The Rise of Hemp: The Federally Legal Industry is Booming
The hemp-derived CBD industry is expected to reach $16 billion nationwide by 2025. The ground-breaking Agriculture Improvement Act of 2018 or Farm Bill removed low-THC cannabis and its derivatives from the Controlled Substances Act, opening the door for FDA-regulated products like CBD pharmaceuticals, food items, additives, and dietary supplements. Already, major retailers like CVS and Kroger are selling CBD products. Granted CBD products, including CBD-infused water, CBD-infused cosmetics and CBD-infused pet treats in the marketplace pre-dated the Farm Bill, those products can now be shipped across state lines and sold legally at the federal level. Here’s what you need to know about the rise of hemp in the U.S.
Hemp Vs. Marijuana
Hemp and marijuana look and smell nearly the same, but the similarities stop there. They derive from the same plant, cannabis sativa, but hemp contains less than .3% THC while marijuana has much higher levels. Hemp is now considered a federally legal agricultural product, and majijuana remains a DEA Schedule 1 drug, only legal in states with medical and adult use programs. In addition, hemp is regulated by the FDA and marijuana is not.
Just like with marijuana, there are hemp cultivation facilities, processing centers, and retail businesses. The focus and capital investment has been on processing centers with businesses in Colorado City, Colorado and Janesville, Wisconsin leading the charge.
Colorado City has a population of under 3,000 but is home to Paragon Processing, the largest hemp-processing center in the United States. According to Westword, Paragon will produce a variety of hemp extractions through isolation and distillation techniques, projecting to produce one million pounds of hemp monthly. Industrial hemp production has the complete buy-in from Governor Jared Polis. “Governor Polis’s administration has pushed for looser regulations on hemp farmers and businesses in order for this state to maintain its top spot in the hemp industry,” adds Westword. “During a recent speech at a hemp and CBD industry conference, Polis said that hemp farming was part of his rural economic initiative, and that he’d like to raise Colorado’s current 62,000 acres allotted for hemp farming by 20 percent.”
Wisconsin’s young market already has as big player in Simply Solutions, a maker of natural personal care products, getting into the hemp game. Simply Solutions will be the area’s first-to- market commercial-sale processing facility with another distinction: a method that extracts almost 100% CBD oil content.
Per GazetteXtra, “Simply Solutions claims their extraction process is a cleaner and more efficient way to extract more CBD from hemp…Methods other producers use extract only 60% to 70% of the CBD, they said.That’s important, considering that some strains of hemp grown for CBD can net $2,500 to $75,000 an acre, according to New Frontier Data, a cannabis industry analyst.”
Sourcing hemp from reputable farmers is crucial for CBD purity, as many companies are extracting CBD from hemp plants not bred for CBD.
Licensing and Regulations
The Farm Bill gives states the authority to submit plans for licensure and regulations. According to the National Conference of State Legislatures, “A state plan must include certain requirements, such as keeping track of land, testing methods, and disposal of plants or products that exceed the allowed THC concentration…State policymakers have taken action to address various policy issues — the definition of hemp, licensure of growers, regulation and certification of seeds, state-wide commissions and legal protection of growers.”
Keeping Marijuana and Hemp Separated “Marijuana entrepreneurs who want to enter the federally legal CBD industry should consider starting a CBD business separate from the marijuana entity,” according to Marijuana Business Magazine. Though the Farm Bill has federally legalized the hemp industry, marijuana remains a Schedule 1 drug, and the main concern for businesses is extracting CBD that stays below .3% THC content. However, the same owner can have separate hemp and marijuana businesses.
The same article reported that Fairwinds, located in Washington state, faced a dilemma, desiring to enter the hemp space. The company’s products include tinctures, capsules, and topicals derived from a cannabis strain with CBD-dominant ratios, but with THC content above the limit. “The solution wasn’t simply removing THC from the products, because that would make them less effective. Rather, in anticipation of hemp legalization, Fairwinds CEO James Hull and his team spent more than a year finding new cannabinoids that could replace THC in formulations that would be federally legal while still an effective treatment.”
