On June 19, 2018, Canada became the second country in history to legalize recreational marijuana federally. This puts Canada at the forefront of a global industry as more and more countries consider legalizing marijuana’s use.
The Canadian legalization also gives US-based marijuana franchisors their first opportunity to extend their reach beyond US borders. However, there are fundamental differences between Canadian and US, state-based legalization that these companies must keep in mind.
Distribution Rules
Although marijuana is federally legalized, the Canadian legislations granted each province and territory the right to determine how to handle distribution, and each one is taking a different approach.
In some provinces, only government-run stores will be allowed to sell cannabis. In others, government officials will issue cannabis licenses to a mix of public and private retailers. There are also different rules concerning age requirements, consumption locations, and growing restrictions from territory-to-territory. These differences may make it difficult for a franchisor to maintain brand consistency throughout the country.
Edibles
Although legislators legalized dried cannabis, fresh cannabis and cannabis oils, Canadian laws still prohibit the sale of marijuana edibles, drinkables and vape-ables. Government data indicates that 28% of cannabis users use edibles, making it the second-most popular way to get high. Thus, the ban on edibles will effectively shut out a huge segment of the market for US franchisors.
Label Requirements
Health Canada’s cannabis packing and labeling requirements requires tamper-proof and child-resistant packaging and also sets limits around the colors, graphics and other visual elements of product wrappers. The federal health organization also requires a specific health warning label and a federally standardized cannabis symbol that must appear larger than any other brand name or logo on the package. Like the current distribution rules, Health Canada’s requirements will likely make it more difficult for US retailers to create brand recognition.
If you are a US-based cannabis franchisor looking to enter the Canadian market, we can help. Contact us today or call us at (314) 454-9100 to discuss how we can assist you in accomplishing your business goals.
Who is Robert Gold?
Mr. Gold is head of AEGIS Chicago office. He has close to 25 years of experience in structuring and executing transactions on both his own behalf and for a wide variety of primarily middle-market enterprises in healthcare, technology, real estate development, manufacturing and intellectual property.
His primary area of expertise involves tax-related issues with a concentration on structuring businesses and transactions utilizing partnerships and other flow-through entities. Robert’s legal practice also has involved corporate advice including ownership-transition planning and governance, and the private placement and syndication of securities.
Prior to joining AEGIS, Robert was a Managing Director of The Chicago Corporation, an investment-banking firm, where he currently serves as general counsel and as a senior advisor.
