How to Open a Dispensary in Ontario

Since the legalization of recreational cannabis in Canada in October 2018, Ontario has become a significant hub for the cannabis industry. The province’s regulatory framework, overseen by the Alcohol and Gaming Commission of Ontario (AGCO), ensures cannabis retail operations adhere to strict standards to promote public safety and responsible consumption. For entrepreneurs aiming to establish a cannabis dispensary in Ontario, understanding and navigating this regulatory landscape is crucial. 

This comprehensive guide outlines the necessary steps, licensing requirements, and compliance obligations involved in opening a cannabis retail store in Ontario.

Understanding Ontario’s Cannabis Laws

Understanding Ontario’s cannabis laws is essential for anyone considering entering the province’s cannabis retail market. The regulatory framework operates on two levels: Federal and provincial, each with distinct responsibilities and requirements.

Federal Legislation: The Cannabis Act

At the national level, the Cannabis Act governs the cultivation, distribution, and sale of cannabis across Canada. Enacted on October 17, 2018, this legislation aims to:

• Protect Public Health and Safety: By establishing strict product quality and safety standards.
• Restrict Youth Access: By setting a minimum age for purchase and prohibiting products appealing to youth.
• Reduce Illicit Market Activity: By creating a regulated legal market to diminish illegal sales.

The Act outlines specific prohibitions, such as restrictions on promotion and packaging that could appeal to minors, and sets penalties for violations.

Provincial Legislation: The Cannabis Licence Act, 2018

In Ontario, the Cannabis Licence Act 2018 and its accompanying regulations address the retail sale of recreational cannabis specifically. This Act establishes the framework for:

• Licensing Requirements: Defining the types of licences required for retail operations, including Retail Operator Licences and Retail Store Authorizations.
• Operational Standards: Setting rules for store operations, security measures, and staff training.
• Compliance and Enforcement: Outlining the AGCO’s authority to enforce regulations and impose penalties for non-compliance.

Role of the Alcohol and Gaming Commission of Ontario (AGCO)

The AGCO is the provincial authority responsible for regulating Ontario’s cannabis retail sector. Its duties include:

• Issuing Licences and Authorizations: Processing applications for Retail Operator Licences, Retail Store Authorizations, and Cannabis Retail Manager Licences.
• Ensuring Compliance: Conducting inspections and audits to ensure stores adhere to legal and regulatory standards.
• Public Safety and Education: Providing guidance to retailers and the public to promote responsible cannabis sales and consumption. 

Additional Regulatory Considerations

Ontario’s cannabis retailers must also comply with specific reporting and operational requirements:

• Data Reporting: Retailers are required to use a point of sale (POS) system that meets the AGCO’s data reporting standards, ensuring accurate tracking of sales and inventory.
• Curbside Pick-up and Delivery: As of March 15, 2022, the AGCO has permitted licensed cannabis retailers to offer curbside pick-up and delivery services permanently for consumer convenience.

Navigating Ontario’s cannabis laws requires a thorough understanding of both federal and provincial regulations. Prospective retailers should engage with the AGCO to combine full legal compliance and successful operations within this strictly regulated market.

Step 1: Determine Eligibility Requirements

Before applying for a Retail Operator Licence (ROL) to open a cannabis retail store in Ontario, it’s essential to meet specific eligibility criteria established by the AGCO. These requirements ensure applicants are qualified to operate within the province’s regulated cannabis market.

Age Requirement

Applicants, including all directors, officers, and shareholders of a corporation, must be at least 19 years old. 

Criminal Record

Applicants must not have any convictions or charges under the following:

• Cannabis Licence Act, 2018
• Cannabis Control Act, 2017
• Cannabis Act (Canada)

Additionally, any association with criminal organizations, as defined in subsection 467.1(1) of the Criminal Code (Canada), will render an applicant ineligible.

Tax Compliance

Applicants must have filed all required tax returns and should not owe any outstanding taxes, penalties, or interest to the Government of Ontario or the Canada Revenue Agency. Failure to comply with tax obligations can result in ineligibility for the ROL.