In the spirit and best practice of keeping the businesses separate, Hull ultimately created a new entity called Fairwinds CBD.
Less Oil Means More Plants
Another significant difference between hemp and marijuana is hemp’s lower oil content, which means that business owners must process more of the crop for an adequate CBD oil yield. Marijuana Business Magazine interviewed Craig Henderson, CEO of Extract Labs, a Boulder, Colorado-based extraction firm and CBD products manufacturer, who says hemp processing facilities will need larger extraction machines. “He [Henderson] estimated that a large marijuana company processes 100-300 pounds of cannabis per week, whereas large hemp companies process 2,000-10,000 pounds of the plant each week.”
In addition to larger equipment, business owners will need more employees and more space to handle the volume of product and extraction needs of hemp. “I think it’ll take people a couple months to figure out what they want to do and how they’re going to create businesses, and hopefully, maybe by June, we’ll see a huge spike in interest,” adds Henderson.
Proceed with Caution
The FDA remains the be all and end all governing body when it comes to regulating hemp. Hemp-derived CBD companies must be judicious about their product descriptions, especially information on potential health benefits. Moreover, the FDA has not given CBD as a food additive the designation of Generally Regarded as Safe.
Stipulated Sum Agreements Make Us the Right Builder for You
Our goal as a design-build firm is to create value for our clients through outstanding service-delivery and building trusted relationships. One of the many ways we achieve our goal is how we structure our contracts. Our clients want to know what they’re paying for, and we are able to clearly spell that out by providing stipulated sum agreements.
What is a Stipulated Sum?
Also referred to as a lump sum contract, a stipulated sum requires a builder to agree to provide specified services for a fixed price based on labor and material costs. The builder is responsible for executing the job properly and will provide its own means and methods to complete the project. Specifically, we use stipulated sum agreements with our multifamily and commercial projects, and they allow us to better define the scope and schedule of projects.
“We have always been client-centric, and what that means is that we want our clients to look at us as their design-build partners. The way we have been set up from inception has lent itself to that type of relationship.”
– Andy Poticha
Why We Use Stipulated Sums
Cannabis Facility Construction uses stipulated sums so that our clients know what they’re getting, and we know exactly what we need to deliver. Our contracts are predictable and easy to manage and benefit our clients in the following ways:
No Hidden Fees
One of Cannabis Facility Construction’s key differentiators is that we never stick our clients with hidden fees, compared to cost-plus-fixed-fee and other contracts. “We don’t charge, as most architects and most contractors do, a percentage of construction,” said Andy Poticha, Principal of Cannabis Facility Construction, on the Cannabis Legalization News podcast. “You have no incentive to finish a job on time and you have every incentive to make it cost more money. We said if we’re truly going to be partners with our clients, we need to have some skin in the game. We’re going to be offering them our process and our intellectual property, and we’re going to say that the project’s going to take this long, and our fee is going to be a stipulated sum based on how long that’s going to take.”
Our clients value the predictability of stipulated sum agreements, especially since they reduce risk and give them more confidence. With an agreed upon sum in place, our clients are not liable for any cost overruns. “It doesn’t matter to us if the project is $6,000, $600,000, $60 Million, or $600 million,” added Poticha. “If it takes six months to do, our fees are going to be the same. Our clients understand that we have an incentive to finish it in the time that we’ve agreed to. But just as importantly, we have the incentive to make sure that our client is getting the most bang for their buck without us having the incentive of trying to sell them something more.”
We find that stipulated sum arrangements foster a greater degree of collaboration between Cannabis Facility Construction and our clients. We are able to execute tight project management and more efficient communication to ensure that both parties are adhering to the scope of work. “We are very different in our approach to how we look at our clients,” said Poticha. “We have always been client-centric, and what that means is that we want our clients to look at us as their design-build partners. The way we have been set up from inception has lent itself to that type of relationship.”
