Key Takeaways
- A working paper found that opening a cannabis dispensary increases nearby business revenue by approximately 7.47%.
- Food and beverage establishments saw the strongest gains, while non-essential retailers did not benefit significantly.
- Chain stores performed better than independent businesses, likely due to brand recognition and visibility.
- Walkable neighborhoods experienced greater revenue boosts from dispensaries, especially on weekends.
- The research suggests that dispensaries can enhance local economies, but benefits vary among business types and locations.
A working paper from researchers at Baruch College, Northern Illinois University and the University of Miami looked at what happens to businesses near a new recreational cannabis dispensary once it opens its doors. Using transaction and payment data from Illinois covering 2021 through 2024, the authors compared business activity near new dispensaries against similar businesses farther away, before and after each opening.
Their method, known as a difference-in-differences design, is a standard way economists isolate the effect of a single event, in this case a dispensary opening, from everything else happening in a local economy at the same time. It’s worth noting this paper is a working paper posted to SSRN and has not yet gone through peer review, so the findings should be read as preliminary evidence rather than a final word.
Still, the results point in a consistent direction. When a recreational dispensary opens, nearby businesses tend to see more foot traffic and more sales, at least on average.
How Much Did Nearby Business Revenue Increase After a Dispensary Opened?
The numbers from the study are pretty straightforward. Across the full sample of nearby businesses, the average increases were:
| Metric | Reported increase |
|---|---|
| Customers | 6.82% |
| Transactions | 8.01% |
| Revenue | 7.47% |
The researchers dug a bit deeper and found that most of this gain came from more people showing up, not from existing customers spending more per visit. In the paper’s terms, the effect worked mainly through the “extensive margin” (more customers, more transactions) rather than the “intensive margin” (bigger purchases). Revenue per customer and revenue per transaction barely moved.
In plain terms: dispensaries appear to bring more people into a shopping area, and those additional people are doing additional shopping, just not necessarily spending more per stop than anyone else.
Which Types of Businesses Benefited Most from Dispensary Openings?
Not every business type saw the same bump. Food and beverage establishments, think restaurants, cafes, bars, showed some of the strongest gains. Retailers selling routinely purchased goods, like convenience items or everyday essentials, also saw improvement.
Businesses selling more specialized or occasional-purchase items didn’t see the same lift. The study found no statistically significant change in activity for what the researchers call non-essential retailers, meaning stores where a purchase usually requires planning or a specific need rather than an impulse stop.
This pattern lines up with how people actually move through a shopping trip. Grabbing a coffee or picking up a few groceries after visiting a dispensary is an easy add-on. Buying a piece of furniture or a specialty item typically isn’t something people decide on the spot.
Independent establishments, meanwhile, did not show a statistically significant improvement overall. That’s important for anyone thinking about cannabis retail’s effect on a neighborhood, because it suggests the benefit isn’t automatic just because a business happens to be located nearby.
Why Might Chains and Established Food Businesses Capture More of the Spending?
The study itself doesn’t explain the mechanism behind this gap, so what follows is interpretation rather than a direct finding from the paper. Still, a few plausible explanations are worth considering.
Chain businesses often have more consistent hours, familiar branding and locations that are easy to recognize from the street. If someone is making a quick decision about where to stop after visiting a dispensary, a recognizable name may win out simply because it requires less thought. Chains may also have more staff on hand and systems built to handle a surge in walk-in traffic without service slowing down.
Established food and beverage businesses may also benefit from being habitual stops already. People are used to grabbing a bite or a drink as part of a usual outing, so adding a dispensary visit to that routine doesn’t require a shift in behavior.
Independent businesses, by contrast, may rely more on repeat local customers who already know the shop exists. New foot traffic from people unfamiliar with the area might simply walk past a business they don’t recognize in favor of something more familiar.
Again, these are reasonable explanations based on general patterns in local retail, not conclusions the study itself draws.
Does Neighborhood Walkability Affect the Dispensary Spending Boost?
Yes, and this is one of the clearer patterns in the paper. The positive effects on customers, transactions and revenue were stronger in neighborhoods that are more walkable. In areas where people can comfortably move between several businesses on foot, the ripple effect from a new dispensary appears to reach further.
The researchers also found the effects were stronger on weekends than on weekdays, which fits with the idea that people are more likely to treat a cannabis purchase as part of a broader outing when they have more free time.
This has practical implications beyond cannabis retail. It suggests the “extra foot traffic” benefit of any destination business, not just dispensaries, depends heavily on how easy it is for people to walk somewhere else afterward. A dispensary surrounded by parking lots and wide roads is less likely to generate the same spillover as one on a walkable commercial strip.
What Does This Mean for Zoning and Retail Site Planning?
For city planners, commercial real estate professionals and anyone evaluating where to open a cannabis dispensary or a business nearby, this research offers a useful but limited data point. It suggests dispensaries can act as a draw for a commercial area, similar to how a popular anchor store might, but the benefit isn’t guaranteed and isn’t evenly distributed.
Municipal zoning debates often focus on potential downsides of dispensary locations, like traffic or neighborhood character concerns. This study adds a counterpoint worth including in that conversation: there may be an economic upside for some nearby businesses, particularly food and beverage spots and chains in walkable areas.
At the same time, independent business owners shouldn’t assume proximity alone will bring them new customers. The data suggests visibility, brand recognition and convenience play a bigger role in capturing that spillover traffic than simply being located nearby.
As more states expand their legal cannabis markets, Illinois alone added 82 new licensed dispensaries in 2024 according to state reporting, this kind of neighborhood-level research is likely to keep getting attention from both the cannabis industry and local policymakers trying to understand what dispensary growth actually means for the businesses around them.
Frequently Asked Questions
According to a working paper examining Illinois dispensary openings between 2021 and 2024, nearby businesses saw an average revenue increase of about 7.47% after a dispensary opened. The researchers used difference-in-differences analysis of transaction data to reach this estimate. The effect is an average across many businesses, not a guarantee for every individual business near a dispensary.
The study found food and beverage establishments and retailers selling routinely purchased goods saw the clearest gains in customers, transactions and revenue. Non-essential retailers, meaning stores selling items people don’t buy on impulse, showed no statistically significant change. This suggests the benefit depends on whether a business fits naturally into a quick, add-on stop.
No. The research found that positive spillover effects were concentrated among chain establishments, while independent businesses did not show a statistically significant improvement overall. The study doesn’t explain exactly why, but factors like brand recognition and visibility are reasonable possibilities worth considering.
The study found that the positive effects on nearby customers, transactions and revenue were stronger in more walkable neighborhoods and on weekends. This supports the idea that the additional foot traffic generated by a dispensary opening tends to travel further and convert into more purchases when people can easily walk between businesses.
