How to Open a Dispensary in Texas

How to Open a Dispensary in Texas in 2024

The Texas Department of Public Safety is not currently accepting new dispensing organization license applications. The last application window closed on April 28, 2023. However, it is important to be aware of the requirements for licensure in order to prepare for future application windows.

Why Open a Dispensary in Texas?

The Texas cannabis market is ripe for the participation of more entrepreneurs. Since the inception of the state's low-THC cannabis industry, only three businesses have been awarded the dispensary license. In 2017, the Compassionate Use Program in the state had 12 patients registered in the Texas Compassionate Use Registry (CURT). As of September 2023, 66,205 patient registrations were recorded in the CURT. The state is looking to award more licenses soon.

Types of Dispensary Licenses in Texas

Only one type of license authorizes the licensee to open a dispensary in Texas. To open a dispensary in the state, you must obtain a dispensing organization license from the Texas Department of Public Safety. The dispensing organization license is a vertically integrated license, meaning that the licensee must cultivate, process, package, and dispense medical marijuana from a single location.

How to Get a Texas Dispensary License

The Regulatory Services Division (RSD) of the Texas Department of Public Safety (DPS) created a 3-step process for obtaining a dispensing organization license:

• STEP 1:
• Complete and sign the Dispensing Organization Application Form available on the DPS website
• Submit the form to the RSD contact page. Select the option “Submit Document(s)”
• Enter the required information and follow the prompts to attach the completed form using the "Add Documents” feature on the page

Note that the application items must only be submitted once a confirmation email has been received with further instructions. All other required documentation must be submitted via a secure portal. Instructions and secure login credentials will be provided to the applicant in an email after the application form is received by the RSD

• STEP 2
• The RSD will send an invoice via email, typically within 3-5 business days from the receipt of the application form. This invoice will include guidance on paying the application fee, totaling $7,356, to the Comptroller via a wire transfer
• In a separate email, also to be sent within 3-5 business days following the application form submission, the applicant will receive login credentials from RSD. These credentials will grant access to a secure electronic portal for the submission of supporting documentation
• To finalize the application process, the applicant must use the secure electronic portal provided to submit all remaining required documentation. This portal ensures the confidentiality and integrity of the submission process
• STEP 3
• The RSD will commence the assessment of the application and may contact the applicant for inquiries if further information is needed for the application review
• Director, Manager, and Employee Registration Applications cannot be submitted until after the Dispensing Organization Application window has been closed
• Applicants will receive email notifications once the application window for Director, Manager, and Employee registrations becomes accessible

As part of the application process, individuals applying for positions as Compassionate Use Program dispensary directors, owners, and employees are obligated to provide their fingerprints to the Department of Public Safety (DPS). Fingerprints must be electronically submitted through the IdentoGo system, except in cases where applicants meet the criteria for the Alternative Fingerprint Process.

Applicants should have an active application in the system before proceeding with the fingerprint submission. Following the application submission, the Department will communicate the necessary instructions for the fingerprint submission process to the applicant. An applicant who lives in Texas must submit fingerprints via the Fingerprinting Services. For more instructions on the fingerprinting process, see the fingerprinting instructions page of the DPS website.

After all application information has been submitted to the Texas DPS for approval, and prior to licensure, the prospective dispensing organization must pass an onsite inspection to ensure compliance with DPS requirements.

Information and Documents Required for a Dispensary License in Texas

To apply for a dispensing organization license in Texas, applicants must submit and provide certain information and documentation classified into 8 categories called exhibits:

• Exhibit A (Ownership Documentation): Proof of ownership, including but not limited to a valid, current Certificate of Existence of Certificate of Authority issued by the Texas Office of the Secretary of State and a Certificate of Good Standing issued by the Texas Comptroller of Public Accounts
• Exhibits B (Proof of Insurance): A certificate of insurance to serve as proof of commercial general liability insurance to cover claims of liability for damage to property of third parties and for personal injuries to such parties

