Pot Shop 101: How Much to Start Up a D.C. Marijuana Dispensary?

Pot Shop 101: How Much to Start Up a D.C. Marijuana Dispensary?
Chris Shott / 08,16,2010

Neon pot-leaf signs like this are a no-no at D.C. dispensaries.
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Rabbi Jeffrey Kahn and wife Stephanie Kahn have a simple plan for bankrolling their controversial proposed medical-marijuana facility on Blair Road NW. "We plan on financing this from our personal life savings," he says.

How much are we talking? Well, that's a bit, um, hazy at the moment.

The biggest expense will likely be the price of the herbal remedy itself, according to Stephen DeAngelo, executive director of Harborside Health Center in Oakland, Calif., which both Rabbi Kahn and fellow aspiring dispensary operators with the nonprofit District of Columbia Patients' Cooperative have toured in preparation for creating their own facilities. DeAngelo tells City Desk, "Out of every dollar we take in, about 62 percent of that goes to paying for the actual medicine. The balance of that goes towards paying our rent, our payroll, our insurance—all the other typical expenses that a business has."

While not a single legal pot plant is yet in production in the District, thus making the budgeting process quite difficult for would-be sellers, we can safely assume that all other costs aren't even the half of it. That said, Mayor Adrian Fenty's proposed medical-marijuana regulations at least provide specifics about some of the other start-up costs:

• The annual fee for a medical marijuana dispensary registration shall be ten thousand dollars ($10,000) + an initial application processing fee of five thousand dollars ($5,000)

If you plan on growing your own, tack on an additional ten grand:

• The annual fee for a cultivation center registration shall be five thousand dollars ($5,000) + an initial application processing fee of five thousand dollars ($5,000)

Next, you'll need to register all your corporate partners...

• The annual fee for each director, officer, member, incorporator, or agent registration shall be two hundred dollars ($200)

And every "bud-tender" on staff:

• The annual fee for an employee registration shall be seventy five dollars ($75)
• The annual fee for a Manager's license shall be one hundred and fifty dollars ($150)

You may also need a permit for moving the medicine between manufacturing and distributing facilities:

• The fee for a transport permit shall be twenty-five dollars ($25)

Not included in the regs: your necessary certificate of occupancy ($33 application fee).
Then there's the whole matter of rent. According to real estate analysts Delta Associates, the average retail rent in D.C. (as of the end of 2009) is about $35 per square foot annually. For a modest 1,500-square-foot dispensary, such as the one the Kahns are proposing, that works out to roughly $4,375 each month, or $52,500 for the whole year. (Add on an additional month's rent for the probable security deposit.)

Next up, payroll. The proposed regs specify that each dispensary "shall be staffed with at least two persons during its hours of operation," with those hours of operation being anytime between 7 a.m. to 9 p.m. seven days a week. Let's say you open on a more limited basis, from 9 a.m. to 7 p.m. A dispensary employing two staffers at all times (minimum wage: $8.25 per hour) would thus run up at least $1,155 in weekly payroll (or, $60,060 annually).

Then there's security to think about. The Kahns, for instance, are planning to hire an off-duty cop to monitor the premises, beginning from a half hour before opening until a half hour after closing. A police officer working "reimburseable detail," as it's called, runs about $55 an hour—roughly three times the price of your average security guard. Let's say you go the cheaper route ($18 per hour); that's $1,386 per week (or, $72,072 annually).

Already, we're looking at well over $200,000, without even factoring in the cost of the required video cameras and alarm system, insurance, a good licensing lawyer—and, most importantly, the pot itself. If we accept DeAngelo's 62-percent figure on the cost of product, then we're talking around half a million dollars (if my math is correct).

In its own financial impact statement, the District predicted the average cost of marijuana sold at dispensaries at about $350 per ounce. Therefore, a dispensary would need to sell about 1,429 ounces of herb annually to cover its basic costs. That's about 119 ounces per month. Patients, meanwhile, are limited to just two ounces per month, and the District expects to register only 300 patients citywide in the first year. Which means dispensary owners may need to dip into their own inventory to make the math look right.

 

Not if some of the members on the city council have anything to do with it. They are already trying to create hoops too expensive for anyone but the rich from opening a dispensary and in charging so much for licensing fees and initial start up costs,they will
have run the price of the medicine up so much that patients will have to settle for what they can find on the streets.