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However, Rule 2 of the Expression of Interest Lottery Rules loomed large.
Rule 2(a) requires the winners to use the same legal name and applicant type identified on the Expression of Interest (lottery) Application in their Retail Operator License Application.
Rule 2(b) prohibits winners from changing their applicant type, ownership and/or corporate structure in a way that would result in a change of control of the Expression of Interest (lottery) Applicant or the licensee until December 13, 2019.
The Alcohol and Gaming Commission of Ontario (“AGCO”) which oversees the licensing process took a very hard line and strict definition of “control” as well as a very broad definition of change of ownership. As a result, and as intended, the lottery winners were forced to maintain complete decision making, control and ownership over their stores. Any who decided to ride too close to the line soon discovered that the AGCO was not messing around (RIP Gary Hatt who was the first, and only, person to get disqualified from the lottery process for violation of rule 2b).
When the dust settled, the process and enforcement of the Expression of Interest Lottery Rules resulted in 12 of the 25 lottery winners “going it alone”. While some or all of these winners may have enlisted help from consultants and service providers, none of them entered into branding relationships for their stores with established companies. As a result, names such as “Central Cannabis”, “Ganjika House” and “The Hunny Pot” have started popping up across the province.
However, established companies were able to create viable relationships with 12 of the 25 winners. High Tide’s Canna Cabana brand will be represented in Sudbury, Hamilton and Toronto.
Canopy Growth brands Tweed and Tokyo Smoke will be represented in London and Toronto respectively. Fire and Flower was able to secure branding rights to at least one store, as was Spirit Leaf, Choom and Nova Cannabis. Other brands such as Superette, Pioneer and Hobo used Ontario as their launchpad with designs on establishing more stores across the country in the future.
With 12 going it alone and 12 partnering with a brand, we will look to Kyle Hildebrand, who won his spot in the lottery after the disqualification of Gary Hatt, to break the tie.
Given the allocation of stores across the province, one can safely assume that all 25 stores will do well in 2019. However, the real question is what will happen in 2020 when the provincial government is slated to open up the licensing system. Will any of the existing retailers, and in particular those with brand partnerships, be able to generate a level of brand loyalty over the course of 2019 that can be used to successfully launch additional locations? Will operational and customer preference learnings gathered in 2019 give these first 25 retailers a meaningful advantage over the wave of retailers who will follow in 2020? Will brands and retailers who were completely shut out of the initial round of stores be at a competitive disadvantage, or will the experience gained in other provinces and territories allow them to competitively jump right into Ontario when the opportunity presents itself? The answers to all of these important questions will have to wait until 2020. For now, we can just enjoy the fact that we finally have bricks and mortar retail stores in Ontario.