How to Start a Cannabis Dispensary in Ontario?

Understanding The Cannabis Market in Ontario

The legal cannabis industry in Canada grew from C$154 million in January 2020 to $256 million in September 2020 which is a drastic increase of 66.36% in just eight months. Also, the number of cannabis retail stores opening in Ontario has increased by over 100 relative to 2019. Would you like to have a piece of this growing cannabis industry and earn good profits? If so, then this article is worth your while to read. In today’s article we take you through the process to help you enter the cannabis dispensary market in Ontario and not only that, but strategies to help you succeed. So without much further ado, let’s begin with the first step.

Research Your Target Market

Cannabis dispensaries are opening at an increased rate across Ontario with over 110 cannabis retail stores receiving authorizations to open from March 2019 to June 2020, making the competition in Ontario a lot tighter. Hype won’t sell your recreational cannabis products anymore which means you need a new approach and strategy to set you apart from your competitors. That strategy first starts with choosing your target market who are people that are willing and able to pay your asking prices based on the value you are able to provide. With this knowledge, you can also craft missile-accuracy marketing messages and it will help you identify which cannabis products to stock instead of carrying items that don’t move off the shelves. Another vital business-building component that knowing your target market will help you nail is choosing the appropriate marketing media. For example, millennials may prefer Instagram and video-based content for promotion. If you are a local dispensary in Ontario, you can leverage directories such as S7DAW to help drive traffic for you based on how near and popular your location is to what the user is searching for.

Important Questions Your Research Should Answer

There are specific questions that we suggest going through to help guide you in your research journey, this way you will know as much as possible about your ideal client. These questions pertain to the demographics and psychographics of your target customers which include:

• Who is your ideal customer?
  • This includes age, income, marital status, sex, and what car they drive.
• Why are they using cannabis?
  • Recreational vs. Medical use.
• Which cannabis products do they prefer and why?
  • Understand which strains and product types your audience prefers.
• What websites do your visitors often visit?
  • Social media channels.

A good place to start your research is talking to potential customers, visiting local stores, and performing an analysis on competitor websites through common SEO tools like Ahrefs, and SEMrush.

Study Your Competition

All cannabis dispensaries face competition, which is a good thing because it shows that demand is present in the area and it leaves room for you to craft a niche for yourself. An example of a niche is a dispensary that also provides bulk-delivery services. With increasing competition, it becomes difficult to compete on price and so you must understand your audience and competition to see what additional problems you can solve or how you can improve on an existing solution. Armed with knowledge of your competitors and audience, you’ll be able to accomplish important steps in starting and growing your pot business. With this knowledge:

• You’ll be able to strategically price your products base on quantity and value (A-AAAA)
• It will be easier to select the right products to sell such as edibles which are increasing in popularity.
• Leaves room for you to provide additional services such as delivery and pick-up.
• You’ll craft an unparalleled customer service by taking advantage of weaknesses of the competition.

Where to Find Your Competitors?

Your direct competitors are other cannabis retail stores in Ontario which means you can easily visit a few stores as a customer which will enable you to have first-hand experience of their customer service, how they’ve set up their store, and their product pricing. Importantly, you’ll be able to figure out how they’re advertising their business in the store. Another excellent source of competitor information is their websites. Here, you may find customer testimonials and complaints. In addition, you may decipher their online marketing strategies to identify appeals you could adopt.

The Cost of Opening a Cannabis Dispensary in Ontario

Canada has stringent requirements to legally sell cannabis products where you will need to apply for and get licenses that permit operating a cannabis dispensary.

Costs for Licenses

The first license is called the Retail Operator License (ROL) that gets issued to an individual which requires an initial investment of C$6,000 allowing you to apply for the ROL. Once you’ve applied for the ROL, you’ll be ready to submit an application for the Retail Store Authorization permit. For this application, the Alcohol and Gambling Commission of Ontario (AGCO) set an investment of C$4,000 to process your documentation. A third license you may need is called the Cannabis Retail Manager License and this costs C$750. You’ll learn more about these licenses below. So, getting these licenses may require you to part with nearly $11,000. Furthermore, you also need to register your business in Ontario for a minimal fee.

*Please keep in mind the prices you see here as updated as of 2020. These license prices may change year-after-year.

