I entered the cannabis retail lottery on a whim—and against the odds, I won. But before I could open my shop, I had to deal with millionaire vultures, hostile landlords, $25,000 in fines, product shortages and multiple death threats
BY STEVEN FRY |
I’ve worked my ass off for everything I have. I grew up in subsidized housing in Barrie, with three siblings and three half-siblings. I got lousy grades in school and was always landing in trouble, but I did better outside the classroom. When I was 12, I became a pin chaser at the five-pin bowling alley where my mom worked. Later, I had a job at No Frills. I figured out that if I pushed myself hard, working late and stocking fast, people noticed and appreciated me. I went to Brock for business, paying my own way with double shifts at No Frills in the summers, and got myself invited to friends’ houses for the holidays so I’d have somewhere to eat. Then I earned my MBA at McMaster, working a full-time job and studying at night.
When I heard the weed lottery radio spot, I was in my 30s, working as a VP of operations for a medical supply-chain management company. I’d also purchased a couple of houses in Hamilton and Edmonton that generate rental income. I’m restless by nature. I’d been thinking about my next move but I wasn’t sure what it would be.
Years ago, I heard a story about Jim Carrey writing a postdated cheque to himself for $10 million. Corny, yes, but I decided to do it too. My $10-million cheque to myself is framed on my wall at home: by 2030, I should be able to cash it. I’m an entrepreneur at heart, and running my own business was always the plan. I just didn’t know what that business would be.
The lottery opened January 7, 2019, just after midnight. The next day, my in-laws were over for dinner at our house in Mississauga, helping me and my wife, Mallory, take care of our 16-month-old daughter. When we finished eating, I sat at my laptop in the kitchen and filled in the application to submit to the Alcohol and Gaming Commission of Ontario. It took less than half an hour. I applied to all five regions in Ontario, figuring the blanket approach would help my chances.
I talked it over with Mallory. Cannabis is not her thing—she’s never smoked a joint in her life—but she was fine with it. I’m always setting goals on a lark, whether it’s travelling to China, gutting my house or buying real estate. Mallory said, “Just to be clear, you’re not going to quit your job to run a pot shop, right?” I assured her I wasn’t. I think she thought, There goes Steve, giving another adventure a shot—and a long one, at that.
I remember telling a friend: “I have a good feeling about this. I think I’m going to win!” He scoffed. “What are you talking about? You’re full of shit.” It turns out 17,000 other people had the same good feeling. I hit send and didn’t think about it again until another friend sent me a Facebook message on January 11. “Hey, are you the Steven Fry who won the pot lottery?” He’d seen the list of winners in his news feed. I checked my computer and there was an email from the AGCO: “Congratulations! Your Expression of Interest entry for a Cannabis Retail Operator Licence was selected for the West Region.”
It was like a gun went off in my head. I had the right to apply for a retail licence—but the offer expired in seven days. I needed to come up with a $50,000 letter of credit and $10,000 in non-refundable fees. To avoid financial penalties in the thousands, I’d have to open the doors to my brand-new store by April 1. I had 10 weeks to become a cannabis entrepreneur.
Theoretically, I had the funds to rent a location on my own if I sold or mortgaged the properties I owned. But there was no way I could liquidate them fast enough to access that cash. Even if I could, I figured I needed about a million dollars to buy enough inventory for the first few months. I knew I’d need to find a partner as quickly as possible. The province had tried to keep the big players from dominating the new market by stipulating that it wouldn’t issue retail licences to corporations that were more than 9.9 per cent owned or controlled by a cannabis producer. Winners also couldn’t sell the licences, at least until December 2019. But partnerships were acceptable. Sixty-four per cent of the winners were sole proprietors, like me, and right away, the big companies started circling like sharks.
The email from the AGCO arrived in my inbox at 6 p.m. on a Friday. By Saturday morning, I had 30 messages on LinkedIn, many from cannabis company executives. You win something like this and everyone wants to be your best friend. Someone hired a private investigator to get my phone number. People were flying in from Alberta and B.C. to meet me. I booked one-hour appointments back to back and set up shop at a corner table at the Union Social Eatery near my house. I said to the wait staff, “Listen, I’m going to be here for eight hours.” I tipped really well.
As people flowed in, I sat back and let them talk. I heard stupid-low offers, like $50,000 or $100,000 for the whole business come December. Sometimes the proposals were wildly inflated, like, this business is going to be worth $80 million! I was gullible. I almost signed with one company that predicted we’d do $30 million a year and split the profits 50-50. But when I looked closer, I realized it was ridiculous. I knew the amount we would be permitted to sell would be capped—supply wasn’t bottomless, so profits wouldn’t be either. A single LCBO isn’t worth $80 million. But everyone had cannabis fever. I hated those early talks in the restaurant. No one was interested in the fact that I’m a competent businessperson. I’d been an entrepreneur in real estate, and I’d grown and scaled businesses. In the cannabis frenzy, I was just a commodity—lottery meat.
