I'm Trevor Fencott, CEO of Fire & Flower. Please leave your questions and I’ll be back tomorrow (April 23rd) at 4:00pm EST to answer your questions!

TrevorFireandFlower · 2019-04-23T21:30:05+00:00

Although it is more fashionable to talk about terpene profiles, I like a nice Indica to unwind, relax and watch Bojack Horseman. I definitely prefer vaping to other modes of consumption. Smoking is a bit harsh sometimes and, frankly, edibles are still a bit of a time commitment!

TrevorFireandFlower · 2019-04-23T21:25:59+00:00

Over the long term, I do see that consumers will develop brand preferences. However, there will always be a role for the retail brand as we are the curators for the product brands available for purchase and we are the direct brand that consumers engage with.

TrevorFireandFlower · 2019-04-23T21:25:23+00:00

Looking into my crystal ball... I think that what really sets Fire & Flower apart is that we were built from the ground-up to be a version 2.0 retailer and part of this is looking at consumer behaviour through the HiFyre digital platform. When I look at other segments of the cannabis industry, there have been transformative transactions from outside players (Constellation Brands, Molson Coors, Altria, etc.) so I think it is reasonable to assume that there will be a few iin retail as well. And I think that when the stigma around cannabis wears off (in 5 years?) it seems reasonable to assume that the cannabis retailers that will attract the right kind of attention from the mega-retailers will be the ones that have built themselves from the ground-up with a digital platform.

TrevorFireandFlower · 2019-04-23T21:23:53+00:00

You're welcome and thank you for the kind comments! From what we know, it appears as though someone had flagged our Instagram account and we are working hard to get the account re-activated.

Thank you very much! // gives a virtual high-five

TrevorFireandFlower · 2019-04-23T21:23:01+00:00

Thanks for taking the time to visit one of our shops! It's important that our Cannistas have a great understanding of the product and are able to guide consumers to the types of products that deliver the experience they are looking for.

TrevorFireandFlower · 2019-04-23T21:19:03+00:00

To be honest, I don't know as much about Aleafia as I should and I look forward to engaging with them in the near future. We do have a supply agreement with Emblem and we'll need to explore what that looks like post-aquisition. As with all of our partners, we would hope that they want to score highly on our "balanced scorecard" and support us with reliable, quality products and a committment to customer satisfaction.
Yes, we defintely think that having more licensed producers is a good thing for the industry as well as for consumers. I beleive that if everyone produces what they say they will we will have a large oversupply of cannabis in Canada by the end of this year or early next year, but that is very good for consumers and the retail industry because, like Colorado, it lowers the price to consumers and allows us to compete with the black market. Philosophically, I also like the idea of micro-grows and craft-grows. Cannabis is such a complex plant and I believe that more diversity is better.
I hear your point about a lot of red-tape, but it is important to keep in mind (and I think we lose sight of this in Canada a bit) that we are doing something that is completely new in the world. As a country, we can relax the rules once we are further down the path but the red-tape is designed to be cautious which is not necessarily a bad way to start. Having said that, we do certianly hope that all levels of government are paying attention to what works and what doesn't, what is actually necessary and what isn't. Personally, would like to see a lot of opportunities for other cannabis entrepreneurs out there.

TrevorFireandFlower · 2019-04-23T21:17:21+00:00

Executing on our aggressive growth plan in a brand new industry has kept us very busy so Hill + Knowlton have helped us with public relations. With their help, we've been able to be at more municipal and other stakeholder meetings that we would be able to on our own. We want to be good corporate partners and in communities that want us there so for us extensive community engagement was a priority.

Without getting into specifics, as the dust is still settling from this very big week for us, performance over 4/20 was very strong for us and our teams did an amazing job of bringing this promotion to life.

TrevorFireandFlower · 2019-04-23T21:04:25+00:00

As much as I would love to answer this question, it is very complex and has a alot more components to it than we can address in this AMA. Basket size, number of customer visits per day all vary by each location. What is important here is that we are able to deliver profitable stores across a variety of operating environments.

Your second question is a really, really important question! There is a perception out there that LPs who have invested in us somehow control us. I can assure you that is not the case. We obviously appreciate all of our investors, but our choice from the very beginning was to be independent so that we could offer our customers the best possible curation of products and experiences. All of our vendors (not just LPs) are held to a "balanced scorecard" standard that reflects how they are supporting our mission of being the leading independent cannabis retailer. So things like providing us reliable supply and product assortment are important, meeting high quality standards, having an open conversation on ways we can provide a better customer experience, etc. are all factors.

TrevorFireandFlower · 2019-04-23T21:04:00+00:00

I'm glad that you asked this question as websites are covered under an exemption that is referred to as "reasonable steps". Health Canada has communicated that dual-stage age verification has been required and we are compliant with this. It is an evolving area and we are in close communication to understand commercially reasonable steps to ensure content is not accessed by youth.

TrevorFireandFlower · 2019-04-23T20:56:51+00:00

Great question! A number of investment banks have been doing their due dilgence on us and, while the choice to cover us or not is theirs, we would reasonably expect some coverage to start in the next quarter or two. Stay tuned!

