New York released its draft regulations on November 21, 2022. Our team took a dive into the regulations and created some key highlights about the dispensary application process and requirements.
Before the regulations are finalized there will be a 60-day window for comment on these draft regulations. This article being based on the DRAFT regulations means that some of the information may change, though we don’t expect it will change too drastically.
Lobbyists and cannabis consultants everywhere are likely submitting a slew of public comments about the draft regulations. You can do the same if you’d like! Let’s dive into what we know as of now about the upcoming New York dispensary application process, who qualifies, and how to complete all of the requirements.
To the surprise of many, New York has chosen to have a mix of merit-based (graded/scoring) selection and lottery selection. This could mean that there will be a minimum score required to get into a lottery, or it means that they will use a merit-based process exclusively up until the point when licenses are limited and then begin using a lottery process. It’s up to the discretion of the Office of Cannabis Management.
Veering from the projections of many in 2021, the process will be ongoing, meaning there will not be a limited time window for applicants to submit their applications. Does this mean that New York will be like other states with ongoing application acceptance, like Oklahoma? We think not. New York’s cannabis regulators will be allowed to stop issuing licenses at a point when they deem there to be enough issued licenses. This shows that they have no interest in having a state overrun with cannabis businesses.
Because there could be a stop put on licensing, it will be SUPER important to get your application for a New York adult use dispensary in ASAP. You’ll want to be the first of many, as NY is expecting 50,000 applicants!
As the rules are currently written, this is what you can expect step-by-step on the path to opening a dispensary in New York:
If this is your first time applying for a dispensary license and you don’t even know how to start organizing this process so that it goes smoothly, check out this guide we made for preparing to apply for a cannabis business and the Cannabis Business Startup Checklist.
The licensing fee is lower than almost any other state in the nation. Applying for New York dispensary will only cost you $1,000, though it’s important to remember that the fee is non-refundable and if you submit a subpar application and don’t get accepted for licensure, that fee will NOT be refunded.
Should you knock your application submission out of the park, you’ll then receive a provisional license which will require the payment of a $7,000 fee.
The first dispensary licenses issued by New York were the Conditional Adult Use Retail Dispensary (CAURD) licenses in November 2022. Many people think that this was all the licenses that New York was going to issue, but that isn’t the case. The CAURD licenses are a special class of license specifically for people who have been harmed by the war on drugs.
The next licenses will go to people of all types!
Groups from disproportionately impacted communities, women, minorities, and veterans will be given preference. Don’t worry though. Even if you don’t belong to one of those groups, you’re still eligible to apply. New York is simply giving preferential status to minority classes because they’re aiming to create an inclusive and equitable industry. Not a single state has pulled off creating an inclusive and equitable industry yet, but NY is giving it a strong try.
You must be at least 21 years of age to apply for a dispensary and must be a person of “good moral character” which essentially means you can show a clean background check, have paid taxes, and for all intents and purposes are not irresponsible, unethical, or potentially running a criminal enterprise.
Funding is one of the biggest issues in the cannabis industry since businesses can’t get loans from traditional banks as with other business types. So, what is one to do? Thankfully the DRAFT regulations don’t have a defined amount of money required for dispensary applicants. However, the application will ask for a ton of financial information including WHO is financing the company, how much capital the company is starting with, and what the financial projections are for the business. If you have $0…we suggest partnering with someone, finding investors, or simply waiting until licensed dispensaries start hiring.
If you’re unsure about how much funding it takes to open a dispensary, we usually suggest $1,5000,000 at minimum to start a dispensary, which usually includes some cash to float the expenses of the store for at least a few months. The cost of opening a NY dispensary will vary based on cost of real estate, cost of construction, and how fancy you want the store to be.
Have we seen financial plans with $750,000 as the startup budget? Yes. So, if you’re in a total squeeze, you may be able to shoot for funding more around that number if necessary.
We know these are some BIG money numbers. It should be noted that New York is supposed to have some sort of loan or grant program for “social equity” applicants which includes the minority, female, and veteran owned businesses. The information about that loan or grant program is not yet available so we aren’t sure how much will be available or what the terms will be. For now, don’t count on it.
You’re probably wondering WHEN you should start preparing to apply. One of the most rookie mistakes in the book is waiting to start preparing an application until the date of license application is announced. There are applicants in New York who have been preparing for over a year. The time to start preparing is NOW.
