Cannabis Dispensary License in Canada

Are Dispensaries Legal in Canada?

As of October 17, 2018, you can open up a legal cannabis dispensary.Canada has officially passed Bill C-45 (Cannabis Act), which allows for the cultivation and retail sales of cannabis for recreational purposes. The retail and distribution of recreational cannabis is within the provincial (not federal) jurisdictions; in other words, each province has a different framework for licensing retailers.

However, a business plan is an essential tool for anyone considering applying for a licence to sell cannabis. Sharp can help you provide Health Canada with a professional cannabis business plan that increases your chances of approval.

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:

It’s advisable that you upgrade the air conditioning or HVAC system to ensure the air circulating in the store is cleaned through a HEPA filter to reduce any odour from your products.
To protect your assets, you should run an ID check on all patrons to ensure that they are of legal age, which varies by province. 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.
Your staff will probably have to have taken an “official” course in cannabis retailing.
You will have to get approval and a business licence from the municipality, so a politically-aware business plan could be very useful.

How Profitable are Dispensaries?

Dispensaries can be a very profitable business. 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.

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.

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.

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 licence. 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.

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.

Where is Cannabis Legally Sold?

How you purchase legal cannabis depends on where you live. Here’s a breakdown of private, public (government) and online retail of recreational cannabis in Canadian Provinces:

British Columbia (BC), Newfoundland and Labrador (NL), Yukon (YT) and Nunavut (NU) will license private retailers in addition to launching some of their own provincial cannabis stores
Ontario (ON), Alberta (AB), Saskatchewan (SK) and Manitoba (MB) will not have any provincial government stores
Quebec (QC), New Brunswick (NB), Nova Scotia (NS), Prince Edward Island (PE), and the Northwest Territories (NT) control their own retail environment and follow a Crown Corporation model where the province owns both the distribution and the retail stores
Online sales of recreational cannabis are permitted across the country in all provinces and territories through private retailers except for Manitoba and Saskatchewan; they will have online sales by the provincial government

One month after the legalization of recreation cannabis, approximately 120 private, government and online dispensaries are legally operating across Canada.

Cities are the third tier of government behind the provincial governments and the federal government. It is the prerogative of the senior governments, i.e. provincial and federal if they choose to enforce the law in each city.

What’s the Legal Age to Purchase and Sell?

All Canadian provinces have set the minimum age at 19-years-old for purchasing recreational cannabis except for Quebec and Alberta where the minimum age is 18. Private retailers will be required to purchase all cannabis inventories from their provincial government distributor, which varies from province to province. Saskatchewan is the exception, which will allow for private companies to distribute cannabis to Saskatchewan retailers.

What Can You Sell?

The Cannabis Act was amended and will allow cannabis 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 dispensaries’ product lines.

Who Should Apply for a Cannabis Licence in Canada?

According the Government of Canada, you must apply for a cannabis licence under the Excise Act, 2001 if you are:

Cultivating (you grow cannabis products)
Producing (you produce cannabis products)
Packaging (you package cannabis products)

“Even if you have a Health Canada licence, you must apply for a CRA cannabis licence for both medical and non-medical (recreational) purposes. If you are packaging cannabis products, you must also register for the cannabis-stamping regime at the same time as licensing.” Your licence is not renewed automatically. if you wish to renew your cannabis licence, you are required to fill out Form L300, Cannabis Licence Application and submit it to your regional excise duty office at least 30 days before its expiration.

How to get a Dispensary Licence in Canada

Each province and territory operate independently for issuing a dispensary licence in Canada. Not only do they have a different framework for licensing retailers, they are also accountable for developing, implementing, maintaining and enforcing systems to manage the distribution and sale of cannabis.

The Cannabis Legalization and Regulation Branch (CLRB) is responsible for overseeing the licensing process.

BC: The British Columbia Liquor and Cannabis Regulation Branch (LCRB) issues private retail store licences following a detailed application process.

AB: The Alberta Gaming and Liquor Commission (AGLC) handles all retail cannabis applications.

SK: The Saskatchewan Liquor and Gaming Authority (SLGA) issues private retail store licences following a detailed application process.

MB: The Manitoba Liquor and Gaming Authority (LGA) issues all licences to an all-private retail market. Any municipality can prohibit a retail cannabis store from opening in their area.

ON: How to get a dispensary licence in Ontario involves a three-part licensing system for cannabis retail stores and their employees, which are issued by the OCRC following a detailed application process.

NL: The Newfoundland and Labrador Liquor Corporation (NLC) issues private retail store licences following a detailed application process.

YT & NU: In the Yukon, regulations and policies supporting the application process for private retailers are still under development. In Nunavut, the Nunavut Liquor Commission (NULC) has yet to finalize their process for the private retail market.

Applying for a Dispensary Cannabis Licence Requires a Business Plan

A business plan is an essential tool for anyone considering applying for a licence 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 can Help Increase Your Chances to Obtain a Dispensary Licence

At Sharp Business Plans, we understand the complexities and frustrations you can face with the application process. 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 licences. 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 or have any questions about obtaining a marijuana licence in Canada, contact us through our website or call +1 (800) 661-9842.