Ontario Cannabis Retail: What to Consider Before Getting Started

Thinking of opening a cannabis retail store in Ontario, but don’t know where to start? Here are some of the main considerations for your cannabis retail business to consider before you begin!

Familiarize Yourself with Relevant Legislation Around Cannabis Retail

To operate a successful cannabis retail business, it’s important that you are knowledgeable on the relevant provincial and municipal legislation around cannabis retail. By familiarizing yourself with legislation, you will gain an understanding of activities that are permitted and those that are not, as well as your responsibilities as a licence holder. It’s also important for you to gain an understanding of how the entire process from planning your business to store opening will go. Success comes with knowledge and compliance, so this is a great place to get things started.

The AGCO offers an excellent Cannabis Retail Regulation Guide online. Furthermore, the full text of Ontario Regulation 468/18 made under the Cannabis Licence Act, 2018 can be viewed on the Ontario government website.

Funding: Start-Up Costs and Ongoing Expenditures

Starting a cannabis retail business in Ontario is no small venture. Here are some of the various start-up costs and ongoing payables that are part of operating a cannabis retail business. Before jumping into the cannabis retail space, you should consider the options you have to keep up with payments.

Some start-up costs for you to consider, including (can add up to $200,000 +):

• AGCO licensing fees
• Rental / Mortgage payments
• Construction, renovation, and interior design to get your store ready for inspection
• Contractor fees
• Physical security devices and installation costs
• Initial inventory costs

Some ongoing costs for you to consider, including (can add up to $500,000+):

• AGCO licence renewals
• Rental / Mortgage payments
• Employee salaries
• Ongoing inventory costs
• Business insurance and banking fees
• Service providers and fees (e.g. Point-of-Sale (POS) system, record keeping, etc.)

While these costs can certainly add up, there are many funding options and strategies available to help kick start your cannabis retail business. Of course, the most ideal situation would be to self-fund the majority of the start-up costs. However, if you do not have enough on hand, you can also consider partnerships, loans, credit lenders or investors.

If you’re thinking of using loans, credit lenders or investors, you’ll need a well written business plan on hand. A good business plan is highly detailed and essential for your cannabis business to succeed. Not only will it help you plan out the lengthy process of establishing a cannabis business, it will also help you focus on the specific steps to reach your short- and long-term goals and objectives. You’ll also need a well written business plan if you’re looking to raise funds from investors and lenders. Investors and banks will only risk their time and money if they’re confident your business will be successful and profitable. A basic description of your business idea is not enough. Your business plan should be clear, easy to read, detailed and informative. It should cover strategies for achieving your objectives, as well as financial details like predicted profits and income streams and potential pitfalls in your plan. We strongly advise that you contact a professional to ensure your business plan is well written, structured and effective.

Retail Store Location

When it comes to choosing the right location for your store, it’s important to practice due diligence and do your research first! In Ontario, there are restrictions on where retail stores can be located, and not all municipalities even allow private stores to set up shop. You can use this link to check which municipalities have opted in/out to having private cannabis retail stores. Once you have identified a municipality you would like to work within, you’ll need to find a retail space where your business will be set up. The location you choose should ideally be positioned away from direct competitors. You can check the status of current cannabis retail store applications here so that you can select a store location away from such potential competition.

Also, you’ll need to ensure your proposed retail store location is NOT located within 150 meters of the property line of a school, or a private school as defined by the Education Act. If you’re unsure about a store location and it’s proximity to a school, the AGCO (along with the Experts at CLE) can help. The AGCO has created an exclusion map using third party school location data provided by the Ministry of Education, which might prevent submission of applications through iAGCO for locations that fall within 150 metres of a school. Keep in mind that online submissions of the application is not a guarantee or confirmation that the proposed location is compliant with the school proximity restriction. The proposed retail location must be in compliance with the school proximity requirement at the time the Retail Store Authorization (RSA) is issued as well.

Finally, it’s important to choose a retail store location in a supportive community. Selecting a retail space in an area surrounded by residential areas, or close to schools, parks, playgrounds and frequented by youth will likely lead to objections during the Public Notice stage of your Retail Store Authorization application – ultimately resulting in your application being rejected or refused. It’s vitally important to reach out to the residents, city councillors, and other businesses in the community before signing a lease or sales agreement, so you can be confident you’ve chosen an acceptable store location.

Corporate Structure, Team Members and Background Checks

Before starting the application process to secure the necessary retail licenses and authorizations, you should think about how you will register your business and set up the entity that will be applying for the necessary licences. An “entity” includes any corporation, partnership, limited partnership, sole proprietorship, trust, or other form of business association. Alternatively, if you already have another business entity set up, you can feel free to move forward without having to create a new one.

