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May the 4th – be with us! CannDelta, Cova, and Thrive are proud to present “The Rise of Farm Gate Cannabis Retail” licensing. Join us as we deep dive into licensing, compliance, and we speak to the impacts for licensed producers opening up their own retail store! Prepare to become vertically integrated.

Cannabis farmgate is an important new retail opportunity for Canada’s cannabis industry but few agree on what it is, what’s possible in each province, and whether it’s right for all cannabis producers. Join CannDelta and Cova Software as we shine a light on these questions, hear the story of an LP poised to open the first farmgate store in Ontario, and mix with experts in breakout sessions to answer your questions! You will learn:
  • What farmgate is (and isn’t) and how it applies to cannabis retail
  • What farmgate currently looks like in the different provinces
  • Why farmgate is a great thing for the cannabis industry in Canada
  • What the future of farmgate could mean for your cannabis business
  • How the right tech partner can help to streamline your operations
  • Best practices to run a successful cannabis retail business

You’ll hear first-hand how Thrive Cannabis experienced the licensing and inspection process in Ontario, and how their brand has evolved as their farmgate vision has become a reality.

When: May 4th, 2021

Time: 1-2 pm EDT, followed by networking

Where: https://hopin.com/events/how-to-navigate-farmgate-cannabis-retail

Cost: FREE

Here’s what you need to know about how retail support software services…

By Shawn Postle, PhD  | Associate Consultant  |  CannDelta

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”.

Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

You’re finally getting to the end of the application process, you’ve spent a small (or sizable) fortune putting everything together: you’ve found the perfect location, secured your store, and trained your budtenders. Don’t stumble at the finish line, the whole point of all this preparation, after all, is to actually make some money selling cannabis. In this article we’ll look at the various services that can help you do exactly that, including point-of-sale, data analytics, click-and-collect, and security integration.

ADAPTING TO CHANGE

We’ll start with a very brief history of the Ontario cannabis retail market. When cannabis retail began in Ontario in January 2019, under the first lottery system, the only option for consumers was to go to their nearest store to browse, order, and purchase cannabis products. Then in November 2019, the Minister of Finance announced that retailers would be allowed to offer click-and-collect services, through which customers could select and pay for cannabis products online or over the phone, before visiting the store to collect their prepared order. In early April 2020, cannabis retail was briefly delisted as an essential service, shuttering all brick-and-mortar stores. The decision was quickly reversed, allowing retail store operators to conduct curb-side pickup and to begin online sales with home delivery. In July 2020 the emergency order allowing delivery expired, returning the Ontario Cannabis Store’s monopoly over all cannabis delivery. Throughout this brief time, the retailers that were best able to capitalize on these changes are the ones working with partners that allow them to adapt quickly. Trying to build all these systems from scratch would take much longer than the three months that online delivery was even an option.

POINT-OF-SALE

 Your point-of-sale (POS) system is the backbone of your day-to-day operations, every aspect of your store is in some way tied to this system, so choosing the right provider is critical. Initially, you might assume that a point-of-sale software only tracks product sales but after a few product demos, you’ll find that the additional features vary from provider to provider and can make a significant impact on your store’s efficiency. Your POS system should make your life as easy as possible, it should automate the boring and tedious stuff, while still making all that information easily available if you should need it. Having inventory inconsistencies is relatively commonplace in many retail stores, but these present a much more serious issue in cannabis retail. Inaccurate inventory in cannabis retail is not only a logistical issue but is also a regulatory compliance issue that can result in fines or even licence suspension depending on the severity. Your POS system should be equipped with as many checks and double-checks as operationally feasible to make sure your inventory is accurate and that your store remains compliant. Cova, for example, works alongside its retailer clients to innovate new system features based on feedback. Features like the automated addition of newly ordered products into your inventory, which not only decrease human data-entry errors but also decrease the time to receive shipments. Other features like segmenting your inventory by physical location or by product type make inventory counts much more manageable and accurate. Many POS service providers will have significant overlap in function but will differ in execution and peripheral services offerings. However, a significant benefit of going with a larger POS company like Cova is that you can be assured that most, if not all, ancillary services will integrate with your system. Upon completion of your pre-authorization inspection, the AGCO will provide you with a form that requires that you complete details of your POS system. The default listed options are COVA, Greenline, Shopify/Netsuite, LeafLogix, ALC-POS (L-BOSS), GlobalTill, Lightspeed, TechPOS, ACCEO Solutions/Smart Vendor, and Barnet POS.. These providers represent the options that the AGCO has previously evaluated and has found to be sufficiently robust from a regulatory perspective. Applicants wishing to use a system other than those included will be required to submit additional answers along with documentation showing how they will manage sales reports, inventory tracking, transaction details, federal reporting, and destruction logs. Ultimately, you want to work with a POS provider that can give you all the tools you need to be competitive, or better yet, a POS provider that will hand you new tools as soon as you need them.

DATA ANALYTICS

 If you want to tailor your sales experience to your customers, you need to know who they are. The best way to learn about your customers is by using all your sales data effectively. Properly leveraged, your sales data represent an on-going customer survey that covers everything from product preferences to promotion effectiveness, to time-of-day and day-of-week shopping trends. The longer your store operates, the more reliable your sales data will become for determining trends and comparing new sales strategies against historical performance. Seasonal sales trends may also emerge (perhaps beverages deserve more focus in the summer than in the winter, etc.) over your first year. Minimizing unpopular products is a priority for any retail store, especially those with limited storage. Sales data analytics will help you answer questions like “what products should I order for the next week?” and even more difficult questions like “is it worth destroying slow-selling product X to make room for popular item Y?” Unless you’re a master of Excel and you didn’t already have a full-time job running a cannabis retail store, this is likely another area you’ll want to use a software service. Headset provides a sales analytics platform for cannabis retail operators that integrates with your POS system. They provide automated reporting of all the sales data you care about, so that you can monitor real-time trends and make more reliable sales projections without spending hours delving into the raw data yourself.

CLICK-AND-COLLECT

 Your online presence plays a significant part in the customer experience, not only for bringing in new customers that are looking for a specific item but also for keeping loyal customers engaged. You want to cast as wide a net as possible while taking reasonable steps to ensure your message isn’t reaching youth. While online delivery is currently unavailable to Ontario private retailers, click-and-collect still represents an important revenue stream. While a store website is a good starting place, using online services like Dutchie will give you access to a much wider audience. Dutchie is a company that aims to make the customer experience as seamless as possible, with customer convenience at its very core. Instead of customers trying to locate individual retailers nearby and checking each of their individual websites to compare availability and pricing of different cannabis products, Dutchie provides a unified experience where customers can sort through the inventory of nearby stores to find what they’re looking for. Dutchie aims to make a smooth experience not only for consumers but also for the retailers. As Shahbaaz Kara-Virani, Sales Leader for Canada tells us “retailers are our customers, our average [ticket] response rate is 27 seconds.” Picking retailer-centric partners ensure that any issues that arise are resolved quickly before they impact your revenue.

SECURITY INTEGRATION

 Because customers will not have access to cannabis products before purchase, the majority of day-to-day inventory that is lost will occur either through staff error or staff theft. In either case, it’s critical to maintaining a clean compliance record that you are able to quickly investigate instances of product loss and remedy the situation. Just as your sales data are a valuable tool for marketing purposes, they are equally important for incident investigation when paired with your recorded security data. A solution like Solink does exactly that, it pairs your store’s sales data with your time-stamped video footage to capture critical events that would be challenging to uncover otherwise.

Do I actually need all these services?

While each of the services discussed throughout this article has a wide array of useful features, they’re only worthwhile if you put them to good use. Does it make financial sense to subscribe to a service that gives you automatic sales or security reports if you never read them or act on them? Definitely not, but rest assured that at least some of your competitors will be poring over their sales data and trying to find insights for marketing strategies or refining their security policies. The people you choose to work with, both in terms of your employees and partners, will have a significant impact on your store’s long-term viability. It’s your job to educate yourself on the available options and find the solutions that fit your vision for running your store.

 WHAT THE EXPERTS HAVE TO SAY

We reached out to three retail support software providers to learn more about how their services can help you adapt to change and stay competitive.

James Manning, Account Executive with Cova Software

Can you tell me a little bit about Cova’s role in Ontario cannabis retail?

Built for Canadian cannabis retail, Cova’s POS & Inventory Management platform is recommended by AGCO and used by nearly 90% of the province’s cannabis stores. The robust software suite offers industry-leading performance, automated compliance, and world-class customer support. Cova has helped Ontario retailers pass inspections and launch stores against tight deadlines and adapt their business to overcome pandemic restrictions. We work continuously with the AGCO to stay on top of evolving regulations. In addition to streamlined sales tools and advanced inventory management for retail stores, Cova POS offers fully integrated online ordering, online payment, and delivery.

What are the ways in which retailers can leverage sales data to increase efficiency?

Cova’s intuitive user interface is easy to learn, and the streamlined sales tools allow Ontario budtenders to create and complete fast transactions. The system’s offline mode ensures that the convenience of mobile tablets is not undermined by spotty Wi-Fi, and sales can continue uninterrupted even if the signal drops. Detailed reports-on-demand and mobile dashboards allow store owners to make fast, confident decisions on staffing, sales, stock reordering, and more. Advanced inventory tools like Rooms segmentation, batch scanning, and bulk updates make auditing easier and improve store efficiency. Retailers can access key business metrics and download reports critical to business success using our POS software. Sales analysis can boost the bottom line of the retail operation. Identify sales channels (e-commerce, delivery, in-store etc.) that are performing through comprehensive Sales Summary Reports and precise sales tracking down to the hour and by employee for KPI.

What are some features of Cova’s software that retailers should know about?

  • PO Import (streamline inventory receiving)
  • GS1 Barcode Support, SCAN-to-CONFIRM feature
  • Automated Compliance Controls and AGCO reporting

What feature (existing or upcoming) are you most excited about?

PO Import, streamlined receiving for next-level inventory management

In what ways does a retailer’s choice of POS software affect their business?

 POS systems that work well in restaurants and other retail establishments may be cheaper, but do not help you remain compliant or run a competitive cannabis operation. Cova is a compliance-first company; we work closely with the AGCO to understand Ontario regulations and keep our system updated as they change. We offer 1-click AGCO reports and built-in automation to help retailers reduce human error and simplify compliance to avoid infractions, fines, or license suspension.

What are some specific challenges for Ontario cannabis retailers that Cova helps mitigate?

 Cannabis Retail is more complex than traditional retail due to the highly regulated platform. Compliance enforcement: rules and regulations with a strict policy to follow, can be overwhelmingly stressful. Cova has learned so much about the Ontario market since the 1st retail business launch in April 2019. It is through this experience, strong relationships forged with governing bodies and unprecedented passion to support the Ontario cannabis retail industry that will ultimately mitigate challenges retailers are faced with.

Jim Farrell, VP of Sales at Solink

What is Solink?

 Solink is a software platform that leverages an organization’s existing technology investments such as POS and Video to provide actionable insights that help a company increase its bottom line.  This platform is extremely easy to use via web or mobile by multiple levels of management to pin-point areas of risk or opportunities for improvement across Guest Experience, Loss Prevention, Liability, Sales, and Training. Example: Solink can automatically report on high-risk transactions and matches them with the security video for quick investigation and resolution.

What systems can Solink integrate with?

 Solink can integrate with any data that has a timestamp and can be married with security video footage.  This includes but is not limited to POS transactions, access controls, shipping/receiving, alarm systems, inventory, labor systems, and speed of service timers.

What specific value does Solink bring to cannabis retailers?