When the restaurant closed, I migrated to a Tim Hortons and took meetings there until the sun came up. I met with representatives from a well-known retail empire. Very powerful people. One of the guys making the approach was worth millions; I’d read about him. They got me in a boardroom early in the week after I’d won and started with the high-pressure tactics. I said I wanted to run their proposal by a lawyer, and the millionaire kept saying, “No, no, don’t do that. We don’t need lawyers.” I was tempted to listen to him—they were throwing a lot of money my way—but my spidey senses were tingling. I posted on Facebook: “Hey, anybody know a good cannabis lawyer?” When I found one, he said, “That’s a shit deal.” I walked away immediately. I’ve spent about $65,000 on legal fees since all of this started.
I didn’t sleep the whole weekend, and on Monday, I went to line up a letter of credit for $50,000. I had no idea how hard that would be. My bank said it would take three weeks, but I had five days or I’d be disqualified. I went to the other big banks, which all told me that cannabis was too risky. Banks don’t want to back cannabis because it’s still illegal in most U.S. states, and their business is international. It would take weeks to vet for money laundering, for criminal activity—on and on, a chain of nos.
Using Facebook and Google, I tracked down several other lottery winners from my region and started emailing them, shooting questions: “Has anyone managed to get the letter of credit from a bank? What games are these big companies playing? Where are you going to set up shop?” Everyone was experiencing the same intensity: the onslaught of high-stakes, confusing offers; the emails and calls; the ticking clock. One of the winners called me at three in the morning crying, saying he couldn’t get financing and he wasn’t strong enough to do this.
I was offering support to the other winners, but I was also doing my due diligence: it was smart business to know what the other winners were up to. After all, we might be competitors one day. Some of them sold their souls to big companies who will profit off their licences for decades. Others accepted crazy-high royalty fees, where the big company earns 30 to 50 cents on every dollar sold—but the margins are so small right now that the partner ends up taking as much as 90 per cent of the profits. And others agreed to be paid in stocks, not cash. Sounds great: $2 million in stock, and they’re told it could go up to $18 million. But cannabis stocks are small and traded in small volumes. They could end up with nothing. That’s one of the problems with the low bar of a lottery. You get a mixed bag of winners: some were businesspeople, others weren’t built for commerce.
After the big bank rejections, I approached smaller financiers. I looked up the CEO of Alterna Bank, an online subsidiary of the credit union Alterna Savings, and Facebook messaged him directly: “Here’s my situation. What the fuck do I do?” To my surprise, he got right back to me. Then, finally, I had my letter of credit. I hooked up some of the other winners with Alterna Bank, too, including the guy who’d called me in tears.
At work, the word was out that I’d won the lottery. I guess I could have quit right away—that fantasy of sprinting out of the office and never looking back—but I knew it might be a long time before the store was viable, and I still needed a regular income to support my family (Mallory was newly pregnant). I manage about 100 people, and I called a company-wide meeting with my staff to tell them what had happened. Then I booked all the vacation days I had; when I did have to work, I moonlighted at the shop to get things organized.
I entered into a partnership with High Tide Inc., a mid-sized cannabis retail company out of Alberta that’s opened 24 stores across the country under the Canna Cabana banner. Their Jimmy Buffett, palm-frond-heavy branding appealed to me, but mostly I liked the arrangement we reached: I’d be the majority stakeholder and run the store on a day-to-day basis, and they’d provide support when needed.
I had the deal before I had the location. As everyone in our winners’ group started locking in retail space, it was like watching a live game of Monopoly: someone would put down a property at a certain location (I pick Guelph!), then I’d have to avoid that square on the map (stay away from Guelph!).
I homed in on Hamilton because I’ve lived there, I like the town and no one else seemed to be looking at it. But many landlords wouldn’t even talk to me once they heard the word cannabis. The real estate broker I was dealing with told me they were worried about shady clientele and noise, as well as sullying the reputation of neighbouring businesses. Others were concerned the store would literally stink, and said I’d have to pay through the nose for special ventilation and storage. (Not true: boxed cannabis is fine at room temperature. It’s only a tiny bit skunky, too.) I was rejected at least eight times.