There are personal and entity disclosure requirements needed when applying for a Cannabis Retail Operator Licence (ROL), Retail Store Authorization, and Retail Manager Licence. The disclosures are part of the background checks (e.g. criminal, financial and other applicant/affiliate background considerations) which are necessary during the licensing process. The following individuals are required to complete a personal disclosure:

• An individual who is applying for a Retail Manager Licence.
• Any of the individuals associated with a Retail Operator that is applying for a licence or:
• A sole proprietor (in the case of an applicant that is a sole proprietor)
• A partner (in the case of an applicant that is a partnership)
• An officer or director of an applicant corporation and/or any parent or holding corporations
• A shareholder holding 10% or more of any shares of an applicant corporation
• A trustee and beneficiary of any trusts that hold any shares or interest in an applicant and/or its parent or holding corporations

Furthermore, entity disclosure information must be provided by all of the following:

• An entity that is applying for a:
• Cannabis Retail Operator Licence
• Cannabis Retail Store Authorization
• A corporate shareholder (including a parent or holding corporation) holding 10% or more of any shares of an applicant corporation
• An entity with an interest (as defined in the Cannabis Licence Act, 2018) in the applicant.

Entity disclosure is not required for corporations affiliated to an applicant unless requested by the Registrar. Entity/individual disclosure information must be provided by applicant corporations and by all corporations directly or indirectly holding 10% or more of shares.

When it comes to building your team, keep in mind that well-trained and qualified employees are key to a business running smoothly and efficiently. However, finding (and keeping) the right employees can certainly be a challenge. When conducting your search for Cannabis Retail Managers and retail store employees (sometimes called “budtenders”) make sure your potential new hires have the necessary education and previous work experience, and are adequately trained to fulfill their roles. Under Ontario law, all cannabis retail employees, managers and store authorization holders are required to successfully complete an AGCO Board approved cannabis retail employee training program (CannSell) prior to their first day of work in the store. Employees must be equipped with the knowledge necessary to perform their jobs efficiently and effectively. You should also hold regular training sessions for your long-term employees to reinforce job expectations, as well as whenever you introduce new products, procedures or responsibilities.

Opening for Business

After your cannabis retail store has secured all the necessary licences and authorizations and passed the necessary inspections (you can read more about this here), you’ll be ready for opening! Keep in mind, there are rules you must follow when operating your store.

You must:

• begin selling cannabis at your authorized store within one year of getting your Retail Store Authorization, and continue to sell cannabis.
• open only during permissible hours: between 9:00 a.m. and 11:00 p.m. on any day of the week.
• display the official cannabis retail seal. The seal must be placed where people can easily see it from outside the store entrance. The seal must be at least 17 centimetres wide and 20 centimetres long. You can choose to post the French version of the seal, or the English version, or both.
• remove the seal as soon as possible if your Retail Store Authorization is revoked or not renewed.
• post your Retail Store Authorization in the store in a place where people can easily see it.
• only sell cannabis that has been made by someone who is authorized under the Cannabis Act (Canada) to make cannabis for commercial purposes. Private retailers can only purchase cannabis from the Ontario Cannabis Store (OCS).
• keep records of specified information and activities.
• have measures in place to reduce the risk that your cannabis will be redirected to the illegal market or illegal activities.
• record all sales.
• make information about the responsible use of cannabis available to patrons.
• obtain criminal background checks from employees as part of the hiring process.
• ensure all licensed managers and other employees working in your store successfully complete the required Board approved training program (CannSell) prior to their first day of work at the store.
• request identification of anyone who looks under 25 years old, and be satisfied the person is at least 19 years of age prior to allowing them to enter the store.
• display your cannabis and accessories in a way that they cannot be seen by a young person, even from outside the store.

You must not:

• sell cannabis or cannabis accessories to anyone who is under 19 years old.
• allow anyone who looks under 25 years old to enter the store, unless you first request identification and are satisfied the person is at least 19 years of age.
• sell cannabis to anyone who is intoxicated or appears intoxicated.
• sell more than 30 grams of dried cannabis (or equivalent amount of another kind) to a person in a single visit.
• hire anyone who is under 19 years of age.
• sell cannabis or cannabis accessories from a display that allows self-service, or from a vending machine.

We hope this article has provided you with some information on how to get started with a cannabis retail business. For more information on things you need to know before you begin, visit the following site: https://www.agco.ca/things-know-you-begin

How we can help you

Cannabis License Experts is your solution to preparing, reviewing and submitting your cannabis retail licence application. We offer support from day one of starting your cannabis business, including strategic planning, floor plan preparation, site audits, SOPs and more.

Resources

https://www.agco.ca/cannabis/registrars-standards-cannabis-retail-stores

https://www.agco.ca/status-current-cannabis-retail-store-applications