If you don’t have a clue where to start, you are not alone, and we’ve made this guide to preparing for a license application process. Read it. Live by it. Remember that we have a lot of the required documents on our products pages. We’ll link those for you throughout the following application outline, so you know what you’ll need. You can also sign up to get notified when we have New York specific documents ready to go!
Fair warning - there is a lot of documentation required for the dispensary application. Why? The state wants to know that anyone they give a license to is prepared to start and operate the business, they want to ensure that dispensary license holders are of good moral character, and they want to create some sort of barrier to entry so that anyone who isn’t serious about the process won’t have a chance in the world of doing everything needed for the application.
Below we’ll go over the documentation required for the application, and the operating plans needed for the application. One good thing about the New York dispensary license application process is that it doesn’t require you to have ALL your operating plans prepared before having a license. There’s a boat load of information and documentation needed, and a few operating plans required when you apply – then, if you receive a provisional license, that’s when they’ll want ALL the operating plans hashed out.
As you go through this overview of the application requirements, you may think to yourself “Really?! They want all this information?! Seems invasive. There’s no way.” To which we would say, “Yes, really. They want all of this in as much detail and with as much clarity as humanly possible.”
The Office of Cannabis Management will provide a form that must be filled out by everyone involved in owning and/or financing the dispensary. Here, they want to know basic information about you/your company (the applicant) and anyone involved in the dispensary. An official form will be issued and will require the identity of company or individuals involved in the company, and the following information:
#1. If applicant is an individual person:
#2. If applicant is a company (LLC, corporation, partnership, trust, or estate) the following information will have to be provided for each company that’s involved in the dispensary ownership and/or financing:
#3. For every person involved in any way shape or form in the ownership of any company that is involved in the dispensary ownership or financing, this information will be required:
New York regulators have been very clear that they will be paying close attention to the ownership and financing of dispensaries. This is because they don’t want any funny business. They don’t want people holding ownership in more dispensaries than is allowed, using financing from questionable sources, or having large multi-state operators secretly controlling smaller companies. Don’t panic. YOU are prepared and starting early so you have time to get all this information together.
We generated the below application guide using the draft regulations, so you can utilize it as a checklist as you prepare for the release of the official regulations and official application process.
A list of any individuals or companies (and the individuals involved in the companies) with any interest in the dispensary ownership or financing, including:
You’ll need to describe all ownership changes that occur between the time of the original application and the time of submission of the application. It was a bit confusing because it seems like the “original application” would be the submitted application. That’s clearly not what they mean. We have interpreted this requirement to mean that the state wants to know ANY and ALL ownership changes that have occurred from the moment you started preparing the application, to the point that the application is submitted.
This description should be in narrative form and include information about events that have occurred since the start of the application. To provide this description accurately, we suggest recording everything that happens throughout the application process, so you won’t have to create a description from memory and risk it being inaccurate. The types of events to be included in the description include:
Here they want copies of every document related to the business ranging from state registrations to contracts. “Every” means that copies of these document types must be provided:
The regulators want to know the history of every entity and individual involved in the dispensary ownership or financing to determine the legitimacy of the applicant. This section is left a little bit vague. The regulation says that the applicant will have to disclose (and therefore likely provide supporting documentation) for:
Duties and promises of the dispensary are super important in showing the state what the company structure is and what types of indebtedness the company has. The regulators don’t want there to be any secret agreements, so the best thing to do is to disclose absolutely everything. A lot of people like to find ways to circumvent the rules by following the rules on paper and then having side agreements off record. Don’t be one of these people.
Provide copies of any proposed or executed contracts, term sheets, agreements, and side letters, between the dispensary and anyone involved in the dispensary ownership, financing, control, or good and services providing that relate to:
The capitalization tables must include anyone with interest in the dispensary that exceeds 10%. This includes any person or entity involved in the dispensary with interest in current or future earnings of the dispensary.
Passive investors are not included in this requirement. A passive investor is someone who owns less than 5% of shares of a publicly traded company, or a person who has no control in a privately owned dispensary and holds less than 20% of the shares of the company. If a person has an agreement in place that will result in their ownership exceeding the set 20% limit in the future, they are no longer considered a passive investor and will need to be included in the capitalization table.
