Arizona Cannabis Manufacturing License
Sales of adult-use cannabis in Arizona have started in January, less than three months after voters approved its legalization. Since then, the industry has seen a boom in consumer demand. Thus, opening a cannabis manufacturing company in Arizona is certainly a good idea. But before you get started with the business, you must first acquire an Arizona Cannabis Manufacturing License. According to the Arizona Department of Health Services, they have already issued licenses to 86 cannabis establishments.
Existing owners of medical cannabis dispensaries in Arizona, which have been legal since 2010, are among the first to receive the newly issued licenses. Stores owned by Harvest Health, Curaleaf, and Columbia Care are among the earliest companies to have commenced sales. With more and more companies diving into the adult-use cannabis market in Arizona and the rise in consumer demand, now is the perfect time to acquire an Arizona Cannabis Manufacturing License.
Applying for Arizona Cannabis Manufacturing License
Since the adult-use cannabis in Arizona is still new, the process for obtaining Arizona cannabis manufacturing license has not been clearly laid out yet. For now, only medical cannabis dispensaries can acquire a license to cultivate and manufacture cannabis for their own inventory or to sell to other dispensaries. Below are some tips for securing a cannabis manufacturing license in Arizona.
- Get a Local Approval
Before obtaining a license from the state of Arizona, operators must first ask approval from their local municipalities to allow them to conduct business in their respective locations. For those who are interested in manufacturing cannabis, they must first secure approval for land use and zoning permit from the regulating authorities. To ensure the safety of employees, as well as the nearby tenants or properties, the operator must also work with the local fire and police department for compliance and safety standards.
In addition, the local municipalities will be required to evaluate whether the project will have negative implications on the surrounding environment. Most of the time, a cannabis manufacturer can take over an existing commercial property or facility, which will only require minor updates that will not have any major impact on the surrounding areas. For manufacturers that are looking to open a new site or build a new facility, they might have to require the municipality to conduct an environmental review.
- Secure Building Permits
After seeking approval from the local governments and before securing the Arizona Cannabis Manufacturing License, a manufacturer will most likely have to obtain a permit for the building to be used for manufacturing. Once you have a building permit, that’s when you can start making improvements to your manufacturing facility, such as building lab-grade rooms, installing equipment and machines for the manufacturing operation, updating fixtures and furnishings, and adding safety equipment. Once your manufacturing facility is completed, the building must first be inspected. If there are no issues, they will issue a Certificate of Occupancy, which means the facility is now suitable for use. But remember that you cannot yet start with the manufacturing business unless you have secured the Arizona Cannabis Manufacturing License.
- Fill out the Licensing Applications
Just like with any cannabis business in Arizona, you need to secure a license for your manufacturing business to operate. Each state in the US has its governing agency that is responsible for the processing of licenses. In Arizona, it is the Arizona Department of Health Services (ADHS) that is in charge of overseeing the cannabis regulations and will process the applications for cannabis recreational store licenses.
The process of applying for the Arizona Cannabis Manufacturing License will require submitting information about the business, its operation, owners, manufacturing facilities, and procedures of waste disposal, quality control, inventory, transportation, and security. Furthermore, the business operator must possess all the necessary documents on hand and must be ready to be uploaded. The business operator must also have business formation documents, such as written statements from the property owner, proof of surety bond, premises diagram, and other important documents.
As for the timing, this will all depend on the local municipality. But generally, the entire process of obtaining a Cannabis Manufacturing License in Arizona can be achieved within 12 months. Since adult-use cannabis is still a new market in the state, the processing time will take longer compared to states with established markets.
Starting a Cannabis Business in Arizona
The cannabis industry in Arizona is very lucrative. You are guaranteed to make a good deal of profit once you have established your customer base. But as with any business, you must do your research well. So here’s what you need to know when starting a cannabis business in Arizona.
Overview of the Legal Cannabis Industry in Arizona
Since Proposition 203 was passed in 2010, adults in Arizona are allowed to possess up to 2.5 ounces of cannabis, but only if they have a written prescription from their doctor. There are currently more than 162,000 patients registered in the Medical Marijuana Program of Arizona.
People are allowed to grow cannabis plants in their respective residences but only for medical consumption, and only if the nearest cannabis dispensary is about 25 miles away. Non-profit cannabis dispensaries are allowed. However, as of 2018, all 130 business licenses for medical cannabis dispensaries in Arizona have already been granted. The allowed number of dispensaries will usually depend on the number of existing pharmacies in Arizona. This will be reviewed by the Arizona Department of Health Services every year. The sales of medical cannabis in Arizona in 2018 are estimated to be as high as $475 million. As for recreational cannabis in Arizona, it has just been legalized this year, but it’s expected to become as lucrative as the medical cannabis industry.
