By Claudia Post,

No matter how successful your cannabis dispensary might be, it’s always a good idea to consider
additional revenue streams. Adding a delivery option for your retail store will attract new
customers who prefer the convenience of online ordering. In turn, this broader client base will
further insulate your business from potential challenges in the future.

There are multiple avenues your dispensary can take if you would like to expand with delivery
options. Firstly, you can build your own delivery service from scratch as an extension of your
retail offerings. Secondly, you can partner with a 3rd party service that handles the e-commerce
and delivery side of your cannabis dispensary business.

While both options for cannabis delivery offer more convenience for your customers, they
present quite different business models. In just about any situation, working with a 3rd party
service poses less financial risk than funding your own delivery operation. Yet, there are times
when long-term business goals might motivate you to start your own delivery service.

Cannabis Business License

One of the most important factors to consider when deciding between delivering your own
product and working with a service is cannabis business license options in your locale.
Occasionally, regulatory agencies in new cannabis markets require dispensaries to deliver their
own products. At the outset of the adult-use market in New York state, only Conditional
Adult-Use Dispensary (CAURD) license holders are able to deliver cannabis. As such,
partnering with a 3rd party service isn’t currently an option in New York, but it’s always a good
idea to keep an eye on changing laws.

With a regulatory model quite different from New York state, the city of Denver, CO only allows
delivery with 3rd party vendors – as opposed to businesses with retail licenses. To deliver
cannabis within the city, both medical and adult-use dispensaries must partner with “licensed
Denver transporters” to get their product to customers. You can learn more about delivery in
Denver by checking out the Medical and Retail Marijuana and Licenses page on the city’s
website.

While compliance laws in your target market will largely dictate your cannabis delivery option
of choice, it’s always smart to keep your business plan flexible to account for changing
legislation and new opportunities.

Overhead Costs

Whether it be hiring, training, marketing, or IT infrastructure, there are many factors to consider
when assessing the overhead cost of implementing a delivery service.

Oftentimes, business owners fail to appreciate just how much it can cost to source, screen, hire,
and train new delivery drivers. As the Society for Human Resource Management (SRHM)
explains, the average cost of hiring a new employee is around $4,700. With the high employee
turnover well-known in the cannabis industry, you could end up paying in excess of $10,000 per
year in additional costs just for hiring and training new delivery drivers.

If you partner with a 3rd party service, you can skip straight to delivering products to your
customers – while avoiding a huge overhead investment. Even better, if you don’t have an
e-commerce platform in place, an established 3rd party service will get you set up with
everything you need for online ordering. Finally, a delivery partner will have the right
technology to pair with your POS and seed-to-sale software, while also providing licensed,
compliant drivers.

For the sake of long-term goals, larger dispensary chains might be more inclined to set up their
own delivery services. Massive vertically-integrated producers like Curaleaf conduct thousands
of deliveries every day. Looking at sales projections at this scale, it makes sense why a company
like Curaleaf would invest in their own delivery operation. The sheer volume of orders they
deliver would help them recoup their investment over time.

In any case, working with a 3rd party delivery service is a great way to implement cannabis
delivery with very little financial risk. If you are unsure which option is best for you, weighing
your projected sales against overhead costs is a great starting point.

Operating Expenses

Not only must you consider how much it will cost to launch your delivery service, but you also
need to think about the expenses of running it on a daily basis.

With your own delivery service, you have to pay drivers’ salaries, worker’s comp premiums, and
liability insurance – regardless of how much money your deliveries actually make. If you hire 2
full-time drivers, you should plan on paying about $66,000 per year in salaries, with another
$8,000 in worker’s comp premiums. In addition, you will be paying around $3,600 per year in
commercial liability coverage.

When you partner with a 3rd party service, you pay them a fee for every delivery that is made.
As such, you are only financially responsible for your delivery service in the event that orders
are actually being placed. This type of “pay as you go” model is attractive because you create new revenue streams without the added stress of increased operational expenses. Even more, 3rd
party partnerships don’t cost you money on the days when business is slow.

The question of scale is also important to consider in the context of operating expenses. As seen
with vertical integration, some cannabis companies are willing to take more financial risks in
order to increase profits with deliveries. Especially with an MSO like Curaleaf that operates 142
dispensary locations, it is likely more profitable to cover their own delivery costs than pay fees to
3rd party vendors for thousands of deliveries made each day.

In just about any situation, working with a 3rd party service is a great way to deliver cannabis
without having to worry about operating expenses. If you decide to scale your business, you can
always reassess your delivery service to realign with future goals if needs be.

Summary

While both delivering your own cannabis and working with a 3rd party service are sure to boost
your bottom line, they present very different business models. Whether it be overhead costs or
operating expenses, working with a 3rd party service always poses less financial risks than
delivering your own cannabis. Yet, there are times when starting your own delivery service might
make sense – especially if you are planning on scaling to multiple locations.

Even if you aren’t sure which business model is best for you, starting with a 3rd party service is a
great way to branch into the delivery vertical. Since you don’t have to invest much capital when
working with a 3rd party service, you can take your time and learn as you go. Even better, many
of these services use sophisticated mobile apps that make ordering easy and convenient, while
also lending a more professional look to your dispensary.

As a final thought, you should always pay attention to new market opportunities for cannabis
delivery. For example, New Jersey currently requires dispensaries to deliver their own cannabis,
but is expected to add stand-alone delivery licenses in the coming year. By getting organized and
anticipating changes, you will be ready when new opportunities arise in New Jersey and beyond.