A True Canadian Cannabis Retail Brand

Calgary-based public Company Inner Spirit Holdings Ltd. (CSE:ISH, Forum) is establishing a chain of recreational cannabis stores under its Spiritleaf brand. The Company has entered into more than 100 franchise partnerships to develop locations throughout Canada, having opened stores in Alberta and Saskatchewan. The Company extended its reach into Ontario earlier this month, when it opened its Spiritleaf-branded retail store in Kingston in partnership with the winner of the province’s first cannabis lottery.



Company Founder, President and CEO, Darren Bondar hailed this as a significant milestone for the Company. He added that the store was ready and open in just 75 days, a testament to their experience and ability to execute its business program.

“As the supply chain improves, we look forward to getting our first wave of 75 premium stores open across Canada and solidify our place as an iconic and leading Canadian cannabis retailer.”

Inner Spirit has been developing a diverse portfolio of quality and curated lifestyle cannabis products, including its own locally sourced lines. These proprietary house brands will be made available to consumers on store shelves.

Unique investment opportunity

Why should investors take a closer look into ISH? For one, the Company is already generating revenue and expanding its business by placing both franchise and corporate stores in key retail locations. It has developed a number of strategic supplier partnerships with industry players who are well recognized and respected licensed producers (LPs). These parties are investing significantly in the Company and hold substantial shareholder stakes.

With cannabis recreationally legal in Canada, ISH is in a strong position to grow its footprint. The Company started its business prior to legalization and spent the past several years securing development permits and locations to get its framework in place. Now it is in an operational phase and will be spending the coming year opening Spiritleaf stores throughout the country.


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Strength of the franchise model

The key to Inner Spirit’s success? Its focus on a franchise model versus only a corporate model. First, let’s look at the Company’s business and how it is generating top-line revenue.

In an interview with Stockhouse Editorial, CEO Bondar compared what ISH has to a “monopoly board” in Alberta, with a number of franchise stores in prime locations already open and generating revenue. The Company’s focus is to open more stores and generate significant revenue as it works toward hitting its expected targets, which is estimated to be approximately $2 million in sales per store, per year. As more high-profile locations open, including strategically located corporate stores in larger centres, that average is expected to increase. Once all 100 are fully online, the Company is projecting about $200 million in annual system-wide sales.



Inner Spirit is truly unique to the cannabis space. It was the first Company granted membership into the Canadian Franchise Association and has been leveraging its franchise model to grow its business and generate revenue as soon as cannabis became a legal industry.

The Company’s leadership saw the Spiritleaf opportunity early and felt a franchise model would be a perfect fit. It enables ISH to partner with local owners and operators in locations across the country who have a personal stake in their stores and in their communities. CEO Bondar has seen success with this retail model as opposed to when large corporations try to manage local community activities from a distant head office.

The big benefit for a franchise partner is the assistance in navigating a complex and challenging new industry with a “turn-key” package from ISH that offers everything from store design, branding, compliance and staff training to help make each store a success.

An IPO and strategic partnerships

In early 2018, Inner Spirit closed a private placement with Auxly Cannabis Group Inc. (TSX:V.XLY) at more than $660,000. Auxley is a diversified cannabis company that provides financial solutions for licence applicants and also owns cannabis cultivation and development platforms.

In July 2018, the Company closed its Initial Public Offering, raising gross proceeds of more than $3.7 million through the placement of 25 million units at $0.15 per unit. Each unit consisted of one share and one-half a warrant, with each full warrant exercisable at $0.30 for 24 months.


(Spiritleaf retail. Image via Inner Spirit Holdings Inc.)

Through the IPO and investments from Auxly earlier in the year and from Newstrike Brands Ltd. (TSX:V.HIP), Inner Spirit raised more than $5.9 million to help fund opening the first wave of Spiritleaf cannabis stores.

The Company’s cross-investment with Newstrike sees both companies having equity interests in each other, under a strategic alliance agreement for the retail distribution of products in the Up Cannabis line, as well as building and operating Up Cannabis-branded customer lounges or “Experiential Hubs” in Spiritleaf stores such as occurred in Kingston in April 2019.

Inner Spirit signed on another major supplier relationship in late 2018 through a major a major investment from industry heavyweight Tilray Inc. (NASDAQ:TLRY) totaling $6 million. Support from a producer with a multi-billion market cap has been another win for ISH. Tilray has made headlines as a global leader in cannabis cultivation, processing and distribution. It serves tens of thousands of patients globally. Through its wholly owned subsidiary, High Park, it utilizes a broad-based portfolio of adult-use cannabis brands and products across Canada and together the companies are serving the market with high-quality branded cannabis products. Through this partnership, ISH will be showcasing High Park's product portfolio in its retail locations.

