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Second Cup to set up cannabis lounges in West

Canadian coffee chain to 'leverage' existing retail space


Updated, April 13 — Canada’s No. 2 specialty coffeehouse chain has a partnership deal in place to convert some of its outlets in Western Canada to recreational cannabis shops and lounges.

Second Cup on Thursday announced a “strategic alliance” with National Access Cannabis Corp. (NAC) to roll out a network of NAC-branded recreational cannabis dispensaries, initially in Western Canada and expanding eastward “where legally permissible.” (See sidebar below.)

Ottawa-based NAC’s business model so far has been in the medical marijuana market, with three clinic sites in Calgary and one each in Toronto, Ottawa, Victoria, Winnipeg, Saskatoon and Halifax.

NAC recently moved to carve out space in the Manitoba retail market for recreational cannabis ahead of legalization this summer, signing deals in December with four Manitoba First Nations (Long Plain, Peguis, Opaskwyak, Nisichawayasihk) to operate stores.

The Manitoba government in February also approved NAC as one of four provincial licensees to operate privately-owned retail cannabis stores.

Thursday’s deal calls for NAC to seek licenses to dispense cannabis products and work with Second Cup and its franchisees to leverage Second Cup’s “extensive” Canadian retail footprint to set up cannabis retail stores.

At the end of fiscal 2017, the Mississauga-based coffee chain — which recently expanded its product offerings to include bagels and, in some outlets, Pinkberry frozen yogurt — included 286 outlets across Canada.

The NAC-branded stores would offer “leading” cannabis products, including pot supplied by Ottawa-based distributor CannaRoyalty Corp., NAC said in a release. CannaRoyalty is already California’s largest legal distributor of cannabis products.

Conversion of any existing Second Cup site to a pot dispensary would depend on getting the appropriate retail licenses from provincial regulators, and on the approval of Second Cup and the store’s franchisee and landlord, NAC said.

“This relationship allows us to quickly expand our footprint in proven high-traffic retail locations across Canada,” NAC CEO Mark Goliger said in Thursday’s release.

“With an initial focus on Western Canada, we’ll look to work with Second Cup to license select storefronts, utilizing our proven business model to deliver secure, safe and responsible access.”

Given the coffee chain’s “exceptional quality real estate located across Canada, our alliance with Second Cup will offer consumers access to quality cannabis products and the superior service in the comfortable setting they’ve come to expect from NAC,” he said.

Second Cup CEO Garry Macdonald, in the same release, described the deal as “a great opportunity to leverage our select real estate assets to increase value for shareholders and franchisee partners.”

The coffee chain, he added, “remain(s) focused on growing our Second Cup brand and sales through continued product innovation and expanding our network across Canada.”

The deal also calls for NAC to issue warrants, expiring April 12, 2023, for Second Cup to buy an aggregate of five million NAC common shares at 91 cents a share. NAC is publicly traded on the TSX Venture Exchange. — Network

Lounge licenses? Not yet

An NAC/Second Cup shop may be able to get a provincial license for retail sales of cannabis in Western Canada, but the concept of cannabis lounges doesn’t yet feature in any of the four western provinces’ plans for pot regulation:

  • Manitoba’s planned legislation specifically forbids it, stating a person “must not consume cannabis in any manner in a cannabis store.”
  • British Columbia’s licensing process for cannabis retailers, as laid out in February, doesn’t include plans to license cannabis lounges “at this time.” The province said it will give consideration to “other types of licences at a later date.”
  • Likewise, Alberta has said cannabis cafes and lounges “will not be permitted” right away on July 1 this year, but the province’s legislation authorizes it to regulate such establishments should it decide to allow them at a later date.
  • Saskatchewan plans to allow private cannabis retailers under a provincial permitting system but hasn’t yet said whether it would allow cannabis lounges, only that it will take a “strict approach” on consumption in public areas. — Staff
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