“A basic capitalization table lists out each type of equity ownership capital, the individual investors, and the share prices. A more complex table may also include details on potential new funding sources, mergers and acquisitions, public offerings, or other hypothetical transactions.” - Investopedia
Here you’ll have to provide documents that relate to the ownership structure of the dispensary, including all holding companies, parent companies, affiliates, and subsidiaries.
The regulations don’t specify what documents are needed for this section. Some documents that many suffice for this requirement include:
Financial statements and taxation documents for the most recent year of the entity that is applying for dispensary licensure.
If the entity that is applying for the dispensary license was recently formed and does not have much information related to it for the past year, still provide:
Make an organizational chart that clearly displays the structure of the business in visual form and includes the names of all individuals and entities involved in the ownership of the dispensary. Include any entity or individual who will be involved in control, decision making or management of the dispensary, or its assets. This should include the name, ownership status (decision making, control, and/or management), and ownership percentages of:
Does anyone involved in the dispensary already own cannabis businesses elsewhere? Here, you’ll show the state any other cannabis business experience that you and your team of investors and/or owners currently have. This will include a description of cannabis licensing in other states. States have so many different names for their cannabis business types that it can be difficult to track. If you have a cannabis license in a state that uses any different naming than that listed below, don’t use that as an excuse to not provide the information. WHATEVER officially state licensed cannabis business anyone involved in the dispensary application holds – provide the info. This info will include any or all the following:
#1 Copies of any existing cannabis business state and/or jurisdictional licenses for:
#2 A statement granting NY regulators permission to contact the regulatory authorities in the states where cannabis business licenses are held.
#3 If the following have not occurred, then provide a statement that the entity or individual involved in the dispensary application who holds the cannabis business license(s) in other states was never sanctioned (never got in trouble). If the following have occurred, then provide documentation relating to the event(s):
The state wants to know if there have been any business troubles in the past. Honesty is the best policy here. If any entity or individual involved in the dispensary license has had any administrative action or governmental proceeding in the past TEN years, you’ll need to provide a description of the proceedings including jurisdiction, state, reason, action taken, etc. Administrative proceedings or governmental agency action that must be described in detail includes:
New York wants their cannabis dispensaries to make money, because if the licensed dispensaries don’t make money, then the state doesn’t make money, which defeats much of the purpose. So, you’ll have to show what your dispensary’s plan is for maintaining the business is, through ownership changes and any events that result in the dispensary no longer being able to operate, such as insolvency issues. Some questions to ask yourself as you develop a business continuity plan:
Why would the state give a dispensary license to a company that isn’t in good standing? They wouldn’t. You’ll need to provide a certificate of good standing or status from the state where the business was formed, and if the business was formed in a state other than New York, you will have to provide a certificate of authority to do business in New York from the New York Department of State.
Nothing says “conflict of interest” quite like an undisclosed relationship or agreement between an applicant and anyone involved with the regulatory body that decides who does and does not get a dispensary license! If your dispensary or any company or individual involved in the dispensary has any type of relationship, agreement, or arrangement with any official or employee of the Office of Cannabis Management, Cannabis Control Board, or any other entity or individual that plays a part in dispensary licensing review and decision making – disclose it and provide any documentation related to such a situation.
The application will require information about past troubles with federal agencies. Again, honesty is the best policy. The information required includes whether any individual or entity involved in the dispensary:
Has your dispensary entity been charitable lately? Provide information about any charitable contributions made by the entity that you’re using to apply for the dispensary license, in the past FIVE years. Hopefully you kept those donation receipts!
In case the state will accept charitable donation information from individuals involved in the dispensary, we suggest collecting that documentation as well.
New York is a big believer in unions. A Labor Peace Agreement signed with the dispensary entity and a bona fide labor organization is required, along with a statement stating that the dispensary entity understands that they may be required to maintain that labor peace agreement for the long term to maintain their dispensary licensure. Are you wondering HOW in the world you’re supposed to figure out what union to contact? We’ve got your back. Contact UFCW.
This part usually makes people uncomfortable if they have any kind of record from their past. This type of information is par for the course in cannabis business licensing across the U.S. because states want to know these types of things before issuing privileged licenses for a high-risk industry such as cannabis. New York wants the following criminal and legal history information for the dispensary entity and any person or company with interest in the dispensary.
Everyone involved in the dispensary application will have to get fingerprinted for a criminal history background check. There will likely be both a state level and federal criminal background check conducted, and the Office of Cannabis Management will provide direction for how to do so properly. As simple as this step may sound, ownership teams get flustered with this step quite often. Take it seriously and keep in contact with everyone included in the application to make sure they get their fingerprints done accurately and in time.
