AGCO announces 2nd lottery with First Nations allotment

UPDATE:  The AGCO increased the allotment to allow for all 26 stores to move through the application process.  If all are approved there will be more stores on reserves than off reserves (only 24 as of right now).

Today we heard from the Alcohol and Gaming Commission of Ontario that there will be another lottery in Ontario to open more cannabis stores.  Stores like ours who meet the qualifications will apply on August 7-9, 2019 with the draw happening August 20, 2019.  The qualifications for stores remain the same, but the lottery itself will be a little different.

Here are some important takeaways:

50 more stores will begin to open in October

The AGCO has said that they will begin licensing 50 more stores.  8 will be allocated to reserves and the other 42 will be on non-reserve land.  The draw will be allocated as follows:

  • East Region (our region): 7 stores
  • GTA Region: 6 stores
  • Toronto Region: 13 stores
  • West Region: 11 stores
  • North Region: One store in each of the following cities: Kenora, North Bay, Sault Ste. Marie, Thunder Bay and Timmins

This means, smaller communities will be able to participate.  In the previous lottery, towns with populations under 50,000 people would not be allowed to participate (even if the town had opted in).  

Indigenous opportunity is limited

8 of the licenses will be allocated to stores on Indigenous land on a first come, first served basis instead of a lottery.  Dispensaries on Indigenous Reserves are already not participating in the law.  While I appreciate this is an attempt to include them separately, I can't imagine why they would all of a sudden want to participate, when the whole premise of their existence is that they operate outside of Ontarian and Canadian law.  Additionally, any store that remained open and selling cannabis products after October 17, 2018 is already disqualified from ever becoming a legal store.  This precludes all existing dispensaries on reserves.  I would contend this is less about giving an opportunity to Indigenous people and more about controlling the existing stores.  This is a mechanism to justify shutting down the existing dispensaries that will remain unlicensed.

The barrier of entry is very high $$$

In addition to the $6000 Retail Operator License, the $4000 Retail Store Authorization Fee, and the $50,000 letter of credit each store must also obtain a Letter of Confirmation from their banks which shows the applicants are in good standing and have access to $250,000 in cash or liquid assets.  This will strongly impact who is able to apply.  In the last round you only needed to have good credit.  Now you need to have good credit and cash (or stocks, etc.) in the bank.  This will automatically preclude most mom and pop shops from being able to apply this round.  Most store owners, even the established ones, will not have access to this type of cash.

The lottery favours existing store owners with locations ready to go

In the previous lottery there was no requirement for leased space at all.  This time around a lease must be in place at the time of application.  The space must be ready by October 1, 2019.  This will help weed out people who do not have a space ready.  It took us about 4 weeks to finalize our lease in our current space and we closed aggressively.  If people want to apply they should start looking for space now.  In the last round we saw a surprising number of real estate agents and companies applying in the lottery, why?  Because they had access to retail space already.  We will probably see this trend continue.

Existing stores and their affiliates cannot apply

No current selected or waitlisted winners or their affiliates may apply. This means a whole new batch of applicants will be putting their names in the hat.  Will we see more Spiritleaf or Fire & Flower deals with lottery winners?  Maybe, but what would be the point?  Applicants must show they have access to funds and a space, so they don't really need the financial backing these companies would provide.  We certainly wouldn't make a deal.

Will Calyx + Trichomes apply in August?  We sure will.  Cross your fingers and toes for us--our hopes and dreams are literally resting on a lottery (yikes).

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