For those who have been paying attention, or who were excited by the news that the first legal marijuana stores would open in New York, you may be worried about the sheer number of licenses that may be available. It’s been reported that New York “needs” up to 3,000 dispensaries and the Office of Cannabis Management has projected that they’ll receive around 50,000 license applications. Whether or not a full 3,000 licenses (or more) will be issued over the next couple of years is yet to be seen.
Entrepreneurs, investors, and industry professionals have been sitting on the edge of their seats waiting for the official dispensary regulations to move forward. Many people thought there would be much more progress made in 2021, but the Office of Cannabis Management has made it clear that they plan on taking their time to be as mindful as possible in their rule making and roll out of cannabis businesses. On October 2022, the New York Office of Cannabis Management released a guidance document regarding what will be required to operate a Conditional Adult Use Retail Dispensary (CAURD), the soon to be announced first 150 adult use cannabis retailers in the state which are a special limited number of licenses designated for social justice involved applicants. 903 applications were received for the CAURD licenses, and the 150 awardees are yet to be announced as of the posting of this article.
The guidance attempts to provide some clarity about how the soon to be announced licensees will be expected to operate their dispensaries, given that there are not yet any finalized dispensary regulations in the state of New York. It is important to remember that this guidance is not a binding regulation, and details that are outlined within could change within the final regulations. Nonetheless, given that it’s good enough for the first dispensary licensees to utilize when setting up operations, it’s arguably a good starting point for any entrepreneur or investor preparing to enter the cannabis industry in New York with a dispensary license application once they become available.
Given that there were 903 applications received for 150 available licenses (six times the number of applicants than licenses available), you may wonder how it can be that they expect to receive up to 50,000 applications for future dispensary licenses. The CAURD license application had some very specific requirements having to do with criminal background, demographics, and past business ownership which created a limited pool of qualified applicants. Future dispensary applications will not have the same level of requirements and therefore it is likely that the number of applicants will far exceed 6 applicants for every one license available.
How does one use this guidance to prepare for applying for a New York Dispensary license? Here we’ll outline the rules laid out in the guidance that pertain to the operating plans that will be required.
In this article we cover the current released dispensary operational guidance for:
Dispensary record keeping is an art form. There are so many types of records to be kept, for so long, through so many channels that it's a never-ending business activity. Records required include inventory tracking, incident reports, financial records, transport records, training and staffing records, recall, quarantine and waste disposal records, security and access control records, and more. Impeccable records are at the heart of every compliant dispensary and New York Office of Cannabis Management is taking it seriously by holding dispensary owners to the highest standard.
Licensees will have an ongoing obligation to maintain up-to-date versions of all records and plans described in the guidance document and/or submitted with their application. The key to success in this area is organization.
Cannabis regulators care about branding regulations because it’s imperative that cannabis products are not marketed to children or made “attractive” to children in any way. This is for the health and safety of children as well as for the legitimacy of the industry.
The New York Office of Cannabis Management defines a brand as “the name, entity name, doing business as name, registered trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other identifiable marker that identifies an adult-use cannabis licensee or its products and is used in any packaging, labeling, marketing, advertising, or other outward facing marketing or advertising.
Adult use dispensaries are not allowed to label products as organic or craft, or use medically related words in their branding, such as apothecary, pharmacy, medicine/medical, doctor, drug/drug store, or any related terms. Dispensaries are also not allowed to appeal to anyone under the age of 21. How do you know if your brand appeals to those under the age of 21? Here are the rules.
Labeling, packaging, advertising, and marketing that is pleasing or appealing to persons under the age of twenty- one by using or including, among other things:
Staffing and training are incredibly important in dispensary operations because employees must perform their jobs in a highly regulated and high-risk environment. Given that adult use dispensaries in New York will be the first in the state, there won’t be a large pool of talent that’s experienced, trained, or familiar with the New York cannabis regulations. It's unreasonable to expect employees to read entire regulations so developing strong training programs that give them the knowledge and skills needed to easily understand how to perform their jobs effectively and compliantly daily is key. Honestly, this is a piece of dispensary operation that seems simple and therefore is done poorly by a large portion of cannabis businesses of every size.
