London cannabis company exec says he'll help pot licence lottery winners franchise
Indiva drew up its own pot retail plans before provincial policy changes forced it to shift priorities
An executive with a London, Ont.-based cannabis company says he's ready to help any of the lucky winners of Friday's lottery by the province for 25 private pot retail licences with a franchise plan.
We can offer a nice solution for a lottery winner with a very tight timeline.- Koby Smutylo
The Alcohol and Gaming Commission of Ontario began to accept expressions of interest on its website at 12:01 a.m. Monday and will be taking submissions until noon on Wednesday.
The draw for 25 licences will take place on Friday, with the results expected to be published by the AGCO within 24 hours.
The lottery will be conducted using software that has been independently verified by accounting and auditing firm KPMG and a gambling research lab in the United States.
With thousands of expressions of interest expected and only 25 licences available, Koby Smutylo, an executive with London-based marijuana producer Indiva said Monday he wants to make the already developed "Ouid" brand retail concept available to any of the winner's of Friday's lottery through a company called RetailGo Inc.
Smutylo is Indiva's chief operating officer and general legal counsel. He is also the President of RetailGo, a company that describes itself as "a modern operator of cannabis shops."
'We have a turn key store'
"We have a turn key store," Smutylo said. "Not just in London but in other locations and we've done quite a bit of analysis about the viability about the locations that we've secured."
Smutylo said Indiva, which is a federally-licenced cannabis producer, provided some of the initial financing to RetailGo and is a minority shareholder, owning less than 9.9 per cent of the store as required by provincial regulations.
He added that neither Indiva nor RetailGo is submitting expressions of interest in Friday's lottery.
"We can offer a nice solution for a lottery winner with a very tight timeline," he said, noting the arrangement would be akin to the way a Subway or a Pizza Pizza fast food outlet is franchised.
In September, Indiva announced plans to open 10 of its own locations across Ontario, even going as far as securing a number of leases, including a store on London's Wellington Street South.
There are only seven private pot retail licences available for Western Ontario in the following communities:
- Niagara Falls
- Norfolk County
- St. Catharines
Not long after that, the Progressive Conservative government, which initially signalled it would not limit the number of private cannabis retail licences, changed the rules.
In November, it announced that licenced cannabis producers such as Indiva could not own more than 9.9 per cent of a retail store, then the province capped the number of private retail pot licences available at 25, citing "severe supply shortages" of the product.
Smutylo said the cap is too small and he predicted the shortage in cannabis that has been felt across the country will even out within a year.
"I think the supply concerns the government articulated are not well founded and are temporary and by the time these locations will open the supply situation will be drastically different."
25 licences not enough, says cannabis lawyer
Jack Lloyd, who is a cannabis lawyer based in Toronto, agreed and said Monday that the once thriving Ontario grey market industry in that city shows there is a need for more licences.
"At one time there were over 80 unlicenced cannabis dispensaries in the City of Toronto and that was still not enough. So having 25 for the province of Ontario is not enough."
However, Lloyd said that while there is a need for more licences, he believes that the lottery being conducted Friday by the AGCO is the fairest way to distribute them.
"I can't see a fairer way to distribute a limited number of operators' licences," he said.
"The lottery certainly prevents what many in the community were concerned about, which is cronyism and large corporations gobbling up all of the licences."
Lloyd said he believes the Ontario government's cap on the number of permits will help prevent what has happened in Alberta, where pot retailer owners are struggling to meet consumer demand amid a national cannabis shortage.
"Ontario doesn't want that to happen so they've limited it to 25 stores," he said. "Hopefully the lottery helps protect what the Ford government said was the main goal, which is to allow small business to participate in this industry."
According to AGCO rules, anyone who is selected in Friday's lottery will have five days to submit their private pot licence application, which comes with a $6,000 non-refundable fee and requires at least a $50,000 line of credit.
Pete Young, who owns London's Organic Traveler and is also the master grower and one of the founding partners at Indiva said Monday the licence conditions imposed by the Ontario government are "not unrealistic."
"I don't think those numbers are unrealistic," he said."I think that's a decent number to start with."
Young, who has sold cannabis accessories for 22 years at his Organic Traveler store on Richmond Street has himself submitted an expression of interest in a private pot retail licence for each of Ontario's five regions, including in his home city of London in Ontario West.
"I want to stay in London, but if it means I get a licence in Toronto or Ottawa or someplace like that, I would be working to open up the store there and at least get my foot in the door until the next round of lottery."
The AGCO said the lottery for the next 25 private pot retail licences is set to take place in December of this year if the cannabis supply situation doesn't improve before then.
- An earlier version of this article stated that Indiva was ready to franchise private retail pot stores, when the company it is not actually submitting an expression of interest in Friday's provincial retail pot license lottery.Jan 09, 2019 4:52 PM ET