VIDEO: Inner Spirit Holdings Ltd (CNSX:ISH) First Franchise Model in Cannabis Retail Space
Inner Spirit Holdings Ltd (CNSX:ISH) is a retail and franchising company with its own recreational dispensary brand, Spirit Leaf. Inner Spirit Holdings is the first franchise model within the cannabis retail space with significant industry partnerships. President and CEO Darren Bondar notes one such partnership is with Newstrike Brands Ltd (CVE:HIP) (OTCMKTS:NWKRF) (FRA:0N8), the company with a strategic alliance with the Tragically Hip to distribute the band’s Up Cannabis brand. The deal ensures Up Cannabis-branded customer lounges in Spirit Leaf stores that will also function as education areas highlighting Canadian music and Indigenous reconciliation.
James West: Welcome back to Midas Letter Live. My guest in this segment is Darren Bondar, President and CEO of Inner Spirit Holdings Ltd., trading on the CSE under the symbol ISH. Darren, welcome.
Darren Bondar: Yeah, thanks for having us.
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James West: Darren, tell me about Inner Spirit Holdings Limited! What is your main business, and how are you going to differentiate yourself in this increasingly crowded cannabis landscape?
Darren Bondar: Yeah, yeah. Well Inner Spirit Holdings is our holding company, and our ultimate business is in retail and franchising. We’ve developed this really cool cannabis dispensary brand called Spirit Leaf. So we’ll be opening up retail stores across the country, both corporate stores and franchise stores, which I think is pretty unique to the market in itself.
James West: Okay, so it’s a franchise strategy within the cannabis retail space?
Darren Bondar: That’s correct, yeah.
James West: So what has to happen for you to be able to sell cannabis in retail locations that are not necessarily affiliated with the provincial stores?
Darren Bondar: Well, look, we’re based in Western Canada, so you’ve got a really great playground in Alberta in particular. Our head office is in Calgary, so Alberta, we granted about 80 franchise locations, and we’ll hopefully have about, you know, 35 to 40 open in Q4 here as the province and municipalities continue to grant licenses and development permits.
James West: Sure. So Alberta has got a great history of private enterprise in the recreational substances business. I happen to have fond memories of Alberta bottle shops where you could get great Scotches and everything. So then, is it your intention, then, to avoid being a grower of any sort and just to source product from different people and brand it, package it yourself?
Darren Bondar: Yeah, for sure. We’re not an LP; we have a low CapEx strategy, so that goes everything from the retail front, where our franchise partners will be opening stores and paying for the cost of buildouts, and then we’ll be sourcing, you know, sourcing products from LPs, and we’ve got some great strategic partnerships already in place with Auxly and Newstrike as part of that.
James West: Oh, okay. So tell me: how does the deal with Newstrike work?
Darren Bondar: Yeah, so Newstrike, well obviously, everybody knows their collaboration with The Tragically Hip and their brand being Up Cannabis. So we’ve done this great cross-investment where 20 percent of our stores will be allocated to Up Cannabis lounges. So we’ll be, you know, showcasing Up Cannabis, comfortable place for customers to come and sit while they’re waiting to be served, and a whole education piece there. So, education on The Tragically Hip and the history of Canadian music, and also really cool charitable aspect to that: we’ve made a contribution to the Gord Downie Chanie Wenjack fund. So it’s all about Indigenous reconciliation; we’ll be providing education in our stores about the importance of Indigenous reconciliation, and designated a boardroom in our head office to, you know, allow people to use and educate.
James West: Hmm, very interesting. When do you expect your stores – I guess your stores start coming out October 17th?
Darren Bondar: Yeah, we should have a handful open October 17th; we’ve got a number under construction, we’ve already been granted permits, and we’ll continue to build out from there.
James West: So this is from all accounts the first franchise model in the cannabis space. And so if I wanted to become a franchisee, how would I go about that?
Darren Bondar: Yeah, so it’s a good question. So look, we’re the first kind of thing we did was became a member of the Canadian Franchise Association, which is kind of the governing and overseeing body of franchises in Canada. So we were honoured to be accepted; we’re still the only cannabis member. So that gives us a lot of reputability and also holds us to a really high standard.
To become a franchisee, you’d apply through our website, and you know, we’d have an introductory phone call; you would, you know, fill out an application, and we’d go through a disclosure process and then help you with all elements to help you set up your business, from filling out applications to securing real estate to HR, design, merchandising, and everything you need to know to be a successful retailer.
James West: Sure. So I’m assuming, then, that the franchise locations are going to be limited to recreational marijuana only?
Darren Bondar: Yeah, that’s correct. We’re purely a recreational cannabis play.
James West: And so will each franchise owner have to become licensed by the provincial regulator?
