What is a cannabis delivery business?
The traditional model of cannabis sales in the legal market has customers go to a dispensary to buy products, whereas with delivery, a customer will make a purchase online and a courier will deliver products direct to your home.
Even in the legal cannabis market, delivery is slow to take hold and not all legal states offer it.
Delivery is a great option for medical patients or customers who are not able to go to a store for health reasons.
Delivery also offers significant economic benefits to cannabis businesses as customers are more inclined make bigger orders online than in person at a dispensary.
Courier companies that deliver for local dispensaries
This is a seperate license like a 3rd party delivery service. A delivery business may be contracted by a dispensary to sell cannabis for delivery. This is like a Doordash, or Grubhub order, in which a driver will pick up the cannabis from a dispensary and deliver it to the consumer.
Dispensaries with their own in-house delivery service
Some dispensaries, where it is legal to do so, operate their own in house delivery team that can either deliver to qualifying patients or in some cases to adult-use consumers.
With this option you would have to have a seperate license to cater to this option of delivery.
Online-only marijuana shops and delivery apps
The proper name for this license is a non-storefront retail, it allows companies to have a online location, similar to Amazon, and deliver cannabis within their state.
Medical or adult use, there are restrictions on where cannabis can be delivered, even within states that allow it. For instance, you can’t legally deliver cannabis to college or university campuses. Although many people still discreetly deliver and receive cannabis products on campuses, it’s illegal to do so since cannabis is a federally controlled substance and higher education institutions that receive federal funding must prohibit its use and distribution.
Delivery vs. Transportation
Also, take note of the difference between delivery and transport. Delivery is from a business to a consumer, transport from one business to another. Most states actually make it illegal for cities to ban cannabis transportation, which would make it difficult for cannabis companies to do business and would be pretty hard to enforce in any case.
General compliance requirements
The initial fee for a medical marijuana delivery permit is $2,000 for a license that will expire in six months or less and $4,000 for a license that will expire in more than six months. All delivery license renewals are $2,000. Of course, licensed cannabis retailers in Colorado will need to check with their city, municipality, and/or county to verify that the businesses are permitted and that the local government is accepting delivery license applications. You’ll need to include all required attachments and documents along with your non-storefront retailer application, including:
Evidence of legal right to use the proposed premises location
Business formation documentation
Evidence of compliance with all local requirements
Transportation procedures form
Inventory procedures form
Security procedures form
Delivery procedures form
Tax overview for Delivery services
Most states have chosen to apply an excise tax to the sale of cannabis.These can be levied at the retail or wholesale level. Several states have excise taxes at both levels. In nine states, the excise tax is levied in addition to the general sales and use tax. Eleven states have also provided for an additional local option tax.
The excise taxes that states have imposed have follow three different approaches.
Based on price. In most states, marijuana excise taxes are based on the retail price and is levied at the point of sale.
Based on weight. Three states (Alaska, California, and Maine) levy a weight-based excise tax, which is collected by growers and/or processors. Most other sin taxes, like alcohol or tobacco, are based on weight or quantity rather than price. Weight-based taxes vary based on the part of the plant being sold. Some experts argue that weight-based taxes are more resistant to volatility in the long term as prices are expected to drop when markets mature, although they may incentivize consumption of higher potency products because taxing by weight does not account for quality.
Based on potency. Illinois is the only state that taxes marijuana based on its potency. Potencybased taxes are based on the THC content, which is similar to liquor taxes based on alcohol content. Taxing based on potency allows the quality of the product to be taken into consideration, but it is likely more burdensome from both a compliance and administrative perspective.
How Much Does it Cost to Operate a Delivery Service?
In the scheme of cannabis dispensary businesses, operating a delivery service is a far more accessible,
scalable, and cost-effective way to enter the market. Your business can range from just a few drivers to a fleet of 40+ delivery vehicles operating in shifts during all permitted delivery hours (yes, state and local requirements may limit your hours of operation as a dispensary).
Buildout is simplified as many retail delivery businesses operate out of a warehouse space and do not need to be centrally located where their customers are or designed to meet the aesthetic needs of the neighborhood. It’s important to note that if you are licenses as a delivery dispensary, then customers are not permitted to purchase from your location.
Building Lease and Construction: $135,000 -$270,000
(4) Compliant Vehicles: $35,000 - $100,000
Fuel $25,000 - $40,000
App development $20,000 - $40,000
Insurance $50,000 - $75,000
Labor (4 Operators and 4 Drivers) $375,000 - $775,000
Misc. Costs $10,000 - $20,000
How Much Profit Does a Delivery Service Make?
In June 2021, cannabis delivery acquisitions got hot. Unrivaled Brands (formerly Terra Tech) announced their agreement to buy Silver Streak solutions. The amount was not disclosed. Fiore Cannabis released a letter of intent to acquire California delivery service, Cannabis Patients Club, for $1.2 million. Finally, cannabis giant Columbia Care successfully announced the acquisition of Green Leaf Medical, a medical marijuana operator with home delivery services in Virginia and Maryland, for $240 million. 44% of U.S. medical marijuana patients use a delivery service to access cannabis, according to Statista. The U.S. cannabis industry is continuing to explode, and customers want easy access to their dispensary favorites. Cannabis delivery services like Amuse, High Road, Eaze, and Zip Run make that possible.
Safe to say, cannabis delivery services are in high demand, and even worth millions if you are smart about your business. It might seem like there are too many cannabis delivery businesses to compete with, but that’s just not true. The cannabis industry is huge, with sales expecting to break $42 billion by 2026 in the U.S. alone. It’s not an easy task to become a successful operation, but launching your own marijuana delivery company is a great way to be an influential part of the cannabis space.
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