How to Open a Dispensary in Virginia

How to Open a Dispensary in Virginia in 2024

A medical cannabis dispensary in Virginia may only operate under a pharmaceutical processor license allowed in a Health Service Area (HSA). Hence, anyone who intends to open a medical cannabis dispensing facility in the Commonwealth must obtain a pharmaceutical processor permit from the Virginia Board of Pharmacy (BOP) when the BOP issues a Request for Application (RFA). No retail cannabis dispensary is permitted to open or operate in the Commonwealth until the legal sale of recreational marijuana begins. Anyone looking to open a medical cannabis dispensing facility needs adequate funding, as running a dispensary in the Commonwealth is capital intensive.

Why Open a Dispensary in Virginia?

The Virginia marijuana industry promises several opportunities once the legal sale of recreational cannabis begins. A report by the Virginia Joint Legislative Audit and Review Commission (JLARC) projects that the state may generate up to $300 million in revenue from adult-use cannabis in its first 5 years of legal sales. An independent report also forecasts that the state's recreational marijuana market may hit upwards of $500 million in cannabis sales in 2024 if the adult-use market launches as planned. Similarly, a 2020 report to the Virginia General Assembly and the Governor of Virginia suggests that a legal recreational cannabis industry could be worth $689 million to $1.2 billion yearly in economic activity, with a potential of about $274 million in tax revenues annually at industry maturation.

While Virginia does not have a mandatory patient registry, the number of registered qualifying patients has increased since the expansion of the state's medical marijuana program in 2020. As of December 2022, the state is estimated to have about 45,000 registered medical cannabis patients. According to reports by the Virginia Board of Pharmacy, monthly dispensations of medical cannabis products increased almost eight times between January 2021 and August 2022. About 562,000 dispensations of medical marijuana products were made in 2021, while it was over 1.4 million in 2022, an almost 50% change. The opportunities in the Virginia cannabis industry are massive, making the Commonwealth a good place to open a marijuana dispensary.

Types of Dispensary Licenses in Virginia

The two types of dispensary licenses in Virginia are:

• Medical Cannabis Dispensary License - This license/permit is obtained in part by a pharmaceutical processor licensee, and it allows the licensee to sell medical cannabis to registered qualifying medical patients
• Retail Marijuana Store License - Businesses with this license will be able to sell adult-use cannabis when the legal sale begins in Virginia

How to Get a Virginia Dispensary License

Anyone interested in getting a Virginia medical cannabis license must apply for a pharmaceutical processor permit. The state uses a scoring system to award medical cannabis licensees, including dispensary licenses. The maximum is 275 points. An applicant's score for each component is determined by the totality of the response to the corresponding component. Below are the steps required to obtain this permit:

• The Board of Pharmacy issues a Request for Application (RFA) to solicit applications for pharmaceutical processor permits in Health Service Area (HSA)
• An applicant will complete an application for a pharmaceutical processor permit for a Health Service Area (check the "Initial Application" box on the form). The application form is usually included as an attachment with the RFA
• The applicant will mail or hand-deliver the completed application with all required documentation to the Board of Pharmacy at:

Department of Health Services Board of Pharmacy Perimeter Center 9960 Mayland Drive, Suite 300 Henrico, VA 23233

The Board of Pharmacy (BOP) wants the application and required attachments provided in the following ways:

• 12 printed (hard) copies, with one marked "Original," for a total of 12 copies
• 12 soft copies on a thumb or CD drive saved as a searchable PDF copy of the entire submission labeled with the RFA number and the pharmaceutical processor's name and address

An ad hoc committee will rack each application submitted by interested entities after reviewing and scoring them. Afterward, the committee will recommend to the BOP the issuance of conditional approval to the highest-ranked applicant. Sometimes, the ad hoc committee may recommend an otherwise qualifying alternate applicant for the Board's consideration should the applicant with the highest-ranked score decide to withdraw their application. The BOP will then issue conditional approval to any applicant that, in its opinion, had the best application. Any applicant who received conditional approval must complete and submit another application for a pharmaceutical processor permit, checking the "Initial Permit" box. They must also indicate the requested facility inspection date and designate the pharmacist-in-charge.

