How to Open a Dispensary in Hawaii

How to Open a Dispensary in Hawaii in 2024

Hawaii requires individuals and business entities interested in opening cannabis dispensaries to obtain licenses from the state’s Department of Health (DOH). To get Hawaii dispensary licenses, they must register online during the open application window announced by the DOH. A licensed cannabis business in Hawaii can operate up to two dispensing locations and two production facilities.

Why Open a Dispensary in Hawaii?

According to the Hawaii Tax Working Group report, licensed dispensaries saw their sales grow from $18.2 million in 2018 to $50 million in 2021. The report also showed that the estimated size of Hawaii's medical cannabis market is $240 million. This means 79% of cannabis purchases are from illegal dispensaries. Registered patients with active 329 cards (medical cannabis cards) also fell from 34,199 on June 30, 2022, to 31,886 on June 30, 2023.

The Tax Working Group recommends the expansion of Hawaii's medical marijuana program to allow more dispensaries to operate legally. According to the group, legalizing recreational marijuana in Hawaii can curb illegal marijuana sales and yield higher tax revenues. Since the first dispensary opened in Hawaii in 2017, the total tax revenues and licensing fees generated from the medical cannabis sales amount to $11 million in 2023. The expected size of the medical and recreational marijuana market is projected to be $354 million, according to the report submitted to Hawaii legislators. Licensing more marijuana dispensaries to operate legally in the state’s cannabis market can generate between $34 million and $53 million in tax revenues annually.

Types of Dispensary Licenses in Hawaii

Hawaii issues Medical Cannabis Dispensary Licenses to eligible persons or business entities in the state. Dispensary licensees can grow, process, distribute, and dispense cannabis products to qualifying patients in the state.

How to Get a Hawaii Dispensary License

Interested individuals and business entities can get Hawaii cannabis dispensary licenses by taking the following steps:

• Applicants must meet the following requirements per HRS §329D-3:
• Individuals must have no felony convictions, be 21 years or older, and be Hawaiian residents for at least five years before applying
• Business entities must be registered by the Hawaii Department of Commerce and Consumer Affairs, have Hawaii tax identification numbers, and have federal employer identification numbers
• Qualified persons or entities must submit applications to the Hawaii Department of Health (DOH) within a specified open application period
• Applicants must pay a non-refundable fee when submitting their applications. After approval, they must pay the licensing fee, without which they cannot open their medical marijuana dispensaries

The DOH’s Office of Medical Cannabis Control and Regulation (OMCCR) opened the application window in January 2016, reviewed all submitted applications, and issued licenses to 8 successful applicants in April 2016. Currently, the OMCCR is not accepting applications for dispensary licenses. According to Hawaii marijuana dispensary laws, the OMCCR can only approve eight medical marijuana dispensaries. The state’s cannabis regulator must distribute only three dispensary licenses in Oahu, two licenses in Hawaii Islands, two licenses in Maui, and one license in Kauai. Future licensing opportunities may arise if the DOH expands the current medical cannabis program or when recreational marijuana becomes legal in the state.

Information and Documents Required for a Dispensary License in Hawaii

• Applicant’s legal or registered name
• The last four digits of the individual's SSN (social security number)
• Applicant’s personal information, including telephone/fax number, street address, email address
• Applicant’s eCrim report from the Hawaii Criminal Justice Data Center
• Tax certificate issued by the Hawaii Department of Taxation
• Organizing documents and bylaws of the business entity
• Federal employer identification number of the business entity
• Hawaii tax identification number of the business entity
• The business registration number and suffix issued by the Department of Commerce and Consumer Affairs
• Names of stakeholders in the business entity
• Production, cultivation, and dispensary locations
• Bank documents or other proofs showing that the applicant or business entity has adequate financial resources to operate a dispensary

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

Having a business plan when applying for a dispensary license in Hawaii can boost an applicant’s chances of getting approved. A Hawaii dispensary business plan should contain the following:

• Company Overview: This must show the company’s name, mission, and goals. It is also mandatory to describe the company’s legal structure and ownership under this section
• Market Analysis: This must include research on the state’s medical marijuana program, market trends, and potential customer base
• Financial Plan: This must show startup costs, operational costs, revenue projections, and potential sources of funding
• Products and Services: The type of cannabis products the company intends to grow and dispense should be indicated in this section
• Management and Compliance: Under this section, applicants can describe staffing criteria/processes and day-to-day operations. Describing how the dispensary or production site will comply with local and state laws is also necessary
• Security Details: Outline the security measures in line with HRS §329D-7(6) to ensure the safety of staff, customers, and products

After approval, licensees must submit site plans to the DOH at least 30 days before producing or dispensing cannabis products in Hawaii. A site plan must contain the following:

• The dispensary/production addresses
• Tax Map Key (TMK) numbers
• Copies of dispensary/production site’s premises lease

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

Hawaii cities and counties cannot prohibit licensees from producing and dispensing medical marijuana to eligible patients. However, they can establish zoning rules to control the location and operation of dispensaries within their jurisdictions.