Corporate Ownership Restrictions

For corporate applicants, it’s imperative that no more than 25% of the corporation is owned or controlled, directly or indirectly, by one or more licensed cannabis producers or their affiliates. This measure is in place to prevent potential conflicts of interest and maintain a fair retail environment.

Additional Considerations

The AGCO conducts thorough background checks on all applicants and associated parties to assess eligibility. Providing false information during the application process will lead to disqualification.

Step 2: Apply for a Retail Operator Licence (ROL)

To operate a cannabis retail store legally in Ontario, obtaining an ROL from the AGCO is essential. This licence authorizes individuals or businesses to manage one or more cannabis retail outlets within the province. The application process is designed to ensure only qualified and responsible operators enter the market.

Application Submission

Prospective operators must submit their applications through the AGCO’s online portal, iAGCO. This platform facilitates the electronic submission and management of applications, streamlining the process for applicants. Access the portal here: iAGCO Online Services.

Disclosure Requirements

Applicants are required to provide detailed information, including:

• Personal History: Comprehensive background information for sole proprietors, partners, and key corporate figures such as directors and officers.
• Financial Details: Documentation demonstrating the financial capacity to operate a cannabis retail business.
• Business Affiliations: Disclosure of any connections with other businesses, particularly those within the cannabis industry.

Application Fees

A non-refundable application fee is required upon submission. This covers the costs associated with processing and reviewing the application. As of the latest information available, the fees are:

• Retail Operator Licence: $6,000 for a two-year term.
• Retail Store Authorization: $4,000 for a two-year term.
• Cannabis Retail Manager Licence: $750 for a two-year term.

Please note that these fees are subject to change, and it’s advisable to consult the AGCO’s official Fees and Payment page for the most current information.

Evaluation Criteria

The AGCO evaluates each application to ensure applicants:

• Meet all legal and regulatory requirements.
• Demonstrate the ability to operate with honesty and integrity.
• Act in the public interest, upholding public health and safety standards.

The AGCO’s registrar may issue the licence, attach specific conditions, or propose the refusal of the application based on these assessments. Applicants have the right to appeal decisions through the Licence Appeal Tribunal (LAT). 

Step 3: Secure a Retail Store Authorization (RSA)

Securing a Retail Store Authorization (RSA) is a critical step in establishing a cannabis retail store in Ontario. Each store location requires its own RSA, ensuring compliance with provincial regulations and community standards. The process involves several key components:

1. Location Compliance

Your proposed store must meet specific criteria:

• Exclusive Operation: The store must operate solely as a cannabis retail outlet. It cannot function simultaneously as another type of business, such as a restaurant, coffee shop, pharmacy, or convenience store.
• Physical Separation: The store must be enclosed by walls that separate it from any other commercial establishment or activity, ensuring a distinct and secure environment. 

2. Public Notice

A public notice process is mandated to involve the community:

• Posting Requirement: You must display a public notice placard at the proposed store location for a minimum of 15 calendar days.
• Community Feedback: During this period, local residents and the municipality can submit written comments regarding the proposed store. Submissions are limited to considerations of public interest, such as protecting public health and safety, restricting youth access to cannabis, and preventing illicit activities.

3. Inspection

Before authorization, an AGCO compliance official will conduct a thorough inspection:

• Regulatory Standards: The inspection ensures the store complies with the Cannabis Licence Act, 2018, its regulations, and the Registrar’s Standards for Cannabis Retail Stores.
• Operational Readiness: Inspectors will verify the store is prepared to order, receive, and store cannabis products securely, with measures like high-resolution surveillance systems and restricted access to cannabis storage areas.

4. Fees

A non-refundable application fee is required for each RSA application:

• Amount: The fee for a Retail Store Authorization is $4,000 for a two-year term.
• Payment: Fees must be paid upon application submission and are non-refundable, even if the application is withdrawn or refused.