Per state law, the BOP may only issue or renew one permit in any year for each HSA. As of 2022, one permit has been awarded to a facility in four of the five HSAs created by the Board of Pharmacy, leaving only HSA I with no dispensary licensee. On September 23, 2023, the BOP rescinded the RFA originally issued on September 25, 2020, for a pharmaceutical processor license in HSA I. The RFA will now be executed by the Virginia Cannabis Control Authority (VCCA). The VCCA is billed to assume the management of the Commonwealth's Medical Cannabis Program by January 2024. No retail marijuana store license has been issued in the Commonwealth.

Information and Documents Required for a Dispensary License in Virginia

• Financial position
• Marketing plan
• Security plan
• Product and site safety plan
• Compassionate need plan
• Research plan
• Evidence of criminal background checks
• Location within the HSA
• Agriculture, production, and dispensing expertise
• Facility exterior and blueprint
• Expected hours of operation
• Delivery service plan
• Authorization to conduct business
• Information about industry involvement and disciplinary action
• Any other information or document requested on the application form

What Plans Do You Need to Open a Dispensary in Virginia?

Preparing a business plan before applying for a dispensary license in Virginia is recommended. A business plan reels out the objectives of a proposed dispensary and how it plans to achieve set goals. It shows a detailed strategy for the dispensary from the operational and financial outlooks and can help attract investment for a new dispensary. Any business plan prepared by a proposed dispensary in Virginia should have the following elements:

• Executive Summary - Brief information about the dispensary's leadership, location, operations, and employees
• Financial Plan - This should outline the dispensary's financial projections, including cash flow projection, estimated profit/loss, and sources and amount of funding
• Company Description - A detailed description of the dispensary, including its name, target market, and business structure
• Products and Services - A description of the cannabis products and services the dispensary intends to offer
• Market Analysis and Sales Plan - This should outline the specifics of sales strategies and how the dispensary intends to market its marijuana products and services
• Operating Plan - A description of how the dispensary plans to operate, including information about logistics and how the dispensary intends to hire its employees
• Competitive Analysis - Details of competitors, potential issues to overcome while entering the cannabis industry, and how the dispensary intends to differentiate itself from others in the marketplace

The Board of Pharmacy also requires prospective dispensary owners to submit security plans as part of their license application. A Virginia dispensary security plan should contain the following details:

• How the dispensary intends to comply with the state's security requirements
• Analysis of proposed training opportunities for dispensary employees
• Plan to employ an electronic tracking system
• Measures it will implement to protect against diversion, loss, or theft

Are There Municipal Requirements for Opening a Cannabis Dispensary in Virginia?

No municipality in Virginia may prohibit medical marijuana dispensary operations within its borders. However, anyone who plans to open a dispensary anywhere in the Commonwealth must provide documents sufficient to establish that they are authorized to conduct business in good standing. Similarly, they must prove that all local ordinances and applicable local and state fire, building, and zoning requirements have been met or will be met before the issuance of a dispensary permit. Under the Commonwealth adult-use cannabis law, municipalities had a short window (between July and December 2022) to hold public referendums on whether to permit recreational marijuana dispensaries within their borders.

How Long Does It Take to Get a Virginia Dispensary License?

How long it takes to process a Virginia dispensary permit during the licensing application period is determined by the Board of Pharmacy. It generally takes a few months.

Where Can You Locate a Cannabis Dispensary in Virginia?

In Virginia, a medical cannabis dispensary should be located in places accessible to patients and compatible with other residential and commercial structures in the immediate vicinity. Typically, it must operate in one of the five HSAs established by the Board of Pharmacy and may not be within 1,000 feet of a daycare or school. It is essential to understand the rules set by municipalities, including their location requirements (if any), before opening a cannabis dispensary. Location requirements for retail marijuana dispensaries in the Commonwealth are not yet known.

Here is a list of cannabis dispensaries in Virginia.

Can Licensees Have More Than One Dispensary Location in Virginia?

Yes. A pharmaceutical processor licensee in Virginia can cultivate, manufacture, and sell medical marijuana from one location and operate five more cannabis dispensaries at separate locations within the same HSA. However, each additional dispensing location must obtain the BOP's permission.