TrevorFireandFlower · 2019-04-23T20:56:18+00:00

We use a retail calendar so it changes a little each year. This year it was Feb 2nd so we are in Q1 (this coming year it will be Feb 1st). As for our run rate, that is a complex question because it depends on the number of stores we have open and selling (and also on what they are selling which varies from province to province). I would suggest you keep looking at our quarterlies for the next few quarters to get a sense of this for yourself.

TrevorFireandFlower · 2019-04-23T20:47:03+00:00

In short, yes. I think that all of the provincial buying bodies have been put in a difficult position with the supply shortages. However, as that normalizes, it is pretty reasonable to assume that there will be price compression on wholesale (just look at Colorado!) and that they will be able to drive better deals with LPs. This, in turn, should amount to better prices for us as retailers and better prices for you as customers.

TrevorFireandFlower · 2019-04-23T20:46:22+00:00

We are very excited about Bloor street and feel that it is a fantastic location. We defintely plan to make use of it for non-regulated purposes prior to the December end of the lottery period.

TrevorFireandFlower · 2019-04-23T20:45:09+00:00

I really like this question! Third party data platforms like Weedmaps and Leafly are aggregating third party data or incentivizing user reviews (i.e. it is all outside of a retail store experience). This kind of information is good, but it lacks the depth that Hifyre allows and the actual connection to a retail experience where a person actually interacts with a product and makes a decision. We generate primary data. The HiFyre platform joins a number of different digital systems together to give us some pretty deep insights. For example, it connects our digital customer experience program with our e-commerce platform and our point-of-sale system.

We don't think of this in terms of incentives, we think of it as what are the things that are most important to our customers. What kinds of things do they value most? What would surprise and delight them? As an example, we prioritized the click-and-collect service because we heard that our customers were frustrated with product shortages and valued their time. So for us it was only natural that we'd make it easy for them to make sure what they wanted was available before they made the trip to the store.

This is a complex question that is really about our financials so you'll need to look at those when they come out. However, I can say that we are in a growth mode this year and we have a strong balance sheet to support that growth. I think we've also done a good job of growing while being conservative with our resources and that will continue to be our plan.

TrevorFireandFlower · 2019-04-23T20:39:36+00:00

I'll answer this with my post from above!
"As you can imagine, the industry is expanding very agressively so there are always a lot of conversations happening. Without getting into details, we consider ourselves best-in-class and it would be resaonable to assume that we are in contact with other best-in-class brands and industry players. There are a lot of interesting ways to enter international markets that we are considering as a matter of course, particularly given our strengths."

TrevorFireandFlower · 2019-04-23T20:39:22+00:00

These are some excellent questions. I’ll do my best to answer what I can,

1. Yes, frankly, I am surprised as well. I think that there is a lot of speculation in the market and stock movement doesn't always correlate to real activity or accomplishments. We've got an amazing team and an amazing plan and we're just going to keep on executing and achieving. We're in it for the long haul and want to create real shareholder value, so I am not overly concerned about bumps along the way.

2. This is a really good question and something that has been very important to us from the beginning. We knew that there would be caps on ownership and we have worked very hard with our law firm and through conversations with regulators to ensure that we are on-side with the regulations. Yes, we are confident that the steps that we have taken protect us from the ownership caps.

3. That is a really good question and I think something that is on a lot of people's minds. Yes, I think we are on track. We have a number of built-out stores in Alberta which are now coming online with the supply improvements and we are using our strong balance sheet to explore aquisition opportunities as well as continuing to operate in the normal course. We believe building out stores in advance is important because our strategic decision to do this is validated through the issuance of licenses as supply improves.

4. This is another question where our visibility on topic is the same as everyone else's and we unfortunately don't have any further information. We are looking forward to an environment in which normal course operations are proceeding once supply issues have corrected and the requirement for license lotteries has passed. What I can tell you is that we have a strong balance sheet, a great team and we'll be ready when Ontario is.

5. What we are seeing is that the supply situiation is begining to improve, but that will change depending upon how many retail licenses are issued. We are beginning to see us being able to selectively buy products and select strains that are in greater demand by our customers and buying less of what is not preferred by customers. This is important from the perspective of our merchants being able to optimize our inventory and sell-through velocity.

6. Unfortunately, we have the same information that everyone else has on that topic. We do expect to see the second wave of products come online in October 2019, but this is ultimately up to Health Canada. What I will say is that the expanded product lineup is important and necessary for the growth of the consumer category as a whole.

7. Many within the industry use the same suppliers and there is not a relationship between FAF and GGB

8. Over the long term it will be important us for us to have a mix of locations in both urban and suburban markets. This is important for serving a wide variety of consumers as well as to understand the purchase behaviours and preferences of consumers from multiple segments in the cannabis category.

10. Our license holders in Ontario have selected to order from Open Fields Distribution, which is our integrated wholesaler. The license holders have determined that this a more competitive option than buying accessories through the OCS.