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

Currently, the Hawaii Department of Health does not accept new cannabis dispensary licenses. The regulatory body usually announces dates for submitting applications and issuing licenses.

Where Can You Locate a Cannabis Dispensary in Hawaii?

Hawaii cannabis law requires that dispensaries be located more than 750 feet away from certain locations, such as schools and playgrounds. Generally, dispensary licensees cannot set up retail stores and production centers in the same location. Per Hawaii Revised Statutes §329D-22, approved applicants must establish dispensaries and production sites in compliance with local zoning ordinances.

Here is a list of cannabis dispensaries in Hawaii.

Can Licensees Have More Than One Dispensary Location in Hawaii?

Yes, a dispensary license holder in Hawaii can run two production centers and two dispensing locations in one county. The DOH may also permit a licensee to open additional cannabis stores in underserved areas in the same county.

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

The cost of opening a marijuana dispensary in Hawaii can range from $1 million to $5 million depending on the following factors:

• Licensing Fees: A $5,000 non-refundable fee is paid when applying for a dispensary license in Hawaii. Afterward, the licensee must pay a licensing fee of $75,000 within seven days of approval. They must also renew their dispensary licenses annually, which cost $50,000
• Capital Requirements: Before approval, licensed dispensaries must show proof of $1 million financial base, together with at least $100,000 per dispensing location
• Real Estate/Location: The average cost of leasing a retail space for a dispensary in Hawaii is $37.25 per square foot per year
• Staff Costs: The average hourly wage in Hawaii is around $25 to $30. Licensed dispensaries often employ budtenders, dispensary managers, security personnel, quality control officers, cultivation staff, and transporters. Staffing costs can be up to $250,000 annually
• Security Costs: The cost of installing and maintaining video surveillance, alarm systems, and exterior lighting can vary based on the size of the dispensary/production center. It will cost anywhere between $30,000 and $50,000
• Operational Costs: To run a marijuana dispensary in Hawaii, a licensee should:
• Set up the seed-to-sale software - Hawaii's BioTrackTHC system installation costs between $2,500 and $3,000. The monthly operational cost is around $400
• Purchase cannabis business insurance policies - Expect to pay between $3,000 and $15,000 on annual insurance premiums
• Have an advertising budget - Between $10,000 and $20,000
• Seek legal and professional services - Annual expenses for expert tax consultants and legal professionals can be as high as $70,000

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

Cannabis business insurance is not mandatory for marijuana dispensaries in Hawaii. However, license holders should buy certain insurance policies to ensure the financial stability and security of their dispensaries and production sites. Insurance policies often cover unexpected or unforeseen financial losses. Recommended insurance policies for medical marijuana dispensaries in Hawaii include:

• Cannabis Business Owners Policy (BOP): This insurance policy is a combination of three coverages:
• General Liability Insurance: This covers third-party bodily injury, property damage, and personal injury claims
• Commercial Property Insurance: It provides financial protection against damage to physical property, including the dispensary and cultivation facilities
• Business Interruption Insurance: It helps cover lost income if the dispensary is unable to operate due to fire or other unforeseen natural disasters
• Product Liability Insurance: This protects against claims related to the cannabis products sold, including potential defects or harm caused by consumption
• Cannabis Crop Insurance: Provides coverage for loss or damage to cannabis crops due to covered perils such as fire, theft, or natural disasters
• Workers' Compensation Insurance: It provides financial benefits to employees for work-related injuries or illnesses
• Commercial Auto Insurance: This covers vehicles used to deliver cannabis products from production facilities to retail stores

The cost of insuring cannabis businesses in Hawaii depends on factors such as the business size/revenue, coverage type, coverage limits, business location, and security measures.

How to Get a Grant to Open a Dispensary in Hawaii

Cannabis dispensary owners in Hawaii need adequate capital and different funding sources to open and operate their shops. The following are some ways to secure funds to open a dispensary in the state:

• Self-funding: Using personal savings or assets to finance the dispensary offers full control
• Family and Friends: Seeking financial support from close acquaintances is a quicker path to getting funding for a proposed dispensary
• Traditional Loans: Licensed dispensary owners may seek loans from private lenders. Note that most commercial banks do not provide loans to cannabis businesses due to federal laws
• Equity Funding: Selling ownership stakes in the business to investors in exchange for capital can help raise significant funds to open a dispensary
• Cannabis-specific Lenders: Specialized financial institutions familiar with the cannabis industry may offer loans or investment options tailored to dispensaries’ unique needs

Does Hawaii Have a Social Equity Program for Cannabis Dispensaries?

Hawaii does not offer a social equity program for dispensary licensees.

Does Hawaii Tax Marijuana Dispensaries?

The Hawaii Department of Taxation receives a 4% general excise tax on every cannabis product purchased by medical marijuana cardholders at licensed dispensaries. Consumers in Oahu, Hawaii Islands, and Kauai counties pay 0.5% surcharges on the general excise tax.