'It's going to be a bloodbath': Why some Toronto pot store owners are giving up

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Like many entrepreneurs, Michael Motala was eager to take part in Canada's newly legal — and hopefully, lucrative — cannabis industry. But after less than a year of running a cannabis store on Toronto's fashionable Queen West neighbourhood, mounting competition and over-regulation are leading him to consider selling his business.

"It was an interesting experience as we were building a new business," said Motala, who operates High Street Cannabis Retail with his parents. "But the space is highly restrictive and regulated to the point where it is a comedy of the absurd, if you will, with advertising and the like."

Motala has listed his retail store, which he opened in October 2020, for just under $2 million. Selling cannabis during a pandemic while adhering to a lengthy list of regulations and amid an influx of neighbouring pot stores has whittled down High Street's bottom line.

"A lot of people probably got into this thinking that it would be a gold mine, but unfortunately we're finding out that's not the case," he said. "Even on our street [near the Queen St. West and Bathurst intersection], there's three stores across from us and when we talk some tell me they make five or ten transactions a day. That's pretty much impossible to survive on." 

While Ontario took a relatively cautious approach in the early days of legal cannabis stores with two lottery processes that allowed for the opening of 75 pot shops in the first year of legalization, the province has since ramped up its licensing to permit 80 stores a month. It’s also taken a hands-off approach and let the free market to determine which retailers will be successful, a process which has unwittingly created clusters of pot stores in many Toronto neighbourhoods. 

There are 859 cannabis stores open in Ontario today, 163 of which are located in downtown Toronto according to the Alcohol and Gaming Commission of Ontario, the regulatory body that oversees legal pot shops in the province. If you include some of Toronto's boroughs outside of the downtown core such as East York and Etobicoke, there are 267 legal and licensed pot shops open in Canada's biggest city.