Finally, I found a former Wild Wing in a mall in East Hamilton, next to a Sherwin-Williams paint store and a Pita Pit. The mall had an LCBO and a Beer Store, so I figured, well, that’s two out of three vices. They should be okay with cannabis, too. But negotiations were tough. Landlords who were willing to rent to a cannabis store often saw it as a licence to print money. Some of them asked for a cut of profits, or jacked up the rent. To secure my location, I had to pay 30 per cent more rent than Wild Wing had, as well as incremental increases depending on my revenue. We signed a 10-year lease. The clock was ticking: I had six weeks to turn a dingy old Wild Wing into the Apple store of cannabis.
I spent close to $400,000 on construction costs and fixtures, hiring crews to demolish the patio and Texas grill decor. They worked triple shifts around the clock, smashing walls and ceilings, pulling out the grease traps, installing the vault where product would be stored. We wanted it to be mellow and beachy and spare, with oversized rattan light fixtures and orange legs on the glass showcases.
Another hurdle was what to put in those cases: how do you stock a business that’s never existed? I had no idea what would sell. To figure out the best menu, I spent hours on Reddit, lurking in cannabis forums, scanning reviews. There were some celebrity brands that always sell out, like the Seth Rogen–backed Houseplant. Later, we’d learn that our clientele was mostly middle-aged professionals, so we’d stock a lot of indica, which is said to be good for sleep and alleviating stress.
I’ve tried to sample products as much as I can. I want to support the local industry, so I tend to favour nearby growers, and they’re everywhere in the Golden Horseshoe. But specific products aren’t always available from the Ontario Cannabis Store, which makes ordering frustrating. A legal store could only buy 25 kilograms per week. The selection was sparse at first. The order sheets were confusing, indicating THC amounts by ranges—for example, a strain might be listed at 16 to 28 per cent—so we didn’t really know if it was a high-THC product or not.
Due to the limited supply, I could only get a box or two of anything at a time, which meant I’d have to create new labels and display every week. And every week, the availability changed entirely. Imagine you ran a grocery store and one week you had Shreddies, but the next week, you only had Cheerios. How annoyed would your customers be? Some of the product was old, too, because the Ontario Cannabis Store had been stockpiling to ensure there was enough for the first round of openings.
For that first pre-opening order, the government allowed a one-time shipment of 100 kilograms of weed. But it would cost more than a million dollars. Even with Canna Cabana’s investment, I didn’t have that kind of money, so I only ordered half that amount for opening day. I had to pay upfront, too, which is unheard of in business: no 30 days to pay the vendor, no instalment plan.
The next thing I needed to do was staff up. As soon as I posted a job notice on indeed.com, I was flooded with applications. I took down the posting at the 300 mark. The store was half-built, covered in concrete dust, so I rented rooms in the Sandman Hotel off the QEW and conducted interviews there. Many applicants had been working in dispensaries that had been shut down, and many of them were cannabis experts—and enthusiasts. They mostly seemed happy to have an above-board job with benefits and no threat of getting busted for possession. Many of them had to go from dealing with money in a garbage bag to dealing with legitimate banking systems. I had to explain: I bank with CIBC, I don’t bank with the Bank of Some Guy’s Van. I love my staff, and I’ve learned a lot from them about cannabis, too. They tend to have a nice, positive attitude—the cliché that cannabis users are happy people is true. Early on, we had a big staff barbecue where we all lit up together and bonded.
April 1 came, and we weren’t ready. The government issued a fine, taking $12,500 out of my line of credit. It was brutally unfair, I thought, to set up these impossible conditions and penalize us for failing to meet them, but I kept going. I had a staff of eight, and I was working by their sides, assembling racks, programming tablets for the computerized sales system, unloading the trucks that were arriving with boxes of product. When you’re the CEO, you’re also the janitor. I basically slept in the store throughout April, working 18-, 20-hour days, going back and forth between my day job and the store. Even so, we missed the second deadline of April 15, too—another $12,500 fine. That time, we were actually ready, but the government hadn’t made it over to inspect the premises yet, so we couldn’t open. I didn’t fight these fines; I knew what I’d signed up for. This was the price of establishing a foothold in a new industry.
We finally passed the inspection and set April 20 as our opening date—4/20, a happy accident. I wanted it to feel like a special event. I spent the day before rushing around IKEA and Costco, buying hot dogs, burgers and lots of vegetarian stuff. I imagined that might suit the clientele. We anticipated big lines, so I set up metal fencing and hired extra security. I was worried about people getting irritated while waiting, so I rented a tent and hired a Jamaican drum band to play. I pulled out all the stops, handing out T-shirts and other swag to the people waiting in line.
On opening day, the first person got in line at 4:20 a.m.—get it? It was pouring rain, but people didn’t seem to mind getting soaked. When we opened the doors at nine, there were at least 100 people in line. I’d hired models to hand out water and to try to keep up the party atmosphere. The rain didn’t matter: we had at least 2,000 customers on opening day. The next day, once again, there was a lineup before the doors opened. By the end of the first week, we’d made around $350,000 in sales.
