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.
Cannabis delivery businesses are unique because you don’t need to have a dispensary storefront to run it. It doesn’t require as much capital to operate. If you have less than $10,000 to start your marijuana company, you might consider launching your own cannabis delivery service.
Cannabis delivery services are growing rapidly
The COVID-19 pandemic skyrocketed the demand for cannabis delivery, likely much faster than pre-pandemic numbers predicted for 2020. Large, multi-state operators acquired smaller cannabis delivery companies in response to COVID-19, primarily in 2021.
In December 2020, Stem Holdings closed a $31.1 million deal to acquire Driven Deliveries in California. In April 2021, Cresco Labs purchased cannabis company Bluma Wellness for $213 million. Bluma Wellness isn’t just a delivery service, but approximately 15% of their revenue comes from home delivery, according to Cresco Labs’ press release.
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.
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.
Here are a few things to know before launching your cannabis delivery company:
1. Not all states have the same cannabis delivery laws
Running a marijuana delivery company is different from running a dispensary, but you will still need to apply with the state or local government you’re operating under. It’s not something you can just begin doing without appropriate licensure.
In Oregon, for example, you must have written permission from the Oregon Cannabis Control Commission to start a cannabis delivery service in the state. Also, your company can only transport up to $3,000 in product at one time.
Oregon was the first state to allow cannabis delivery services in 2017. California followed suit in 2019 and became the first state to legalize delivery services in all municipalities, even those that have banned cannabis businesses. This made cannabis industry history, and specifically, cannabis delivery history.
Believe it or not, cannabis delivery services didn’t start in Denver, Colorado until last month, August 2021. The Colorado Legislature passed bills in 2019 to allow for cannabis delivery services in the state, but municipalities could choose to opt out. Denver is now allowing cannabis delivery services in the city, with a cut-off time of 10 PM.
Denver customers over 21 years old are limited to receiving one ounce of cannabis flower, eight grams of concentrate, or edibles containing up to 800 milligrams of THC through a Colorado-certified cannabis delivery service. All customers must have a valid ID present at the time of delivery.
Many states require cannabis delivery companies to use unmarked vehicles with blacked out windows to prevent robberies, while other states might have marketing and advertising restrictions, too. Cannabis delivery laws are different in every state, so make sure you hire an attorney familiar with these laws to help you at every step.
2. Your cannabis delivery company needs an easy payment processing solution
State-legal cannabis dispensaries and delivery services can’t accept credit or debit cards, thanks to tax code 280E. Tax code 280E says any business handling a controlled substance can’t claim traditional business expenses on their taxes, can’t apply for traditional banking loans, and can’t work with traditional banks. This means cannabis operations across the country are forced to rely on cash payments, no debit or credit cards allowed.
Many cannabis dispensaries are making it easier on their customers by installing ATMs in the store, but the fees can turn customers away. Not to mention, long lines and shared ATMs might cause COVID-19 concerns.
It’s harder for cannabis delivery services to provide options like the ATM, which is why contactless, cashless payment processing is the only choice for marijuana delivery companies. Cannabis delivery companies like Eaze, Amuse, and ZipRun utilize AeroPay’s contactless cannabis payment processing system for their customers.
Think about the purpose of cannabis delivery services: to give your customers a way to access the cannabis products they love without leaving home. Your customers will most likely have to leave their house and withdraw cash from the bank, only 16% of American consumers carry cash on them at all times. This defeats the easy, accessible, and low-stress experience of using a marijuana delivery service.
You don’t want your drivers carrying cash, either. In the unfortunate event of a robbery, your driver can remain safe by carrying limited cash on their person. This also prevents your company from losing thousands to tens of thousands of dollars to theft. If your driver is ever robbed, most officials recommend handing over the cash to prevent harm and immediately calling the police.
With AeroPay, customers can pay by logging into their online bank account after scanning a QR code. There’s no need to withdraw cash or provide a routing number. AeroPay is completely free for customers to use, there are no fees like ATMs or other payment processors. Your customers won’t need to provide sensitive information because we don’t need any of it to process their payment.
3. Cannabis business taxes aren’t like traditional taxes
We mentioned tax code 280E and how it affects cannabis businesses. Aside from payment processing challenges, tax code 280E prevents state-legal cannabis businesses from claiming most business expenses on their taxes. The primary exception to this rule is cannabis cultivation operations, as tax code 280E says any cost related to the direct production of cannabis can be claimed as a business expense.
Cannabis delivery businesses don’t have much leeway when it comes to this tax code, because you aren’t producing the cannabis itself. However, marijuana delivery operations are typically less expensive to manage than dispensaries. Cannabis dispensaries need to pay rent, electric bills, merchandise if they choose to offer it, staff salaries and benefits, display cases, various software and equipment, and the cannabis itself, on top of any other expenses that might occur.
If you’re a cannabis delivery service, you don’t pay for most of these things. Your job is to form a partnership with dispensaries and deliver the products they carry to dispensaries, not actually hold or purchase the product wholesale.
AeroPay’s cannabis delivery partner Amuse, for example, has a few retailers they work with in California. Customers place an order with Amuse and the orders are routed to one of their local retail partners. This means your primary expenses will likely be your driver’s salary, vehicle maintenance, licensing fees, gasoline, software, and any equipment you’d need to deliver cannabis.
Tax code 280E says most of these expenses can’t be deducted from your taxes, but until a cannabis-educated accountant looks at your business - you can’t know for sure. Implementing AeroPay is the easiest way to keep track of your customer’s payments in one easy, organized digital dashboard, helping you streamline some of your accounting data for your tax professional to review.
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When you’re ready to begin thinking about processing payments for your marijuana delivery business, schedule your demo with AeroPay and see how we help our partners seamlessly process payments, increase their average order size, and retain satisfied customers.
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