In addition to being well-funded, the Company boasts an advantageous cannabis brand portfolio. Thanks to its strategic relationship with the LPs, it does not need to be a licensed producer of cannabis and spend hundreds of thousands of dollars to build out facilities. Rather, it now holds the commercial rights to buy as much cannabis as it needs to sell in its stores across the country.

Another partnership the Company has made, is with a household name that is no doubt familiar to readers: High Times Magazine. Through its investment and distribution deal, ISH will be privy to a number of rights, such as VIP access to High Times events across North America, as well as contests and giveaways for the Company’s best customers.

Inner Spirit will also distribute High Times Magazine across many of its stores. High Times is the most iconic cannabis magazine in the world and gives Inner Spirit reputability as a true cannabis retailer and player who understands the culture, which is critical to the retail brand.

The importance of brand

Spiritleaf is positioned to be an iconic Canadian brand and the most trusted source for recreational cannabis. The Company’s leadership team, having worked together for the past decade in franchise retail, is applying its proven strategies to the cannabis retail sector.

For other cannabis retailers, the plan usually involves owning wholly owned corporate stores, which is an old-school retail model. With Spiritleaf, there is an advantage to having franchisees invest in the brand and gain a turn-key operation using a low capital expenditure requirement model. It means the Company can open 100 stores with very little of its own capital deployed, as its franchise partners pay out the build costs and pay ISH a fee to do so. Inner Spirit will also further support the franchise system with strategically placed corporate stores in larger centres like Calgary and Edmonton.

As CEO Bondar puts it, conversations about Inner Spirit’s business will always revolve around the brand. While branding is an anomaly for much of the cannabis industry, this is a strategic differentiator for ISH and makes the company distinct in its space. Nowhere was this more evident than when CEO Bondar visited the annual Cult Gathering in Banff where the mightiest brands in marketing congregate. As he toured through cannabis offerings from other jurisdictions, he continued to see the opportunity to introduce more sophisticated and modernized retail branding in the cannabis space and he knows Inner Spirit can provide just that and become a true retail brand for customers.

He equated what it means to become an iconic Canadian cannabis brand to that of Tim Hortons for its “Canadiana” and to a globally recognized retailer like Starbucks for its focus on the shopping atmosphere and quality products. ISH also aims to be more than just a store for its customers with a comfortable shopping experience and trained and knowledgeable staff members. The Company also represents an investment opportunity for its supporters and enables them to participate in the growth of Canada’s cannabis market through a local retail business.

That sense of community is important to the Company and was how its Spirit Fund was launched. Via this platform, a portion of every sale goes back into the community through educating the public on topics that the Company values, while investing in arts and culture. The first donation was a multi-year contribution to the Gord Downie and Chanie Wenjack Fund, which supports Indigenous reconciliation. That was followed up with a $5,000 donation on opening day of its Kingston shop. Another was a contribution to the city of Moose Jaw, Saskatchewan, to help it reclaim the title of World’s Tallest Moose. As these are places where the Company operates, CEO Bondar says ISH sees this as a way to give back to the communities in the true Canadian spirit.

Experienced leadership team

Inner Spirit is led by a reputable management team that has been deeply involved in franchising for more than a decade. Together, the team has won Retail of the Year and Franchise Startup awards, among other corporate recognition.


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The team has experience as franchisors and has taken its infrastructure, staff and revenue that was in place to advance Inner Spirit’s business. This all but eliminated the “cash-burn” most companies deal with to kickstart their operations and it helped set the framework to build the brand. ISH was the first cannabis retail company to do a true IPO in July 2018, which provided revenue pre-legalization.

Looking ahead

The Company’s goal through the end of the year is to see all the many stores in the pipeline open their doors for business. Through 2020, Inner Spirit will continue to capitalize on opportunities in Ontario and has identified additional location opportunities in that province. ISH is expecting to do more as the legal market matures to solidify its footprint with a goal of 150 stores in the next two to three years throughout the country.

Inner Spirit Holdings is certainly off to a great start with the growing cannabis market as retail establishments make inroads as growth opportunities for investors. Spiritleaf-branded stores are being placed throughout the country to serve a growing clientele of Canadian consumers, and investors are seeing the opportunity to invest in a local cannabis retail brand with deep Canadian roots.



FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.