The design-build methodology supports our goal because it allows us to streamline the construction process, which ultimately benefits our clients and our management team. “We look at every project not as a one-time project, how much money can we make, finish it, and go on to the next project,” added Poticha. “We’re offering our client this partnership so that they can go on and do what they do best, while we do what we do best.”
What’s New for America’s Most Popular Cannabis States?
2019 has been the year of the cannabis plant in the United States. New states have joined the recreational cannabis club, young medical programs are exploding, mature ones are diversifying, and the Northeast is inching along. Here is the latest on the nation’s most popular cannabis states.
Colorado’s Cannabis Program Adds Versatility
Changes are coming to Colorado’s medical and recreational cannabis programs. House Bill 1230 will allow legal social consumption at businesses like dispensaries, restaurants, hotels, and music venues. Home-delivery of medical cannabis can begin in 2020, followed by recreational in 2021 thanks to the passage of House Bill 1234. In response to the state’s opioid epidemic, Governor Jared Polis signed the MMJ for Opioids Bill, which allows doctors to recommend medical cannabis as an alternative to opioid medications. The medical program also added autism to its list of qualifying conditions. Finally, House Bill 1090 opens Colorado’s cannabis industry to out-of-state investors and capital, including publicly held companies and large venture funds. Per Westword, “The bill would also permit investors to own smaller stakes (less than 10 percent) in a cannabis business.”
Illinois Hits a Snag
According to the Illinois Regulation and Tax Act, the state’s 55 existing medical dispensaries would have first dibs at applying for a recreational sales license at the same site, plus a second license for one at a different location. However, recently, The Illinois Department of Financial & Professional Regulation, the agency in charge of issuing those initial recreational-use licenses, announced a different interpretation: “…if a medical dispensary wishes to relocate for any reason — whether it’s for more space or if a home municipality bans recreational sales — it forfeits its right to also sell recreational marijuana,” per the Chicago Tribune.
This has created chaos for companies like Green Thumb Industries (GTI), which was awarded a retail license by the state in its Naperville location before the city council opted out of the program. “Naperville’s 6-3 vote on Tuesday, September 3 (2019) marks one of the first major roadblocks for Illinois’ marijuana industry as it prepares for recreational sales next year,” the Chicago Tribune added. “Whether GTI, or any other company, can open a store for recreational marijuana, could be reconsidered by the council after a potential non-binding voter referendum.”
Other municipalities in Chicagoland to ban recreational stores include Bolingbrook and Wheaton.
Oklahoma Medical Cannabis is Soaring
Previously, we wrote about the launch of Oklahoma’s medical program, and nothing is halting its trajectory toward a projected value of $250 million per year by 2025.
As of August, 2019, there are 162,273 registered medical cardholders, a number that’s been growing by up to 10,000 per month for the last year. To put those numbers in perspective, that’s 4 percent of the state’s total population.
There’s a pretty easy explanation for this success: patients don’t have to meet qualifying conditions, and instead only need a referral from a physician. There are also no caps on dispensary licenses, which is why the current number is over 1,700. Additionally, the barrier to entry is low. According to the Arkansas Times, “The license to grow on a commercial scale or open a dispensary in Oklahoma is a flat $2,500 and a fare thee well, open to any Oklahoma resident who hasn’t had a felony in the past five years. Their law allows cardholders to possess up to a half pound of marijuana, and grow up to six plants at a time. Their law also made possession of up to 1.5 ounces by non-cardholders a misdemeanor punishable by a maximum $400 fine.”
Additionally, High Times Magazine put Oklahoma’s cannabis culture on the map when it held its renown Cannabis Cups in Oklahoma City in August.