In case you haven’t already had to gather enough information about legal issues, the regulators want to know basically every legal action there is to tell them about, whether civil, criminal, or administrative. Start collecting your documents if the dispensary or any person or company involved in the dispensary has any legal action, either pending or past. You’ll have to provide information and a description about each one of the following:
“Good Moral Character” is one of our favorite requirements in cannabis business applications because, who really is to say definitively how to best measure good moral character? In this case, the Office of Cannabis Management in New York has that power. To show evidence of good moral character, a dispensary applicant must provide the dispensary applicant’s (everyone involved):
Ok!!! We’re finally to the part where you don’t need “documentation” but rather you need some operational plans related to RUNNING a dispensary. One good thing about the NY dispensary license application process is that it doesn’t require you to have ALL your operating plans prepared before having a license. There are a few operating plans required when you apply, and then if you receive a provisional license, that’s when they’ll want ALL the operating plans hashed out. For the first step of the dispensary licensing process, the application, the state wants the following operating plans.
New York is adamant that cannabis businesses contribute to the community, especially any disadvantaged or disproportionately impacted communities. Making an impact requires a well-developed strategy. A good Community Impact Plan includes a baseline strategy for implementing community engagement initiatives and developing them over time. Community impact is long-term efforts to support systematically marginalized neighborhoods. By definition, community impact extends beyond temporary reforms. Likewise, it does not attempt to treat the symptoms of inequality. It instead addresses systemic issues within neighborhoods and disadvantaged demographics and intervenes to produce lasting changes.
#1. The Community Impact plan must include a plan for how the dispensary will benefit communities and individuals from communities that were disproportionately impacted by the enforcement of cannabis prohibition, including, but not limited to:
#2. The Community Impact Plan must also include identifiable resources the dispensary will use to execute the plan, including, but not limited to:
#3. Additionally, the plan should include a description of the strategy to measure, track, and record the performance and execution of the plan that identifies qualitative and quantitative metrics, and includes frequency of tracking such metrics.
#4. Finally, provide a statement about the ability to execute on the proposed plan as described in the application based on the suitability and appropriateness of the metrics the dispensary will use to measure the success of the proposed plan; and the connection described between the plan’s desired outcome, implementation strategy, and the dispensary’s demonstrated ability to execute the plan.
Energy and environment are more important, now, than ever before. Of all cannabis business types, dispensaries have one of the lowest carbon footprints, especially when compared to cultivation and processing facilities. However, dispensaries can still do their part in selecting energy efficient equipment and having environmental plans in place as far as they relate to retailers (dispensaries).
As a dispensary applicant you must document, implement, and maintain an energy and environmental plan, explaining operational processes for sustainability and tracking such processes in a manner and form determined by the Office, which must include but is not limited to:
#1. Actions to reduce or eliminate the dispensary’s use of single-use plastics in accordance with the Retail Packaging Sustainability Program.
#2. Description of actions that will be taken to minimize both the use and disposal of chemicals that are considered hazardous waste when disposed.
#3. Reduction of the dispensary’s carbon footprint, including, but not limited to a sustainable energy use and conservation plan that addresses the sourcing and use of energy, including:
#4. Submission of an annual energy report which must include energy benchmarking in a manner required by the Office.
#5. All planned lighting and the energy impact of the planned lighting including, but not limited to:
#6. Environmental control and odor mitigation plans that meet all standards:
+ Dehumidification equipment must be one of the following
+ A refrigerant emission reduction plan, including either plans to utilize HVAC and refrigeration equipment with ultra-low Global Warming Potential (GWP) and/or natural refrigerants or a plan for managing refrigerant leaks and disposal
+ An HVAC and odor inspection and maintenance plan must include, but not be limited to a description of how the licensee will ensure proper operation and energy efficient operations, including, but not limited to, practices to limit or improve odor control and air filtration
+ Odors from all enclosed and enclosable storage must be mitigated to minimize objectional impacts off-site. Mitigation technology includes activated carbon filtration, vapor-phase systems, or other technology approved by the Office.