Additional Considerations

• Proximity Restrictions: The proposed store must not be located less than 150 meters from a school or private school, as defined by the Education Act of 1990.
• First Nations Reserves: If applying for a store on a First Nations reserve, you must obtain approval from the Band Council for the store’s location.

Step 4: Obtain a Cannabis Retail Manager Licence (CRML)

In Ontario, each cannabis retail store must have at least one licensed cannabis retail manager to oversee daily operations and ensure compliance with regulatory standards. Holding the Cannabis Retail Manager Licence (CRML) is essential for individuals who are responsible for supervising staff, managing sales, purchasing cannabis, and handling contracts. The application process involves several key steps:

Training Requirement

Completion of an AGCO-approved cannabis retail employee training program is mandatory. The CannSell Standard Certification is the primary training program approved for educating retail employees on the responsible sale of cannabis and their legal obligations. The course costs $64.99 plus HST and takes approximately five hours to complete.

Application Process

Applications for the CRML are submitted through the AGCO’s iAGCO online portal. Applicants must provide comprehensive personal and financial information to facilitate the AGCO’s assessment.

Fees

A non-refundable application fee is required upon submission. As of the latest information available, the fee for a Cannabis Retail Manager Licence is $700  for a two-year term. 

Exemptions

Sole proprietors or partnerships where the owner manages the store may be exempt from obtaining a separate CRML. However, they must still fulfill all responsibilities associated with the role.

By ensuring compliance with these requirements, prospective cannabis retail managers can handle the licensing process effectively and contribute to the responsible sale of cannabis in Ontario.

Step 5: Prepare the Store for Operation

Preparing your cannabis retail store for operation in Ontario involves several critical steps to ensure compliance with the AGCO regulations. Here are some key considerations:

1. Security Measures

• Surveillance System: Install a high-resolution video surveillance system that monitors all areas where cannabis is present, including points of sale and storage rooms. Ensure cameras cover entrances and exits to capture clear images of individuals entering and leaving. Maintain recordings for a minimum of 30 days, as stipulated by the AGCO’s Registrar’s Standards.
• Secure Storage: Store all cannabis products in a secure, locked room or container accessible only to authorized staff. Implement inventory management systems to track cannabis from receipt to sale, preventing diversion and theft.

2. Product Display

• Visibility Restrictions: Ensure cannabis and accessories are not visible from the exterior of the premises. This includes implementing window coverings or display cases that prevent external visibility.
• Sensory Display Containers: If offering sensory displays for customers to see and smell cannabis, use tamper-proof, locked containers that prevent direct contact with the product. These containers must be secured to prevent removal from the premises.

3. Staff Training

• Mandatory Certification: All employees, including managers and security personnel, must complete an AGCO-approved cannabis retail employee training program before their first day of work. This training educates staff on responsible sales practices, legal requirements, and the prevention of sales to minors. 

4. Point of Sale (POS) System

• Compliance Requirements: Implement a POS system, like IndicaOnline’s platform, which is capable of recording and reporting sales data in accordance with the AGCO requirements. The system should track inventory, process transactions securely, and facilitate accurate record-keeping for audits.
• Data Retention: Maintain sales and inventory records for a minimum of three years, ensuring they are readily accessible for inspections or audits by the AGCO. 

5. AGCO Inspections

• Ongoing Compliance: Be prepared for periodic inspections by the AGCO to ensure continued compliance. Maintain up-to-date records and be prompt in addressing any issues identified during inspections to avoid penalties or potential suspension of your Retail Store Authorization.

6. Accessibility Compliance

• Physical Accessibility: Ensure your store is accessible to all customers, including those with disabilities. This includes providing ramps, wide aisles, and accessible restrooms, adhering to the Accessibility for Ontarians with Disabilities Act (AODA).
• Service Accessibility: Train staff to assist customers with diverse needs, ensuring an inclusive shopping experience for everyone.

7. Health and Safety Protocols

• Employee Safety: Develop comprehensive health and safety policies, including training on handling cannabis products, emergency procedures, and protocols for dealing with impaired customers.
• Sanitation Standards: Maintain high standards of cleanliness throughout the store to ensure a safe environment for both customers and staff.

