATCs are not subject to sales tax, recreational cannabis dispensaries in New Jersey must remit sales and use tax. A 6.625% sales and use tax is imposed on recreational cannabis in the state. In addition, municipalities may impose a Local Transfer Tax on cannabis dispensaries licensed and established within their borders. The rate, predetermined by the municipalities, may not exceed 2% of the proceeds of each sale by cannabis retailers. The New Jersey Division of Taxation collects the cannabis sales and use tax in the state.

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