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Small Businesses Won Big in Ontario's Cannabis Lottery

On Friday Ontario announced the winners of the province's cannabis retail lotteryand the majority of them are mom and pop shops.

In total, there were 16,905 applications for the 25 licenses to sell recreational marijuana in Ontario. The vast majority of those applications came from individuals looking to open a small business, not big corporate players who are already established in the space. And in this first round of licensing draws, the small businesses won big. Of the 25 licenses, 19 were granted to unincorporated sole proprietorships—your average small business.

The next step for theses business will be applying for their prospective store locations. Lottery winners can apply to open a shop in any municipality with a population over 50,000 as long as the municipality hasn't opted out of cannabis sales. Winners will have until the end of this week to submit applications for the location of their stores. However, the timing of this is "awkward," noted cannabis consultant Edward Collins, since municipalities have until January 22 to opt out. That means winners may end up applying for store locations in municipalities that later decide to bar stores from opening there.

The winners also have to pass a criminal background check and produce the hefty fees demanded by the government as well. Business owners will need C$10,000 just to pay for the ability to open a single store and must also post a C$50,000 line of credit that will be regularly deducted from if they don't open their shops by the April 1 deadline.

Many of the lottery winners may not actually have that kind of money on hand, but experts don't think it'll be too hard for them to get it. While the lottery winners can't sell their store licenses until the end of the year, many are expected to enter some sort of deal with one or another or partner with one of the big industry players.

Despite those advantages, cannabis business advisor Tina Fraser believes these small business owners will still have a hard time being ready to go by the April 1 date. She says consumers should expect only a few stores to be operational by then.

The ongoing product supply shortages facing the Canadian cannabis industry could also prove to be difficult for the new Ontario pot shops to overcome. Even if supply does level out in the coming months, the demands of these new business is likely to cause further strain on the system.

At any rate, we're still a long way out from the some 1,000 cannabis retail locations the Ontario government promised when they announced their plan to privatize cannabis sales.

H/T: Ottawa Citizen

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