There is a lot of value that assists all retailers when it comes to loss-prevention, dealing with the police/insurance or guest experience aspects of a traditional retail environment.  The key areas of value for Cannabis specifically revolve around the regulations and the regulators:
  1. System health is monitored and has alerts to ensure that the system is always operating effectively and ensuring compliance with the “Security System” aspects of the regulations.
  2. Save-and-share allows a Cannabis retailer to quickly share clips of video with transaction information for any inquiry by an auditor/regulator or police in seconds.
  3. Accessibility to ensure that the environment being monitored both proactively using data and AI, but also providing quick, consistent and clear access to enable an operator to spot check/audit multiple locations for policy and best practices in minutes.

What events can Solink capture that would be difficult or impossible with stand-alone security?

 Anytime you are using multiple systems it can be difficult.  Most Solink customers had a standalone security system and some level of transaction analytics before adding Solink. The issue is that video is “on” all the time so weighting through hours of footage isn’t practical and the data can be manipulated by staff in different ways. Solink provides Daily Audit Reports and Real-time Alerts that will compare the data, quickly show trends visually, and highlight quantifiable variance. As an example, an operator can receive one of these audits where Solink AI has noted an 82% increase in discounts or voids over the same day last week.  A quick investigation with video footage may show the same employee on each discounted ticket using another employee login. Having both aspects of the information at your fingertips makes the review quick and the action to correct can happen in real-time. How was Solink able to adapt to COVID-19 measures, such as curbside pickup and delivery, to still capture meaningful data? Most of the systems are all already integrated into the POS systems so things like mobile and online ordering process through the system.  That said, customer pickup and delivery had significant increases seemingly overnight.  Having access to remote video to be able to ensure you know who you have onsite, that they are being safe, and operating under these new constraints was key for many Solink customers.  In fact, the use of the Solink platform jumped by 80% for the months of March-May compared to the previous 3-month timeframe. Solink also introduced Video Alarm Alerts, People & Vehicle Detection/Counting and several other features to help customers navigate the situation and protect the business they worked so hard to build. Which Solink feature, either existing or in development, are you most excited about? Solink is wrapping up the development and productization of integrated traffic counting to help retailers manage store traffic and conversion rates.  This process will initially require some specific cameras that enable the two-dimensional/directional trip-wire capabilities but the transaction data and video should enhance the usefulness and accuracy of traditional traffic counters.

Phil McDonald, Director of Regional Strategy, Canada at Headset

 What strategies cannabis retailers are using to obtain customer-specific sales data?

 We are beginning to see retailers develop membership and/or “loyalty-light” programs as a way to collect customer-specific information to drive customer engagement and loyalty. These can be as simple as collecting customer information when customers sign up for a mailing list, to launching membership programs aimed at communicating new product arrivals, discounts, top sellers, or other benefits via text/email that are not conditional on the purchase of cannabis or accessories. It’s important to note that store operators are subject to the Federal Cannabis Act and its regulations, as well as the Registrar’s Standards for Cannabis Retail Stores in Ontario, which outline permissible and prohibited advertising and promotional activities. One notable restriction is the inability to offer cannabis or an accessory for free as part of a traditional “two-for-one” “or buy one get one free” retail offer. So, it’s important to stay on top of federal and provincial regulations as they evolve.

What are some innovative ways cannabis retailers are leveraging customer data?

Retailers are leveraging customer data to drive engagement, loyalty, and develop store communities. The most sophisticated retailers are using analytics to identify, understand, engage specific customer segments by offering timely discounts, relevant product information, or engaging content. Beyond identifying traditional demographic segments, some retailers are segmenting customers using basket value and composition, shopping frequency, and product/brand affinity to better anticipate and react to their customers’ needs.

How would a system like Headset help a retailer with effective inventory ordering?

Headset’s Retailer Pulse and Premium platform help operators streamline inventory management with the goal of limiting costly stockouts and excess inventory carry, whether that’s purchasing and managing inventory at a single store or multiple locations across the country. Specifically, Headset does this through three dashboards: Inventory Coverage, Reorder Report, and Inventory Turnover. Operators lean on our intelligent re-order report to help inform minimum re-order quantities and estimated days of supplies based on their Weeks of Supply (WOS) target and sales history. In addition, operators rely on metrics such as stock-coverage ratio to quickly identify over/understocked products and categories, and leverage inventory turnover metrics to quickly identify fast movers and shifts in consumer demand.

What added challenges/expenses do cannabis retailers have in comparison to other retailers?

 There are current limitations on the type of loyalty programs a retailer can implement. This limits the ability for retailers to leverage best practices from traditional retail and forces them to get creative to remain compliant.

Can you tell us about the new Headset retail software that has come out recently?

Headset recently released Headset Retailer Premium. Premium is an extension of the existing Retailer Pulse platform that provides retailers a turnkey business intelligence solution to drive their store’s performance. Premium introduces 4 new modules: Basket Analysis, Customer Analysis, Marketing, and Demand Planning. Basket Analysis helps operators identify what’s in the basket and how to grow it. Customer Analysis helps operators learn who their customers are and track purchasing patterns. Marketing allows retailers to track the ROI of marketing efforts and assess the impact of promotions and discounts. And Demand Planning helps operators understand the “when” behind their sales to identify seasonal patterns for certain products and adjust product assortment for holidays and in response to major trends. Headset also recently released Retailer Starter Pack in Ontario, aimed at helping retailers launch their retail store with confidence. The package provides retailers market data and turnkey tools to build reliable sales projections and full financial proformas, develop optimized staffing plans, and drive inventory and assortment strategies.

CannDelta is Here to Help

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Canadian regulatory and scientific cannabis consulting firm that can be reached at info@canndeltav2:8890 or toll free at 1 (877) 274-6777 .

Here’s what you need to know about SOPs, and why they are so important for your retail store…

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”.

Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

In this article, we guide you through the development and implementation of Standard Operating Procedures (SOPs), which are a critical component of a cannabis retail operation. Having a robust set of SOPs established will not only ensure that your retail operation operates within the confines of federal and provincial compliance, but it will also maximize productivity and profit while minimizing the risk and liability of incidents. After reading this article, you will have a newfound appreciation for SOPs and will be ready to produce a strong working set for your retail store.

WHY SOPs MATTER

Having clear instructions on how to conduct your job is always important. When your job is a part of the nascent cannabis industry that is littered with strict rules and regulations, it is imperative that you have clear instructions on how to conduct your job. This is particularly true in the case of a cannabis retail store, where it is easy to make missteps that could very well end up costing you your hard-earned retail licence. SOPs are therefore especially important in the cannabis industry, as they provide clear guidelines on who is responsible for doing what, and how. SOPs should be constructed in such a way that they can answer any question that may arise during the operation of the retail store, such as:
  • What do we do in the event of a product recall?
  • Am I allowed to issue a customer refund?
  • Are our cameras capturing enough of the secure storage area?
  • Is our marketing and advertising campaign compliant?
  • Who needs to be present for cannabis destruction?
  • What do we do in the event of a burglary?
  • What do I do if I catch an employee smoking cannabis during their shift?
While it is natural to focus on the major components of the retail store when drafting SOPs (e.g., inventory management, security systems, purchases, opening, and closing), it is imperative to have a comprehensive set of SOPs that encompass all aspects of the retail operation, including for scenarios that are unlikely to occur. Not only are SOPs great resources for unexpected events that require clear guidance (e.g., an emergency), they are also fantastic training material for new employees. Having a concise and clear set of SOPs will ensure that your employees understand exactly what to do in a given situation and it will minimize the need for repeated training sessions. DEVELOPING SOPS  SOPs are meant to provide clear and concise guidelines for who is responsible for doing a particular task as part of the retail operation.  A strong set of SOPs will have the following features:
  • They should be comprehensive, covering all aspects of the retail operation
  • They should be concise and unambiguous
  • They should clearly identify who is responsible for a given task, and also identify the chain of command for reporting purposes (e.g., the budtender is responsible for _______, and shall report to the retail manager on duty)
  • They should include contingency plans (where appropriate) in the event that something unexpected happens
  • They should be dated, regularly audited, and continuously updated with best practices to ensure they are functioning as intended
  • They should be made available to all retail store employees, who must have read and understood the contents of the SOPs prior to their first shift. A reliable and robust set of SOPs can be used as training material for new staff and an on-going reference manual.
The retail store operators and managers are responsible for drafting SOPs, and it is strongly recommended that a complete set of SOPs be available prior to hiring staff and opening up your retail store. Featured below are strategies for developing a complete set of SOPs for your retail store.

Do Your Research

A great way to get started on preparing SOPs is to visit local licensed cannabis retail stores and take inventory of the various aspects of their retail operation. How do they conduct age-gating? How many sales staff do they have on the floor? How are they taking customer orders? How are they preparing/fulfilling customer orders? Where do they have their cameras positioned throughout the store? This is a great way to figure out how you want to tailor the design of your store and to get a good sense of what aspects of the retail operation will require SOPs. Brushing up on the rules and regulations for cannabis retail stores is another great way to conceptualize what SOPs will be needed. As an example, the AGCO’s Registrar’s Standards for Cannabis Retail Stores outlines exactly what Ontario licensees are required to comply with when opening and operating a cannabis retails tore. The comprehensive set of standards covers everything from surveillance and record-keeping measures to advertising and training activities. Familiarizing yourself with the laws and regulations is a great way to strategize what SOPs are needed and what activities they should encompass.

 Talk to Existing Retailers

 As has been mentioned throughout this article series, it is strongly recommended that you reach out to existing retailers for advice and guidance. A major strength of the nascent Canadian cannabis marketplace has been the incredible willingness for competitors to support one another in the quest to strengthen the industry as a whole. You should have no problem finding a retailer who is willing to offer up tips and tricks for how best to prepare and implement your SOPs.

Hire Experts

 We’ve highlighted throughout this series how important it is to contract professionals to support key aspects of the retail operation such as interior design, licensing support, and legal counsel. This also holds true for SOPs, which some consulting and law firms will offer for a set price. In looking for a firm to purchase SOPs from, be sure to check that they have extensive experience in cannabis retail, specifically in your province of interest. The latter point is particularly important given that the licensing laws and requirements vary between provinces and territories across Canada. You will also want to ensure that the SOPs have been “stress-tested” by licensed retailers and that the SOPs encompass all important aspects of the retail operation. If possible, ask a prospective firm to provide references for retailers who have purchased their SOPs, so you can reach out to them for feedback. You can also contact these firms to look over your personally produced set of SOPs to provide a gap analysis on what SOPs are missing, and what can be done to improve them.

IMPLEMENTING SOPS

Once you have successfully crafted or purchased a set of SOPs, it is important to conduct “stress-tests” in mock-up scenarios to assess your employee’s comprehension of the SOPs language and therefore the quality of the SOPs overall. These stress-tests should be designed to encompass all aspects of the retail operation, such as:
  • Employee Management
  • Inventory Management
  • Shipping and Receiving
  • Record Keeping
  • Vendor Management
  • Purchases and Returns
  • Point of Sale
  • Security and Emergencies
  • Advertising and Promotions
The results of the stress-tests can be used for further refinement, including for drafting new SOPs to cover previously non-considered aspects of the retail operation. It is strongly encouraged that you have a completed set of stress-tested SOPs as early as possible, and certainly before opening your doors to customers. Make your mistakes during mock-scenarios so you can avoid them when your store is up and running. Once your store is open to customers, you will want to establish a clear mechanism for continuously evaluating the performance of the SOPs. Are new employees able to quickly comprehend the material? Are they functioning as intended? Are there SOPs we need to create? These are questions you should be asking yourself on a routine basis to ensure that your store runs smoothly. We recommend having each SOP be dated and regularly audited (e.g., on a quarterly basis) to continuously update them with best practices. Finally, it is recommended that you hire experts (e.g., consultants and lawyers) to conduct mock inspections, akin to the periodic inspections the AGCO will conduct at your retail store. This is a great way to ensure that your store is running efficiently and within bounds of compliance.

