Part 1: So You Want To Open A Recreational Dispensary in New York State?

            If you’ve been paying attention to the cannabis news in New York State, you’ve noticed that the state has begun to green-light adult-use (a.k.a “recreational”) dispensary openings, with the first in the state opening its doors in late December 2022. And if you’re someone who already works in the cannabis industry, you may be wondering how you could open your own dispensary, or bring your existing brand into New York. After all, it is projected to be one of the biggest cannabis markets in the world once it is fully open and operational, and thus represents an excellent business opportunity for newcomers, industry veterans, and lifelong New Yorkers looking to revitalize the economy in their part of the state.

            There are many things to consider (to say nothing of the cost) when developing a business plan for a New York State adult-use dispensary. The biggest and perhaps most obvious factor is the state licensing – that is, getting permission from New York to own and operate a dispensary in the first place. There are many experts – attorneys and otherwise – who have already published great information on this topic. Here in Parlatore Law Group’s Cannabis Practice Group, we are fortunate enough to have some seasoned cannabis attorneys who can help with that part of the process.

What I’ll be focusing on in this article (and a series of articles to follow) are the advertising, marketing, branding, packaging, and labeling requirements that dispensaries and other licensed cannabis businesses need to consider. Even though they may seem like they’re small details, there is reason these regulations are so important: with cannabis still illegal at the federal level, state-level regulation is the highest form of legal oversight on the cannabis industry. And every state is going to have their own particular requirements. So even if you’re already familiar with how things work in California, Colorado, Washington – or even in Massachusetts, New Jersey, or Connecticut, you cannot assume that you’ll be compliant in New York unless you pay attention to the details of New York’s rules.

            It turns out, New York’s regulations for advertising, marketing, labeling, and packaging cover a lot of different elements of the industry, so I’ll be breaking these down into smaller topics for easier digestion, and to serve as a reference you can come back to in the future. First up: advertising and operating rules for dispensaries.

Exterior

            Now that you’ve purchased or secured a lease on a building or piece of land and obtained your license from the NYS Office of Cannabis Management, and you’re ready to set up your storefront on the licensed premises. Here’s what you need to know as you design and build out the store:

• The store is permitted a maximum of two (2) exterior signs, with very limited text.
  • These signs can only contain the business or trade name, the location and contact information of the store, and the type of business (i.e. “adult use cannabis dispensary”) – no mottos or slogans! No health claims! And the signs should be “no larger than necessary” to display the necessary information to people who are near the store.
  • The signs must be on the same parcel of land as the store, and must be permanently attached to either the building or another structure.
  • You cannot use neon lights in your sign.
• Your dispensary can use a trade name (also known as a “d/b/a” or “doing business as”) – you are not required to use the entity name as the public-facing brand name of the store.
• As a recreational, adult-use dispensary, it cannot appear to look like a medical dispensary, or an ordinary pharmacy/drug store or doctor’s office.
• This is a big one: Your store cannot use branding, marketing, or advertising that would appeal to individuals under the age of 21. More specifically, this means you can’t use:
  • Cartoons
  • Bubble-type font or cartoon-like font
  • Bright, “neon” colors (for designers, this means saturation must be under 60%)
  • Words like “candy”/ “candies” or alternate spellings (like “kandee”) – unless it’s actually part of the name of the business or the trade name
  • Symbols, images, characters, toys, phrases, public figures, or games that are commonly used to market other, non-cannabis products to people under age 21
  • Branding that appears too similar to existing food products, candy, soda, cookies, or cereal – unless it’s actually part of the name of the business or the trade name
  • If there are any photos of individual people used in advertisements, those individuals should generally be age 25 or older – the state prohibits the use of individuals who “appear” to be under the age of 21, unless they are in fact 25 or older.
• Cannabis product cannot be visible from outside – if you’ve visited or walked by a dispensary in another state that permits adult-use cannabis, you have probably noticed that the windows are blacked out, made of mirrored glass, or are otherwise blocked. These measures are not specifically required by New York State, so dispensary owners have a lot of flexibility in how they comply with this rule, just as long as cannabis product is not visible from outside the store.
• If you’re expecting long lines, you’ll need to have crowd-control measures so that you do not block the sidewalk for other pedestrians.
• Make sure to also check with local rules (municipal and county ordinances and regulations, including zoning laws) on the topics of odor control, noise, parking, and other possible local “nuisance” issues.