In cases where a certificate of insurance is unavailable during the application process, applicants may instead submit a letter expressing their intent to secure the necessary insurance coverage. However, before the final approval of a license, applicants will be mandated to furnish a valid certificate of insurance as a prerequisite

• Exhibit C: Proof of the ability to secure the resources, premises, and employees necessary to operate as a dispensing organization. The proof must show the:
• Comprehensive information about all properties intended for use in the cultivation, processing, and dispensing of low-THC cannabis, along with ownership details for each property
• Detailed descriptions of the methods proposed for cultivating, processing, and dispensing low-THC cannabis
• Clear outlines specifying the types and placements of worker safety equipment, as well as comprehensive plans and procedures to ensure compliance with federal regulations for workplace safety published by the Occupational Safety and Health Administration (OSHA)
• A list of current and proposed staff members, including their positions, roles, responsibilities, and an organizational chart depicting the supervisory hierarchy within the dispensing organization
• A description of the applicant's intended testing laboratory, including an outline of the proposed testing protocols and methodologies
• A proposal demonstrating the capability to secure premises strategically situated to enable patient access through existing infrastructure, thereby ensuring convenient access for patients
• Exhibit D: Proof of the ability to uphold strict accountability for all raw materials, finished products, and any byproducts, with the aim of preventing diversion or unauthorized access to these substances
• Exhibit E: Proof of the financial capacity to sustain operations for 2 years from the application submission date
• Exhibit F: Proof of technological and technical capacity to cultivate, process, and dispense low-THC cannabis
• Exhibit G: Proof of infrastructure to dispense low-THC cannabis to registered patients, showing:
• Map depicting the location of the applicant's proposed facilities with streets, property lines, buildings, outdoor areas, parking areas, fences, security features, fire hydrants, access to water and sanitation systems
• Floor plan of the proposed or actual building or where dispensing activities will occur depicting areas designed to protect patient privacy and locations designed for retail sales, with proposed operation hours
• Detailed description of HIPAA-compliant computer network used by all facilities
• Identifying descriptions of vehicles to be used to transport product
• Description of communication systems
• Exhibit H: A project schedule and plan

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

A business plan for a cannabis dispensary in Texas is a vital tool for securing essential funding and investments. Given the substantial startup costs and regulatory requirements, potential investors and financial institutions require a detailed and well-structured plan to evaluate the viability and potential return on investment.

A well-detailed business plan typically includes the following sections:

• Executive Summary: An overview of the business, its mission, vision, and a concise summary of the entire plan
• Company Description: Detailed information about the business, its history, legal structure, location, and ownership
• Market Analysis: Research on the industry, target market, competition, and market trends. This section may also include a SWOT analysis
• Products or Services: A description of the products or services offered, their features, benefits, and competitive advantage
• Marketing and Sales Strategy: Detailed marketing plans, pricing strategy, sales channels, and promotional strategies
• Financial Projections: Financial statements such as income statements, balance sheets, cash flow projections, and break-even analysis

Per Texas dispensary organization license application requirements, the following plans are also required to be submitted:

• Project Schedule and Plan: This plan must detail how you intend to start up operations if licensed, including timelines, milestones, deliverables, and projected dates for filling prescriptions. The plan must also identify how you would provide statewide coverage for patients
• Floor Plan: Floor plan of each facility or proposed facilities, showing:
• Locking options for all of ingress and egress points consistent with life safety requirements.
• Video surveillance
• Alarm systems
• Name, layout, and function of each room
• Storage, including safes and vaults
• Financial Plan: The plan must provide information on:
• Description of the applicant's business organization and corporate structure, if applicable
• List of all owners of a non-corporate applicant or all shareholders of a corporate applicant
• List of all entities and individuals with control over the applicant
• Projected 2-year budget
• Description of available assets necessary to support the dispensing organization activities
• Technical Plan: This plan must show a technical ability to cultivate, process, or dispense low-THC cannabis in the following areas:
• Cultivation, analytical organic chemistry and microbiology, and analytical laboratory methods
• Patient interaction and education and the handling of confidential information, including familiarity with HIPAA (Health Insurance Portability and Accountability Act) requirements
• Emergency management plan
• Record-keeping plan
• Diversion prevention plan
• Inventory control plan

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

Currently, there are no municipal requirements for establishing dispensing organizations in Texas. Licenses issued by the Texas Department of Public Safety to dispensing organizations authorize them to operate statewide.