 BOTTOM LINE

 It is essential that you develop or acquire a robust set of SOPs to cover all aspects of your retail operation as early as possible. You are now armed with the knowledge needed to develop, stress-test and implement your own SOPs, to ensure that your retail store is well-prepared to open up to customers. By continuously assessing the performance of your SOPs, you will ensure that your employees feel confident in executing their required duties, which will keep you on the right side of compliance.

CANNDELTA IS HERE TO HELP

CannDelta offers a robust set of 55 customized SOPs that cover all aspects of the retail operation, including employee management, sales operations, security, record keeping, inventory management, regulatory reporting, including for curbside pick-up and home delivery. Hear from Rob Heydon, Co-founder of 420Love (976 Main St. E, Hamilton) to get his perspective on the importance of SOPs and his experience with CannDelta provided SOPs. “The SOPs I received from CannDelta for our brand 420Love are very detailed guidelines and instructions on how to properly run a retail store. When I won the lottery last year and partnered with another “BRAND” they provided very little or no training and none of these SOPs. We feel very strongly that our brand 420Love will complete, stay compliant and succeed in the marketplace with the help of these valuable SOPs.” Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndelta.com or toll-free at 1 (877) 274-6777.

Here’s what you need to know about hiring and retaining top talent for your cannabis retail store…

Provincial Licensing | CannDelta

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”.

Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

Among the decisions a new cannabis retailer has to make in establishing their business, hiring employees is arguably the most important of them all. Not only will your first wave of employees set the tone for your brand, but they will also establish the work culture of your retail store – for good or bad – that will be difficult to change over time. It is therefore essential that you carefully select the best candidates that match your target brand and culture, especially at the outset of your initial hiring wave.

In this article, we will teach you about Ontario provincial hiring guidelines, how to attract and retain the best people, and how to build a culture that maximizes productivity and employee wellness. You will hear from the experts at the Vetrina Group, who specialize in helping make cannabis retail businesses as profitable as possible by working with retailers to improve all facets of the business.

HIRING ELIGIBILITY

Background Checks

The Alcohol and Gaming Commission of Ontario (AGCO) has established the Registrar’s Standards for Cannabis Retail Stores, which outlines what prospective and current Ontario licensees need to comply with when opening and operating a retail store. In relation to hiring and training practices, the Registrar’s Standards state that licensees must obtain criminal background checks from all employees as part of the hiring process.

While you can interview and even hire candidates who have yet to undergo background checks, they cannot begin their first shift until this has been completed. As the Registrar’s Standards are generally non-prescriptive by design, there is no clear guidance as to what could disqualify a candidate from earning a position based on the results background check.

Based on conversations with the AGCO and private retailers, it appears that any serious conviction that falls under the Cannabis Control Act, 2017 (CCA), or the Cannabis Licence Act, 2018 (CLA) could be grounds for employee disqualification. As an example, a candidate who was charged and convicted for running an illicit dispensary may not be eligible for hire with a licensed cannabis retailer, however, there is an encouraging number of instances where those individuals are being given an opportunity. Make sure you highlight the need for employees to undergo background checks before being hired as part of your job advertisements.

CannSell Training

In addition to background checks, the Registrar’s Standards state that all employees must have completed any required training prior to the first scheduled shift, including the AGCO Board-approved CannSell training program. CannSell was developed by Lift & Co. in partnership with MADD Canada and was approved by the Board of the AGCO as the mandatory cannabis retail employee training program in Ontario.

The CannSell provides an overview of cannabis and its history, federal and provincial regulations, general compliance obligations and sale guidelines for employees and retail stores, and the risks and harms of cannabis and responsible use. All employees, including holders of a Retail Store Authorization (RSA) and Retail Manager Licence (RML), must successfully complete the CannSell Standard Certification.

Ongoing Training

Keeping your staff on top of their game is essential to competing in the cannabis retail space. This means staying on top of product developments, staying abreast of new regulations, and news from licensed producers. Training updates can come in the form of new modules to the CannSell program, in which the AGCO allows 60 days for employees of retail stores to complete. Licensed producer provided training can also be a rich source of budtender education, for example, The Green Organic Dutchman provides an in-person organic cannabis certification course at stores carrying their products. Third-party educational platforms like Spiffy also play an important role in budtender education as well. Spiffy provides a platform where employers can curate bite-sized information courses for their employees based on duties. These courses can be built by the employer, licensed producers or Spiffy and require employees to demonstrate understanding through quizzes. Chris Snoyer, Spiffy’s creator, notes “on the back of education and knowledge consumption… retailers have the ability to motivate and incentivize staff.”

STAFFING POSITIONS

While employees of a retail store often wear many hats, there are distinct positions that come with different responsibilities, training, and background requirements.

Budtenders

Your budtenders are your brand ambassadors, and the first point of contact with your customers. They are responsible for guiding your customers through your product selection, educating them on different product classes and responsible use practices, and helping them make informed purchasing decisions. Top candidates for budtending positions are those who are passionate and personable, eager to learn and stay abreast of your store’s offerings – including different strains and their associated effects – and have a knack for cultivating a sale.

Inventory Staff

Effective management of your inventory is not only critical for running a successful retail operation but is also massively important in remaining on the right side of compliance with respect to federal and provincial regulations. It is therefore strongly recommended that you employ dedicated inventory staff that are responsible for all aspects of inventory management, including record keeping, receipt and transport of product, stocking shelves, product recalls, audits, and regulatory reporting.

Security

Hiring designated security staff is a great way to add a layer of protection for your retail store and will go a long way in making your customers, employees, and local community feel at ease. Your security staff should be familiar with the entire retail store operation and have an appreciation for any vulnerabilities in your security system that may exist. Notably, any security staff to be hired for your retail store will also need to complete CannSell training and undergo security background checks prior to their first shift, and records of such employees must be retained for a minimum of three (3) years.   

While retail store managers often take on the responsibility of ensuring that the store’s security systems are operating as intended, it is not uncommon to hire a Head of Security, or Security Director, who oversees all security-related operations. They would also be responsible for devising and implementing security based standard operating procedures (SOPs) for the store, including employee training.

Managers

The retail store manager is the public interface between the retail store, customers, regulators, law enforcement, and the general public. You should, therefore, spend considerable time looking for the right candidates to assume the role of retail store manager.

The manager is responsible for a variety of important operations, including:

• Ensuring smooth day-to-day operation of the retail store;

• Hiring, managing and training employees;

• Ensuring that the chain of custody is followed;

• Entering into contracts for the store;

Ensuring inventory management is executed properly;

• Ensuring compliance for all aspects of the retail operation is continuously achieved;

• Monitoring and analyzing sales data to drive future business decisions;

Any employee who intends to function in a managerial capacity will need to obtain an official Retail Manager Licence (RML) from the AGCO. The application for the RML can be completed through the iAGCO portal at the same time or after the RSA application process. The RML application fee is $750 which is non-taxed and non-refundable.

HIRING AND RETAINING TOP TALENT

Finding the right people to help run your retail store is a top priority in starting your business. Attracting and retaining top-quality candidates isn’t easy, but can be accomplished by offering the following to prospective and current employees:

• Create a Great Culture: the first thing potential applicants will do when seeing your job posting is going on your website to see what your store brand and message is all about. By establishing a great brand and culture, and ultimately showcasing it, you will attract and retain the right candidates for your retail store.

• Educate Your Staff: teaching your staff about your products, their intended uses, and how to educate customers on them, will go a long way to improving your sales and will endear you with your employees by showing them your commitment to their growth.

• Offer Competitive Compensation: as the number of retail stores grows, so too do the opportunities for those looking for employment. You should, therefore, offer a competitive compensation package, including salary, benefits, and profit-sharing considerations.

• Advancement Opportunities: in order to retain top talent, you will need to show commitment to their long-term success with your company by providing them with a clear path forward for advancing into more senior positions.

• Always Strive to be a Better Leader: always be humble and appreciate that you can always make improvements to your leadership and mentorship style. Make a habit of routinely speaking with your employees to ensure that they are happy with their role and how the retail store is being run.

WHAT THE EXPERTS HAVE TO SAY

We caught up with Leandra Reid and Krista Raymer from the Vetrina Group to teach you what you need to know to become a great employer and make your business as profitable as possible.  The Vetrina Group specializes in supporting cannabis retail stores with inventory management, forecasting and loss prevention, operations infrastructure development, and digital integration.

How important a role do employees play in establishing the target brand and identity of a retail store?

“People are what makes your brand and experience come to life.

Having the right people directly influences how your brand is perceived. Employees humanize your brand by communicating it in an aspiring way your customers can relate to and want to be a part of.”

What tips do you have for retailers looking to hire for the first time?

1. “Start by creating a mission for the roles you are hiring for. Your mission should reflect your company mission, include the role requirements and expected outcomes. By doing this you can interview and assess candidates with focus.

2. Interviewing is a skill! While meeting candidates focus on their emotional intelligence, body language and facial cues. Prepare your questions and what key takeaways you’re looking for ahead of time.

3. Do not rush the processes! A hiring mistake is a costly one. If you are unsure of a candidate or tight for time, bring in some help to ensure you are building a team that can support your mission.”

What are some of your favourite recruiting tactics?

“Where possible, see them in action! While we highly recommend clients post positions online, our most effective tactic is to see candidates while acting as service leaders in their current position.

Retail requires attention to detail, multi-tasking, and someone who can work in a fast-paced environment. Someone at a hotel front desk or busy restaurant may be the perfect fit, as they are service-oriented and have the ability to solve problems on the fly.”

What is one question every retail store owner should ask a prospective employee during an interview?

“Every cannabis retail interview should include culture and character-based questions.

One of our favourites; what gets you most excited to go to work every day?

Traditionally, interviewing has been in Q + A format. What are your strengths? Weaknesses? Why do you want to work here? What do you know about the company?  This does not bring out the best of the candidate or the interviewer.

When an interviewer can engage a candidate in a dialogue offering key information without question style prompting it is an indication that:

A. The interview is going well.

B. The interviewer has mastered the art of interviewing.

C. The interviewer will get an accurate indication of how the candidate will integrate into the company and perform in their role.”

How important is it for retailers to establish robust training programs for their employees?

“Your business valuation and revenue potential depend on it. Training needs to extend far beyond a singular focus on product knowledge.

Revenue:

It directly affects your top line, and ultimately your bottom line. In a company with revenues of $2.5M, it‘s the difference between one untrained employee selling $400k a year and a trained one selling $500k.  Depending on how many sales employees a retailer has, that $100k difference adds up quickly.

Customer Experience:

It’s the difference between a 3-star review and a 5-star review.

It’s more impactful than you would think. People consider customer reviews before trying new places and products.

Customer Loyalty/ Retention:

It’s the difference between a customer visiting 3x a year and one that visits monthly or more. For example, 1000 existing customers who usually spend $40 3x per year versus  $40 monthly is $36,000 in additional annual revenue.”

Can you talk to us about the importance of the retail store manager role? What are some of the added challenges of being a manager of a retail store in the heavily regulated cannabis industry?

“The retail manager is so important.  They have your Retail Operating License, customer retention, and profitability in their hands.

We have worked with multiple clients who experienced management turnover because the employee was not prepared for the multifaceted responsibility.

