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The large openings of cannabis stores in Ontario promise a little too little



Business owner Brandon Long shows a bong at Fire and Flower, a Cannasbis store in downtown Kingston, Ontario. Fire and Flower is one of 25 approved retail cannabis stores in the province, due to open in April.

JOHNNY C.Y. LAM / The Globe and Mail

Part of cannabis and small shops and retail

Ontario opens its first handful of legal cannabis stores on Monday. Many more will remain closed and high lease payments for emerging retailers still hoping for access to the country's largest consumer market.

It is not clear how long they have to wait.

Businesses and contractors moved hundreds of them to sites, often for above-average interest rates, last summer after the Ontario government announced a private system for the sale of recreational cannabis. Industry observers expected more than 1,000 stores to open in the first two years of the private market.

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But the major openings of cannabis stores in Ontario this week promise a repressive effect. Relying on nationwide supply shortages, the conservative government of the province moved to a "step-by-step" approach in mid-December, granting the right to randomly apply for 25 cannabis retail licenses by lottery the following month.

The winners were mostly first-time entrepreneurs with no previous trading or cannabis experience. Less than half will be open on Monday.

The others are still waiting for a license, but many others are just waiting for a chance to apply. Similar to Alberta, when regulators stopped issuing new branch licenses last November, entrepreneurs across Ontario faced high costs and no clear timetable as to when they could earn revenue.

"I was definitely caught guard, I think everyone was taken by surprise," said Tom Dyck, chief executive of mihi, who had secured over 40 locations in the province to open a chain of recreational cannabis stores, before Ontario took a step-by-step approach. "We had the team, we had secured the leases, we had designed the shops, the applications were completed and certified, checked by a criminal investigation. We were ready to submit applications for all 40 sites on December 17 [so]. This was certainly disappointing. "

With funds totaling $ 25 million, mainly from Toronto-based private equity firm BlackShire Capital, Dyck said Dyck holds a total of 41 leases across Ontario and will continue to do so as long as it does lasts.

"We will continue to run them and continue to run them until the licensing process opens," he said. "We intend to hold these businesses until they can be opened and serve the communities in which they are located."

Others are in the same position, although not everyone who wants to sell recreational cannabis in Ontario can afford to wait for the province, they keep their promise to return to an open licensing system. Ed Sonshine, CEO of RioCan Real Estate Investment Trust, said in February, the Cannabis Professional news service from The Globe and Mail that the commercial landlord had signed 25 leases with 10 different companies before the phased approach was announced, and most agreed Payment of rental payments to "Far Above" what RioCan had hoped for these rooms.

These companies have until May 1 to decide if they want to give up their leases, Mr. Sonshine said or continues to pay rent blank storefronts. "And I think we signed them for five years, so they have a big decision to make," he said.

Even the 25 cannabis retailers in Los Angeles had tremendous challenges when their stores were filled, staffed, and licensed on time for April 1. More than half of them are still on Friday evening at various stages of the licensing process of the Alcohol and Gaming Commission of Ontario (AGCO). It is guaranteed that only one store will be opened throughout the city of Toronto.

Among those who obtained approval on time, many had to make their preparations while fending off millions of dollars worth of bids. Established retailers that are already legally selling cannabis in other parts of Canada are seeking active partnerships with lottery winners and offer very lucrative terms.

"There seemed to be a lot of desperation," said Brandon Long, a 20-year-old tow truck driver who was among the top five winners in Eastern Ontario. "They were very desperate to meet a person who had won and they almost begged for the opportunity."

He signed a contract with Fire & Flower, Edmonton, to help him set up a business in downtown Kingston. The company had already secured preventative backing from several locations. Since the AGCO rules expressly prohibit lottery winners from selling their licenses or giving them control of their store, this has led to delays.

"We had to change the structure of the business in terms of controlling Fire & Flower against the control I had. The AGCO has been great at making sure I do not get Fire & Flower full control of the store, "Mr. Long said. "When they asked us to change it, I did not think we could do it. It was more of a scare. "

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No further licenses will be issued until December 2019, at the earliest, the province said repeatedly, though Mr. Dyck, Mr. Mick, holds the government for her oft-repeated promise, eventually becoming one

"Our leases are usually tied to 10 years, [so] we're building a business that will last," he said. That would not be what we'd rather have seen, it's unfortunate and me Do not think the government wanted it, but we are where we are. "


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