Costs for Buildings and Furnishings

To run a cannabis store you need to have a building to do business in. Although unlikely you will have the capital to build your retail store from the ground up, look for existing dispensaries that are for sale, or find a small space near high foot-traffic to ensure success. Obviously, there are other costs associated with this and the amount you will need depends on your store size and design. Other costs include furnishing, architectural improvements, a security system, initial stock, and employee salaries. Overall, the startup costs could be anywhere from $80,000 to $120,000 to run an efficient and scalable dispensary.

Funding Your Cannabis Retail Store Business

As you saw above, the cost for starting up a cannabis retail store could be steep. Unless you have massive savings or a relative loaded with cash, you may have to seek funding elsewhere through resources like your local bank, private lenders or investors. The key when applying for funding is providing ample evidence that your business is financially feasible. Funders don’t want to lose money, hence why they often require you to have a sound business plan. The best approach to seeking funding is to approach the process as if applying at a traditional institution like a bank. This is because these financiers have strict requirements. Besides an accurate business plan, ensure you have documentation and information like the following:

• Company registration documents.
• Bank account details.
• A clean credit history and a good credit record.
• Tax information (both for business and yourself).

Financiers such as traditional lending institutions, private equity firms, and private financing companies are among those you could approach for funds.

Licenses Required to Operate a Cannabis Dispensary

As mentioned previously to operate a legal cannabis retail store in Ontario you will need to have 3 licenses:

• Retail Operator License.
• Retail Store Authorization.
• Cannabis Retail Manager License.

The applications can be done online through the iAGCO portal. The first step is to create an account on the website, then start applying for the relevant license. If you’re starting from scratch, the first license to obtain is the ROL. The AGCO requires applicants to qualify for the ROL through an eligibility assessment set in the Cannabis License Act 2018. You need to furnish the legal name of your business, type of company, and its legal structure during the application. After filing for the application and paying the C$6,000 fee, you’ll be provided with the File Number. Using this number, you may go ahead and apply for the Retail Store Authorization. This permit is required for each store that you run. Importantly, prior to applying for the Retail Store Authorization, check with the local municipality to ensure your target store meets the zoning requirements. Finally, you may need to apply for the Cannabis Retail Manager License if someone other than the owner runs the store. Such a person manages compliance to regulations in the store, hires and manages staff, coordinates the sales of cannabis, or signs for purchases of cannabis.

Licenses Required to Operate a Cannabis Dispensary

Running a cannabis dispensary is a huge responsibility. With changing regulations and the need to strictly adhere to the current laws, you need to be on top of things. That’s why you need to have others on your side to help stay on top of your game. Besides hiring the manager, you may need to bring in other employees to help with tasks like customer service, inventory management, and security. But every employee you hire must have successfully completed the CannSell training program. This certification is available online in both English and French for C$64.99, plus the harmonized sales tax. Furthermore, you need to have a legal eye to help you stay up to date with the changing cannabis regulations. This is probably one of the best cannabis business-running decisions you can ever make. Other professional services necessary include accountants for preparation of financial statements. These tools provide a picture of what’s happening inside the business and also help forecast the short-term future of your dispensary.

Conclusion

In a nutshell, starting a thriving cannabis dispensary begins with targeting your ideal customer. Following this with spying on your competition helps to uniquely position your business to succeed. It can cost upwards of $100,000 to start a cannabis retail store which is why it is important to seek partners who can invest with you, or look for financiers to support this lucrative opportunity. Finally, build a strong team of trained employees and professionals like attorneys, accountants and an insurance agent to keep yourself from being sued. Taking these steps ensures that you minimize the stress that comes with starting a business. More importantly, you improve your chances of building a profitable cannabis retail store. The final thought to mention is if you are starting up a dispensary, chances are you won’t have such a high capital to invest into marketing right away. Leverage cannabis directories like S7DAW by creating a free account and let us help you with driving traffic to your local business listing.

Frequently Asked Questions

• Can I sell cannabis through an e-commerce platform if I have a Retail Store Authorization?
  • Only the Ontario Cannabis Store (OCS) is permitted to trade cannabis online.
• Who handles deliveries of cannabis orders from the OCS to private retail stores?
  • The Ontario Cannabis Retail Corporation (OCRC) transports cannabis products to retail stores.
• Am I allowed to sell medical cannabis to my customers?
  • You are allowed to sell only recreational cannabis as per your AGCO Retail Operator License and Retail Store Authorization Selling medical cannabis requires you to have a Sale for Medical Purposes license from Health Canada.

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