Passion about the product is important, but it’s not enough to lead the store to be successful.  You need to hire someone that will support a team, drive the business and effectively communicate the mission with ownership.”

In your experience, what are successful retail stores doing differently than others to attract and retain top talent?

“Skilled and talented people are invaluable.  As cliché as it may be it’s true- Employees are assets, not liabilities.

Successful stores show appreciation by investing in their people and the employees feel it. The ROI is a group of dedicated and loyal employees that share that appreciation with your customers and business.  A well-trained team attracts additional applicants, decreases turnover and possesses an engaging energy customers are drawn to.

It is difficult to identify actual annual opportunity costs to retailers who do not leverage training because the sector is so new. However, our work with retailers in other sectors in Canada, the US, and Europe usually see a 15%-30% increase in retention.”

Do you think CannSell training adequately prepares employees to work in a cannabis retail store?

“Cansell training provides the foundation to sell cannabis safely. The program is not designed to address customer service, sales, brand or operational training.”

A number of cannabis retailers are first-time business owners who may not have ever held a managerial type role; are there particular things new retailers might struggle with respect to the management of employees?

“Consistency. This starts with a clear mutual acknowledgment of expectations from the day they are hired.

• Setting the expectations in writing, with a well-written employee contract and employee handbook

• Coaching

• Feedback

• Gratitude

To be fair, retailers with little to no retail experience work with the knowledge/experience they have from being a customer or employee. They default to the same HR, marketing, customer experience, and operations they have seen before.

Hiring an employee is an investment of resources. They are also a direct link between store revenue and customer relationships. Regardless of cannabis experience,  poorly evaluated hires can make or break your store and be why your customer picks your competitor.

Ultimately, you don’t know what you don’t know. By investing in some retail consulting with us, retailers will have the ability to make a lasting decision such as hiring with greater confidence and be more equipped to manage a diverse retail team.”

What type of training does the Vetrina group offer to cannabis retail stores?

“Vetrina Group equips front line retail teams with the skills to:

• Attract new customers

• Maintain high customer retention

• Build customer spend

This requires elevating existing soft skills to enable employees to connect authentically with the customer and sell the products they want and need.

A critical topic being ignored or avoided in store-level training programs is Accountability.

A team trained together in accountability has a dramatic effect on improving sales and decreasing costs that impact the bottom line.

Vetrina Group specializes in creating custom-tailored learning experiences that use small group exercises, situational training and other interactive segments to drive change in sales behaviour and customer experience.”

Have you done any training with retailers related to new COVID-based operations?

“Vetrina Group has been very active in supporting retailers with COVID response.

Our response programs and webinars focus on building trust and maintaining customer relationships.

We don’t foresee COVID adaptations being removed in the near future. As a retailer, we encourage you to create a response program that focuses on the customer experience and how this relates to comfort, safety, and security.”

What challenges has COVID imposed on cannabis retail stores in terms of how they hire and train employees?

“Candidates and owners have varying comfort levels. While hiring during COVID it is important to take this into account and communicate early in the process what the retailer’s and potential employees’ expectations can be.

As we move through the opening Stages of 1, 2, and 3 it is imperative to be adaptable. Public Health requirements should be reviewed regularly, along with an audit of current practices. Vetrina Group equips retailers to be better planned and more organized during COVID.”

What is your favourite part about working with cannabis retail store employees?

“When else have we seen such a diverse group of people united by a shared culture? For us, this is exciting.

Anyone who enters a new industry has a couple of common characteristics; passion, yearning for learning and tenacity. We like to be surrounded by those types of people.”

BOTTOM LINE

Everyone wants to become a great employer, but actually becoming one is difficult, especially as you grapple with the myriad of things needed to get your retail store up and running. In this article, we provided you with a blueprint for becoming a great leader for your business and establishing your target culture. You are now equipped with the information needed to attract, hire, and retain top talent on route to becoming a successful retail operation.

CANNDELTA IS HERE TO HELP

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndeltav2:8890 or toll-free at 1 (877) 274-6777.

Here’s what you need to know about how to make sure your retail store is protected…

By Chris Lavoie, PhD | Director of Provincial Licensing

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”.

Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

Ensuring that your cannabis retail store has sufficient insurance coverage is one of your biggest challenges in setting up shop. Your insurance plan should be developed with the unique challenges of storing and selling cannabis in mind, such as strict government regulations, increased risk of theft, and product spoilage. In this article, we teach you how to get the insurance package your retail store needs to be protected now and in the future. You will hear from legal and insurance experts across the industry who have offered up great advice for you to protect your store.

THE BASICS

Setting up your insurance package should be one of your earliest priorities in setting up shop. You will need a comprehensive insurance plan for several important checkpoints, including for establishing a lease agreement, bank account, and wholesale purchasing account with the Ontario Cannabis Store (OCS). The basic coverages you will likely need include:

  • general commercial liability insurance
  • umbrella liability insurance
  • cyber & privacy liability insurance
  • crime & fidelity insurance
  • property insurance
  • business interruption insurance
  • product recall insurance

There are additional risks however associated with running a cannabis retail store that you should consider such as spoilage of cannabis products, higher risk to theft and fires, and regulation changes as Federal and Provincial Governments continue to make changes. For Ontario cannabis retail applicants, your insurance policy must contain Commercial General Liability Insurance in the amount of no less than $5 million* to set up your wholesale purchasing account with the OCS.

Your coverage also plays a big role in securing a retail location says Patrick Gordon – an associate with Blakes Commercial Real Estate – who stressed that insurance is a key factor that tenants should consider when entering into a retail lease:

“Prospective cannabis retail tenants should canvass their ability to obtain insurance for the property they propose to lease and the cost of such insurance as early as possible in the transaction (and quickly once the landlord’s proposed insurance obligations are under the lease). Obtaining such insurance has proved challenging for some insureds in Canada to date although this market should continue to develop.”

Given the distinct provincial regulations governing cannabis retail stores, it is highly recommended that you consult with an insurance broker that specializes in cannabis to understand what level of coverage will be needed for your specific retail operation.

WHAT THE EXPERTS HAVE TO SAY

We caught up with some of the cannabis industries leading experts to teach you what you need to know to secure a comprehensive insurance plan to cover all aspects of your retail store.

Matthew Doty, Account Executive with Whitley Insurance & Financial Services

How important is having a business plan in place for obtaining great insurance coverage?

“In order to adequately prepare a cannabis business for the retail market, it is essential that one develops a proper business plan. Having a strong business plan and working with a collaborative team like CannDelta & Whitley Insurance can set a new business up for greater success.

In terms of insurance—a key element required prior to opening—one thing that underwriters are looking for is a thorough understanding of the business. As such, that business plan becomes uniquely important. Your business plan provides the blueprint for your business’ success and can demonstrate to insurers your understanding of the operational needs (staffing requirements, cannabis inventory, non-cannabis stock, equipment, etc.), market, real estate, risks, and possible revenue streams available.”

Tell Us About Whitley Insurance’s experience with cannabis retailers.

“At Whitley Insurance, we work with cannabis retailers frequently and understand the market and risks. This means we’re better able to advise business owners on the best

insurance approach and build a detailed submission which is appealing to insurers. Underwriters want to see a submission which is complete and one that demonstrates that the business owner and broker understand their operation and its risks—including numbers which are accurate and realistic in relation to the size and scope of the operations.”

Is it challenging for cannabis retailers to obtain insurance coverage?

“Right now, the cannabis sector is still quite new. That means market options are limited for insurance, and capacity plays a major role in placement of businesses as well. Working with experienced cannabis insurance brokers ensures that you have someone you can trust advising you and advocating on your behalf with those limited markets. In addition, the strong relationship between your broker and the market is an essential piece of the puzzle. When you partner with Whitley Insurance, you also partner with the Navacord Group of Broker Partners which gives you access to licenced brokers in every province and territory. For cannabis business owners looking to expand, this means you have access to the same level of local-touch expertise across the country ready to help you grow. This is a vital component as the insurance requirements in each province vary, sometimes significantly.”

What kind of coverages do cannabis retail stores need?

“In terms of the coverages needed when opening a retail location, outside of the required coverages like Liability, Products, and Completed Operations and Business Interruption, it is suggested that you look at a Cyber Liability Policy and potentially a Director and Officers policy. As cyber-attacks are an increasing worry for many businesses, a dedicated cyber policy can be put in place for a relatively low cost. Cyber policies can provide coverage for losses including Ransomware, Cyber incident response costs, cybercrime, system damage and business interruption, Network security and privacy liability, Media liability, and Technology errors and omissions.

Additionally, we have the right people in place to assist in building a Directors and Officers Liability Program for public and private companies. This is a unique sector, so we provide guidance and education on the personal liability associated with serving on a board and making strategic decisions at the C-Suite level. Many do not realize that Directors and Officers coverage does not only help protect large corporations but can also be a valuable tool for smaller organizations who are looking to help protect their personal assets.”

What are the common claims for cannabis retail stores?

“We are often asked what we are seeing in terms of claims, especially with this being such a new and emerging sector. The simple answer is that your largest exposures are likely to be the same or similar that most retailers face: slip and falls will be your number one concern, but you also need to be diligent in your preparation and have Standard Operating Procedures in place for employee dishonesty, and what is expected from your employees in the event of an attempted robbery.”

Have more questions? Reach out to Matthew directly:

Matthew Doty, BA, CIP, CAIB

Whitley Insurance & Financial Services

T: 613-243-0130

E: mdoty@whitleyfinancial.com

Fady Kamel, Managing Partner with All-Risks Insurance Brokers Ltd.

Can you tell us about the experience of All-Risks Insurance with the cannabis industry?

“Since early 2016 Fady Kamel has been working with Licensed Producers protecting them through Risk Management and Customized Insurance Solutions for Property and Liability coverages. In October of 2017 Fady began working with retailers in Alberta as stores were licensed and ready to open before Ontario. Working with retailers in Alberta from day one has given him the expertise and relationships required with Insurance company partners to find the best coverages and price available in today’s market.”

What factors determine your insurance premium?

“Your premium is determined based on two main factors your coverage limits and your expected revenue for the year. Coverage limits should be set based on the level of protection you require as well as your tolerance for Risk. This is why it is important to select a broker who will take the time to understand your business and tailor your coverage accordingly. The 2nd factor that determines your premium is your expected revenue, which usually comes from your business plan.”

What are some unique challenges that cannabis retailers encounter that impact their insurance coverage?

“Cannabis retailers encounter challenges that other businesses do not e.g. increased chance of theft. Criminals believe they can get away with burglarizing a cannabis retail store failing to realize the level of security at these locations is extremely high. For this reason, you should ensure you have the best security systems in place, we also recommend training all employees on how to handle a burglary situation which includes full co-operation with the criminals. These steps can reduce the severity and frequency of a claim which is crucial, as a claim could result in an increase in your Insurance premium on renewal.

Another challenge is the lack of options/competition. There are only a handful of Insurance companies who offer coverage for Cannabis Retail Stores, and we all know less competition means higher prices. Insurance brokers do not decide the rates, which is why choosing the right broker is important as relationships and understanding the risk Cannabis retailers face is where you will find more value than saving a few dollars.”

What are some tips for obtaining the best premiums?

“Insurance is a purchase that you do not want to cut corners on, we can beat any rate guaranteed by reducing coverages, however, if you don’t have the protection you need when a loss occurs then you are not protecting your business according to your risk needs but instead according to your budget. This can end up costing you much more in the event of a claim then if you had purchased the recommended coverage. A risk management assessment with your broker is crucial to determine your coverage needs, and risk tolerance level. Once that is completed and you receive quotes the best way to get competitive pricing is to see if there are any areas that you may be over-insuring and ask your Broker to negotiate the best terms for you.”

