How to Transition Your Dispensary from Medical to Recreational
Published on 4/26/22
A state usually follows a pattern on its way to full cannabis legalization. First, the state legalizes medical marijuana and creates a state-run medical cannabis program. Medical dispensaries are licensed and qualifying patients can buy from those dispensaries. Then, a few years later, a state may legalize recreational, adult-use marijuana. At that point, many dispensaries can apply to transition into selling both recreational and medical weed. How do you make that transition as a medical dispensary owner? Here's what you need to know.
Cannabis Legalization in the United States
While there's still a long way to go before marijuana is fully legalized in the United States, we've come a long way in the last 25 years. Cannabis has been deemed by the federal government to be highly addictive and have no medicinal benefits since 1970, when the Controlled Substance Act classified it - along with LSD, heroin, and ecstasy - as a Schedule I drug. The first state to legally go against the federal government's decision was California in 1996, when it legalized medical marijuana. Then, in 2012, Colorado and Washington were the first states to legalize recreational adult-use marijuana. Since then, a total of 36 states have legalized medical marijuana and 18 have legalized recreational marijuana.
The only time a state did not follow the pattern of first legalizing medical marijuana before legalizing recreational use a few years later was South Dakota. In the November 2020 election, South Dakota voters passed measures to legalize both medical and recreational marijuana. However, lawsuits were filed against the recreational Marijuana Legalization Initiative and the state's supreme court deemed the amendment to be unconstitutional in November 2021, a year after voters approved the initiative with a significant 8% margin. So, it's safe to assume that states moving forward will likely follow the trend of medical first and then recreational a few years later.
How to Transition from a Medical Dispensary to a Recreational Dispensary
Because this transition has now happened across 18 different states, there is a fairly defined process that should make it easier for dispensaries that are now looking to make the same transition from medical sales to recreational. Here's a list of steps to follow if you're transitioning from medical to recreational sales.
Acquiring Your Licenses
Without the proper licenses, your operations as a dispensary quickly become illegal and can land you in a lot of trouble once discovered. One of the most significant differences between med vs. rec dispensaries is the licenses involved. The first step in the transition should be to acquire the proper licenses from your state. Follow these tips to make the process as smooth as possible:
- Make sure your dispensary is located in a zone that allows a recreational storefront. This varies on the county and city levels.
- Check if your state has recreational dispensary availability. There's a limit to how many dispensaries are allowed in each state; fortunately, many states give license priority to existing medical dispensaries (although this is only the case just as applications are opening up).
- Look into your city and county licensing laws after you look at the state level. Some municipalities have their own regulations and even their own licenses required. Even certain municipalities don't allow the sale of adult-use marijuana, even if it has been legalized at the state level. For example, marijuana sales are not permitted in roughly 80% of California cities.
- Know the cost of a retail license and gather all documentation needed before applying.
- Check if there are other licenses you may need once you have a license to sell recreational marijuana. For example, you may need a transportation license to move products to your store.
Expanding Your Inventory
This step is very dependent on your state, so you'll want to check your state's regulations as soon as you know you've been approved and have the licenses. Here are some things to consider:
- Certain states require your recreational inventory to be kept completely separate from any medical products.
- Potency rules may differ between medical and recreational products, and some states only allow certain types of products for recreational use (i.e., no edibles or concentrates).
- Recreational and medical products are often taxed differently - this may affect your prices and how you manage inventory and finances.
- Supply issues are not uncommon since cannabis must be grown and sold in the same state. This is especially true if your state is just beginning to make the transition from medical to recreational legalization.
- There may be other limits to consider when building out your new inventory list, including recreational purchase limits, marketing laws, labels, and inventory report requirements.
Updating Your Store Layout
Opening up your store to recreational sales means an entirely new customer base, more foot traffic, and (again) different regulations.
- Consider dividing your waiting/check-in area by recreational and medical - this will make navigating the rest of the experience easier for everyone and allow you to identify the medical customers for priority.
- Security should be key. As you're expecting more foot traffic and inventory, you may likely need to update and add to your security systems.
Training Your Staff
In addition to potentially needing to hire more staff since recreational sales significantly increase your customer base, you'll also want to train your staff in a variety of ways to be prepared. Here's what you'll want your staff to know thoroughly:
- How to use your state's seed-to-sale tracking system, your recreational inventory management systems, and any recreational POS differences there may be.
- What recreational products you'll sell, how they differ from the medical products you offer, and how to explain the products to recreational adult customers. Often, recreational users are less informed, so your staff will need to be prepared to answer any cannabis-related questions and provide recommendations.
- How to manage customer profiles and differentiate between a medical marijuana sale and a recreational marijuana sale - regulations may vary between the two, depending on your state.
- Your state's sales limits. Recreational limits can differ from medical limits. You do not want to oversell to your customers.
Updating Your Marketing
Many new compliance measures are usually created when a state transitions from medical to recreational legalization, including those related to marketing. While every state has different regulations, here are some overarching rules you should follow:
- Do not target minors with any of your marketing materials or use any imagery/tactics that appeal to minors.
- Do not promote the overconsumption or abuse of marijuana.
- Follow state laws surrounding marketing limitations, which often include no traditional advertising.
- Be a source of cannabis knowledge - educate your recreational customers on proper consumption.
Updating Your POS and State Tracking System
This final step should help with every aspect of running a recreational dispensary, from inventory management to keeping track of med vs. rec customers and running your state's seed-to-sale tracking system. Especially if your business involves e-commerce, you'll want to pick a POS system with live menu integrations so you're online and in-store inventories can be easily synced.
Have you made the transition from medical to a recreational dispensary? Let us know what the process was like and what other tips you have. Comment below!