How to Open a Medical Marijuana Dispensary in Ohio

medical cannabis leaf

To open a dispensary in Ohio, there are several regulatory, legal, and practical issues to address. Considering that medical marijuana/cannabis is highly regulated in Ohio and remains federally illegal, aspiring dispensary owners need to retain a lawyer with experience in the medical marijuana/cannabis industry.   This post will provide readers with a general outline of information and should not be considered legal advice.

Opening a Medical Marijuana Dispensary in Ohio

First, there must be a current active round of applications.  In November 2021, the Board of Pharmacy accepted applications for its second round of provisional dispensary licenses.  Those licenses were awarded in late Spring.  It is not known if and when the Board will issue another round of applications, but it is likely that given that demand is strong in Ohio and that there are several indicators that Ohio will significantly expand its medical marijuana/cannabis laws in the next few years. 

Second, if applications are open, applicants must have their business organized and fully fleshed out.  That means forming an Ohio entity, developing a business plan, identifying officers, advisors, and perhaps even a board of directors.  Applicants, whether new to the industry or not, should conduct serious research into the Ohio market, its legal limitations, and most importantly, discuss the finer points of their business plan with an experienced Ohio medical marijuana/cannabis attorney. Ohio’s market is significantly different from many, more open, markets.  Many applicants, especially multi-state operators (MSOs) come to Ohio with attitudes, plans, and expectations based in California, Colorado, or Oregon successes.  Many of those things will not work in Ohio and may get the application rejected. 

Third, and most important, the applicant must identify property and secure it via purchase or lease (usually on a contingency) prior to applying.  Identifying a suitable property that meets Ohio’s statutory requirements can be challenging.  Applicants should be aware that property owners, have, for the most part, been allowed by the Board to “stack” applications on its property.  Applicants should avoid this if possible and seek exclusivity – which eliminates the possibility of 2 applicants receiving licenses for the same property.  Ohio law currently does not allow winning applicants to transfer the provisional license to a different property.  So, identifying and controlling the property tied to the provisional license is critical. 

Finally, applicants will have to apply for a provisional license from the Board.  Historically, the application will require a fully fleshed out business plan, security plan, architectural drawings and floor plans, zoning confirmations, financial information, and background checks.  Applications may include more detail operations plans.  All plans must meet the minimum requirements set out in Ohio law or they will be automatically rejected.  All applicants must be able to demonstrate the financial ability to build and operate the dispensary.

If an applicant wins a provisional license, it will have a certain time period to build the dispensary and begin operations.  At that time, the Board will conduct some final inspections, and if the dispensary passes, a certificate of operation will be issued, and the dispensary can open for business. 

What Legal Issues Can a Dispensary Applicant Expect?

An applicant needs an attorney with experience in the medical marijuana/cannabis industry that also understands real estate transactions, corporate formation and governance, corporate transactions, regulatory compliance, administrative law, zoning, Ohio medical marijuana/cannabis laws, financing, data security and privacy, HIPAA, and litigation.  It is helpful to have an attorney who understands the plant, how it is grown, how it is processed, how it is sold, how it is used and the medical benefits of, and interaction between, cannabinoids.  

How Much Does It Cost to Start a Dispensary?

Obtaining a certificate of operation for a medical marijuana/dispensary is expensive. Applicants must be well funded and be realistic about their financial ability to see the process through to completion.  The application fee is currently $5,000 per application.  The certificate of operation is $70,000.  The application fee for each key employee is $250 or $500 and $100 for support employees.  Most dispensaries can expect to spend at least $2,000 on employee applications.  Every other year, the dispensary will have to renew the certificate of operation for $70,000.

This does not even address the cost to create the application and its components, hire experts and consultants.  Ultimately, to get a dispensary to its first day of business, an applicant can expect to spend at least $100,000 to do it right and have the best chance to get a license.  Additionally, the applicant will actually have to build the dispensary.  Many factors are involved (such as is the dispensary renting or purchasing the property?), but the total cost to open the dispensary can easily cost $150,000 – $250,000 and in many cases exceeds that amount.  It is an expensive venture that, if accomplished, will be highly lucrative. 

It is critical that applicants understand the financial situation as the Board requires them to prove that they have the money, disclose all money being used and identify the source, and do not allow changes of ownership once the provisional license is obtained.  An entrepreneurial applicant cannot “get by” and then sell the provisional license to a MSO.  Winning applicants must perform, or they will lose the provisional license. 

Conclusion

The medical marijuana/cannabis industry is rapidly evolving, and there are a lot of moving parts when it comes to starting a legal cannabis business. There are Ohio and federal laws to navigate, licensing requirements to meet, and a variety of other compliance issues. An experienced attorney can help you navigate the legal landscape and start your business on the right foot. An attorney can also help you obtain the appropriate licenses and permits and ensure that your business complies with all applicable laws. 

Whether you’re just getting started in the industry or you’re looking to expand your existing business, an attorney can be a valuable resource. Contact Ickes Holt today for a consultation.

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