The guidance issued by the Office of Cannabis Management (OCM) requires that every dispensary has an Employee in charge who is at least 21 years old and oversees the day-to-day function of the dispensary, including maintaining a staffing plan, maintaining a written training manual, and ensuring that required training takes place during operating hours, within the first 30 days of an employee’s hiring. Employees must be trained for the time they spend training, and the trainings must be recorded in a training log that includes an employee’s name, hiring date, list of trainings received, date of trainings received, name of trainer, and a copy of any training materials used other than the written training manual.
When it comes to age verification, you can't be too careful. There's no faster way to get a compliance fine or be shut down by the state than selling to a minor, in this case, under the age of twenty-one. The Age Verification Plan shows the state that you mean business when it comes to ensuring your dispensary never sells to anyone under the legal age for purchasing. It covers everything from what equipment to use, to what verification process your employees use to verify age thoroughly and accurately.
Dispensary workers must inspect a customer’s government-issued ID before that customer can purchase cannabis or cannabis products to ensure that the customer is at least 21 years of age. This process usually includes an integrated plan that utilizes manual, visual, verbal and technological resources.
The first thing you need to know about inventory management is that it's not just about tracking your products—it's also about making sure no illegal product enters your business or gets mixed up with your legal product. The state wants a real time tracking system in place to ensure they have visibility on all licensed cannabis cultivation, production, transportation, and sale. Dispensaries will have to maintain thorough inventory records of all products that enter and exit the facility and will have to have procedures in place for regular physical inventory audits. This is the piece of the puzzle that most often gets dispensaries in trouble with regulators – not ensuring that the records are accurate and thorough. The Office of Cannabis Management laid out key rules of inventory control that they expect dispensary licensees to adhere.
You can't go wild and sell anything and everything in your New York dispensary. It's not a convenience store. Dispensaries can only purchase cannabis products from distributors licensed in the state of New York. All purchases must be entered into the inventory tracking system. New York dispensaries are allowed to sell:
To track changes in inventory, companies have to know their starting point in its entirety. Before starting operations, a dispensary must conduct an initial inventory of products in the store and send the report to the Office of Cannabis Management via the real-time inventory tracking system. The initial inventory must include damaged, defective, expired, or adulterated cannabis products awaiting disposal, including the name, the quantity, and the reasons for which the licensee is maintaining the cannabis product.
Well implemented systems make daily cannabis business operation more manageable. Dispensaries will be required to have an inventory management plan in place including protocols and standard operating procedures – including a plan for what to do in the case that the system goes down. The standard procedures must include regular monthly inventory audits of cannabis products and if discrepancies are identified during an inventory audit, the dispensary must notify the Office of Cannabis Management within twenty-four hours. For each audit, the dispensary will have to record at least the name(s) and signature(s) of worker(s) who conducted the inventory audit, date of the inventory audit, summary of inventory findings, and any other information that may be determined by the Office of Cannabis Management.
Robust inventory technology is a compliance requirement and can be wildly helpful in business development because of the amount of data and sales reporting the platforms can provide when there's a consistent practice of accurate data entry. Dispensaries must use an inventory tracking system capable of compiling the dispensary’s cannabis product inventory, transaction data, and tax liability. That system must be compatible and capable of reporting real-time data to the Office.
Dispensaries will have to utilize an inventory tracking system that can integrate with the Office’s seed-to-sale tracking system and capable of compiling the dispensary’s cannabis product inventory, transaction data, and tax liability to accurately record in real-time, at least the following information:
For those of you who have ever had the entire inventory tracking system go down at your dispensary, you know it's a nightmare. You've got customers banging on the door and employees with questions about what to do.
The first step is to make sure you have a thorough plan in place keep and maintain comprehensive records detailing all inventory tracking activities that were conducted during the loss of access, including customer transactions, so that even if your computer system goes down, you can still conduct sales! If the system comes back online before everything is reconciled and recorded, dispensaries must provide all records from the down time to the Office of Cannabis Management. While keeping manual records may seem like an easy solution during these times, it's not familiar to staff and can create an environment that’s ripe for compliance violations.