What do cannabis retailers need to know about the required coverage?

“Many clients ask for a liability limit to meet their leases Insurance requirements however they do not anticipate the liability limit that a retailer requires in order to do business with the OCS which results in higher premiums. A good question to ask yourself is “If there was a fire and I had to rebuild everything again will my Insurance policy limits be sufficient, or will I be out of pocket?”

What are the common claims for cannabis retail stores?

“As of today, we do not have official data to show where the majority of claims are coming from for Cannabis retailers however, what we have primarily seen is theft/burglary. A retail Cannabis store has many of the same risk factors as any other store for example; fire, water damage etc. Therefore, loss mitigation and risk management techniques are important to reduce the chances of loss whether you’re selling clothes or Cannabis many of the risks are the same from an Insurance perspective.”

Have more questions? Reach out to Fady directly:

Fady Kamel CIP, CRM, RIBO

All-Risks Insurance Brokers Ltd- Erin Mills

Cannabis & Commercial Insurance

Office: 905-820-5252

Cell: 416-837-7486

E: fkamel@all-risks.com

Mert Guler, Partner at Purves Redmond Limited

How is PRL involved in the cannabis industry?

PRL insures 5.5 million sq. ft. of cannabis production space across North America with our cross-border partners. Our cannabis team works hard to be one of the leaders in cannabis with respect to retail, production, Directors and Officers liability, as well as US and international expansion.

Outside of cannabis, our team insures 1,600 retail locations across Canada. These include franchises, corporate-owned and independent retailers. Our retail clients employ nearly 90,000 people across Canada.

What are the most important aspects of insurance premiums for cannabis retailers?

The OCS requires cannabis retailers to obtain $10 million in product liability to cover the risk associated with the product after a purchaser leaves a store, e.g. illness or injury. As a result, it is not uncommon that 50-60% of the premium on a typical policy is associated with product liability.

  • Most landlords and leases also require other types of insurance. The key coverages include:
  • Property’ insurance to protect you from loss or damage to cannabis stock, furniture, fixtures, leasehold improvements and electronic equipment.

Leases increasingly require retailers to purchase ‘loss of profit’ (or business interruption) coverage which is triggered if you are shut down after an insured property loss.

What added challenges and expenses do cannabis retailers face in comparison to other retailers and what are the most common types of claims?

The OCS’s minimum liability insurance requirements drive insurance costs higher for cannabis retailers versus other industries. Additionally, there are only a limited number of insurers doing business in the Canadian cannabis sector (for now). These factors can make it a challenge for new business owners to find the right insurance.

The two most common types of claims we see for retail are:

  1. (a) customer slip and fall claims (legal liability)
  2. (b) water damage (e.g. flooding, water rising from drains or sewer back up) which is covered under property insurance.

Cannabis retailers are likely to experience these types of common exposures as well. Our experience also indicates that security, theft, and crimes are all challenges and risk issues in this relatively new sector.

What tips do you have for obtaining the best insurance premium package?

There are many variables insurers consider. The best way to minimize pricing is to provide full and complete information in insurance applications and to have a detailed conversation with your broker outlining the following:

  • Compliance with AGCO
  • Details of building construction and upgrades (electrical, plumbing, roof, etc.)
  • Risk mitigation factors such as sprinklers, proximity to the nearest fire hall, security, details of your safe
  • Monitored fire and burglar alarm system
  • CCTV cameras
  • Detailed store risk management protocols and handbooks for employees; Criminal background checks for staff

Liability premiums are based on your sales forecasts, so be conservative and realistic – do not over-inflate the estimates. Have your insurance broker review your lease to ensure compliance with insurance requirements. Lastly, find a trusted insurance broker with experience in cannabis and retail since working with an inexperienced broker can lead to wasted time and higher premiums.

What types of insurance coverage do new cannabis retailers not anticipate?

During build-out, it is important to ensure clear communication with your construction consultant(s) or contractors with respect to insurance. Determine who is responsible for the risk of loss and insuring your store/assets? E.g. if there is a flood or a fire that damages the store during build-out (or if someone gets hurt), you do not want to be guessing whether there is insurance in place. Also, ensure compliance with the requirements of Workplace Safety and Insurance Board, click here to learn more.

How important is a solid business plan for obtaining the right insurance?

Insurers want to understand how your business and your risks will be managed. The more you share – even if a draft – the better you position yourself. Some of the specific items to include in your business planning, from risk mitigation and insurance perspective, are the items listed above as well as what is included in the insurers’ cannabis retail applications. The good news is there are ways to reduce costs by knowing the underwriters’ preferences and by working early with a knowledgeable insurance broker to position your store as “best in class”.

Have more questions? Reach out to Mert directly:

Mert Guler

Purves Redmond Limited

Cell: 647-524-2139

E: mguler@purvesredmond.com

BOTTOM LINE

In last week’s article, we taught you how to design and implement a robust physical security system to ensure your employees, customers, and assets were protected. This week, we continued the theme of protection by teaching you how to ensure your store has adequate insurance coverage for all risks associated with running a cannabis retail store operation. While a comprehensive insurance plan can be costly (typically $20,000 to $50,000 / year), it is a worthwhile expense to keep your mind at ease as you embark on the journey towards becoming a successful cannabis retailer.

*Edit: A previous version of this article published in August 2020 stated that cannabis retailers are required to obtain a minimum of $10 million in product liability. As of November 18, 2020 the OCS now only requires a minimum of $5 million commercial general liability (CGL) insurance to be obtained by cannabis retailer operators in Ontario.

CANNDELTA IS HERE TO HELP

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndeltav2:8890 or toll-free at 1 (877) 274-6777.

Here’s what you need to know about how to make sure your store is secure and compliant without breaking the bank…

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”. Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

Protecting the customers, employees, and assets of your retail store is the most important job of retail store owners and managers. From a physical security standpoint, this means equipping the retail store will all the necessary features to ensure that you can adequately prevent and react to any threats against your store and the individuals within it. In this article, we teach you how to design a robust security system that will ensure your retail store is secure, on the right side of compliance, all without breaking the bank. You will hear from leading security experts across the Canadian cannabis industry, who have offered up tips for developing your physical security plans.

PROVINCIAL REGULATIONS

 One of the foremost goals of cannabis regulations is to prevent the diversion of cannabis products into the hands of youth and the illicit market. Accordingly, federal and provincial regulations were designed to ensure that companies dealing with the production, handling, and distribution of cannabis products are equipped with a sufficient level of security features to prevent theft or the misplacement of products. Each provincial government has established its own set of requirements for the level of security needed for recreational cannabis stores, which should be reviewed extensively prior to initiating the development of your security program. Here, we cover the requirements for Ontario retail stores as described by the Alcohol and Gaming Commission of Ontario (AGCO) Registrar’s Standards for Cannabis Retail Stores, however much of this information can be applied to other provinces.

Mandatory Security Requirements

 The AGCO’s Registrar’s Standards outlines numerous mandatory physical security requirements that will need to be in place prior to passing your inspections and opening your doors to customers (see Article 3 for details on inspections). Noteworthy requirements include: Section 2.1: A secure, high-resolution surveillance system must be in place at all times. Cameras and lighting must be positioned to clearly capture 24-hour coverage of the interior of the premises and immediately outside the premises, including entrances, exits, age-gating, pick up areas, point of sale area, receiving, sales floor and storage areas. Section 2.2: All cannabis must be stored securely at all times and be accessible only by staff from receipt of the product to point of sale, destruction, or return to the Ontario Cannabis Store (OCS). Section 2.4: All points of access to the premises must be secure and protected against unauthorized access. Section 2.5: Licensees must ensure that cannabis and accessories are not visible from the exterior of the premises. Section 5.1: Licensees must take reasonable measures to ensure that patrons are not purchasing cannabis or cannabis accessories on behalf of individuals under the age of 19 During your first inspection, the AGCO compliance officer (C/O) will look to confirm that each physical security requirement listed in the Registrar’s Standards has been implemented into your retail store and is functioning as intended. They will check to see that visualization into your store from the outside or in your age-gating area (e.g., vestibule inside the store) is not possible, that you have camera footage covering all areas where cannabis could be present along with your point of sale area, and that your access points are secured. They will look at your live surveillance footage to ensure there are no blind spots throughout the store. This is especially important for your secure storage area, and C/O’s will often strategically position tissue boxes throughout your storage room and check the camera footage to ensure it remains visible at all times. They will also ask about the structural makeup of your secure storage area, and while the AGCO has no prescriptive guidelines for the construction of your storage area, they will look to see that you have made an effort to secure it (e.g., drywall reinforced with metal mesh). Passing your first inspection is a critical checkpoint during the Retail Store Authorization (RSA) phase for advancing into the queue where you will await your licensing date. Given that the security system is the priority of the first inspection, it is highly recommended that your early efforts focus on getting your store built out to the point where you can have your system installed. Like many components of your retail store operation, your physical security system is something that should be developed in consultation with professionals, ideally those with cannabis retail experience. Working with experts will ensure that your security program is appropriate for your store location and is compliant with respect to all federal and provincial regulations. It is no secret that it can be quite expensive to equip your store with all the necessary security features to keep it secure and compliant. In Article #1 of this series, we highlighted that a security installation (equipment included) can cost you anywhere between $25,000 to $75,000 depending on the size and level of detail required. Working with professionals such as security consultants is a great way to ensure you don’t overspend in the pursuit of the perfect security system.

DESIGNING A ROBUST SECURITY SYSTEM

 The AGCO Registrar’s Standards is a great guide for the level of security detail your store will need, but it is by no means exhaustive, and additional features will be needed to ensure the safety of your store. Adapting your physical security measures to the risks associated with your specific location, including any vulnerabilities that might exist based on the construction and design of your store, will go a long way to ensuring a robust security system is achieved. A comprehensive security system is developed by considering a retail store’s specific needs and identifying potential risks to create a program that has multiple layers of security. The following key principles should be considered when developing your security program:
  • The ability to prevent individuals under the age of 19 from purchasing cannabis or cannabis accessories;
  • The ability to deter a security incident in the first occurrence;
  • The ability to detect a security incident at the earliest opportunity;
  • The ability to delay the intruder from their objective following detection;
  • The ability to respond to the security incident;
  • The ability to recover from the security incident.
Each layer of security increases the ability to deter, detect, delay, respond, and recover from a security incident. In addition, security-specific Standard Operating Procedures (SOPs) should be established to allow staff to be aware of security protocols and to react appropriately (more on SOPs later).

Physical Security

In addition to surveillance cameras, many stores implement additional security features such as access and intrusion controls (e.g., electronic card readers equipped with door contact sensors and electric strike), advanced locking systems, motion detectors, glass breaks, and silent alarms. Many retail stores will also install a camera viewing station directly outside your receiving area so you can confirm that an approved individual is at the door before opening it. Importantly, your retail store security will be connected to external security companies such as a ULC listed central monitoring station, which keeps tabs on your closed-circuit television (CCTV) and other security systems and will notify local emergency authorities in the event of an alarm. It is also strongly recommended that you establish a strong relationship with the emergency service stations within your community, including the police and fire department. The more familiar they are with your retail store operation, including its physical make-up and layout, the better equipped they will be to respond in the event of an emergency. While it is not required by the AGCO that you employ security guards at your retail store, many retailers will opt to do so as an added layer of protection. This is a great way to strengthen your retail store security and to provide comfort to your patrons, staff, and members of your community. Additionally, it is common to employ a Head of Security (or similar position) who can manage all security-related aspects and personnel of your retail store, which frees up significant bandwidth for your retail store manager to focus on other aspects of the operation. Designing a robust physical security plan is of utmost importance for your retail store operation (photo taken from Body and Spirit Cannabis at 361 Yonge St, Toronto).  