Darren Bondar: Yeah. So every individual owner obviously has to get their own license; we assist with that process, and then as a corporation, we also need to have a parent license. So in Alberta and BC, that is now open, and we’re working through the due diligence process there, and I imagine Ontario is not too far behind.
James West: Sure. So in the US, I mean, the franchise model I think of that is not necessarily a franchise model is MedMen, who’s essentially trying to, you know, create this impression of Apple Stores in every major city in top locations and to be a sort of superstore of cannabis products and knowledge and everything. To what extent would you say that you emulate and also differentiate from the MedMen kind of model?
Darren Bondar: Yeah, well look, we’re different. We’re Spirit Leaf, and we have a different philosophy a little bit around retail and branding.
James West: Plus your shareholders can probably vote.
Darren Bondar: Yes, our shareholders can vote, as well. So yeah, we’re a completely different retail concept; we’re really focused on the Canadian market. That’s where our roots are, we know what Canadians like, we know how to retail, we know how to be effective franchisors; you know, that’s been my experience for the last 20 years. So yeah, I think we’ll do really well. And the US is pretty challenging as, you know, franchising has got some federal regulations, so it’s something we really can’t implement down there.
James West: Right. Do you think that the laws are going to sort of become more uniform across Canada as they roll out, or do you think that they’re going to become even more different province to province?
Darren Bondar: Yeah, I think they’re going to continue to be different province to province, then municipality to municipality. It’s a challenging national landscape to navigate, but it’s kind of the advantage of the franchise model, you know. You’ve got franchise partners working out with local municipalities in Cold Lake or Lethbridge, you know, smaller towns where a big corporation just can’t get to. So yeah, so you learn the landscape, and navigate the waters.
James West: So I guess Newstrike is going to provide you with a lot of your starting product?
Darren Bondar: Yeah, again, we have to buy through all the provincial agencies, but yeah, we look forward to carrying Up Cannabis product in our stores. And yeah, it’s going to be great product, and everybody’s going to be pretty interested to try it.
James West: Yeah, fantastic. Do you have any plan at any point potentially to become a grower of your own product?
Darren Bondar: Well look, we actually have our own proprietary brands that we’ve developed from a marketing and branding standpoint; a brand called Ruby, which is really focused on the female consumer; we have a brand called Stone Selects and a craft brand called Prairie Flower, which is, you know, grown in Alberta. Kind of in line with our low CapEx strategy and our partnership with Auxly, as an example, they’re providing us the inputs, so we’re working on strain selection from the various licensed producers that Auxly is partnered with. And, you know, that product will come in to us without us having to build our own facility. So they’re our factories, if you will, and we’ve got a really close collaboration with Auxly to make that happen.
James West: Sure. I’m curious: What do you think will happen if, let’s say, October 17th rolls around, and let’s say everybody abandons their friendly neighbourhood dispensary and decides to all start buying off of the incumbent suppliers, and they don’t have enough cannabis on Day One? What will you be forced to do to acquire cannabis?
Darren Bondar: Yeah, well, look, everybody’s going to have an equal chance, particularly in Alberta, to buy an equal amount. So if there’s only 100,000 kilos available and there’s demand for 200,000, everybody will get pro rata. I don’t foresee a cannabis shortage; I thin it’s going to take guys a long time to get their stores built and open, and I think the availability of supply will catch up to that and maintain that pretty quickly.
James West: Okay, interesting. How did you come up with this idea, and what made you decide to sort of pursue this franchise angle?
Darren Bondar: Yeah, well look, I started my first franchise business 20 years ago, which was a watch company, it still exists today, called Watch It. And we had great success in the retail front, and expanded nationally using a franchise system. So yeah, we kind of took that model and took our existing infrastructure, saw the opportunity of being a long-time cannabis advocate and a medical patient. And you know, amongst my close network it became pretty apparent that if somebody was going to open a chain of retail stores across Canada, that it probably should be me. So yeah, we saw the opportunity and took some early risks, and yeah, here we are today.
James West: Sure. There’s been a sort of propensity to open coffee shops and sort of set those out as potential places to learn about cannabis until the rules change and they can sell cannabis-infused coffee. Is that something that you would consider pursuing as well, or is that just outside of where you’re going?
Darren Bondar: Yeah, you know, we might open a couple of lifestyle stores, but for the most part we’ve been really disciplined and waiting for the locations to get their permits before we open. So yeah, I think that strategy might work for some, and again, we might open some lifestyle stores, especially in Ontario so people can get familiar with our brand. But you know, soon enough, in 30 to 40 days, we’ll have actual cannabis dispensaries open in Alberta and Saskatchewan, and BC is not too far behind.
James West: Exciting times.
Darren Bondar: Yes, it is.
James West: Darren, that’s a great introduction to the company. We’ll leave it there for now and I’ll come back to you in a quarter’s time and see how you’re doing. Thanks very much for joining me today.
Darren Bondar: Yeah, appreciate it. Thanks.
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