Interior

            Moving inside the store, you will also need to consider a few things:

• In a conspicuous location within the store, you’ll need to post the following information:
  • The licensee's retail dispensary license;
  • Hours of operation;
    • The state does not currently permit operation of a dispensary between 2 AM and 8 AM, but municipalities and counties may have their own additional restrictions.
  • Notification that “Consuming cannabis is not allowed on this premises.”;
  • Notification that “Cannabis can impair concentration, coordination and judgment. Do not operate a vehicle or machinery under the influence of cannabis.”;
  • Notification that “Using cannabis, in any form, while you are pregnant or chest/breastfeeding passes THC to your baby and may be harmful to your baby. There is no known safe amount of cannabis use during pregnancy or while chest/breastfeeding.”; and
  • Notification, in bold typeface and including capital letters as indicated, that “Adult-use cannabis products are for use only by persons 21 years and older. KEEP OUT OF REACH OF CHILDREN AND PETS.”
• The dispensary will also need to post or provide consumer education materials created by the Office of Cannabis Management.
• As tempting as offering product samples might be, there are tight limits on what a dispensary can do with product samples: no on-premise consumption, nor can customers take the sample away from the store.
• A full menu of products is not required, but there should be price tags on all products, showing all prices and any applicable taxes.
• You’re limited in the items you can sell in the store: cannabis products from a licensed distributor or processor, cannabinoid hemp products, cannabis paraphernalia, stationery, gifts and other small items, and branded merchandise (in adult sizes only) for your store (but not other brands!). Other than water, you cannot sell any other non-cannabis food or beverage items, nor can you sell any candy, toys, or other things that would appeal to people under the age of 21.
• You can’t make or imply any health claims about cannabis – you can offer objective information about the THC and other cannabinoid content of a product, or the effects of cannabinoids on the human body, but cannot give subjective statements about whether a product will help someone feel better or cure an ailment.
• The product manufacturers are also required to comply with a very specific set of rules regarding packaging and labeling of products. In some cases, dispensaries are involved in adding labels to products. Dispensaries cannot sell products that are non-compliant with the packaging and labeling rules, so the dispensary should be paying close attention to the products it receives from suppliers before putting them on the shelves.
• When people leave the store with product they purchased, you can absolutely send them home with branded “exit packaging” – i.e. a shopping bag with the dispensary’s name, logo, slogan, etc.

Advertising Your Store

Generally speaking, a dispensary is permitted to advertise using television, radio, podcasts, Internet (both pop-up/banner ads and websites), social media, and outdoor signage (including billboards – but only for retail stores and delivery services), as long as the expected audience is going to be 90% (or more) over the age of 21 – and the dispensary has evidence to support its belief that the audience will meet the age requirement. Any outdoor advertising must be out of sight from a school, childcare center, playground, public park, or library. And regardless of when or where the advertisements appear, they can never include elements that would tend to appeal to people under the age of 21! (See the list above.) Websites and apps need to have “age-gates” to prevent access by people under the age of 21.

No giveaways, reward systems, or customer loyalty programs are permitted, nor can a dispensary advertise discounts or price drops. A store also cannot use handbills or mascots to advertise or market their store. Dispensaries – and other licensees – can sponsor events, but only if the expected attendance is 90% or more comprised of people age 21 or older.

This last section is just a brief overview, and there are quite a few specific requirements for each format of advertising. Since there’s so much to cover in the area of advertising, and these rules apply to all licensees, not just dispensaries, I’ll dive into that topic in much more depth in a separate article.

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If you have questions or commentary on the content of this article, or are in need of legal assistance in this subject area, please feel free to contact the author, Max Hass, partner in Parlatore Law Group’s Cannabis Practice Group, at max.hass@parlatorelawgroup.com.