ORGANIZATIONAL SECURITY

 The retail store’s hierarchy system, which stipulates the direction, responsibilities, and flow of information between positions within the organization, should be understood by all employees of the store. It is recommended that you develop an organizational chart that identifies all key positions, along with their responsibilities, and make it accessible to all employees. By understanding who to report to, your employees will be well equipped to respond to an alarm or emergency in an effective and timely manner.  Responsibilities of The Store Manager and Owner  The Retail Store Manager (RSM) and Retail Store Owner (RSO) are responsible for ensuring that all applicable physical store requirements set out in Section 2.0 of the Registrar’s Standards for Cannabis Retail Stores are strictly adhered to. Additionally, the RSM and RSO are responsible for:
  • Implementing a Security Awareness and Training program for new employees, and ongoing training of all employees;
  • Developing and maintaining company Standard Operating Procedures (SOPs) and policies related to security;
  • Ensuring secure transportation of cannabis either back to OCS in the event of a product recall, or to another authorized store controlled by the RSO;
  • Maintaining and ensuring a system and policies that protect customer information;
  • Managing all cybersecurity, IT infrastructure, and potential operation threats that could compromise the security of the company;
  • Investigating and taking corrective and protective actions for any security concerns, incidents, breaches, loss or theft, operational risk, adverse information, threats, security/fire/hazard alarms, and safety incidents.

 SOPs and Staff Training

 Successful retailers will strive to establish a culture of security and safety within their store from the outset. This is best achieved by training and educating your staff on the risks associated with the retail store, and how to properly respond in the event of an emergency. A great way to educate and train your staff is to develop and implement a robust set of Standard Operating Procedures (SOPs), which are the blueprint for how your employees should operate in a given situation. Having a robust set of SOPs established will not only ensure that your retail operation operates within the confines of federal and provincial compliance, but it will also maximize productivity and profit while minimizing the risk and liability of incidents and emergencies. It is imperative to have a comprehensive set of SOPs that encompass all aspects of the retail operation, and this is especially true for security-related measures. A strong set of SOPs will be comprehensive, concise, and unambiguous. They should clearly identify who is responsible for responding to a given alarm or emergency, and who to report to. They should contain contingency plans (where appropriate) in the event that something unexpected happens. They should also be “stress-tested” during mock-up training scenarios to assess your employee’s comprehension of the SOPs and therefore the quality of the SOPs overall. SOPs you should consider developing for your retail store security include:
  • General security protocols
  • Alarm systems
  • Cash handling
  • Video Surveillance (CCTV) protocols
  • Emergency Action Plans (e.g., burglary, break-and-enters, power failures)
  • Opening and Closing Procedures
  • Transportation Manifest and Security
  • Record Keeping and Inventory Management

TIPS FROM THE SURVEILLANCE SHOP

To give you first-hand insight into all that goes into designing a robust security system, we caught up with Claudia Pietrantonio from The Surveillance Shop, a Canadian based company that specializes in commercial security camera systems, intrusion alarm, access control & intercom.  Can you tell us about The Surveillance Shop’s role working with Cannabis Retailers? Government requirements make security a major investment in any cannabis project and this is absolutely the case with retail. Our job as a security integrator is to educate our customers on not only what they need to meet government requirements but also on products and services that help them run their businesses safer and more efficiently. What should retailers be considering when developing a security program for their store? There are three important questions to ask yourself before requesting quotes on your project:
  1. Do you intend to have more than one store?
  2. Do you see value in a keyless environment?
  3. Are things like real-time customer traffic/heat mapping important to you?
Basic requirements for a cannabis retail store start at a camera system that provides coverage of the storage, retail, entrances, and receiving areas as well as an intrusion system. We always recommend coverage throughout corridors/transitional areas and ask our customers what other areas are important to you? The next step in building your system is asking yourself if you ever intend to own more than one store. If the answer is no, you are can likely get away with a basic recorder intended for small businesses – this would be the most cost-effective solution. If the answer to this question is yes, you need to start considering systems that allow for centralized control and user management. This is critical when you have many users spanning multiple locations. Do you recommend retailers implement access control systems? As a retail store, you are not required to implement an access control system to comply with government requirements. However, we strongly recommend access control at a minimum on your main employee entrance and on your secure storage room. This is not just a good practice is something that just makes practical business sense for most people. It allows you to do things like limit the time period employees can access the store or secure storage (why would someone need to access secure storage at 3 am?), allows you to keep track of the time people are coming and going (time and attendance) and removes the need to call a locksmith if keys are lost or employees are terminated. Are retailers starting to use more advanced security tools? We always ask our customers to consider if a technology such as video analytics (that provide some real-time intelligence) is important to them. These would allow you to do things like heat mapping to show activity in your store and send alerts if a customer waiting has been waiting for longer than they should. While these technologies can be pricy, some retailers prefer to have that added layer of security included in their program.

BOTTOM LINE

 Establishing a robust security program that will protect your store, including its customers, employees, and assets, is the foremost goal of all cannabis store retailers. Hiring professionals who have experience working in the cannabis retail space is a great way to ensure your store gets the security program it needs and is on the right side of compliance. Additionally, working with experts will ensure that you don’t overspend on security features you don’t need. We finish off by leaving with you some advice from Barry Davidson, who is a leading cannabis security expert with the Hyde Advisory and CannaNavigators: “The importance of integrating your security and safety systems into your business operations cannot be understated. In a retail environment, especially high-profile and high-value cannabis retail, this is a true imperative to the success of your business. Don’t be oversold but don’t go short because both of those choices have consequences.” Be sure to check out next week’s article on insurance coverage for all aspects of your cannabis retail store, which will be published Wednesday, August 19th.

CANNDELTA IS HERE TO HELP

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndelta.com or toll-free at 1 (877) 274-6777.

Here’s what you need to know about how to design an intriguing cannabis retail store …

By Vanessa Bairos, M.Sc.  | Project Coordinator | CannDelta

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”. Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

The key to success for cannabis retail stores – whether you’re just setting up shop or you’ve been in business for some time now – is converting casual customers into loyal customers who will be champions for your brand. The design of your store will go a long way towards this goal, and while it may seem daunting, focusing on key concepts with your target customer demographic in mind will go a long way. Like most things in the cannabis industry, cultivating a unique customer experience through branding and marketing can be a challenge but, if done right, will put you ahead of the pack. In this article, we will explore how to create a store design that is both inviting and consistently intriguing to create a strategic and successful brand, separating you from the competitors. You will hear from licensed retailers across Ontario who have offered up tips to help you design a great store.

DESIGN

Now that you have set up shop in a prime location, the interior/exterior design can attract consumers who are either well-versed or new to legal cannabis in Canada. Unlike traditional retail stores, a cannabis dispensary holds a unique position in being a source for cannabis products and a resource to help navigate cannabis regulations. A successfully designed dispensary will help bring your brand to life. Being intentional with the physical environment and focus of creating an ambiance for your target customer demographic will differentiate yourself from other retailers. As a new cannabis retail store owner, you want every customer who enters to not only make a purchase but to also be inclined to return the next time. Strategic merchandise selection and placement, along with the creative integration of digital and physical experiences will go a long way towards achieving this goal. The store should reinforce your brand experience through immersive design, starting with the storefront, the signage, and storefront display. Your store ambiance, carefully crafted using lighting, colour, and material helps create a memorable feeling for customers. Each variable needs to be carefully optimized based on your vision for your store. It is important to remember that it is okay if don’t nail this at first, but you should be continuously assessing customer feedback to inform positive changes to your design.

TIPS FOR STORE LAYOUT

Whether customers enter your store for a first look around or they visit with something specific in mind, you want your space to encourage them to browse and tempt them to purchase. There are numerous tips for achieving this:
  • Make sure your store is as accessible as possible with aisles wide enough to accommodate mobility devices.
  • Colourful displays and showcases make it easier to see products/merchandise but you will also want to create a space that is open, uncluttered, and has an inviting area where customers can glance around your store.
  • Making sure customers can comfortably navigate the store without having to squeeze by other patrons or display shelves. Building your layout around an established traffic flow important (increasingly so to maintain social distancing).
  • Most customers turn right upon entering a store so, showcasing popular products at a short distance inside and to the right will be eye-catching for the customer and more likely leading to a sell.
  • Place wall units and taller displays around the perimeter of the store and then use cabinet style display showcases, and multi-sided islands with glass sides/tops throughout the store to provide visibility. Cabinets should be fitted with locks to secure merchandise. Some retailers can get ahead of themselves and order too many display cabinets which can get costly so ensure you are buying a reasonable amount.
  • Displays should be rotated every few weeks, so your store offers new glances every time a returning customer enters. Relocating merchandise or displaying it in different ways can give it a fresh appeal to a consumer.
  • Give new brands/items a place of prominence, so customers can’t miss them.

SECOND MOVER ADVANTAGE

 If you’re reading this article and are thinking about starting a cannabis store, you might feel that you’re a little bit late to the game. In fact, you are a little bit late to the game, but that’s okay, you have the advantage of seeing all your competition’s cards. You can select branding that sticks out from the crowd, your logo can be something other than a cannabis leaf, your company name can be something other than a cannabis pun, your store can be something totally unique. Just as you should seek to put some distance between your store location and the competition, you should equally look to carve out your own territory in the marketing realm.

RESEARCH

Do some reconnaissance: put on your best “customer” disguise and go scout out what your competition is doing. Find out what elements you like, then get a second opinion, then a third… and so on. Every store owner has something (or a list of somethings) they wish they had done differently, talk with them and try to suss out what they would change about their own store, learn from their mistakes. If the first cannabis store you walk into is yours, you’ve gone about this entire process the wrong way. You want the store to be true to your vision, but ultimately, you’re building it to appeal to the customer.

DIY (or not)

Because we’re inundated with well-crafted branding and effective marketing campaigns on a daily basis, we may be lured into the false sense that it’s easy to do ourselves. This would be succumbing to survivorship bias, where we don’t acknowledge the mountain of failed brands and forgettable marketing. Marketing and branding professionals can take the grab-bag of ideas you have in your head and refine it into a cohesive strategy. A marketing company can also help you from running afoul of strict promotion regulations. Whether you decide to work with a professional or go it alone, the process is largely the same. Start with a core concept or core message and build outwards to peripheral details that convey that vision.  Building a design portfolio with photos of materials, colours, furniture, or really anything else that exudes the message is a good next step. Use this collection of inspiration to decide on colour pallets and company typeface.  Your logo and your name are the two most important branding elements and will largely dictate the success of your company, invest in them accordingly.

 CUSTOMER EXPERIENCE AND CREATING BRAND LOYALTY

Due to the strict regulations around promotion, retail loyalty programs are largely prohibited, leaving little to no wiggle room to ensuring cannabis retailers can keep consumers coming back to shop. However, focusing on personalized service, consistent inventory, partnerships, and education can be creative avenues to heighten a customer’s experience and create brand loyalty. Focusing on personalized in-store services such as attentive and knowledgeable salespeople can increase a customer’s overall experience, especially those who are new to cannabis. Keeping a consistent inventory will also drive the customer experience as customers find specific strains or brands that are suitable for them and ultimately want to purchase more. Guarantee that the customer’s second visit does not fall short from the first due to out-of-stock products. Partnerships between retailers and license holders is becoming popular, where license holders provide retailers with branded ‘swag’ for free giveaways. Lastly, providing education to clientele who is new to cannabis will assist in helping the customer feel safe to purchase and consume cannabis in a familiar space.

