Written by Chad Finkelstein, Financial Post. Link to article at the bottom.
Someone called me for advice about their operation of a cannabis dispensary, clearly confused about whether the law around it is unsettled. It isn’t. It’s black and white. Dispensary operations are illegal.
Public confusion over the retail sale of medicinal and recreational cannabis runs high, likely due to the confluence of inconsistent law enforcement and the perception that if so many such businesses exist surely they could not be illegal.
So here’s the deal – there is no way to legally sell cannabis for recreational purposes in Canada. None. There is only one way to legally sell cannabis for medicinal purposes in Canada – an individual must obtain a medical document from a health-care practitioner (a physician or nurse practitioner permitted to authorize its use). That individual must fill that prescription with one of the 34 cannabis producers licensed by Health Canada, who will send the product by mail. That’s it. Retail sales, or any other type of sales, by any organization other than those licensed producers, are strictly prohibited.
However, on July 1, 2018, with the enactment of the federal Cannabis Act, Canadians will be authorized to possess, sell or distribute cannabis, provided they are permitted to do so in the province in which they reside or operate. That proviso is vital to understand and is somewhat overlooked. While cannabis will be decriminalized at a federal level, each province will have broad discretion to determine how to regulate the possession, sale and distribution of it within their own borders, meaning that one province’s distribution model may not be the same as another’s. (And they don’t have to be ready to go by July 1, 2018.)
Denver, crimes with a clear connection to marijuana slightly increased following legalization, but make up less than one per cent of the overall crime in Denver
As a franchise lawyer, I can’t help but think about how the restaurant industry is going to be impacted. I recently presented on this issue to the board of directors of Restaurants Canada, and learned about the issues on the minds of its members.
So much of what we think may occur after cannabis is legalized is speculative, but we can learn something from the states of Colorado and Washington, where recreational sale is permitted and regulated. In Colorado, restaurateurs report alcohol sales are down between two per cent and four per cent. They attribute this drop to people opting to consume cannabis rather than alcohol. In Washington, the gap between alcohol and cannabis sales has been closing. At the end of 2016, only US$37 million a year separated the two markets (US$212 million for cannabis and US$249 million for alcohol). In 2016, the U.S.’s biggest beer brands saw sales volumes down between 2.4 per cent and 4.4 per cent in states that had legalized cannabis.
Also of note, a recent survey compiling more than 150 million consumer trips to quick-service restaurants in states with and without legalized cannabis found no difference in the volume of food sales. So, no, increased cannabis sales doesn’t lead to increased food sales.
The restaurant industry also may see increased staff loss. In Colorado, restaurants have been losing workers to cannabis retailers and producers. In many cases, employees can earn US$20 to US$22 per hour with full benefits, which is a significant lure for restaurant workers.
Safety and security may also be an issue. Nearly a third of the crimes committed in Denver occur near a dispensary. There were about 7,000 reported crimes within 1,000 feet of a dispensary in 2013, up 1.8 per cent from the previous year. In Denver, crimes with a clear connection to marijuana slightly increased following legalization, but make up less than one per cent of the overall crime in Denver. Most cannabis-related crime is connected to store break-ins, and violent crimes are very rare.
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Nonetheless, restaurant operators in Canada may need to consider adding security and surveillance measures a if cannabis outlet is to be located nearby. In addition, there is impact on customers (in particular, families) and parking when cannabis outlets are in proximity and the patrons are consuming the product on the spot. I don’t mean to suggest that safety and security issues are an inevitability – in fact, plenty of restaurants in Canada are quite happy or unaffected by their dispensary neighbours – but it is a consideration.
Many restaurant operators are wondering whether they will be permitted to cook with cannabis or sell prepackaged edibles. For a variety of reasons, I think the former is highly unlikely to come to pass and the latter, while permitted in Colorado, is not currently contemplated in the current legislative framework for Canada. As a result, restaurant operators in Canada should probably not be making plans or forecasts reflecting their sale of cannabis-infused products.
Canadian restaurants will have many other novel issues to grapple with, including advertising (the new legislation will likely prohibit any advertising glamourizing cannabis use), workplace safety (are employees more likely to be under the influence?) and occupiers’ liability (will the duty of care that businesses serving alcohol owe to their customers apply in the same way to customers who show up already high?). It’s a fascinating time for Canadians, and one that presents numerous opportunities and challenges.
Chad Finkelstein is a franchise lawyer and registered trademark agent at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto.
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