Arizona Cannabis Business License Types
Arizona will only issue licenses for non-profit medical cannabis dispensaries to companies that have grown their own cannabis. A cannabis dispensary is a retail storefront where anyone over the age of 21 can purchase cannabis, provided they have a valid prescription from their doctor. In Arizona, all cannabis dispensaries are required to follow strict health and safety protocols when it comes to cultivating and selling cannabis. As for location, it should be at least 50 feet away from a school and must be opened for at least 30 hours each week.
Standalone cannabis operations are not allowed in Arizona, as well as standalone infused product manufacturing. Unlike other US states, cannabis testing is not required in Arizona, but this could change in the future.
If you do not want to cultivate and sell cannabis in Arizona, you have other options that will not require the need to apply for an Arizona Cannabis Manufacturing License. You can develop a payment processing service, create an app, establish a branding agency, offer advertising services, consulting, and more.
Fees and Other Barriers to Entry in the Arizona Cannabis Industry
Local governments could prevent cannabis companies from operating, so it is best to check the local county and city regulations before you open your Arizona cannabis manufacturing license. You will be required to get local approval before you can launch your business. As part of your application, you will be asked to submit documentation from a local authority stating that the location of your dispensary complies with the local zoning laws.
- Application Fees – it will cost you $5,000 to register your cannabis business in Arizona. If your application is denied, the $1,000 will be refunded back to you. The cost for registration renewal is $1,000.
- Fingerprinting and Background Check – owners of cannabis medical dispensaries and their employees are required to undergo fingerprinting and criminal background checks.
- Registry ID card – it will cost around $500 for the dispensary agent to acquire a registry identification card. Dispensary agents refer to employees, volunteers, board members, etc.
- Food License – if you wanted to sell or produce cannabis-infused edibles, you must first acquire a written authorization and a Food Establishment License.
- Medical director – Arizona would require that medical cannabis dispensaries will hire a physician and a medical director. The medical director will be in-charged of training employees. They must be available to reach while the dispensary is open and they are responsible for providing oversight for the educational materials of the dispensary.
What To Include In Your Arizona Cannabis Manufacturing Business Plan
The business plan is one of the most important documents that you need to submit when applying for an Arizona Cannabis Manufacturing License. Here’s what to include in your business plan.
Description of products or services – you need to describe the products and services that you plan to manufacture. What is unique about your products and services? Try to be as specific as you can. Identify the strains of cannabis products that you intend to manufacture and sell.
Market research – find out how many cannabis users live within five miles of your business. Identify your user base and why would they purchase products from you instead of your competitors? Come up with exact figures instead of mere estimates.
Competitors – who are the companies that you will be competing with? Which aspect of the industry are they doing well and which aspect are they struggling with? What about their reputation online? How is your company different from them?
Team management – summarize the qualifications of your management team including your medical director. Make sure to include their experience in the cannabis industry but you can leave it blank if they do not have any. Don’t forget to highlight their leadership skills, business development experiences, customer services, even in other industries.
Financials – the financial aspect of your business plan can be tricky, but this must not be left out. Try to come up with a five-year financial forecast, which should include the projected annual revenue, operating expenses, and net profit. The projected revenue for each year must include not only the revenue but also your margin and direct costs.
To forecast your revenue, estimate how many cannabis products you think you can manufacture and sell. Think of the market potential, retail price, and production cost. You need to also consider the amount that goes to rent, payroll, and other operating expenses. The cash flow statement can help to give an idea if you have enough cash to stay in operation.
You can also include a sensitivity analysis on your financial forecast. Specify the best and worst-case scenarios, and identify which shows 15% higher and 15% lower in revenue compared to your initial forecast. When conducting a sensitivity analysis, it is best to do it based on future potentialities of the wholesale price of the products per pound. You can also include a break-even analysis to show which months you are expected to be profitable.
Arizona-specific Requirements – make sure to include any of the requirements that Arizona would specifically require, especially in terms of security systems, product tracking, waste plan, secure product transport, and some other aspects of your business.
Investor proposal – if you’re going to present your plan to your potential investors, specify how you will value their shares. You may need to consult with an attorney to ensure that you comply with the state and federal laws. It would also help if you let your attorney draw up an offering memorandum, also known as the private placement memorandum or PPM. This document will inform potential investors regarding the details about your company’s operations and any potential risks that come with their investment.
Arizona’s cannabis industry is on track to become even bigger this 2021, and the number of business owners wanting to get their hands on an Arizona Cannabis Manufacturing License is about to explode. It’s not surprising to find many companies trying to open their own cannabis business in the state. While others would prefer to run a dispensary, there are those who are more interested in manufacturing cannabis products. But before you can open your company, you must first have a license. To apply for an Arizona Cannabis Manufacturing License, remember that knowledge is the key. If you want to be among the first companies to take advantage of the thriving adult-use cannabis industry in Arizona, it’s important that you keep a realistic outlook on the process and plan your business accordingly.
Learn more about any of the Arizona Cannabis License Laws below: