Large Cannabis Store Openings in Ontario Promise to Be Disappointing

Ontario will see its first legal cannabis stores open Monday. Many more will remain closed, racking up huge rent bills for aspiring retailers, all in hopes of gaining access to the country's largest consumer market.

We do not know how long they will have to wait.

Businesses and entrepreneurs have found hundreds of sites, often at rates higher than those of the market, last summer after the Ontario government announced the creation of a private system sale of cannabis for recreational purposes. Industry observers were waiting at the opening of more than 1,000 stores during the first two years of the private market.

But this week's big cannabis store openings in Ontario promise to be disappointing. Citing supply shortages across the country, the provincial Conservative government opted for a so-called "phased-in" approach in mid-December, granting the right to randomly apply for only 25 lottery cannabis retail licenses. the next month.

The winners were for the first time business owners with no prior experience with retail or cannabis. Less than half will be ready to open on Monday.

The others are still waiting for a license, but many others are just waiting to apply. As was the case in Alberta, when regulators stopped issuing new store permits last November, contractors across Ontario are facing significant expenses and an uncertain timetable to start making money.

"I'm definitely off guard, I think everyone was caught off guard," said Tom Dyck, chief executive of mihi, who had secured more than 40 stores across the province to open a chain of stores recreational cannabis before the gradual transition to Ontario is approaching. "We had the team, we had guaranteed leases, we had the designed stores, the applications were completed and notarized, judicial checks were made. We were ready to submit applications for the 40 sites on December 17th. [so] it is sure that it was disappointing.

Armed with $ 25 million in financing, mostly from Toronto-based private equity firm BlackShire Capital, Dyck said Mr. Mihi continued to hold 41 leases in Ontario and would continue to do so "as long than necessary.

"We continue to transport them and will continue to carry them until licenses are available," he said. "Our intention is to keep these stores until they can be open and serve the communities in which they are located."

Others are in the same situation, although all those who wish to sell cannabis for recreational purposes in Ontario can not afford to wait for the province to keep its promise to return to an open licensing regime. . Ed Sonshine, CEO of RioCan Real Estate Investment Trust, told The Globe and Mail's Cannabis Professional press service in February that the business owner had signed 25 leases with 10 different companies before the announcement of the establishment progressive approach. "Far above" what RioCan hoped to achieve for these spaces.

These companies have until May 1 to decide whether they wish to abandon their leases, said Mr. Sonshine, or continue to pay rent on empty storefronts. "And I think we signed them for a five-year term. They must make a big decision, "he said.

Even the 25 winners of cannabis retail sweepstakes in Ontario have faced tremendous difficulties in sourcing their stores, staffing and licensing on April 1st. . Friday night. The opening of a single store is guaranteed throughout the city of Toronto.

Many of those who were able to get permission on time had to prepare themselves for multi-million dollar bids. Established retailers already selling legal cannabis in other parts of Canada have actively pursued partnerships with lottery winners, providing lucrative terms.

"It looked a lot like desperation," said Brandon Long, a 20-year-old tow truck driver and one of only five winners from eastern Ontario. "They were extremely desperate to meet a person who had won and they begged almost on the occasion."

He eventually signed a contract with Fire & Flower, based in Edmonton, to help open a store in downtown Kingston, one of many places previously secured by the company. However, as the AGCO rules explicitly prohibit lottery winners from selling their licenses or transferring control of their stores, this transaction ultimately resulted in delays.

"We had to change the structure of the agreement in terms of control exerted by Fire & Flower over the control I had. The AGCO has made every effort to ensure that I do not give Fire & Flower any room to run the store, "said Long. "When they asked us to change it, it was not that I did not think we could get away with it. It was no longer a fear. "

No other licenses will be issued until December 2019 at the earliest, the province said several times, although Dyck de mihi said he holds the government accountable for his repeated promise to eventually return to a system of open license.

"Our leases tend to be tied for an average of 10 years, [so] we are building a sustainable business, "he said. "That's not what we would have liked to see, it's unfortunate and I do not think that's what the government wanted it to happen, but we are where we are."