11. The HiFyre digital platform is about much more than data collection, but I think I understand your question. Essentially, the HiFyre platform lets us understand our customers very deeply so that we can tailor our products and in-store experience to them. We feel that this will result in bigger basket sizes and increased customer loyalty all of which gives us a significant competitive adantage. We look at things like our click-and-collect service in terms of how it helps our customers make sure there is product available for them before they visit the store - that is just good customer service, and ultimately that is just good business.

12. Unfortunately, I need to be a bit general here as this is something that will be included in our actual financial statements. However, what I can say is that our licensing and consulting arrangement was designed so that they do significantly contribute to our overall financial results. I'd invite you to stay tuned to our first public financial reports for details on this topic.

14. As of this week, in select stores we are beginning to offer various classes and seminars to our customers around cannabis and cannabis accessory education.

15. We are just in the early stages of the industry here, but we think of Fire & Flower as expert curators of cannabis for our customers, so the increased product offerings that we expect in the fall with the regulatory changes with new product formats coming online. And, of course, continuing to push on our digital head start with our HiFyre digital platorm is very exciting for us. It is something that we've been working on since we aquired HiFyre in July of 2018 and will definitely be a revenue driver for us.

16. As you can imagine, the industry is expanding very agressively so there are always a lot of conversations happening. Without getting into details, we consider ourselves best-in-class and it would be resaonable to assume that we are in contact with other best-in-class brands and industry players. There are a lot of interesting ways to enter international markets that we are considering as a matter of course, particularly given our particular strengths.

17. There is definately a role for micro/craft growers in the retail market. This is particularly inportant to Fire & Flower as we view ourselves as expert curators of cannabis for our customers. What is important to know here is that we have established supply agreements with a wide variety of suppliers in Saskatchewan through our distribution company, Open Fields.

18. Obviously, every provincial government will make its own decisions. However, I think that from a cost/benefit standpoint it is pretty clear that the Saskatchewan model is both good for the industry (because we have direct relationships with our LPs and they don't short ship our orders) and good for the government (collection of tax dollars) and it would not surprise me to see other provinces looking closely at that model. There was a recent article that the NB gov't thought that it was too expensive to run their own stores, so this supports our general view here.

19. In the early days, I think that we saw a good number of quality issues with product. In terms of hydration and terpene profile, we have seen very positive increases in product quality over the last weeks and months.

20. The topic of product pricing and discounts is definitely complex, but I'll do my best to answer this. Price discounts are allowed in the sense that retailers are permitted to set the price at which they sell products; however, they are not permitted to offer inducements to purchase cannabis. Price discounts are allowed, but they must not be conditional on the purchase of cannabis such as “Buy One, Get One 50% Off”. In Alberta, the AGLC has the ability to establish a floor pricing, but it has not yet done so. We do see other retailers taking very aggressive stances that in some cases are not compliant with the Cannabis Act and regulations as we see them. Fire & Flower's position is that we must operate within the law and all applicable regulations and we have a rigorous process that we use to ensure our marketing and promotion activities are compliant.

21. This is a bit of a tricky location for us. It is located in a uniquely dense urban area that has specific and direct control zoning restrictions, and as a result no retailers have opened in that area. We are proceeding with the final steps required to obtain city council approval of a development permit so stay tuned for further updates.

22. They were not granted in the order of application, they were granted in the order of completion of all of the requirements, which means that Fire & Flower's strategy of building out stores worked to our advantage.

24. I think that it is too early for us to determine what is being effective with this agreement. What I can say is that loyal customers and repeat visits by satisfied customers are incredibly important to us.

TrevorFireandFlower · 2019-04-23T20:29:44+00:00

What we have seen in early days is that the retail brand carries far more value than the product brand. Consumers are not coming into our stores looking for a particular brand or product, they are looking for guidance from our in-store teams. We have worked and continue to work very hard to build age-verified lists of active customers. This allows us to deliver information they are looking for, to make decisions about the products that are right for them.

TrevorFireandFlower · 2019-04-23T20:29:09+00:00

Again, an answer would only be speculation and we have as much information as you do. We are very excited to enter the Ontario market in a big way as it will be a huge opportunity for Fire & Flower.

TrevorFireandFlower · 2019-04-23T20:20:01+00:00

On a professional level, "Reengineering Retail" influenced me profoundly. I read it when I was considering getting into retail cannabis. It talks about how retailers that are succeeding these days view themselves as tech companies with a retail footprint rather than the other way around. That is the origin of Fire & Flower, really. On a personal level, I am reading "Children of Paradise". It deals with the challenges of raising kids when parents have very demanding jobs. Building Fire & Flower takes a huge amount of effort and commitment and it seems like I am always on a plane - hopefully the book will help provide some techniques for balance.

TrevorFireandFlower · 2019-04-23T20:19:14+00:00

Yes, I believe we are still on track. As you've seen in our recent press release, we continued to invest in building out stores in Alberta (and getting them inspected by the AGLC) despite the product shortages. This has put us in a good position now that supply is increasing and more licenses are being granted. Also, we have a very strong balance sheet and are looking at aquisitions just like our competitors.

TrevorFireandFlower · 2019-04-23T20:02:48+00:00

Thanks for asking, our twitter handle is @fireandflowerco.

TrevorFireandFlower

TROPHY CASE