Multistate Operators: Expanding Your Cannabis Business

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Contributor, Benzinga
April 11, 2023

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A multistate operator (MSO) in the cannabis industry is a company that operates in multiple states where cannabis is legal. For existing cannabis business owners, expanding into multiple states is a great way to increase profitability, broaden customer bases and offer higher-quality products. But it’s important to understand the complexities of managing a multistate operation before taking the plunge. Read on to learn about MSOs.

What is a Multistate Operator?

Becoming an MSO involves expanding your existing cannabis business into multiple states that have legalized marijuana products. The first step is conducting extensive research on the regulations and laws governing cannabis in the states you’re considering. This includes understanding licensing requirements, tax laws and other legal restrictions that can impact your business operations. 

What Multistate Operators Should Consider when Opening a Dispensary in a New State

There are some important things to consider before you expand your business into multiple states.

Licensing and Permits

Before you make a move, familiarize yourself with the relevant legislation. For instance, some states may mandate that all cannabis businesses obtain a license from the State Board of Pharmacy or the Department of Agriculture before they can legally operate within their borders. There could be specific rules concerning the types of products you offer, such as which strains are allowable for sale or whether edibles are prohibited. 

If you want to find cannabis license requirements, the best place to look is on the official website of each state that allows it. For example, in California, you will find information by visiting the state’s Department of Cannabis Control site. 

Most states with legalized cannabis have websites that provide detailed information regarding cannabis license requirements. Oregon has an online resource center dedicated to helping business owners become informed and compliant with local cannabis laws. The website provides step-by-step guides to navigating the licensing process as well as links to applicable forms and documents needed for submission. 

Market Demand

When considering becoming an MSO, it's important to research the local demand for cannabis in the area. Knowing how much of a market already exists can help you determine what products you should offer and at what price points. It can also provide valuable insight into the potential success of your venture. Analyzing consumer trends can help you anticipate customer needs and plan accordingly. 

Competition in the Area

Competition is always a factor when launching a business, but it's particularly important when opening a dispensary in a new state. Understanding who your competitors are and what services they offer will give you the advantage to differentiate yourself from them and gain market share. By knowing the average prices of your competitors, you can create competitive pricing strategies for maximum profitability. 

Marijuana Tax Rates

Taxation varies across jurisdictions. It could be a flat rate or based on gross sales/receipts. You may need to adjust how you price your products or absorb some of the costs associated with taxes as part of doing business. 

Packaging and Label Requirements

Marijuana packaging regulations differ depending on where your business operates, so you'll need to familiarize yourself with these laws. Regulations may include specific terms that must appear on labels such as warnings about potential risks or disclaimers regarding health benefits that must be included on all products sold in-store or online to comply with state law.

For example, California requires that all cannabis products sold in the state be packaged in child-resistant containers that meet specific requirements, including being opaque, resealable and difficult for children to open. The label must include a Proposition 65 warning.  

Local Zoning Laws

Wherever marijuana businesses operate, they must comply with local zoning laws by ensuring they locate their facility in an area that meets safety requirements such as fire safety codes and public access rules. 

Each jurisdiction typically has restrictions pertaining to signage visibility, advertising placement and security measures that must be met before a marijuana business is allowed to open in the area. Familiarizing yourself with applicable zoning laws is essential for any cannabis company looking to become an MSO operating in multiple states or regions simultaneously.

How to Get Funding to Become a Multistate Operator

Securing the necessary funding to become a multistate operator can be challenging because traditional banks can't lend to cannabis companies. But with the right plan and by working with an appropriate direct cannabis lender, you can increase your chances of success. 

When looking for a direct cannabis lender, make sure to find one that understands your unique needs as well as the risks associated with opening a new dispensary location. A good lender will provide you with guidance and resources throughout the process to ensure that you secure the funds needed to get up and running quickly. 

Once you have identified a suitable lender, you can build a comprehensive business plan that outlines your proposed strategy for success. This plan should clearly explain who your target audience is and how you intend to reach them, what services or products you will offer, why they will be successful in reaching your intended customer base and any other pertinent information about your plans for expansion into multiple states. Make sure that your plan includes detailed financials that show potential lenders how much money you need upfront to cover expenses such as rent, staffing, licenses, advertising and miscellaneous costs associated with opening a new dispensary location.

Expand With an Expert by Your Side

Cannabis businesses looking to expand across multiple states have a unique set of challenges to overcome. From finding the right partners and navigating varying legal landscapes to managing taxes and inventory control, the complexity of multistate expansion can be a little overwhelming. Specialized cannabis lenders understand the legal intricacies of each state's laws and regulations. 

Frequently Asked Questions

Q

What are the benefits of being a multistate operator?

A

The benefits of being a multistate operator are numerous. It allows businesses to quickly expand and potentially increase profits by entering multiple legal markets. MSOs are also able to gain economies of scale in purchasing, marketing and distribution costs.

Q

What is the cheapest state to open a dispensary?

A

The cost of opening a dispensary varies greatly depending on the state, but some of the most affordable states include Arizona, Oklahoma, Montana and Nevada. In these states, the costs can range from $2,000 to $5,000 for application and licensing fees. Other factors impacting cost include real estate prices and local taxes.

Q

Are MSOs profitable?

A

Yes, MSOs can be very profitable. Operators who have been able to enter multiple markets experience lower overhead costs because they can achieve economies of scale. This allows them to maximize their profits.