Province sticks with pot shops by April 1
Licence winners have ‘incredibly hard’ 2 months of work ahead, observers say
Almost a month after Ontario held a pot-shop lottery, there is still no word on where the province’s first 25 stores will be located or when the public can weigh in.
However, Ontario still plans to have the privately run shops open by April 1, says a spokesperson for the Alcohol and Gaming Commission of Ontario, which is responsible for licensing.
That will be a challenge, say several consultants and lawyers in the cannabis industry.
“We only have two months now,” says Mark Asfar of Ottawa’s Momentum Law. His firm has advised more than a dozen clients who plan to open cannabis stores when licences open up. “It’s going to be incredibly hard.”
He predicts the majority of stores won’t open on time, “but I’m happy to be proven wrong.”
Matt Maurer, a Toronto lawyer who represents “multiple” lottery winners, says all of them expect to open on time, barring uncontrollable circumstances such as a delay in getting a building permit.
But some winners might find they can’t develop the brand and marketing they want by April 1, said Brenna Boonstra, the director of quality and regulatory consulting for Cannabis Compliance Inc.
Boonstra ticks off some of the things lottery winners must do: obtain a location, design a store and complete renovations, install a security system, hire and train staff, order products and ensure all regulations are met.
“Opening a cannabis retail store is not the same as opening a retail clothing store,” she said. “The security elements alone are significant. The record-keeping commitments are significant. It’s a highly regulated industry.”
The first 25 stores in the province will also be under a public microscope “because they are the lottery winners, and everyone wants to see what they have done with this golden ticket,” she says.
There were nearly 17,000 entrants in the Jan. 11 lottery that gave winners the right to apply for a cannabis store licence. The province decided to temporarily restrict the number of licences because of a shortage of cannabis.
The AGCO is working closely with the winners, said spokesman Raymond Kahnert.
Winners must apply for two licences, at a cost of $10,000, and put up a $50,000 line of credit that can be drawn down if they don’t have their stores open by April 1.
As part of the second licence, applicants must post a notice on the storefront to allow residents and municipalities 15 days to comment.
The AGCO will also post the list of locations on its website.
There is no indication of when that might occur.
The AGCO timeline for store openings, published on its website, is “very ambitious and not entirely logically consistent,” said Asfar.
For instance, the AGCO says stores should begin hiring staff around Feb. 11. However, as of Feb. 5, the 15-day public-notice period had not yet begun for any of the stores.
So applicants will have plans well underway by the time the public starts commenting on their location.
If the AGCO rejects a licence application after considering public comments, the applicant would have to find a new location.
That may seem unfair to the business owner, but it’s a typical risk in the brand-new industry, said Boonstra.
“Cannabis retail is not for the faint of heart.”
The first 25 stores in Ontario are also expected to be lucrative. They will have the country’s largest cannabis market to themselves — at least, for a few months.
Ontario has said the licence restriction is temporary and will be lifted when the cannabis supply increases.
The majority of the lottery winners were individuals, not corporations.
Most have no experience in the cannabis industry, and some have never run a business. The winners have been deluged with offers of help from consultants, investors and corporations eager to get a head start in retail cannabis in Canada’s largest province, but it remains unclear what partnerships will be allowed.
Lottery winners who receive a licence can’t change their ownership structure, hand over majority ownership or control of their business, or sell or transfer their licences.
In the one deal announced this week but not yet approved, High Tide Inc., which runs cannabis stores in Western Canada called Canna Cabana, says it signed a letter of intent with one lottery winner to obtain a minority interest and the option to acquire a greater interest in the future.
No details were released about which winner it was or where the store would be located.