Opening a recreational marijuana dispensary can provide a measurable economic boost to surrounding businesses, according to a new study finding that nearby retailers experienced increases in revenue, customer traffic and transactions following dispensary openings.
The research, published October 13 on SSRN, examined recreational marijuana dispensary openings in Illinois between 2021 and 2024. Researchers found that nearby businesses experienced an average 7.47% increase in revenue, an 8.01% increase in transactions and a 6.82% increase in customers following the openings.
The 31-page paper, titled “Like a Good Neighbor? Demand Spillovers from Recreational Cannabis Dispensary Openings to Nearby Retail Establishments,” was conducted by Ecem Basak of Baruch College, Aida Sanatizadeh of Northern Illinois University and Kevin Hong of the University of Miami.
Researchers combined administrative records documenting dispensary openings with monthly data tracking customer counts, transactions and revenue at surrounding establishments. Using a difference-in-differences research design, they compared business activity before and after dispensaries opened to estimate their impact on neighboring retailers.
The findings suggest the economic benefits largely stem from marijuana dispensaries attracting additional customers to commercial areas rather than encouraging existing shoppers to spend more. While overall customer counts and transactions increased, revenue per customer and revenue per transaction remained essentially unchanged.
However, the benefits were not evenly distributed across different types of businesses. Food and beverage establishments and retailers selling essential goods experienced significant gains, while businesses selling nonessential products showed no statistically significant changes.
Researchers also identified differences between chain businesses and independently operated establishments. Positive economic effects were concentrated among chain retailers, with independent businesses showing no statistically significant improvements following dispensary openings.
Location and timing also influenced the findings. Businesses in more walkable neighborhoods experienced stronger benefits, while establishments relying more heavily on customers from their immediate surrounding areas saw smaller increases. The positive revenue effects were concentrated on weekends, suggesting that dispensary-related shopping activity may be particularly beneficial during periods of heavier consumer traffic.
