How Much Does it Cost to Open a Cannabis Store?

Recreational Cannabis Market

Spending on legal cannabis worldwide is expected to reach nearly $50 billion by 2026 at a compound annual growth rate (CAGR) of 16% from 2020 and hit $57 billion by 2030. The recreational cannabis market will cover about 67% of the spending while medical cannabis will take up the remaining 33%. This puts global annual recreational cannabis sales at approximately $40 billion by 2030, a 60% increase from the current $25 billion. The growth in recreational cannabis sales will be largely driven by ongoing policy reform in the US and Europe.

North America will remain the world leader in adult-use cannabis sales, according to the latest projections.

In the US, most states have legalized cannabis for medical purposes only, but 24 states have gone further by legalizing the use of cannabis for recreational use. Legal cannabis sales in the United States totaled approximately $29.5 billion in 2023, including $20.2 billion from recreational cannabis sales and $9.3 billion from medical cannabis sales. Total US sales are expected to reach $35 billion in 2024.

Canada legalized adult-use cannabis in 2018 and now has approximately 3,300 retail cannabis stores across the country. Total cannabis sales in Canada are now approaching C$5.5 billion (about US$4.1 billion), with 90% of the total being recreational cannabis sales and the remaining 10% coming from medical sales.

In Europe, the legalization of cannabis for adult use is in its infancy, with recreational cannabis only coming to the fore in 2023 with legalization in the Netherlands and Switzerland, while Luxembourg, Portugal, Spain, Germany and Malta are set to introduce legal access to cannabis for adult use, at least on a trial basis, by 2025. In 2024, Germany became the third country in Europe, after Malta and Luxembourg, to legalize cannabis for recreational use.

Other countries that have legalized recreational use of cannabis are Georgia, Mexico, South Africa, Thailand, and Uruguay and the Australian Capital Territory in Australia.

How Much Does it Cost to Open a Cannabis Store?

The costs of starting and operating a cannabis store are very similar to the costs of a dispensary and may differ more in terms of net income due to cannabis taxes, which generally do not apply to medical cannabis sales, but only to adult-use cannabis sales.

How Much Does it Cost to Open a Dispensary?

According to industry estimates, the average setting up costs for a dispensary is around $750,000 or $200 per sq. foot. Our example is a small brick-and-mortar cannabis store of approximately 2,500 sq. feet with delivery service.

$50,000 legal fees & insurances
$100,000 building renting (includes security deposit)
$70,000 inventory, packaging supplies
$7,500 website design and development, hosting
$42,500 marketing campaign
$101,250 space improvements including finishing/painting, kitchen, office space, bathrooms, etc.
$45,000 security system including multiple camera feeds and metal/weapons detectors
$41,250 furniture, display counters, refrigerators, freezers, multiple POS/cash registers, registration computer, commercial label printer, storage hardware and shelving, etc.
$7,500 computer software
plus salaries for director, managers and guards
plus deals with growers and manufactures

= approximately $750,000 start-up expenses

Ongoing operating expenses such as salaries, rent or mortgage payments, building and equipment maintenance expenses, administrative, professional services and insurance expenses, license renewal costs, etc. will range from $50,000 to $100,000 per month, depending on your location and space. To complete a budget, your will need to include the costs for a sufficient supply of cannabis inventory to sell.

How Profitable Can a Cannabis Store Be?

According to a 2016 MJBizFactbook study, average sales per square foot were $1,773 for recreational stores and $1,143 for medical dispensaries, while reasonable expectations at this point are around $1,000 per square foot, but may reach $3,000, especially in new markets.

Sample of a revenue model for a cannabis retail shop:
Revenue = $3,600,000 (100%)
-Direct Costs = $2,073,000 (58%)
Gross Profit = $1,527,000 (42%)
– Operating Expenses = $608,318 (17%)
Operating Income = $918,682 (25%)
Net Income = $506,577 (14%)

Cannabis retail business conditions differ from country to country and state to state and if you have planned to set up your own retail business, then you must comply with the laws of your particular location. Licensing requirements will also depend on the type of business you wish to start.

How Much Does It Cost to Grow Cannabis Indoor?

Cannabis Retail Financial Model Sample

Calculate the costs and profits of your cannabis retail business with our pre-populated cannabis retail financial models. All you need to do to get started is enter your monthly sales target and store size. The model will help you estimate how much it costs to open and operate your own cannabis store, build all revenue and cost line-items monthly over a flexible seven-year period, and then total the monthly results by quarters and years for an easy view into the various time periods.

Cannabis Retail Business FAQs

How much does it cost to get a cannabis retailer license?

Cannabis application and licensing fees vary in the 24 states where cannabis is legal for recreational use. Application fees range from $250 for retailers in Maine, Oregon and Washington to $6,000 for Michigan applicants, with most states charging no more than $1,000 in application fees. Meanwhile, licensing fees range from as low as $1,381 in Washington to as high as $96,000 for large California cannabis retailers.

How is cannabis sales taxed in the US?

Most states impose an ad valorem tax on the retail price of cannabis; its rates range from 6 percent in Missouri to 37 percent in Washington. Some states, including Connecticut and New York, have imposed potency-based taxes per milligram of THC.