The hours were overwhelming. My staff were working 9 a.m. to 11 p.m., seven days a week. They started burning out. The assistant manager left within a couple of weeks, followed a few weeks later by the manager. Some staff couldn’t believe how much work was required: not only did we have to serve a never-ending stream of customers during the day, but once the doors closed, we had to meet the government regulations, checking inventory against sales for discrepancies. I was scrambling to hire staff. If someone seemed cool and spoke English, I’d get them on the floor that afternoon. We went from eight people to 30 in a matter of two weeks. Staffing and rent were our biggest overhead expenses, but even so, within two months, we were turning a profit.
Our biggest sellers were pre-rolled joints and high-quality flower, but we quickly started running out of everything. We were selling about five kilos a day, and we could only order 25 kilos per week. I had to open later and close earlier to avoid bare shelves. Within a month of opening, we had to close two to three days a week. It was a nightmare. We had such momentum, but now we had people showing up to locked doors. Customers ranted online about the closures. We were driving them back to the black market. When I complained to the government, they said I should have bought the extra 50 kilos before opening..
Here’s how the store looks now. The author went with a Jimmy Buffett aesthetic
He had barely touched pot since Grade 8, but he tried to sample as much product as he could before stocking shelves
By late summer, the Ontario Cannabis Store had changed the policy slightly, lifting the cap on about 50 products. It’s a mixed bag, but we buy it anyway, just to keep our doors open. The way I see it, the 25-kilo cap makes no sense: Hamilton is much bigger than some other Ontario markets, but every store gets the same amount of product. The government is still working through those glitches. They’re the ones who profit most from legal cannabis. Don’t they want to beat the black market? Don’t they want to win?
During the early months, Mallory was pregnant and not feeling well. In the mornings, I’d get our toddler up and off to daycare while she rested. Usually I’d work all day at my job in Oakville, come home for dinner then head to the shop. One night, I was in the vault at three in the morning doing inventory and the phone rang. I checked my voicemail and there was a deep, furious voice: “I’m going to blow your brains out.” It was terrifying. I checked the security cameras on my iPad and called the police. An officer came over and took a report, but nothing came of it. Since then, I’ve had other death threats, including a Google review that my mom found, saying I deserved a bullet in the head. I don’t know who it was, but some crime families are involved in cannabis, so I take the threats seriously. In the early days, dealers loitered outside the door, harassing my staff and customers.
One Sunday in July, I was in the store all day, and the next morning I had to prep for a board meeting at my other job. I remember literally pinching myself to stay awake. It felt like a breaking point. I was thinking, Okay, I’m making money, but am I crushing my soul to grind this out day in and day out for months on end? Is it worth it? In August, Mallory and I had our second baby, another girl, and I took some time off to hang out with my family. For a short while, I wasn’t thinking about cannabis.
Things have settled down at the store. There’s still a steady stream of customers, but it’s not as insane as those first months, and we’re turning a steady profit. I suspect I’m one of the most successful stores in Canada: early on, my store and one in Ottawa were the only two to regularly sell out of our allotted 25 kilos. At this rate, by our one-year anniversary in April, I’ll have sold more than a metric ton of cannabis. People always ask me if I’ve gotten stinking rich. I signed an NDA, so I can’t disclose specifics, but let’s just say it’s been six months and I’ve almost earned back my initial investment. The owner of the Pita Pit nearby thanked me for all the business I’m throwing his way.
At the end of the summer, the government announced the second round of lottery winners. This time, they changed the rules. The barriers to entry were higher: within five days of winning, applicants needed a document confirming they had a secured location and access to $250,000 cash, as well as the $50,000 letter of credit. Forty-two winners were announced, but this lottery was even more controversial. There were reports that big companies were gaming the system: one location was entered 173 times. Then 12 winners were disqualified for not delivering their letter of credit within five days. It was a mess.
When the new winners were announced, I started hunting them down, just like I’d been hunted. I wanted to save them from some of the mistakes I’d made, and I also saw another opportunity—my next big thing. I co-founded a company, called Sessions Cannabis, to work with lottery winners like me and help them navigate the process. When the new round of licensees were announced, I started reaching out; I knew what they were going through. I encouraged winners to keep full ownership, and offered our services and branding expertise for half what our competitors charge. With Sessions, we want to develop long-term partnerships so we can grow together. We’re stronger if we unite.
I recently served notice at my health care job so I can focus on growing this side of my cannabis business. And I’ve already signed my first client: he’s a guy from Toronto who’s opening his own store. He’s brand new to all this. I have a lot to tell him.