HOW TO DIFFERENTIATE YOUR STORE?

Cannabis retail stores are already faced with the challenge of having competitors who sell the same products, so the most effective strategies for marketing and advertising are having a comprehensive marketing and media relations plan, attractive artwork/branding and creating a brand with good selection and customer service which can be spread through word-of-mouth. Choosing the correct segments of the market and catering your retail store to focus on those will inevitably create a strong branding experience and lead to success. Ensuring that your advertising is only ever reaching adults by using age-gated platforms and venues will go a long way towards staying compliant with regulations. Some market research and comparisons on what other retailers are selling can help direct the ‘Dos and Don’ts’ of your cannabis retail store.  Using your sales data to identify consistently popular products allows you to curate your inventory to make room for new products without sacrificing customer favorites. Cannabis retailers who will survive and thrive in this competitive marketplace will need to focus on the customer experience, good product selection, product-focused education and a strong, consistent brand.

ADAPTING STORE DESIGN DURING COVID-19

In light of the current global pandemic, store protocols have to be adapted to value customer safety over everything else. Being able to adapt and incorporate digital streams for online sales and curbside pick-up service, protective shields, personal protective equipment, adhering to social distancing through visible markers and signage will keep customers safe and more likely to buy from your store.  With no end date in sight for the pandemic, store design that mitigates close contact and incorporates preventative measures will create a safe and welcoming environment for the customers.

BOTTOM LINE

From design to marketing, there are creative ways to help your cannabis retail store stand out from your competitors. For this article, we covered what to consider when thinking about design as well as helpful tips for a store layout. You should now be equipped with the information needed to build an awesome brand for your retail store. In next week’s article, we cover physical security and other regulated features to incorporate in your store design.

WORDS OF WISDOM

Featured below is advice from current Ontario retailers who have been there and done that. You’ll hear more from these retailers, along with others in the industry throughout this series. What strategy have you found to be the most effective for marketing and advertising? “Great artwork”
  • Rob Heydon, 420 Love Main and Gage
“Word of mouth. Never underestimate the power of the spoken word”
  • Don Tetrault, Bud Bank
“Failing to plan, is planning to fail. It is important to have a comprehensive marketing and media relations plan.”
  • Steven Fry, Sessions Cannabis
“word of mouth – good pricing, the right product selection, and outstanding service sell themselves”
  • Jason Krulicki, One Plan Kensington Market

CANNDELTA IS HERE TO HELP

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndeltav2:8890 or toll-free at 1 (877) 274 6777.

Here’s what you need to know about how to design an intriguing cannabis retail store …

By Vanessa Bairos, M.Sc.  | Project Coordinator | CannDelta

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”. Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

The key to success for cannabis retail stores – whether you’re just setting up shop or you’ve been in business for some time now – is converting casual customers into loyal customers who will be champions for your brand. The design of your store will go a long way towards this goal, and while it may seem daunting, focusing on key concepts with your target customer demographic in mind will go a long way. Like most things in the cannabis industry, cultivating a unique customer experience through branding and marketing can be a challenge but, if done right, will put you ahead of the pack. In this article, we will explore how to create a store design that is both inviting and consistently intriguing to create a strategic and successful brand, separating you from the competitors. You will hear from licensed retailers across Ontario who have offered up tips to help you design a great store.

DESIGN

Now that you have set up shop in a prime location, the interior/exterior design can attract consumers who are either well-versed or new to legal cannabis in Canada. Unlike traditional retail stores, a cannabis dispensary holds a unique position in being a source for cannabis products and a resource to help navigate cannabis regulations. A successfully designed dispensary will help bring your brand to life. Being intentional with the physical environment and focus of creating an ambiance for your target customer demographic will differentiate yourself from other retailers. As a new cannabis retail store owner, you want every customer who enters to not only make a purchase but to also be inclined to return the next time. Strategic merchandise selection and placement, along with the creative integration of digital and physical experiences will go a long way towards achieving this goal. The store should reinforce your brand experience through immersive design, starting with the storefront, the signage, and storefront display. Your store ambiance, carefully crafted using lighting, colour, and material helps create a memorable feeling for customers. Each variable needs to be carefully optimized based on your vision for your store. It is important to remember that it is okay if don’t nail this at first, but you should be continuously assessing customer feedback to inform positive changes to your design.

TIPS FOR STORE LAYOUT

Whether customers enter your store for a first look around or they visit with something specific in mind, you want your space to encourage them to browse and tempt them to purchase. There are numerous tips for achieving this:
  • Make sure your store is as accessible as possible with aisles wide enough to accommodate mobility devices.
  • Colourful displays and showcases make it easier to see products/merchandise but you will also want to create a space that is open, uncluttered, and has an inviting area where customers can glance around your store.
  • Making sure customers can comfortably navigate the store without having to squeeze by other patrons or display shelves. Building your layout around an established traffic flow important (increasingly so to maintain social distancing).
  • Most customers turn right upon entering a store so, showcasing popular products at a short distance inside and to the right will be eye-catching for the customer and more likely leading to a sell.
  • Place wall units and taller displays around the perimeter of the store and then use cabinet style display showcases, and multi-sided islands with glass sides/tops throughout the store to provide visibility. Cabinets should be fitted with locks to secure merchandise. Some retailers can get ahead of themselves and order too many display cabinets which can get costly so ensure you are buying a reasonable amount.
  • Displays should be rotated every few weeks, so your store offers new glances every time a returning customer enters. Relocating merchandise or displaying it in different ways can give it a fresh appeal to a consumer.
  • Give new brands/items a place of prominence, so customers can’t miss them.

SECOND MOVER ADVANTAGE

 If you’re reading this article and are thinking about starting a cannabis store, you might feel that you’re a little bit late to the game. In fact, you are a little bit late to the game, but that’s okay, you have the advantage of seeing all your competition’s cards. You can select branding that sticks out from the crowd, your logo can be something other than a cannabis leaf, your company name can be something other than a cannabis pun, your store can be something totally unique. Just as you should seek to put some distance between your store location and the competition, you should equally look to carve out your own territory in the marketing realm.

RESEARCH

Do some reconnaissance: put on your best “customer” disguise and go scout out what your competition is doing. Find out what elements you like, then get a second opinion, then a third… and so on. Every store owner has something (or a list of somethings) they wish they had done differently, talk with them and try to suss out what they would change about their own store, learn from their mistakes. If the first cannabis store you walk into is yours, you’ve gone about this entire process the wrong way. You want the store to be true to your vision, but ultimately, you’re building it to appeal to the customer.

DIY (or not)

Because we’re inundated with well-crafted branding and effective marketing campaigns on a daily basis, we may be lured into the false sense that it’s easy to do ourselves. This would be succumbing to survivorship bias, where we don’t acknowledge the mountain of failed brands and forgettable marketing. Marketing and branding professionals can take the grab-bag of ideas you have in your head and refine it into a cohesive strategy. A marketing company can also help you from running afoul of strict promotion regulations. Whether you decide to work with a professional or go it alone, the process is largely the same. Start with a core concept or core message and build outwards to peripheral details that convey that vision.  Building a design portfolio with photos of materials, colours, furniture, or really anything else that exudes the message is a good next step. Use this collection of inspiration to decide on colour pallets and company typeface.  Your logo and your name are the two most important branding elements and will largely dictate the success of your company, invest in them accordingly.

 CUSTOMER EXPERIENCE AND CREATING BRAND LOYALTY

Due to the strict regulations around promotion, retail loyalty programs are largely prohibited, leaving little to no wiggle room to ensuring cannabis retailers can keep consumers coming back to shop. However, focusing on personalized service, consistent inventory, partnerships, and education can be creative avenues to heighten a customer’s experience and create brand loyalty. Focusing on personalized in-store services such as attentive and knowledgeable salespeople can increase a customer’s overall experience, especially those who are new to cannabis. Keeping a consistent inventory will also drive the customer experience as customers find specific strains or brands that are suitable for them and ultimately want to purchase more. Guarantee that the customer’s second visit does not fall short from the first due to out-of-stock products. Partnerships between retailers and license holders is becoming popular, where license holders provide retailers with branded ‘swag’ for free giveaways. Lastly, providing education to clientele who is new to cannabis will assist in helping the customer feel safe to purchase and consume cannabis in a familiar space.

HOW TO DIFFERENTIATE YOUR STORE?

Cannabis retail stores are already faced with the challenge of having competitors who sell the same products, so the most effective strategies for marketing and advertising are having a comprehensive marketing and media relations plan, attractive artwork/branding and creating a brand with good selection and customer service which can be spread through word-of-mouth. Choosing the correct segments of the market and catering your retail store to focus on those will inevitably create a strong branding experience and lead to success. Ensuring that your advertising is only ever reaching adults by using age-gated platforms and venues will go a long way towards staying compliant with regulations. Some market research and comparisons on what other retailers are selling can help direct the ‘Dos and Don’ts’ of your cannabis retail store.  Using your sales data to identify consistently popular products allows you to curate your inventory to make room for new products without sacrificing customer favorites. Cannabis retailers who will survive and thrive in this competitive marketplace will need to focus on the customer experience, good product selection, product-focused education and a strong, consistent brand.

ADAPTING STORE DESIGN DURING COVID-19

In light of the current global pandemic, store protocols have to be adapted to value customer safety over everything else. Being able to adapt and incorporate digital streams for online sales and curbside pick-up service, protective shields, personal protective equipment, adhering to social distancing through visible markers and signage will keep customers safe and more likely to buy from your store.  With no end date in sight for the pandemic, store design that mitigates close contact and incorporates preventative measures will create a safe and welcoming environment for the customers.

BOTTOM LINE

From design to marketing, there are creative ways to help your cannabis retail store stand out from your competitors. For this article, we covered what to consider when thinking about design as well as helpful tips for a store layout. You should now be equipped with the information needed to build an awesome brand for your retail store. In next week’s article, we cover physical security and other regulated features to incorporate in your store design.

WORDS OF WISDOM

Featured below is advice from current Ontario retailers who have been there and done that. You’ll hear more from these retailers, along with others in the industry throughout this series. What strategy have you found to be the most effective for marketing and advertising? “Great artwork”
  • Rob Heydon, 420 Love Main and Gage
“Word of mouth. Never underestimate the power of the spoken word”
  • Don Tetrault, Bud Bank
“Failing to plan, is planning to fail. It is important to have a comprehensive marketing and media relations plan.”
  • Steven Fry, Sessions Cannabis
“word of mouth – good pricing, the right product selection, and outstanding service sell themselves”
  • Jason Krulicki, One Plan Kensington Market

CANNDELTA IS HERE TO HELP

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndeltav2:8890 or toll-free at 1 (877) 274 6777.

Here’s what you need to know about how to find the best location for your cannabis retail store…

By Chris Lavoie, PhD | Associate Consultant | CannDelta

ABOUT THIS SERIES

CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”. Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.

OVERVIEW

British real estate tycoon Lord Harold Samuel coined the phrase “location, location, location”, which is the best piece of advice to follow when considering where to position your cannabis retail store. The location of your store will have major implications on nearly every aspect of your operation, from customer demographics and accessibility to pricing strategy and revenue. Finding the right location becomes even more of a challenge when considering Ontario private cannabis retail regulations, which place restrictions on where retail stores can be located (spoiler alert: not all municipalities in Ontario allow private retailers, looking at you Mississauga!). In this article, we will teach you how to find a great retail store location that suits your desired goals, is within a compliant region, and is strategically positioned away from competitors. You will hear from current retailers and commercial real estate agents, who have offered up tips and tricks for finding a great location and negotiating favorable leasing terms. For the purpose of this article series, we are focusing exclusively on Ontario cannabis retail, however much of the information contained within this article series can be translated to other provinces.

