OVERVIEW
CannDelta , in partnership with the Business of Cannabis, will be releasing a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”.
Throughout this series, you will hear from leading voices in the industry, including current and prospective retailers, along with a multitude of ancillary service providers such as realtors, interior designers, security integrators, financial institutions, insurance brokers, and lawyers. This will be your one-stop guide to getting started. We will be releasing a new article each Wednesday for the next 10 weeks, starting on July 8th. Once all 10 articles are published, we will be compiling the information into a first-of its-kind e-book which will be made available for FREE.
ARTICLE BREAKDOWN
A HISTORY LESSON
The Canadian federal legalization of cannabis in the Fall of 2018 had many canna-enthusiasts dreaming of opening up a legal dispensary, seeing it as a golden opportunity to start a lucrative business in an exciting new industry. Initial projections for the national cannabis market (medical and recreational) were as high as $4.3 billion dollars for the first year alone (2019). In Ontario, it seemed any citizen who could scrounge together some money was submitting an application into the initial cannabis retail lottery system and hopefully awaiting for their golden ticket to arrive.
And then, for most, reality sunk in.
The formidable monetary expectations and requirements for early prospective cannabis retailers turned many hopefuls away. How many people could actually provide a $50,000 letter of credit within seven days? Those first-era lottery winners in Ontario who were equipped to march forward had to endure many challenges on their way towards opening up a cannabis retail store. From unfair lease agreements to funding challenges to lack of community support and breaking and entering, they faced it all.
While new-era prospective retailers have their own set of challenges to overcome en route to becoming a licensed retailer (more on those later), we can, fortunately, lean on the experience of established retailers as a guide on how to get the ball rolling. In this article, we will teach you where to begin and what to expect when pursuing a cannabis retail licence.
GETTING STARTED
Whether you are a successful businessperson, a former legacy market operator, or someone with minimal relevant skills or experience, the first step is the same: do your research and make a plan . Like any worthwhile mission, it is imperative to be prepared before diving in headfirst, throwing around hard-earned cash without a clear goal in mind. There are many ways for you to begin the learning process, including understanding the licensing requirements, networking, talking with people who have done what you are trying to do, reading blogs and articles, tuning in to webinars, engaging in chat forums, and consulting with professionals (e.g., consultants, lawyers).
Some key questions and considerations for you to ask and research early on include:
- Why do I want to open a cannabis retail store in the first place?
- What is the licensing process to open a cannabis retail store in my province?
- What professionals and experts will I need to hire to help me?
- How much funding do I have currently, and how much will I need?
- Who will I partner with? Do I even need a partner?
- What type of company structure will I have (e.g., sole proprietor or corporation)?
- How do I register a company?
- Where should I open my store? Does that municipality permit cannabis retailers?
- What is a reasonable timeline for making this happen?
Doing your homework to answer these questions will give you a great start in understanding all that goes into opening a successful cannabis retail store. You’ll notice that questions like “What will I name my store?”, “How many employees will I need?”, “How much money will I make?” were not listed. While important, these questions are best left for when you have answered the fundamental questions that are most critical for getting your licence application submitted as soon as possible.
Article #2: Company structure, Financing, and Banking Options
In the first article of this series, you learned how to prepare for the long and exciting journey towards opening a cannabis retail store. In this article, we will teach you how to put those plans into action, by registering your company, securing funding, and opening up a bank account. You will hear from industry experts across the cannabis space, including existing Ontario retailers and executives from Trichome Financial, and Alterna Savings/Banking.
COMPANY STRUCTURE
Once you have made the (fantastic) decision to pursue opening a retail store, one of the next key steps is to register your business, which will be required as part of the licensing application. If you already have an existing business entity that you plan on using to open a cannabis retail store, then you are ahead of the game, but should nonetheless follow along to learn about cannabis retail-specific guidelines.
There are three common types of business entities to consider when registering your cannabis retail business: sole proprietorships, corporations, and partnerships. It is important to understand these entity types when picking the company structure that is right for you, particularly as it pertains to exposure to liability.
FUNDING OPTIONS
In the first article of this series, we covered the expected start-up and annual ongoing costs for opening and operating a cannabis retail store. These estimates were generated through market research, and in interviewing numerous cannabis retailers in Ontario. The projected start-up cost range is $250,000 to $1,4000,00, which includes licensing fees, real estate, construction and renovation, interior design, professional contractors, security installation, and the initial inventory purchase. The projected annual operational costs ranged between $1,600,000 to $8,600,000, which includes licensing renewals, real estate, staff salaries, inventory orders, insurance, professional contractors, banking, and service provider subscriptions.
