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HIGHLIGHTS
  1. Fire and Flower says will not make bidding deals with second-round lottery winners in Ontario
  2. Compay’s CEO says Ontario needs to shift to open and due diligence-based system for cannabis retail licence distribution
  3. Fire and Flower still aims to open 75 stores in Ontario

One of Canada’s biggest cannabis retail chains said on Friday it will not make any bids to the second round of Ontario lottery winners due to “outrageous” multi-million dollar requests that do not make financial sense for the company’s objectives for return on capital, as well as expectations for the provincial government to make more permits available.

"We had no shortage of incoming calls but also no shortage of outrageous asks that we couldn’t, in good conscience, proceed,” said Fire and Flower Holdings Corp. chief executive Trevor Fencott.

“I think the lottery winners are of the view there will be no competition. That’s how they’re justifying their asks. Our view is the government will facilitate to get the number of stores to generate tax revenue and displace the black market.”

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The company said more than 20 of the 42 lottery winners reached out to Edmonton-based Fire and Flower, making offers to partner in various ways with the established retailer for a range of roughly $4-million to $6-million each. Mr. Fencott said these proposed amounts to acquire one store licence in Ontario equates to the build-out costs of eight to 12 Fire and Flower stores.

Earlier in the summer, the company received broad attention after convenience store operator Alimentation Couche-Tard Inc. announced its strategic investment in the retailer. And, this week, Fire and Flower announced plans to buy Cannabis Cowboy Inc.’s eight proposed cannabis stores that are under development in Alberta for $5.65-million in cash and shares.

Last Janurary, after Ontario’s first lottery gave 25 winners the opportunity to apply for store licences in the burgeoning cannabis industry, established pot retailers offered winners millions of dollars for the right to brand and operate venues on their behalf. There are now two Fire-and-Flower-branded stores in Ontario, after the company established agreements with winners of the region’s first lottery.

Ontario has so far opted to offer a total of 67 retail cannabis licences via two lotteries this year, with an additional eight on First Nations land, bringing the tally to 75.

This method was due to the Ontario government’s effort to limit store numbers in the face of a national shortage of legal pot that caused stores in other provinces to open with limited supplies and often reduce their shopping hours. Legal cannabis inventories, however, have improved significantly in recent months. Alberta has granted 280 retail cannabis licences, by far more than any other province, and stores are well-stocked weekly.

Fire and Flower, which operates adult-use pot shops in Alberta, Saskatchewan, Manitoba and the Yukon, said that supply is no longer an issue.

“This second licence lottery clearly demonstrates the problems with trying to allocate opportunity in this way as the focus seems to be on taking advantage of the system,” Mr. Fencott said.

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“Instead, we should all be focused on building and regulating a system that combats the black market, generates tax revenues, and creates jobs.”

It is time for Ontario to shift to an “open, due diligence-based system that is predominant in most other provinces,” Mr. Fencott said.

Fire and Flower said it still aims to open 75 stores in Ontario, which is the maximum number of outlets for one company there, and that it wants fair and merit-based opportunities.

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