Are Dispensaries Legal?
As of Summer 2018, according to Canadian law, it is definitely illegal to sell cannabis or cannabis products from a storefront. The only 100% legal way to purchase marijuana is to obtain a doctor’s authorization, and then purchase it directly by mail order or online from one of the Licensed Producers (LPs) approved by Health Canada. However, there have been a number of court cases where judges have ruled that the current system is too restrictive for medical patients. In particular, the 2016 Allard case (Allard vs. Canada) determined that there were too many restrictions regarding access to medical cannabis. Many (perhaps most) dispensary owners feel that they will be able to fight a shutdown order or criminal charges and win.
There are probably hundreds of dispensaries across Canada (although only 69 according to Health Canada), including Toronto and Vancouver and many smaller cities. In Vancouver, as well as other cities, the city has decided that it’s better to license the good operators, subject to location, rather than fight them. Regardless of what the cities say and do, cities are only the third tier of government; they’re behind the provincial governments and the federal government. It is the prerogative of the senior governments, i.e. provincial and federal if they chose to enforce the law in each city.
What will be legal, and where?
By March 2018, every province had revealed its cannabis retailing plans and some have started the licensing process. There may be licensing limits, so the early bird may be rewarded.
Government stores: Ontario – ON (With Doug Ford’s election, this may change), Quebec – QC, New Brunswick – NB, Nova Scotia – NS, Prince Edward Island – PE, Yukon – YK, Northwest Territories – NT. Yes, darned near all of Eastern Canada: ON, QC, NB, NS, PEI, YK, NWT
Private Retailers: British Columbia – BC, Alberta – AB, Saskatchewan – SK, Manitoba – MB, Newfoundland & Labrador – NL, Nunavut – NU . You got it…all of Western Canada plus a couple of outliers.
Public (Government) & Private: BC, NL, NU
Private Online Sales: SK, MB. Both must have retail license.
How do Dispensaries Operate?
Dispensaries operate much like any other retail business that carries any high-value merchandise; however, there are some specific factors, which include the following:
- You should probably upgrade the air conditioning or HVAC system to ensure that the air circulating in the store is cleaned through a HEPA filter to reduce any odour from your products.
- To protect your ass(ets), you should run an ID check on all patrons to ensure that they are of legal age. According to Bill C-45 aka the Cannabis Act, the federal age limit is 18; however, the legal age will vary by province. Check your province’s regulations. Some provinces have decided that they do not want any dispensaries; however, you may wish to obtain legal advice about the Allard case and other case laws involving cannabis.
- A good point-of-sale (POS) system may not only be useful, it may be mandatory so that you can track what each customer purchases. A POS will definitely help you market to your existing customers and may be essential if the manufacturer or producer has to issue a product recall.
What do You Sell?
The Cannabis Act was amended and will allow edibles and concentrates to be consumed by adults within 12 months of the October 2018 cannabis legalization. At the very least, you would be selling the types of products that are currently (Summer 2018) produced by Licensed Producers including the following:
- Dried cannabis (bud) and dilute cannabis oils. The maximum legal strength of cannabis oil in Canada is 30 mg. of THC per ml. Compare this with high-quality hash oil for instance, where the hash oil contains 90% THC. One gram of this hash oil would contain 900 mg. of THC, equivalent to 30 times the THC in one ml. of the legal cannabis oil.
- Not currently legal – Cannabis concentrates such as shatter, wax, and hash oil are big sellers in most dispensaries. The current legally available cannabis oils are too diluted to be smoked or vaped. Smokers, dabbers and vapers need a more concentrated product.
- Not currently legal – Edibles are hugely popular with people that don’t want to smoke or vape cannabis. Cannabis cookies, brownies, etc., enable people to consume cannabis without having to inhale it.
- Pre-rolled cannabis cigarettes/joints are becoming a big seller in the US market and in dispensaries in Canada. They are not only very convenient for the consumer, but can be very profitable if the dispensary makes its own pre-rolls using an inexpensive rolling/filling machine.
- CBD versions may be legal – Cannabis creams (topicals) and bath bombs are another big seller. Many people use topicals to relive localized pain, especially arthritis and joint pain.
- Vaporizers, dabbing rigs, bongs and rolling papers are certainly important. These accessories are part of the cannabis culture and are an integral part of most dispensary’s product lines.
Profitability of Dispensaries
Dispensaries can be a very profitable business. Depending on the quality of the dispensary, the initial investment could be as low as $50,000 plus inventory. Realistically, in a good retail area, you might invest around $200,000 in leasehold improvements, security systems, and display cases, etc. You would still need inventory and working capital, but a mid-range dispensary leasing about 1,500 square feet in a good retail area could easily expect to gross $150,000 to $200,000 a month and net 10% to 20% of those revenues, based on the results of US cannabis retailers.
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