Earlier this week, Ontario and the Alcohol and Gaming Commission held it’s second round lottery for cannabis retail dispensaries. Below are some additional comments to an earlier post we shared in regards to the AGCO’s first round of the cannabis retail lottery.
The rules for the second round of retail cannabis lottery limited applicants compared to the first round of the lottery. For example, anyone already holding a license from the first round lottery is prohibited from applying including his or her affiliates.
The second round lottery further limited applicants. The applicants needed to be able to show that they had access to at least $250,000.00 in liquid funds or from a credit facility. Once an applicant wins the lottery, within 5 business days the applicant is required to submit their applications for a retailer operator license and its fee of $6000.00, application for retail store authorization and its fee of $4000.00. Further, applicants need to be able to prove they have rights to occupy retail space as of October 1, 2019 and have a $50,000.00 letter of credit provided from a bank.
Another limitation to the second round lottery was that anyone operating an illegal dispensary was barred from participating. However, in recent news there is some controversy as the C.A.F.E brand located at Harbord Street in Toronto was granted a license this past week after being deemed as an illegal dispensary and being shut down many times by Toronto Police and By-law officers. It is not clear at this time whether the same owners of that illegal dispensary were granted the license or a new applicant not affiliated with that dispensary was granted the license.
Some other developments in the news of the 42 winners of the second round is that 3 licenses were granted in the town of Innisfil, Ontario, two of which are apparently located 140 meters from each other.
Lessons have been learned though from the first round lottery and winners of the second lottery should be aware of them. For example, there are high capital investment and operating costs. For instance, your first order of 25kg of marijuana can cost you upwards of $1,000.000.00.
There are also some operational challenges that the winners of the first lottery experienced. For example, when it comes to ordering product from licensed producers, you must pay for it in advance and have the option of ordering product once a week. Many of the already operating dispensaries experienced issues with bar codes and scanning errors in the SKU’s. For example, the scanners had issues with reading the bar codes on the products.
Lastly, another important lesson learned from the first round lottery was in regards to the quality of the product. The problem is that there are no expiry dates on the product. The products only have a packaging date on them. Retailers ran into issues with the inability to sell the product because customers don’t trust the product to be fresh and the retailer has paid for it already in advance. It is important for future retailers and winners of the second lottery to consider and know how much product they should be ordering and how often, based on customer demands to ensure the product is fresh as possible for sale and minimize the risk of not being able to sell product that maybe considered too old from the consumer’s perspective.
If you or anyone you know is interested in investing in a retail cannabis store, becoming a partner of winners of the lottery or provide commercial retail leasing space to cannabis dispensaries contact Kesarwani Law Office to further discuss your rights and obligations.
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Please do not construe this article as legal advice.