Heating systems that exhaust to the atmosphere and require an air permit or air facility registration from the New York State Department of Environmental Conservation, must obtain an issued permit or registration before construction on the facility starts. Construction is defined in 6 NYCRR Part 201-2.1(b)(9) as “[the] initiation of physical on- site construction activities which are of a permanent nature excluding site clearing and excavation. Such activities include, but are not limited to, installation of building supports and foundations, laying underground pipework and construction of permanent storage structures.”
#7. A plan for reducing greenhouse gas emissions and reliance on fossil fuels, including, but not limited to:
- annual estimates of miles driven
- fuel consumed
- type of vehicle driven
- strategies to reduce fuel consumption
- strategies to increase travel efficiency
#8. Water conservation and use, including, but not limited to a sustainable water-use and conservation plan that addresses water sources, quality, and use.
#9. Waste management, recycling and disposal, including, but not limited to:
#10. A description of the dispensary’s strategy to measure, track, and record the dispensary’s performance and execution of the plan that identifies qualitative and quantitative metrics, and includes frequency of tracking such metrics.
The Office of Cannabis Management will develop a training program utilized to create, at a minimum, a consistent base of cannabis and cannabis business knowledge. Dispensary applicants must complete any workforce training programs offered by the Office of Cannabis Management prior to applying for a dispensary.
It’s easy for anyone to put together a community engagement plan or diversity plan and say that they’ll practice business in a way that’s equitable and considers the well-being of disadvantaged groups. However, in the history of cannabis business licensing, those claims have been proven to be a bunch of lip service without any follow through. A great indicator for future performance is past performance, and New York will be considering the past business practices of dispensary applicants.
The wants to know a dispensary applicant’s history in creating or managing an equitable workplace environment, and will review previous business and management practices including:
A key component in operating a diverse workplace is providing services to help out employees who need support. The dispensary application will require the dispensary applicant’s history in creating or delivering culturally and linguistically competent services to diverse and underserved populations, including:
The application wants you to brag about all community leadership wins. Provide information about community leadership roles held by any individual related to ownership in the dispensary application including serving in community leadership roles within established and licensed:
A dispensary applicant DOES NOT need to have real estate selected and listed on the dispensary application. You don’t have to submit information about your specific location until you receive a provisional license (though you do have to submit which jurisdiction you want to be licensed in), but you REALLY should have real estate in mind before you apply. Imagine if you apply and get a provisional license and then can’t find real estate. That would be crazy.
During your search for real estate there are some things to keep in mind. We suggest finding a location that is no smaller than 2,500 square feet. As the facility is designed it will have to contain every required area that the state establishes, and it can be difficult to do that in less than 2,500 square feet.
Additionally, you’ll want somewhere that will be easily accessible to customers. Many times, new cannabis business owners find any location that they can which adheres to the requirements for dispensary location. This is an ill-advised moved. Those operators often wind up not being able to make any money because of their awkward location. Just as with any other business – location, location, location. Also make sure that the location is prime for construction so that your construction budget doesn’t get out of hand.
Once you find a location that seems like a dream come true, you’ll need to do some research to make sure it fits the rules for distancing. The Office of Cannabis Management requires that dispensary locations:
Ok, now that you’ve found a great location that meets the distance requirements and is in a jurisdiction that allows cannabis dispensaries, what’s next? You’d think this one goes without saying, but make sure that you have a good landlord. Are they comfortable with cannabis at their facility or are they just okay-ish with it and might cause problems? Speak with the landlord before you apply, or as you’re completing your application. It wouldn’t make any sense to see an available property and set your sights on it without building a relationship with the landlord and knowing whether they’ll have you.
New York Office of Cannabis Management is doing its best to create an equitable industry by also making sure there are high standards for dispensary ownership, and operations.
Now that you know the rules for the New York dispensary license application, as they're currently written in the draft regulations, you can start preparing for your application!
Hopefully the outline of requirements didn't seem too daunting. If you really want to start a dispensary in New York, one of the most visited and infamous cities in the world, putting in the work to knock the application out of the park seems worth it. To keep up to date on when Leafsheets will have the ready-to-go New York dispensary operating plans available, sign up for our email list on leafsheets.com.
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Leafsheets is a cannabis business support and acceleration platform that is breaking the barriers to entry and success in cannabis business by simplifying cannabis entrepreneurship by providing vital operating plans, business information, and answers to the most pressing questions. **Leafsheets is an experienced business advisor and not a legal advisor. For legal advice, consult with a licensed legal practitioner in your state.
