Cannabis Retail Business in Canada

“Even as some retail business owners contemplate an exit, others have established successful niches in the cannabis market.” (MJBizDaily) This is a perfect description of the current situation in the retail sector of the Canadian cannabis market. Despite relatively small gross margins, some retail operators have still managed to find their niche and operate cannabis retail businesses profitably in Canada.

Cannabis Retail Licensing in Canada

Most Canadian provincial governments allow licensed private retail stores to sell cannabis and cannabis accessories in brick-and-mortar stores and accept online orders for delivery to their customers. Check the conditions for each province here. You must apply for a separate licence for each store. The application fee and required licenses will cost approximately C$10,000.

Cannabis Retail Fees and Taxes in Canada

The annual regulatory fee rate depends on the classes of licences held at a given facility. A Standard sale for medical purposes licence is subject to a rate of 2.3% of cannabis revenue or $23,000, whichever is higher. GST/HST will also apply to sales and purchases of cannabis and related products depending on the province or territory in which the product is purchased.

Cannabis Store Startup Costs

Industry estimates place the average cost of opening a cannabis store in Canada at about C$300,000, or C$120 per square foot. Our example is a small brick-and-mortar cannabis store of approximately 2,500 sq. feet.

• $20,000 legal fees & insurances
• $30,000 building renting (includes security deposit)
• $40,000 inventory, packaging supplies
• $2,500 website design and development, hosting
• $10,000 marketing campaign
• $85,000 space improvements including finishing/painting, kitchen, office space, bathrooms, etc.
• $37,500 security system including multiple camera feeds and metal/weapons detectors
• $35,000 furniture, display counters, refrigerators, freezers, multiple POS/cash registers, registration computer, commercial label printer, storage hardware and shelving, etc.
• $6,250 computer software
• plus salaries

= approximately $300,000 start-up expenses

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Cannabis Store Ongoing Costs

Ongoing operational expenses will average around C$750-C$1,000 per sq. foot and include:

• Cost of Goods Sold (COGS) refers to any cost that goes directly to the products sold by the retailer. COGS typically represents those expenses that are directly attributable to acquiring inventory and delivering it to the point of sale.
• Selling, General & Administrative (SG&A) expenses include all non-direct expenses incurred by a company in any given period, such as rent, utilities, insurance, advertising, marketing, accounting, salaries & benefits, and more.

Cannabis Store Profitability

Average sales per square foot for a cannabis shop is about C$1,100-C$1,250.

Revenue = $2,900,000 (100%)
-COGS = $2,071,429(71%)
Gross Profit = $828,571 (29%)
– SG&A Expenses = $448,604 (16%)
Operating Income = $379,967 (13%)
Net Income = $271,944 (9%)

Main article: cannabusinessplans.com.

Calculate the costs and profits of your retail cannabis store with our pre-populated cannabis financial models. All you have to do to get started is enter your monthly sales target and store size. The model will help you estimate how much it costs to open and operate your own cannabis store, plot all income and expense items monthly over a flexible seven-year period, and then summarize the monthly results by quarter and year for easy viewing.

Cannabis Retail Financial Model Sample

Cannabis Retail Business in Canada FAQs

Should you have any questions, please do not hesitate to contact us. 

Business plan templates for other countries are available at cannabusinessplans.com.