Because of this many dispensaries choose to close their doors when their inventory tracking system goes down so they can focus on getting back up and running as soon as possible without worrying about losing money on lost sales or having no way of knowing how much product they have left.
When you're in the cannabis industry, it can be easy to forget that cannabis education is still a huge need among the general population.
The Office Cannabis Management wants all dispensaries to have educational materials on hand for customers to help them learn more about New York's unique customer base. This education will have to focus on safe consumption and cover topics including product types, delivery methods, effects, terpenes, cannabinoids, safe consumption guidelines, local laws, federal laws and what to do in the case of over consumption.
It's important for customers to understand how different varieties of cannabis affect their bodies differently before they make a purchase based on their preferences or needs.
New York dispensaries will have an array of sales abilities for cannabis products. Sales of cannabis are allowed during operating hours (which shall not include the hours of 12:00am to 8:00am) in the dispensary, in an express lane for pre-orders, through delivery orders, and in a drive through window. Yes, it's true. Delivery to consumers is allowed and the even less common cannabis dispensary drive thru lane will be allowed in New York as well - both requiring special written approval from the Office of Cannabis Management before commencing.
You can't sell it if you don't list the price. Prices of cannabis products must be made clear to the consumer and must be listed in a tax included format whether in store, online, over the phone, or on a price tag, sign, or placard.
The Office of Cannabis Management (OCM) has made it official: Dispensaries are not allowed to offer discounts or promotions. In a decision that's likely made to reduce incentivizing cannabis use and to stall price competition, the OCM has prohibited dispensaries from promoting product give aways, discounts, price reductions, points-based reward systems, or customer loyalty programs including but not limited to by using the words “sale”, “free”, “price drop” or “discount” on a menu, in any communications to customers or elsewhere.
Drive Thru requires written approval from the Office of Cannabis Management and will possibly require written approval from the local jurisdiction before operations. The drive-thru isn’t just for drivers! Customers are permitted to enter a drive-thru service window or drive-thru pick- up lane in any form of transportation, including on foot, making it especially important for dispensaries to have a plan in place to ensure customer safety when in the drive thru lane.
It’s well known that New Yorkers love convenience, and when it comes to cannabis products, delivery is one of the most convenient methods. However, there are a lot of safety issues to consider when delivering cannabis.
Developing a delivery plan is crucial because there are a lot of safety issues to take in to account since delivery agents will be dealing with cash and cannabis. The delivery plan should also take in to account how to properly record all sales information into the inventory control system given that the customer will not be in store when the order is placed or when payment is made. Safety precautions such as route planning, delivery manifests, and vehicle standards will need to be included.
There must be procedures in place for age and identity verification, payment (cash only), receipts, and record keeping. During a delivery transaction the following information will need to be recorded: the name, location, address, and license number of the dispensary; the name and address of the customer; the name and quantity of each item to be delivered to each customer; the name and signature of each worker performing or accompanying the delivery of the cannabis products, and any other information as determined by the Office.
Dispensaries must own the transportation method used for deliveries which may include only ground transport (such as a car, van, bike, foot, etc.). The transportation method must bear no signs, markings, advertisements, or marketing that would identify or indicate the transportation of cannabis products, have temperature controls to prevent the cannabis products from deteriorating during transport, secure the cannabis products in a fully enclosed and locked box, bag, cage, or other container, only contain cannabis products that are on the shipping manifest for that transport, and have an operating GPS.
Dispensaries in New York will have to have unbeatable security measures sufficient to deter diversion, theft or loss of cannabis and cannabis products, theft or loss of cash, prevent unauthorized entrance into areas containing cannabis or cannabis products, and to ensure the safety of workers, customers, and the public.
