B.C. government restrictions have retail-cannabis entrepreneurs scrambling

Entrepreneurs who want to own private cannabis stores in B.C. are rethinking business plans after the B.C. government’s July announcement that it will not allow any company or individual to own more than eight stores.

The government defines an owner as being an entity that controls 20% of a retail operation.

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The Ministry of Attorney General would not clarify whether an individual or company could own 19% stakes in multiple cannabis retailers that each operate eight stores, and it told Business in Vancouver in an email that it would be up to the Liquor and Cannabis Regulation Branch (LCRB) general manager.

“The general manager of the LCRB has discretion to decide where influence may be,” the ministry said in its email.

“The LCRB will only provide an assessment on an application that has been submitted, and only discuss that assessment to the applicant.”

The ministry’s reluctance to provide clarity on whether individuals or companies can have multiple minority stakes in cannabis retail companies is creating confusion, say those who want to invest in the sector.

“We are disappointed, certainly frustrated,” with the eight-store ownership limit, National Access Cannabis (NAC) CEO Mark Goliger told BIV on August 2.

Goliger had wanted to open 20 cannabis stores in B.C. by the end of 2018, telling BIV earlier this year that about five of those locations would likely be located in former Second Cup cafés, as part of an arrangement with that coffee chain.

“[The B.C. government] has put us into a hard spot where we now have to decide what we do next. I can’t get into our strategy of what we do next as we’re still trying to understand better what they are going to allow,” he said on August 2.

“We had plans to have majority shareholdings in more than eight locations and, obviously, have been trying to pursue that through redevelopment and partnerships with First Nations.”

He said that if multiple minority stakes in cannabis retail ventures are allowed, that is an ownership strategy that NAC would consider.

His company still plans to open dozens of stores across the rest of Western Canada, as Alberta, Saskatchewan and Manitoba will also allow privately owned cannabis stores.

“We’re hiring hundreds of workers across Western Canada,” he said. “It’s going to be difficult [but] for many people, cannabis is something that they are passionate about. I feel that this will make it different from the challenge of hiring people for the average restaurant job or service job.”

There are other companies that, like NAC, never operated illegal street-front dispensaries but want to get into the legal cannabis retail trade in B.C.

Alberta’s Alcanna Inc. (TSX:CLIQ), which had been planning a rollout of an unspecified number of stores in B.C., and Vancouver’s Jak Group, which operates 14 liquor stores across the province, are two of them. Alcanna, on August 8, announced that its retail stores will be branded Aurora, thanks to an agreement with Aurora Cannabis.

“It’s going to be a very fluid situation,” Jak Group CFO Mike McKee told BIV.

“I understand the government’s concern. They don’t want to see a private monopoly in the industry so it does make some sense to limit, at the outset, the number of stores that people can have.”

He said the government may in time relax its limit on the number of stores that a retail-cannabis chain can operate.

“We’re going to continue finding eight locations,” McKee said. “That will be a lot of work in the first place, so if I’m struggling to get store No. 9 sometime in the middle of next year, that will be a good problem to have.”

McKee’s company has secured five locations, including three in Metro Vancouver. It still needs to get provincial and municipal approval before the stores can open.

The B.C. government on August 10 started accepting applications from entrepreneurs who want to operate cannabis retail stores. It also announced on August 10 that it will implement a 15% mark-up on cannabis prices and that this is in addition to many other taxes.

Glen Korstrom / Business In Vancouver 

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