BANKING OPTIONS
Much like credit lenders, many of the big banks are hesitant to work with cannabis entrepreneurs due to the infancy of the marketplace. This can present a major roadblock for prospective cannabis retailers in need of basic banking necessities such as payroll, checking, and credit accounts. The lack of banking options has even led to some retailers resorting to a cash-only business , which puts them at a significant risk of theft. Even when cannabis retailers can find a bank or credit union who will, they are often subject to major fees that do not necessarily apply to other business types. Nonetheless, there is an increasing number of banking options for cannabis retailers, prospective retailers should research all available options and understand the application requirements ahead of time.
Article #3: Navigating the Licensing Process
Two articles into the “So, you want to open a cannabis retail store?” series, you have learned how to create a plan, register your business, secure funding, and open a bank account. In this article, we will walk you through each step of the Ontario cannabis retail licensing process to help you prepare to submit a robust application.
KNOW YOUR REGULATING BODIES
On October 17, 2018, the Cannabis Act and Regulations made the sale of recreational cannabis legal throughout Canada. While the federal government handles industry-wide rules and regulations, each provincial and territorial government is responsible for enacting restrictions regarding the sale and distribution of cannabis for their regions. The licensing laws and requirements will, therefore, vary between provinces and territories across Canada.
For the purpose of this article series, we are focusing exclusively on Ontario cannabis retail, however much of the information contained within this article series can be translated to other provinces.
The Alcohol and Gaming Commission of Ontario (AGCO)
After a slow rollout of retail licenses during the controversial lottery era, Ontario has shifted to a progressive open market for private cannabis retail. In December 2019, the Alcohol and Gaming Commission of Ontario ( AGCO ) put an end to the lottery system and removed the cap on the number of cannabis retail licenses for the province.
The open market era in Ontario began in two phases: (1) on January 6 th, 2020, applicants could apply for a Retail Operator Licence (ROL), which focuses on the tax, financial, and criminal history of individuals and businesses; and (2) on March 2 nd , 2020, applicants could apply for a Retail Store Authorization (RSA), which focuses on the store itself, including organizational and physical security plans, and municipality approval.
The AGCO is responsible for issuing cannabis retail store licenses and regulating the activities of licensed operators. Private retailers are only permitted to sell cannabis products and accessories approved and obtained by the Ontario Cannabis Store (OCS), which operates Ontario’s only legal recreational online cannabis store.
Licensees are required to comply with the Registrar’s Standards for Cannabis Retail Stores (known herein as the Registrar’s Standards), as well as all applicable laws and regulations, including the Cannabis Control Act, 2017 (CCA), the Cannabis Licence Act , 2018, and ON Regulation 468/18.
The Registrar’s Standards stipulate licensee requirements in the following key areas:
- Store premises, equipment and facilities, including surveillance and security
- The prevention of unlawful activities
- Advertising and promotional activities
- Employee training and the responsible sale of cannabis products
- The protection of assets and the prevention of diversion of cannabis
- Record-keeping and measures to maintain confidentiality and security of records
- Compliance with the federal cannabis tracking system
During the licensing application process, the AGCO eligibility and compliance officers will be looking to see that your retail store has been designed so as to be compliant with all federal and provincial regulations. Once opened, the AGCO will periodically visit your store to conduct inspections to ensure that you are operating within the confines of the Registrar’s Standards. The strict and ever-evolving regulatory requirements can be challenging to keep up with, which is why it is important to retain the services of regulatory experts and to have staff managers dedicated to ensuring retail operations are executed in a compliant fashion.
Article #4: Where to Set Up Shop
OVERVIEW
British real estate tycoon Lord Harold Samuel coined the phrase “location, location, location”, which is the best piece of advice to follow when considering where to position your cannabis retail store. The location of your store will have major implications on nearly every aspect of your operation, from customer demographics and accessibility to pricing strategy and revenue. Finding the right location becomes even more of a challenge when considering Ontario private cannabis retail regulations, which place restrictions on where retail stores can be located (spoiler alert: not all municipalities in Ontario allow private retailers, looking at you Mississauga!).
In this article, we will teach you how to find a great retail store location that suits your desired goals, is within a compliant region, and is strategically positioned away from competitors. You will hear from current retailers and commercial real estate agents, who have offered up tips and tricks for finding a great location and negotiating favorable leasing terms.