Step 6: Ensure Ongoing Compliance

To operate a successful cannabis retail store in Ontario, you need to navigate and comply with the detailed regulations set by the AGCO. These requirements are designed to keep your operations lawful, safe, and transparent, focusing on essential aspects of day-to-day management. Here’s what you need to know:

1. Reporting Obligations

• Sales and Inventory Reporting: Submit detailed sales and inventory data to the AGCO regularly to maintain transparency and support market monitoring. Implementing a robust inventory management system can facilitate accurate and timely reporting.

2. Age Verification

• Strict Age Restrictions: It’s illegal to sell cannabis to individuals under 19, so you must establish and enforce protocols to verify the age of every customer before completing a sale. Acceptable forms of identification should be specified, and staff should be trained to recognize valid IDs.

3. Advertising and Promotion

• Regulatory Compliance: Ensure all marketing materials comply with federal and provincial guidelines, avoiding content that could appeal to minors or promote irresponsible consumption. Advertisements should be factual and also avoid any content that could be enticing to youth. 

Additional Considerations

When establishing a cannabis retail store in Ontario, it’s crucial to observe both provincial regulations and local requirements to ensure full compliance. Here are additional considerations to keep in mind:

Municipal Regulations

• Local Bylaws and Zoning: While the AGCO oversees the licensing of cannabis retail stores, municipalities have authority over land use and zoning. This means they can dictate where cannabis stores may be located within their boundaries. Before selecting a location, consult municipal zoning bylaws to confirm that cannabis retail is permitted in your chosen area. Engaging with local planning departments can provide clarity on any restrictions or additional requirements that may apply.
• Municipal Opt-Out: It’s important to note that municipalities in Ontario can choose to opt out of allowing cannabis retail stores within their jurisdictions. As of January 22, 2019, some municipalities have exercised this option. Before proceeding, verify whether your intended municipality permits cannabis retail operations.

First Nations Reserves

• Band Council Approval: Operating a cannabis retail store on a First Nations reserve requires explicit approval from the Band Council. This approval is typically formalized through a Band Council Resolution (BCR) that endorses the proposed store location. A complete Retail Store Authorization (RSA) application must include this resolution. It’s advisable to engage in open communication with the Band Council to understand their specific requirements and obtain the necessary approvals.
• Opt-Out Provisions: Band Councils have the authority to prohibit cannabis retail stores on their reserves by passing a BCR to that effect. If a Band Council has opted out, the AGCO will not issue an RSA for a store on that reserve. Additionally, Band Councils can restrict cannabis delivery services to their communities through a similar resolution process. It’s essential to verify the current stance of the Band Council regarding cannabis retail and delivery before initiating any business plans. 

Redefining Cannabis Retail Through Community and Innovation

Opening a cannabis dispensary in Ontario is more than a business venture—it’s an opportunity to contribute to a transformative industry that’s reshaping consumer habits, local economies, and societal norms. Beyond compliance and operational setup, consider how your dispensary can stand out as a trusted destination in your community. This involves creating a welcoming environment where education, responsibility, and innovation thrive.

To streamline your operations and stay ahead in this competitive market, consider tools like IndicaOnline’s comprehensive cannabis retail solutions. From integrated e-commerce to advanced inventory management, IndicaOnline helps dispensaries operate efficiently while enhancing the customer experience. 

Additionally, think about future-proofing your dispensary. As the cannabis industry continues to evolve, keeping an eye on emerging trends—such as the integration of wellness products, cannabis tourism, or even usage of blockchain for transparency in sourcing—can give your business a competitive edge.

Finally, as the stigma around cannabis fades, your dispensary has the chance to help shape perceptions. By running a business that prioritizes ethics, sustainability, and education, you become not just a retailer, but a positive force in a rapidly growing sector. Your efforts today will set the standard for cannabis retail in Ontario for years to come.

Note: This guide offers insights but is not legal advice—consult the AGCO or legal experts for up-to-date, tailored guidance.