Science & Health
Opening Legal Marijuana Dispensaries Provides An Economic Boost For Nearby Businesses, Study Shows
The opening of recreational marijuana dispensaries can help boost nearby businesses by increasing foot traffic, purchases and revenue, according to a new study.
Researchers from the City University of New York, Northern Illinois University and University of Miami examined cannabis market growth, credit and debit card purchases and socioeconomic and demographic data in Illinois from 2021 through 2024, finding that “recreational dispensary openings increase the number of customers at nearby establishments by approximately 6.82%, transactions by 8.01%, and revenue by 7.47%.”
The economic gains are largely seen through what researchers call the extensive margin (customer traffic) as opposed to the intensive margin (purchasing frequency). That is, while revenue per customer and per transaction was largely unaffected, the overall number of customers coming through the door and the overall amount of transactions did increase.
“Following a dispensary opening, nearby establishments exhibit increases in customers, transactions, and revenue.”
The study, published as a preprint by the Social Science Research Network (SSRN) ahead of potential publication in the journal Production and Operations Management, also found that not all businesses near a new marijuana dispensary see the same benefits—with food and beverage establishments as well as essential retailers seeing “significant gains” while non-essential retailers saw no major changes.
“Food, beverages, and routinely purchased goods can be incorporated into a destination-oriented trip with relatively little additional planning or search,” the paper said. “Many non-essential purchases require a more specific need or greater expenditure commitment. Proximity therefore creates access to additional customer flows, but it does not guarantee that an establishment can convert those flows into demand.”
The “positive spillovers” where also “concentrated among chain establishments, with no statistically significant effects for independent establishments,” the researchers wrote. “Chains may benefit from brand familiarity, standardized offerings, and established operating systems that facilitate the capture of additional customer activity.”
The positive economic effect of cannabis dispensaries leads to “larger increases in customer volume, transactions, and revenue in more walkable neighborhoods,” the study found, whereas the boost is “weaker for establishments with a larger local customer base, suggesting that establishments with more geographically dispersed customer bases may have greater capacity to capture incremental demand generated by dispensary-related activity.”
“Dispensary openings increase nearby business activity.”
Positive revenue boosts are also more pronounced on weekends, “when consumers may have greater flexibility to engage in destination-oriented and multipurpose trips,” the analysis showed.
“Overall, our findings suggest that recreational dispensaries can function similarly to localized demand-generating anchors by attracting customer activity that creates opportunities for surrounding establishments,” the study said.
The researchers cautioned that the study has some limitations, including that it only looked at trends in a single state and that it focused on observational data rather than direct sales records from individual establishments.
“This study shows that recreational dispensary openings can reshape demand beyond the cannabis industry by generating economic activity for nearby businesses,” the paper concluded. “The benefits, however, are not evenly distributed, indicating that proximity alone does not determine whether surrounding establishments gain from a new entrant. Instead, the value of dispensary-generated customer flows depends on the characteristics of nearby businesses and the local commercial environment.”
Previous research has also examined the economic impacts of legal marijuana access.
A study published last year found that “hotel revenue increases by 25.2% (or $63,671 monthly) due to dispensary legalization, with the effect continuing to grow even six years after legalization.”
Another study from last year should that home values in states with cannabis legalization increased by $60,327 more, on average, than home values in jurisdictions that still criminalize the drug.
A study from 2021 found that legalization of adult-use marijuana in Colorado increased jobs and did not negatively impact worker productivity.
