Cannabis retailers continue to face challenges ranging from excessive taxes to ballooning competition and that situation has spurred some pot shops to close their doors, sometimes involuntarily.
One such case recently occurred in Toronto’s East Chinatown area and involved a pot shop that had only been up and running for months.
According to BlogTO, there are now “Retail for Lease” signs posted on the window of the former LoveBud Cannabis store and previously there had been notices from the landlord.
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In essence, the retailer appears to have been locked out, with an Aug. 22 notice stating the store was in default of $7,740 in rent payments as of Aug. 15, and that the matter needed to be rectified by noon on Aug. 23. A $500 administration fee would also be applied, the notice pointed out, for a total of a little more than $8,200.
“The Landlord is prepared to take all necessary action to enforce the Lease to pursue all remedies available to him under lease and applicable Ontario statutes for commercial leases,” BlogTO screen capture of one notice reads.
These remedies include terminating the lease, retaining the right to sue for rent, costs, charges accrued and damages to the date of termination, and the right to “claim for damages for the loss of benefit of the lease over the balance of the term thereof.”
Another notice dated Aug. 24, a day after the rent payment was due, points out the “premises had been repossessed effective immediately,” and that entry would require the written consent of the landlord.
Toronto rents for commercial space run the gamut
With lease signs now up, it appears the hunt is on for new tenants.
It is not known what the monthly rent was for LoveBud Cannabis. Rents for commercial space range widely in Toronto, with listings on Realtor.ca showing a space on 652 Gerrard St. E at $2,750/month and another at 169 King E. at $11,460/month.
While the latter property is just a stone’s throw from Yonge St., the former is also located in East Chinatown.
Although LoveBud’s Instagram page is still active — albeit with only two posts: one from March and another from May — the website eweedpro notes the shop is temporarily closed and the last user review on the site is from July.
Stores are closing their doors
This past May, Marijuana Business Daily cited data from the Alcohol and Gaming Commission of Ontario showing that 1,468 licensed pot shops were open as of May 2, with 445 more active store authorization applications under review. On the flip side, the publication reported that 32 cannabis retailers in Ontario had closed their doors since June 2021.
In a letter to stakeholders, Zachary George, CEO of Calgary-based Sundial Growers, noted “we are seeing bizarre behaviour at the margin” where licensed producers purchase shelf space to sell products at a loss.
“Most retailers are struggling to be profitable, and we are starting to observe a trickle of closures on a weekly basis. I expect to see massive store closures in Canada, with the toll likely closer to 1000 than 100,” George added.
Craig Kolochuk, CEO and founder of 13th Floor Cannabis in Alberta, predicts about a third of the existing retail outlets in the province could shut down over the next year or two, per CBC News.
And in B.C., where pot shops are still dealing with the fallout from a recent strike that shut down cannabis distribution, some have suggested public confidence in and acceptance of the legal sector has taken a big hit. The concern was that the blow could translate to people once again turning to the illicit market, Spensir Sangara, owner of THC Canada, told the Vancouver Sun.
Figures show cannabis use and sales decreasing
This past spring, following the Lift & Co. Cannabis Expo in Toronto, accounting, tax and advisory company BDO Canada noted the cannabis sector is struggling to access capital and retail sales have pulled back from 2020 levels.
The 2021 summary for the Canada Cannabis Survey shows 25 per cent of polled Canadians reported having used weed within the past 12 months compared to 27 per cent a year earlier. Looking at provinces or territories, use estimates ranged from 17 per cent to 38 per cent.
For retail sales, the latest figures from Statistics Canada show the entire country had $61.3 million in July, down from $62.9 million in June and $62.3 million in May, but up from $60.9 million in April and $60.5 million in March.
BDO Canada reports that one of the most noteworthy themes to emerge from the recent conference was that regulation continues to be a problem. “Otherwise well-run businesses continue to struggle to make ends meet between excessive taxes, limitations on dosage size, packaging and marketing — plus the illicit market that continues to flourish,” the consultancy argues.
Conference participants further voiced the need for the industry to evolve, including with respect to differentiating medical cannabis from recreational weed.
“The industry has done little to educate the medical community in Canada and the average cannabis retail outlet isn’t particularly welcoming to someone not yet comfortable with that product, but seeking a medical solution,” BDO Canada relays. “Education is key for bringing new consumers into the fold as there are many curious people, but there’s still a stigma around cannabis consumption.”
Company launches retail support program
Leafythings, which operates a web platform, mobile application and advertising medium, notes there’s a “rise of cannabis store closures on the horizon in the Ontario cannabis marketplace.” That being the case, the company announced this week it was launching a retail support program to help struggling pot shops.
“Leafythings discovered that the wind-down process for an authorized retailer takes approximately two months,” a delay due to inventory requirements. “For retailer store owners, this process is deepening the losses for owners with an additional two more months of rent, two more months of insurance and two more months of labour and other overhead costs,” the company states.
It will begin its new support program “by buying all available inventory from stores who wish to wind down in a timely fashion,” says Jeffrey Neil, the company’s director of community engagement. “We will be sharing and gifting these products at all of our events and exhibitions,” Neil reports, with the company adding it recently secured a private investment of $8 million to help with acquisitions and experiential programs.
Federal act review announced
Though a year late, the federal government this week announced the legislative review of the Cannabis Act is moving forward. The act aims to protect the health and safety of Canadians and provide for establishing a diverse and competitive legal industry “made up of small and large players to displace the illicit market.”
For its part, the review led by an independent expert panel is meant to “ensure that the act adapts to the current situation and continues to meet Canadians’ needs and expectations.” Beyond keeping ministers up to date on progress made towards achieving objectives, panel members will also “help identify priority areas for improving the functioning of the legislation.”
But Vivianne Wilson, founder of GreenPort Cannabis in Toronto, recently told CTV News the federal review is unlikely to help many cannabis businesses.
The review “at a federal level is not going to change what they’re doing at a provincial level, so we’re going to continue to see stores close, unfortunately,” Wilson suggested.
A lawyer who has represented legal pot shop retailers told the news outlet that some Toronto retailers have told her they are being undercut by the black market. Kendra Stanyon is quoted as saying people who followed the rules and got licences “sometimes find themselves situated beside an illegal pot shop, that is doing better business than them and often probably selling better products.”
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