Applying for a Cannabis License for a Dispensary in Canada?
The legalization of the cultivation, distribution, and sale of recreational cannabis is going to be a multi-billion dollar market. Even the government’s Parliamentary Budget Officer (PBO) predicts that cannabis sales in 2018 will be 655,000 kilos. If retail pricing is just $10 per gram that means retail sales of Cannabis in 2018 will be $6,550,000,000. Other experts have suggested larger numbers than the traditionally conservative PBO. For example, Deloitte forecasts a cannabis market of $8.7 billion.
Cannabis can also be a highly profitable industry. If you’re growing cannabis legally as a Licensed Producer (LP) under the ACMPR or Cannabis Act, your cost of production, before depreciation, administration and selling expenses, is most likely somewhere around one dollar per gram. If you’re retailing that gram for $10, your gross margin is 90% and your gross profit is $9 for every gram you sell.
If you are a legal storefront retailer or dispensary, you will be buying cannabis products at wholesale prices and selling them at retail. Your revenues will depend on the size of your store, quality of your store, the location, and the quality of the merchandise. Mainstream retailers like Apple generate $5,500 per square foot, Tiffany & Company, $2,950, and Lululemon Athletica, $1,560. A good quality dispensary in a solid location should easily generate $1,500 to $2,000 per square foot; therefore, a typical 1,500-foot dispensary could earn over $2,000 000 per year with net profits of $300,000 to $500,000.
Sure, those revenue and income numbers look amazing and you want a piece of the action, right? If you want to grow cannabis commercially, you need to apply to Health Canada under the ACMPR or apply through Health Canada’s CTLS for a micro-cultivation license. For the ACMPR application, be prepared to spend $100,000 to $150,000 on your application, then a few million more to build your facility. As a micro-producer, you’re probably looking at around a quarter of those amounts. If you’re less patient than a grower needs to be, the retail side of the business may be a lot more interesting.
Even for a retail operation or dispensary, your province will most likely want you to apply for a license. Some provinces have already decided that only the public sector can sell cannabis, for instance, Quebec and New Brunswick, just to name a couple, where the black market will continue to flourish by providing the products that people actually want, sold by knowledgeable people. Other provinces will allow privately owned retail cannabis stores. Ontario’s new government switched from “government only” to “private retail” in August 2018.
It’s most likely you will have to apply for a license to operate a retail cannabis business since the various governments want to keep an overview of the industry. Some provinces are even asking for businesses to reply to their Requests for Proposal (RFP) so they can evaluate the applicants.
A business plan is an essential tool for anyone considering applying for a license to sell cannabis.
You need to know how much you’ll have to invest in a cannabis business and how much you should make in profits. You’ll also need to know the cash flow information…especially for the first couple of years, when you won’t be able to sell concentrates or edibles.In fact, Health Canada requires a business plan as part of its application process. If you’re responding to a RFP, you will undoubtedly need a business plan, so the province or municipality can see the relevant information in a familiar format.
A good business plan is not just a financial forecast with some words around it. A good business plan is designed to help the reader approve the proposal within the plan. There is a great deal of political sensitivity around cannabis, so a solid cannabis business plan should help to assure the reader by providing information that makes the political decision much easier.
We are expert business plan writers and we specialize in the cannabis industry. We’ve prepared over 40 business plans for license applicants and some of those businesses have already received their licenses. We are a Canadian firm, based in BC, so we really do understand the industry. Not just the financial and business aspects, but also the political ones, too. When you need help with a business plan, contact us or call +1 (800) 661-9842.