Jan 11, 2019
WeedMD, Pita Pit strike joint venture to open pot shops across Canada
, BNN Bloomberg
Cannabis producer WeedMD Inc. (WMD.V) is partnering with Pita Pit Canada in a new joint venture aimed at developing a pot retail presence across the country, marking the latest move by a Canadian restaurant chain to enter the burgeoning cannabis industry.
The venture, dubbed Pioneer Cannabis Co. Inc., will look to open pot shops and assist entrepreneurs eager to open their own cannabis stores in provinces where privately-owned retail is allowed.
The company will leverage Pita Pit's three decades of retail and franchise experience as well as WeedMD's background in the cannabis industry to differentiate itself from already-established pot retailers, said Jordan Schwartz, the new venture's chief executive officer and a former managing director of Serruya Private Equity.
"Our objective is to be a competitive player in this marketplace as it grows," said Schwartz in a phone interview with BNN Bloomberg.
The partnership comes several months after another Canadian quick-service restaurant opted to enter the cannabis industry when Second Cup Ltd. signed an agreement with National Access Cannabis Corp. to convert some of its underperforming coffee stores to pot shops.
However, none of Pita Pit's 225-odd locations in Canada will be converted into pot stores, said Chris Fountain, the food chain’s chief executive officer.
"We’ve spent years learning and perfecting the skills we have in our businesses such as finding locations and hiring people," Fountain told BNN Bloomberg in a phone interview. "Quite frankly, it's probably a once-in-a-lifetime opportunity for something like this."
WeedMD will take a 9.9 per cent stake in most of Pioneer Cannabis stores to comply with various provincial ownership restrictions on licensed producers, said Keith Merker, chief executive officer of WeedMD, in a phone interview. The remaining ownership stake would be shared by Pita Pit and the store's franchisees.
Schwartz said Pioneer Cannabis will look to establish a foothold in several provinces including British Columbia, Alberta, Manitoba and Ontario, but aims to maintain a long-term view as provinces provide more licences to pot shops once supply normalizes.
"We believe that there's capacity here for the retail network that we're servicing to generate sales in the $30 million to $50 million range that shows profitability and demonstrates that there's a sustainable business here," Schwartz said.
However, the newly-minted company will take a wait-and-see approach in the coming months to develop Pioneer Cannabis-branded stores given how provinces across the country have pulled back in issuing licences for cannabis retail shops, Merker added.
"We work and live in an environment of great uncertainty in the cannabis world," said Merker. "What we've tried to develop is a flexible structure that can provide for that to exist in that world of uncertainty."
Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.
