Aug 24, 2020
'It's very frustrating': Ontario pot shop hopefuls fume at licence lag
Ontario pot shop owners upset by licence delays
After spending nearly $400,000 to build and prepare a new cannabis store in Brampton, Ont., Mirna Diab doesn't know if she and her family can wait until next August to get the paperwork needed to open its doors.
"Put yourself in our situation," Diab, who led all construction and development of their HiBuzz cannabis store while her husband Charbel handles administrative duties, told BNN Bloomberg in a phone interview. "My husband can't sleep at night and we've spent our life's savings. Now that we've spent everything we have, [the provincial regulator] told us we need to be on the waiting list for almost a year. It's very frustrating."
The Diabs’ tale mirrors the experiences of some other cannabis store applicants, waiting for months for the Alcohol and Gaming Commission of Ontario (AGCO), the province's retail regulator, to authorize their pot store licences. Applicants are paying thousands of dollars in rent for unopened stores while some complain that a lack of communication and transparency from the AGCO has hampered their efforts to take part in the lucrative industry.
Diab said that after submitting an application for a store licence shortly after midnight on March 2, the first day anyone in the province could apply, she and her husband have spent $300,000 on construction, paid the store's lease for the next year in advance, and have placed another $65,000 deposit on a potential second store's lease. In addition to mortgaging their home, they've also taken loans from family to help complete the store's buildout, she said.
"I'm shocked at what the government has been doing," Diab said. "You'd think the government would want to help their people but I don't see that. They should put themselves in our shoes because it only looks like rich people can be part of this industry."
With over 900 pot store applications waiting to be processed by the AGCO, only five licences are being issued each week, a pace that would take nearly two years to open a cannabis store if an application was submitted today.
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Farrell Miller, chief compliance officer at Erbn Green, a cannabis retailer with stores planned in Toronto and Picton, Ont., estimates that there's about 120 applications ahead of hers, which would peg her opening date sometime in January.
"It feels like you're a racehorse chomping at the bit but stuck in no man's land," Miller told BNN Bloomberg in a phone interview. "It's been tough to not go full steam ahead and see the light at the end of the tunnel, which is when we can open our doors and generate some revenue."
For Canada's cannabis industry, Ontario represents an important market that is hard to ignore. The country's most populous province has about 130 licensed cannabis stores but is still short of the 1,500-odd outlets that many pot producers are pinning their hopes on to help bolster their flagging bottom lines.
Legal pot sales in the province hit $48.9 million in June, the most in the country, according to Statistics Canada. Those figures represent a nearly-19-per-cent bump from the prior month
However, Ontario's foray into the legal cannabis industry has been rife with delays and frequent stumbles. The province held a lottery to award an initial 25 store licences in early 2019, while a second lottery took place several months afterward, aiming to open 75 outlets by the end of the year. Some of those stores were delayed by court rulings last September after several disqualified applicants sought to be reinstated in the application process.
Potential store owners are also blind to nearby competition when submitting their applications, some applicants said.
Vish Joshi, chief executive officer of ForeverBuds, said he applied for his store to be located along Toronto's College St., only to discover weeks later that he was surrounded by six potential competitors within a one-kilometre radius.
"I thought I was the only one on the block," Joshi told BNN Bloomberg in a phone interview, adding that he's paying about $8,000 per month for rent and staffing costs for his store that could open sometime next spring.
Other retailers told BNN Bloomberg that their monthly expenses range as high as $25,000 to ensure they qualify for a licence when the AGCO completes its final store inspections.
For its part, the AGCO said it hasn't yet been directed to issue more than the five licences per week that the government legislated last year.
"Per the government’s direction, since April 2020 the AGCO has been issuing store authorizations at a rate of approximately 20 per month. We cannot speculate on any future changes," Ray Kahnert, senior communications advisor for the AGCO, said in an email to BNN Bloomberg.
"The AGCO remains committed to working with our government partners on opportunities to increase the number of [retail store authorizations] that can be issued each month."
Analysts expect the authorization limit to be increased soon as the province completes construction on a second distribution warehouse. BMO Capital Markets analyst Tamy Chen said in a report last month that the second warehouse would be open in September which would help ease supply chain challenges in the province.
Matt Maurer, partner and cannabis law specialist at Torkin Manes LLP, said that he expects the AGCO to double the number of licences it issues shortly, but cautions that it might be too late for some prospective cannabis retailers.
"We know some people who, when they learned how long it would take to get licensed, decided to withdraw their application and get out of the industry altogether," Maurer told BNN Bloomberg in a phone interview. "For anyone that has been able to hang in, any increase in licence granting capacity will be a welcome change."
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