For the purpose of this article series, we are focusing exclusively on Ontario cannabis retail, however much of the information contained within this article series can be translated to other provinces.
WHERE TO GO?
Deciding where to set-up shop will primarily depend on the region you live in, municipal zoning (more on that later), and the position of existing and prospective retailers within that region. While it is ideal to have your retail store in close proximity to your place of residence, this may not always be the best option (or possible). In this section, we discuss strategies and key considerations for finding a great location.
Article #5: Interior Design and Marketing
OVERVIEW
The key to success for cannabis retail stores – whether you’re just setting up shop or you’ve been in business for some time now – is converting casual customers into loyal customers who will be champions for your brand. The design of your store will go a long way towards this goal, and while it may seem daunting, focusing on key concepts with your target customer demographic in mind will go a long way. Like most things in the cannabis industry, cultivating a unique customer experience through branding and marketing can be a challenge but, if done right, will put you ahead of the pack.
In this article, we will explore how to create a store design that is both inviting and consistently intriguing to create a strategic and successful brand, separating you from the competitors. You will hear from licensed retailers across Ontario who have offered up tips to help you design a great store.
DESIGN
Now that you have set up shop in a prime location, the interior/exterior design can attract consumers who are either well-versed or new to legal cannabis in Canada. Unlike traditional retail stores, a cannabis dispensary holds a unique position in being a source for cannabis products and a resource to help navigate cannabis regulations. A successfully designed dispensary will help bring your brand to life. Being intentional with the physical environment and focus of creating an ambiance for your target customer demographic will differentiate yourself from other retailers. As a new cannabis retail store owner, you want every customer who enters to not only make a purchase but to also be inclined to return the next time. Strategic merchandise selection and placement, along with the creative integration of digital and physical experiences will go a long way towards achieving this goal.
The store should reinforce your brand experience through immersive design, starting with the storefront, the signage, and storefront display. Your store ambiance, carefully crafted using lighting, colour, and material helps create a memorable feeling for customers. Each variable needs to be carefully optimized based on your vision for your store. It is important to remember that it is okay if don’t nail this at first, but you should be continuously assessing customer feedback to inform positive changes to your design.
Article #6: Protecting your Retail Store
OVERVIEW
Protecting the customers, employees, and assets of your retail store is the most important job of retail store owners and managers. From a physical security standpoint, this means equipping the retail store will all the necessary features to ensure that you can adequately prevent and react to any threats against your store and the individuals within it. In this article, we teach you how to design a robust security system that will ensure your retail store is secure, on the right side of compliance, all without breaking the bank. You will hear from leading security experts across the Canadian cannabis industry, who have offered up tips for developing your physical security plans.
PROVINCIAL REGULATIONS
One of the foremost goals of cannabis regulations is to prevent the diversion of cannabis products into the hands of youth and the illicit market. Accordingly, federal and provincial regulations were designed to ensure that companies dealing with the production, handling, and distribution of cannabis products are equipped with a sufficient level of security features to prevent theft or the misplacement of products. Each provincial government has established its own set of requirements for the level of security needed for recreational cannabis stores, which should be reviewed extensively prior to initiating the development of your security program.
For the purposes of this article, we cover the requirements for Ontario retail stores as described by the Alcohol and Gaming Commission of Ontario (AGCO) Registrar’s Standards for Cannabis Retail Stores, however much of this information can be applied to other provinces.
Article #7: Insuring your Retail Store
- What you need to know about SOPs, and why they are so important for your retail store
Article #8: Becoming a Great Employer
- What you need to know about hiring and retaining top talent for your cannabis retail store
Article #9: Standard Operating Procedures
- What you need to know about making your initial and ongoing inventory selections
Article #10: Sales and Inventory Operations
- What you need to know about establishing an efficient and profitable sales operation
PUBLISHING TIMELINE
- Article #1 — July 8th
- Article #2 — July 15th
- Article #3 — July 22nd
- Article #4 — July 29th
- Article #5 — August 5th
- Article #6 — August 12th
- Article #7 — August 19th
- Article #8 — August 26th
- Article #9 — September 2nd
- Article #10 — September 9th
For questions regarding the articles, please contact:
Lucas C. McCann, Ph.D.
CSO & Co-Founder
CannDelta Inc.
info@canndelta.com
p: (416) 613-8569