Buying or Selling a Cannabis Dispensary in Ontario

Buying or selling a cannabis retail store (otherwise known as a dispensary) in Ontario can be an exciting and rewarding affair. However, there are many aspects that you want to m make sure are taken care of before going ahead with a deal. Below I will share some tips for buyers and sellers of cannabis dispensaries, whether in Toronto, the Greater Toronto Area, or elsewhere in Ontario. It’s also important to be aware of the legal regulations surrounding cannabis in Ontario and Canada as a whole. For those considering future expansion, understanding how to export cannabis from Canada can be a game changer in maximizing your business potential. Ensuring compliance with local laws will not only facilitate a smoother transaction but also provide a solid foundation for success in this growing industry. It’s crucial for both buyers and sellers to understand the regulatory landscape surrounding cannabis retail. For buyers, ensuring that the current owner has obtained all necessary permits and licenses is essential; specifically, you must ensure that they have their ability to get dispensary licence in ontario. Additionally, prospective owners should conduct thorough due diligence to evaluate the business’s potential for growth and compliance with local laws.

Here are some tips for prospective purchasers / buyers of dispensaries:

Determine Your Store Location Search Area

As a buyer, you will want to ensure you determine the area in which you are looking to buy a dispensary. Are you looking across Ontario, or only in a particular city or cities? If your dispensary will be far from where you live, you will have to commute to it to oversee the store, or ensure you have hired one or more managers that can take effectively take care of the place. Confining your selection to one municipality can make decisions simpler, but it also means you are restricted in your odds of finding a strong locations. If you expand your search to the rest of Ontario you will have a greater opportunity to find a suitable location and more options to choose from that you can evaluate. Location is everything when it comes to a successful cannabis retail store.

Finding The Final Location

When you have decided on one or more final locations, it’s crucial you do a search to ensure you are not within 150m of a school, which isn’t permitted. As well you will want to check to see if you are closely to any existing operating cannabis retail stores. Particular attention should be paid to see if your prospective location will be close to existing stores. Two companies whose stores are known to charge below market rate for cannabis products is Canna Cabana and Value Buds. If your prospective cannabis retail store is close to one of these chains’ locations, dealing with them as competition can be fierce and difficult for an independent. Additionally, it’s important to understand local regulations and the b300 cannabis duty overview, as compliance can significantly impact your business operations. Familiarizing yourself with these guidelines will not only help in avoiding legal complications but also position your store advantageously within the marketplace. Consider reaching out to local cannabis associations for insights and support to navigate these challenges effectively.

Determining Sale Type (Asset vs Share Sale)

One big consideration, which may depend on the situation of the seller, is whether you are going to be purchasing 100% of the shares of the company that owns the retail store licence (this is called a “share sale”) or whether you will instead be buying the assets of the company such as the lease and the right to obtain a cannabis licence at the location (this is called an “asset sale”).

This is an important determination, because with a share sale you will generally not have to apply to the AGCO for the applicable authorizations (the Retail Operator Licence and the Retail Store Authorization) after completing the transaction as a purchaser. You will still have to provide disclosure about the new individuals or entities involved to the AGCO, but with a share sale you will not need to apply for a new set of licenses with the AGCO as you would need to if you were buying a dispensary through an asset sale.

Doing Your Due Diligence

When buying an Ontario cannabis retail store, you must do your due diligence. That means reviewing all relevant documentation. What are the sales and profit margin of the store. What’s the annualized sales? What’s the average basket size, and the rate of growth every month? Are sales growing, stagnating, or declining? Is the lease assignable to the new owner? All these matters must be taken into consideration.

Selling A Cannabis Dispensary or Thinking of Putting One On Sale?

Here are some tips for prospective sellers of dispensaries:

Determining Sale Type

As a seller you must determine if you’re going to structure the sale as an asset sale or a share sale. Earlier in the article we talk about the differences in the two. Essentially, if you have cannabis retail licences at other locations under the same corporation, you will likely be stuck with an asset sale – what you are selling to the third party is the assets of the deal, namely a lease assignment and permission to apply for licensing from that location. In contrast, a share sale allows you to transfer ownership of the entire corporation, including its licenses and operational capabilities, which may be more beneficial in certain situations. If your business is involved in multiple sectors, such as how to sell alcoholic beverages, understanding the implications of each type of sale becomes critical. Ultimately, seeking professional advice can help you navigate these complexities and optimize the transaction for both parties.

Drafting the Documentation

It’s always a good call to have a lawyer draft your sale documents. That way they can draft robust sale contractors that are tailored to your situation. Ideally both the seller and the buyer will have their own legal representations, but in certain situations the lawyer might represent both sides of a transaction.

Closing Thoughts For Buyers and Sellers

One last word I would like to share: The cannabis retail environment is highly competitive in Ontario. The truth is some existing stores are or will fail to stay in business, while on the other hand there are some stores consistently pulling in seven digits of sales per year. It is a tough but rewarding industry. As consumer preferences shift and regulations evolve, the market continues to present both challenges and opportunities for retailers. For many, the experience of enjoying cannabis has become a part of the lifestyle, such as smoking weed in a condo Ontario, which has created a diverse customer base. Adapting to these trends and understanding customer needs will be essential for retailers aiming to thrive in this dynamic environment. The differentiation between success and failure often comes down to effective marketing strategies and customer experience. For those looking to carve out their niche, understanding how to establish a cannabis farmgate store can be invaluable. With a well-executed plan and a focus on quality products, newcomers can thrive in this dynamic market.