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

It is not yet clear how long it will take the Texas Department of Public Safety to issue dispensing organization licenses when the next license application window opens. Discuss your needs with a cannabis consultant today.

Where Can You Locate a Cannabis Dispensary in Texas?

Unlike in some states where municipalities are allowed to restrict the operation of cannabis dispensaries in their jurisdictions, a Texas county or municipality may not enact, enforce, or adopt an ordinance or resolution to prohibit the dispensing of low-THC cannabis. However, per Administrative Rule 12.7(n), all regulated low-THC dispensary premises may not be located within 1,000 feet of a school or daycare center.

Here is a list of cannabis dispensaries in Texas.

Can Licensees Have More Than One Dispensary Location in Texas?

All cultivation, processing, and dispensing operations conducted by a Texas-licensed dispensing organization must be performed at a single location. However, remote pickup locations are authorized, provided products have already been dispensed and labeled for receiving patients, and the products are not stored overnight.

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

Since the dispensing organization license is vertically integrated, it requires a lot of capital to set up a cultivation, processing, and dispensing facility, with its operations potentially serving low-THC cannabis patients statewide. Firstly, you must pay a non-refundable application fee of $7,356 when submitting a license application.

If approved, the dispensing organizations must pay a licensing fee of $488,520.00 for a 2-year period. A biennial renewal license costs $318,511. The dispensary must also pay certain fees per employee to register them with the Department of Public Safety. Considering other costs such as real estate costs, staffing, inventory, legal, insurance, and marketing, it may take between $1.5 million and $5 million or more to start a dispensing organization in Texas.

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

In accordance with Title 37, TAC §12.11(b)(6):

• A dispensing organization must have a commercial general liability insurance coverage to protect the business against claims of liability for damage to property owned by third parties and personal injuries to third parties, including bodily injury, product liability, and property damage with a limit of:
• $1,000,000 each occurrence
• $2,000,000 general aggregate limit
• $1,000,000 product liability

How to Get a Grant to Open a Dispensary in Texas

This legal conflict in cannabis status makes traditional financial institutions, such as banks, reluctant to provide loans or grants to cannabis-related businesses. While Texas allows patients with specific health conditions to use low-THC cannabis to treat their conditions, cannabis is illegal federally and not considered to have any therapeutic value.

Despite this limitation in accessing loans from traditional banks, entrepreneurs may consider the following alternatives when sourcing funds to open a dispensary in Texas:

• Self-funding: If you have the financial resources, such as savings or investments, to self-fund your dispensary, this can be a good option to secure the required funds to open your dispensary
• Family members and friends: You may be able to borrow money from family members and friends to start your dispensary. This can be a good option if you have a strong personal network and your family members and friends are supportive of your business
• Equity investors: Equity investors are individuals or organizations willing to invest in your dispensary in exchange for equity in the business
• Cannabis-specific lenders: There are some lenders who specialize in providing loans to cannabis businesses. These lenders are usually more willing to lend to cannabis businesses than traditional banks
• Crowdfunding: Online crowdfunding platforms can be used to raise money from many public investors. Crowdfunding platforms can be a good option for businesses that are unable to obtain a loan from a traditional financial institution. To start a crowdfunding campaign, you will have to create an account on a crowdfunding platform, detail your business idea, and explain how you plan to use the funds

Does Texas Have a Social Equity Program for Cannabis Dispensaries?

Texas does not have a social equity program for low-THC dispensing organizations.

Does Texas Tax Marijuana Dispensaries?

No, low-THC cannabis sales are not taxed. Hence, licensed dispensing organizations are not taxed by the state.