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

• Licensing Costs- A non-refundable $10,000 application fee and a $60,000 initial permit fee
• Employee Costs - Between $200,000 and $300,000 annually, depending on the number of dispensary staff
• Initial Inventory (Product) Cost - Depends on the size with which the dispensary intends to start its operations. Typically, a pound of cannabis costs about $1,500
• Cost of Retail Space - Depending on the size and location, the cost of leasing or constructing a retail space will range between $250,000 and $4 million
• Cost of Security Systems - Between $30,000 and $60,000
• Cost of Insurance - Depends on several factors but will typically range between $15,000 and $30,000 yearly
• Marketing and Advertising Costs - Between $10,000 and $20,000
• Legal Assistance and Professional Services Costs - Between $10,000 and $45,00

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

Insurance can help protect a dispensary against unforeseen losses, but it is not a mandatory requirement for licensed marijuana dispensaries in Virginia. However, dispensary owners who wish to protect their investments in the Commonwealth may consider purchasing one or more of the following insurance policies:

• Business Owners Policy (BOP) - This is mostly offered as a bundle of the following three vital coverages, and it is usually cheaper to purchase them together rather than separately:
• Commercial Property Insurance - This covers a dispensary's building and the contents in the facility
• General Liability Insurance - This covers common accidents that may occur on the premises of a dispensary
• Business Interruption Insurance - This covers a dispensary for income loss in the event that the dispensary cannot operate as it should due to unforeseen circumstances, such as a disaster
• Product Liability Insurance - Covers legal costs if a dispensary's products cause illnesses or injuries
• Workers' Compensation Insurance - Covers missed wages, medical expenses, and more for dispensary employees who fall ill on the job or sustain work-related injuries

Factors such as coverage limits, dispensary size, the location of a dispensing facility, coverage type, and the owner's experience affect how much a Virginia dispensary will spend on insurance costs.

How to Get a Grant to Open a Dispensary in Virginia

• Marijuana Investment Groups - Getting funding from investors eager to support marijuana entrepreneurs in Virginia. The interest rates are usually high
• Family and Friends - Borrowing from friends and relatives to fund a dispensary usually comes at little or no interest rates
• Business Partners - This involves joining forces with a few persons and forming a partnership to raise funds to open a dispensary
• Capital Brokers - This involves engaging capital brokers specializing in marijuana businesses to help find potential investors for a proposed cannabis dispensary. It may require giving the broker an ownership stake in the dispensary
• Self-funding - This means funding a dispensary business with personal savings
• Social Equity Investment - Prospective dispensary owners who qualify for the proposed social equity program in Virginia will have access to loans to open cannabis dispensaries once the program is fully developed
• Equity Financing - With equity financing, a prospective dispensary owner in Virginia can raise capital from equity financing firms in exchange for a share of the business

Does Virginia Have a Social Equity Program for Cannabis Dispensaries?

Virginia is currently developing a social equity program known as the Cannabis Equity Business Loan Program for its recreational marijuana industry. Under this program, qualified social equity marijuana licensees, including dispensary licensees, will be able to access loans to promote cannabis business ownership. When it is fully developed, qualified social equity cannabis dispensary licensees will get low-interest business loans and enjoy waived or reduced Virginia marijuana application or license fees.

Per Section 4.1-606 of the Code of Virginia, a social equity dispensary license applicant is an individual or entity who has lived or domiciled in the Commonwealth for no less than 12 months and is either any of the following:

• An applicant with at least 66% ownership by a person or individuals who have lived for at least three of the past five years in a jurisdiction determined by the VCCA Board to have been disproportionately policed for cannabis crimes
• An applicant with at least 66% ownership by an individual or persons who have been convicted of certain misdemeanor cannabis offenses
• An applicant with no less than 66% ownership by a person or persons who attended and graduated from a historically black college or university in Virginia
• An applicant with at least 66% ownership by an individual or individuals who have lived for at least three of the last five years in a place determined by the VCCA Board to be economically stressed
• An applicant with at least 66% proprietorship by an individual or persons who is the spouse, sibling, parent, or child of an individual sentenced for certain misdemeanor marijuana offenses

Does Virginia Tax Marijuana Dispensaries?

Sales of medical marijuana in Virginia are exempt from sales and use tax. The sale of recreational cannabis has yet to begin in the Commonwealth. However, in addition to the sales and use tax, a 21% excise tax will be imposed on retail marijuana sales made by licensed retail marijuana stores once the legal sale of adult-use cannabis starts. Local municipalities may also adopt ordinances to impose a 3% tax on any sale taxable under Virginia cannabis tax. The VCCA has been earmarked to collect these taxes once the legal sale of recreational cannabis begins.