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Canadian coffee chain Second Cup is jumping on the marijuana bandwagon with plans to convert some of their coffee shops into dispensaries. They also want to make some of the cafes into pot lounges once it becomes legal this year.

They announced Thursday that it has signed an agreement with marijuana clinic operator National Access Cannabis (NAC) to develop and operate this network of pot stores. The company has been struggling to find its place in a competitive market with independent coffee shops, Starbucks and Tim Horton’s locations growing. After the announcement, shares in the company rose as much as 31 per cent.

However, neither Second Cup or NAC currently have a license to sell marijuana, so everything depends on approval from the governments, franchisees and landlords.

“(Cannabis) is going to be an awfully big business in Canada, and we have some amazing locations,” said Second Cup’s board chairman Michael Bregman. “I wish I knew now in what form we would be pursuing and participating. We’re just trying to position ourselves so we can participate as the opportunities arise and the legislation is formed.”

“This strategic relationship provides Second Cup with a great opportunity to leverage our select real estate assets to increase value for shareholders and franchisee partners,” said Second Cup chief executive Garry Macdonald in a statement.

“Let’s say there’s a Second Cup store doing $750,000 a year…. That’s OK, it will be profitable for everybody, for Second Cup and the franchisee,” said Bregman. “But let’s say there’s an opportunity to transform it into a dispensary that might do $5 million out of the same space … we’d be crazy not to take a look at that opportunity.”

The stores would first be located across Western Canada, and expand across all provinces where legally permissible. NAC will apply for licenses to dispense cannabis products and work with Second Cup and applicable franchisees to construct stores carrying cannabis products.

While the details of those consumption lounges would depend largely on regulations, NAC chief executive Mark Goliger described them as “Amsterdam, with Canadian conservativeness attached to it.”

“We do feel that cannabis lounges are a logical next step … As most provinces are making it very restrictive as to where people can actually consume in public,” he added.

Second Cup got the idea to get into the pot business after several cannabis producers approached them. Right now, it’s unclear how many stores will be ready by the time it becomes legal, but the companies plan on submitting as many as 20 applications for licenses in Alberta and will see how many are approved.

“This is an opportunity where there is plenty of potential upside and no real downside,” said Bregman. “This can’t hurt the company, can’t hurt the franchisees. But can help a lot if things go well.”