WHERE TO GO?

Deciding where to set-up shop will primarily depend on the region you live in, municipal zoning (more on that later), and the position of existing and prospective retailers within that region. While it is ideal to have your retail store in close proximity to your place of residence, this may not always be the best option (or possible). In this section, we discuss strategies and key considerations for finding a great location. Eligibility Requirements In January 2019, Ontario municipalities had a one-time option to opt-out of allowing private cannabis retail stores in their communities. Municipalities that opted out can opt-in at any time, however, this would prevent them from opting out in the future. The AGCO continuously updates a list of Ontario municipalities prohibiting or allowing cannabis retail stores, and there are currently 73 municipalities out of 444 total in Ontario that has opted out. Some notable municipalities  that currently prohibit private cannabis retail stores include (2016 census of the population):
  • Markham (328,966)
  • Mississauga (721,599)
  • Newmarket (84,224)
  • Oakville (193,832)
  • Pickering (91,771)
  • Richmond Hill (195,022)
  • Vaughan (306,233)
  • Whitby (128,377)
Once you have identified a municipality to set-up shop in, you will then need to find a retail space. There are no restrictions on how close you can situate your store relative to other licensed cannabis dispensaries, however, your proposed retail store cannot be located within 150 meters of the property line of a school, or private school as defined by the Education Act. To automate approvals, the AGCO has created an exclusion map using up-to-date school location data provided by the Ministry of Education. Upon request, the AGCO can conduct a review of school proximity calculations to verify the distance between a proposed cannabis retail store location and nearby schools. Do Your Research The number one goal in finding a location is to be situated in an area that is easily accessible for your intended customer demographic and is as far as possible from competitors. There are numerous resources available to help you find a good location in your chosen region:
  • AGCO Map: shows the position of current/prospective retailers
  • Real Estate Brokers: look for brokers with cannabis retail experience
  • Professional Contractors: consultants and lawyers who specialize in cannabis retail
  Figure 1. A map of prospective and current cannabis retail stores in Ontario (overlooking Toronto). Community Response Situating your retail store in a location that will upset the community can be a recipe for disaster. The registrar has established a mechanism known as the Public Notice Period (PNP) to provide constituents of a given municipality a platform to voice their concerns. The PNP is a critical 15-day period during the RSA licensing stage where you will need to post public notice placards on your storefront to notify the community of your prospective store. The placards give residents instructions for submitting objections to your store, which typically are related to proximity to schools, daycares and public parks, traffic safety and parking, and the number of other cannabis retail stores in the area. It is important to choose a retail location that the community will endorse. Situating a retail store in an area that will upset the local community (e.g., highly residential areas close to schools, parks, and playgrounds) will lead to an abundance of objections, which can take significant time to respond to, and could even result in an application being rejected (the Registrar’s decisions are final). Talk to residents, city councilors, and MPPs before finalizing a retail space so you have confidence you are setting up shop in an appropriate location.

LEASE AGREEMENTS

Once you have identified a great location in your target region, you will then need to secure a leasing agreement for the desired retail space. Negotiating a favorable lease agreement can be a major challenge for cannabis retailers, who are routinely forced into paying premiums by landlords who are skeptical of the longevity and profitability of the cannabis market. It is strongly recommended that you work with professionals such as lawyers, consultants, and real estate agents to ensure favorable lease terms that protect your short and long-term interests are secured. One of the leading Canadian law firms operating in the commercial real estate space is Blakes, who has extensive experience in the Ontario cannabis space. We caught up with Patrick Gordon, an associate from Blakes, to provide tips and tricks for negotiating favorable lease agreements for cannabis retail stores. What is the hardest part of finding a great location for a client? “One of the most critical and complicated issues in finding a great location from a legal perspective is managing the zoning and municipal approvals process. As a starting point, many jurisdictions have strict rules regarding the minimum distances between cannabis-related uses and other uses, such as liquor stores, schools and daycares. Municipalities may also have varying restrictions related to the general zoning of cannabis-related businesses; tenants should ensure that licensed cannabis retail is a “permitted use” under the specific municipality’s by-laws. The Alcohol and Gaming Commission of Ontario provided municipalities a one-time option to opt-out of sitting cannabis retail stores within the municipality, resulting in more than 75 municipalities in Ontario opting out. Tenants first need to ensure that they are not agreeing to lease space in one of those 75 municipalities – after that, it gets more complicated! Most landlords will not provide tenants with any comfort with respect to the tenant’s legal use of the property, thereby requiring the tenant to satisfy itself that such zoning is in place and all necessary approvals are in good standing. Failure to confirm such approvals may leave the tenant with an unusable lease and make it difficult to assign or sublet given the cannabis-specific use clause most likely contemplated in the lease.” Aside from location, what are other dominant factors that prospective retailers are considering? “Some additional key factors that tenants should consider when entering into a cannabis retail lease are the following: Security Measures: Tenants may need protections in the lease related to their ability to install security and surveillance features to comply with legislation including the Cannabis Licence Act, 2018 (Ontario). Tenants may also need provisions preventing the landlord from accessing areas where the tenant’s cannabis inventory will be kept in accordance with the Cannabis Act (Canada). Insurance: Prospective cannabis retail tenants should canvass their ability to obtain insurance for the property they propose to lease and the cost of such insurance as early as possible in the transaction (and quickly once the landlord’s proposed insurance obligations are under the lease). Obtaining such insurance has proved challenging for some insureds in Canada to date although this market should continue to develop. Existing Security on Title: Tenants entering into leases should consider conducting legal due diligence such as title sub searches to ensure that any existing security granted by the landlord and registered on the title to the subject property would not prohibit a cannabis-related use of the property.” Cannabis retail leases can contain provisions that are not in a typical commercial lease. What are some examples that clients should be mindful of? “To protect themselves, landlords may include additional provisions in cannabis retail leases. Below are some provisions that tenants should be aware of when reviewing a lease: Additional Covenants: Landlords can be charged for owning or operating properties whose tenants are selling cannabis without the required license under the Cannabis Control Act (Ontario). As a result, landlords may include protections in the lease beyond the tenant’s general covenant to comply with applicable law, including a right to terminate the lease immediately or with an extremely short cure period for issues such as a breach or cancellation of a tenant’s license to operate a cannabis retail store. Odours, Ventilation, and Utilities: Landlords will want to ensure that the premises have sufficient ventilation to ensure odours are not transmitted outside of the premises or to other units in a multi-tenant complex. Landlords may also be concerned about utility use beyond that of a typical retailer and may seek to include lease provisions allowing the landlord to recover all associated power and utility costs and requiring the tenant to pay for upgrades. Nuisance: Tenants will want to ensure that the permitted use of the leased premises cannot be said to be a nuisance under the lease, which is typically an event of default. This could involve deeming the permitted use to not contravene the typical “no nuisance” language. Without a provision in the lease to this effect, the tenant’s risk profile can increase in certain circumstances, such as where other tenants complain about cannabis-related activities at the leased premises. Access and Security: Landlords may include provisions that establish security measures and limit a cannabis retail tenant’s access to the premises or common areas. For instance, in a multi-tenant property, a landlord may want to grant itself additional rights to control security measures on the premises by adding security guards to the premises and limiting customers’ ability to loiter in common areas. A cannabis retail tenant’s focus should be on trying to ensure the landlord cannot treat it differently than it treats its other non-cannabis tenants and their customers in the same complex. Alternative Forms of Financial Security: Commercial leases commonly grant landlords the right to exercise distress, a common-law remedy that allows the landlord to hold as security and sell the tenant’s goods and chattels found on the leased property to satisfy rent arrears. However, provincial and federal legislation prohibits unauthorized and unlicensed parties from handling, seizing, or distributing cannabis products. Tenants should ensure their leases recognize this tension, and landlords may look for security in other ways, such as holding security deposits and/or letters of credit.” What has been your experience dealing with landlords when they find out your client wants to open a cannabis retail store? “For the most part, once a lease or offer to lease retail premises for a cannabis retail use lands on the desk of the lawyer for the prospective tenant, the location has been chosen and the landlord already understands the desired use of the premises. However, many smaller landlords will be engaging with the legal points inherent in entering into a cannabis retail lease (many of which are described in this article) for the first time, and having experienced tenant counsel can be invaluable in helping the landlord understand and work through certain points in the legal landscape for this type of use smoothly and on an expedient timeline.” What strategies do you find effective for negotiating a more favourable lease agreement for cannabis retail tenants? “Prospective tenants should pay close attention to the wording of offers to lease entered into prior to the execution of a final lease agreement. If offers to lease are drafted carelessly or omit terms that are material to the tenant, it will likely limit the ability to subsequently introduce such material provisions. Tenants should consider the material terms most critical to them before engaging in direct negotiations with a prospective landlord and ensure as many of those terms as possible are addressed or negotiated at the offer to lease stage to ensure that these terms remain enforceable in a future executed lease agreement. For example, tenants should give thought to legislative requirements and try to negotiate for them in the offer to lease to import those necessary details in the transaction as early as possible. In addition, offers to lease are frequently binding on the parties and have more in common with the formal lease agreement than with a non-binding letter of intent. Landlords and tenants need to work together to strike a balance between ensuring the landlord’s comfort with the use of the premises and the tenant’s ability to operate its business according to its normal practices.” How important is it to negotiate and include a favourable termination clause in a lease agreement? What do those clauses look like? “Tenants should prioritize negotiating a termination option or other rights of mitigation when committing to a long-term obligation where they lack sufficient insight into their ability to operate for retail cannabis use. For example, the Expression of Interest Lottery implemented by the Alcohol and Gaming Commission of Ontario with respect to Ontario retail licenses that was amended, litigated against and ultimately dismantled made it extremely difficult for a tenant to ascertain its ability to obtain a retail operating license if it did not already have one at the time it was negotiating a retail lease. The overall regulatory uncertainty, including previous changes of directions, demonstrates the need to draft leases to allow for a termination option if a prospective tenant does not obtain a cannabis retail license or otherwise cannot commit to opening for business. Tenants without these clauses may be required to pay significant financial penalties for breaching the lease agreement if they cannot operate a cannabis retail store for lack of a government license, and will have difficulty assigning their lease or subleasing their leased premises given the cannabis-specific use clause most likely contemplated in their lease. These clauses typically are time-limited and frequently include the payment of a termination fee or permit the landlord to retain an often-significant security deposit if the tenant exercises the option. These options can seem very expensive when they are being negotiated but can be worth their weight in gold if tenants need to make a clean break from an otherwise long-term lease commitment.” The cannabis industry rules and regulations are fast changing. How are landlords adapting? “In my experience over the past couple of years, landlords ranging from major institutional investors to one-off property owners have invested time and money in trying to understand and learn the issues and complexities involved in leasing space to cannabis-related tenants including prospective cannabis retailers. Although many landlords’ initial approach to the issues and complexities is to identify them and subsequently try and push the risk onto the tenant, I’ve been really encouraged by the number of landlords willing to engage in a constructive dialogue over these novel provisions and to come to the table to try and strike deals that make sense for both landlord and tenant.”

BOTTOM LINE

Finding the right location for your retail store is one of the biggest decisions you will make. For this article, we covered what to consider when looking for a location, what resources are available, and how to negotiate favorable lease agreement terms. You are now well equipped to put this information into action and begin your search for the perfect retail store location.

CANNDELTA IS HERE TO HELP

Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a based regulatory and scientific cannabis consulting firm supporting companies across Canada. We can be reached at info@canndeltav2:8890 or toll-free at 1 (877) 274-6777.

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