In order to keep their doors open and stay in business, dispensaries will need to employ a variety of security measures including but not limited to: video surveillance, access control systems such as card readers and biometric scanners, intrusion detection systems (IDS) such as motion detectors/video cameras/infrared beams/etc., alarms connected directly to local police stations (to prevent false alarms), guards patrolling the perimeter at all times (optional), sensors on windows/doors/ventilation ducts/etc., panic buttons for employees who feel threatened by customers or visitors... The list goes on!
Effective dispensary security requires a great security plan. Every dispensary will be required to have a security plan which must include a description of the measures a licensee will undertake to:
To successfully execute the security plan, dispensaries are required to have a security system that utilizes commercial grade equipment to prevent and detect diversion, theft, or loss. The equipment should be professionally installed by a licensed contractor and tested on a regular basis. System requirements include at least:
What are you going to do with all that cannabis? We know you want to be the best dispensary in town, and we've got some tips on how to keep your products safe and secure per the OCM rules.
First of all, it's important that customers cannot have direct access to cannabis products while shopping unless inspecting samples with the assistance of authorized dispensary staff. Products may be displayed to customers only if locked behind a counter or other barrier. A custom display case usually gets the job done.
Products not intended for display should be secured in an area that is only accessible to authorized workers and not visible to customers. Any counters, cases, safes, rooms, or other areas of the premises containing cannabis products (such as keys, passwords, or combination numbers), must not be accessible to customers or to workers who are not authorized to access such products. The access control system will play a large role in ensuring these areas are not accessed by unauthorized individuals, in coordination with security procedures.
You know what we're about to say, so we're just going to say it: quality control is Queen. Dispensaries will be required to establish written policies and procedures to monitor and track all quality assurance concerns and complaints from licensees and customers, including, but not limited to, procedures for quarantine, waste destruction, and rapid notification to the dispensary's supply and distribution chain to recall any cannabis product when directed by the Office of Cannabis Management, or as deemed necessary.
Implemented written procedures for recalling a cannabis product, whether initiated by the licensee or mandated by the Office, shall include:
It's never fun to have to dispose of inventory but sometimes it must be done. Dispensaries in New York must dispose of any cannabis product that is beyond the date of expiration, damaged, deteriorated, contaminated, or otherwise deemed not appropriate for sale. Cannabis product that's deemed as waste may not be sold or transported, must be locked and stored in a separate area prior to disposal, and may be disposed of in one of three ways:
All cannabis waste will have to be weighed, recorded, and entered in the inventory tracking system prior to, and after, disposal. Dispensaries will have to maintain records of disposal for at least five years, and make available to the Office for inspection, including the form (or type) cannabis product being disposed, quantity of the cannabis product, batch or lot number, as applicable, of the cannabis product, and the signatures of at least two of the licensee’s workers who witnessed the disposal. Having at least two agents present during disposal of cannabis is a crucial compliance measure because it mitigates for the risk of theft and record keeping inaccuracy.
New York’s first adult use cannabis retail dispensary businesses are soon to be a reality. While much of the rest of the country is covered in uncertainty, New York has a chance to seize the opportunity to become a leader in this space. There will be plenty of challenges along the way, and the guidance provided by the OCM will help navigate these obstacles, but it's only a piece of the puzzle. This document, while a good first step, is not set in stone. It will evolve over time and there are still questions that remain unanswered. Rather than allowing the high that this industry is giving cannabis users to go straight to their heads, hopeful dispensary license applicants would be wise to focus on the high bar that NY regulators have set for this industry. There are a lot of unknowns and challenges ahead, but if applicants and soon-to-be operators can manage those effectively, NY cannabis can soar as an adult use market.
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Employee Agreements, Forms, and Handbook
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Leafsheets is a cannabis business support and acceleration platform that is breaking the barriers to entry and success in cannabis business by simplifying cannabis entrepreneurship by providing vital operating plans, business information, and answers to the most pressing questions. **Leafsheets is an experienced business advisor and not a legal advisor. For legal advice, consult with a licensed legal practitioner in your state.
https://cannabis.ny.gov/system/files/documents/2022/10/guidance-for-adult-use-retail-dispensaries_1.pdf