Massachusetts Social Equity
As more recreational cannabis businesses come online in Massachusetts, the push for social equity is taking center stage. Real Action for Cannabis Equity (RACE) started in Boston in September, 2019 to address the dearth of minority-owned operators. Per Marijuana Business Daily, “Organizers say they’re frustrated that all but two of Massachusetts’ 184 marijuana business licenses were issued to white operators…black entrepreneurs in Massachusetts who say people of color are being shut out of the lucrative marijuana industry are joining forces to close the gap.”
New York Decriminalizes Cannabis
Though New York state failed to pass recreational cannabis during the 2019 legislative session, a last-minute compromise was reached on decriminalization. According to The New York Times,”Under the new law, possessing between one and two ounces of marijuana will no longer be considered a Class B misdemeanor. It will now be a violation, with fines up to $200. Those found with less than an ounce of marijuana will now face a $50 fine, compared with $150 previously.” In addition approximately 160,000 people will have cannabis convictions expunged from their records.
New Jersey Still has a Chance to Pass Recreational Cannabis
The Garden State saga to legalize recreational cannabis is back on. The state Legislature came up short on votes to pass a new law earlier in 2019, but the law-making body isn’t giving up, envisioning two scenarios:
- Holding another vote for the bill during the lame duck session at the end of 2019 or the first half of 2020
- Putting it on the ballot for the November, 2020 election
Governor Phil Murphy has voiced his preference of passing recreational cannabis through the Legislature versus relying on the ballot box. According to NJ.com, “Such a move would allow leaders to more easily mold and regulate the new marijuana industry. And waiting until next year’s elections means you likely won’t be able to consume weed legally in New Jersey until early 2021, at the earliest.”
Cannabis Extraction: What Exactly Does it Mean?
Cannabis extraction, sometimes referred to as processing, is one of the fastest growing sectors in the industry. In fact, over 50 percent of cannabis sales are concentrates and infused products created by extraction. To give you an idea, Illinois’ medical cannabis program in 2018 saw concentrates and infused products out-sell flower for the first time since its inception. Let’s take a closer look to better understand what extraction entails.
What is Cannabis Extraction?
Extraction refers to the conversion of target molecules in cannabis raw material into a usable form. The process removes the oil found in the trichomes from the cannabis plant and targets and collects the most potent compounds from the plants, including THC, CBD, and terpenes, among others.
Why is it Important?
For one, cannabis extraction creates versatility for products and methods of administration, providing many viable options for consumers. Cannabis extractions are also known as concentrates, and they are stronger than flower, presenting with higher cannabinoid and THC content. According to Maximum Yield, “Extraction is a common practice performed for a number of different reasons, ranging from increasing marijuana’s medical benefits to producing a more potent recreational product.”
What are the Methods of Extraction and Where does it Take Place?
The three most popular methods of extraction are CO2, hydrocarbon, and ethanol. CO2 extraction occurs when carbon dioxide is pressurized in metal tanks until it converts into a supercritical fluid. As MJBiz Daily describes it, “The fluid pulls out the desirable compounds from the flower. The fluid is then separated, leaving only concentrates.” During hydrocarbon extraction, butane or propane dissolves raw cannabis matter and collects cannabinoids and terpenes. “The solvent with the essential oils is then heated up to evaporate off the butane or propane, leaving behind the extract.” Ethanol extraction is performed by soaking raw cannabis in ethanol to capture trichomes into the solvent. “The cannabis is then removed; the liquid is filtered and the alcohol purged from the extracted material.”
The extraction method often depends on the facility. According to Leafly, “Some shops are devoted to CO2-based extractions, others operate mostly on butane-centric machinery, and a few employ machines of both stripes and more. Some will have large-scale machines for extracting cannabinoids—as well as other important cannabis compounds like terpenes—from big batches of flower, and smaller setups that let them conduct experiments on the side.”
“Every step of the extraction process demands a balance of art and science, beginning with the selection of starting material and ending with the purging and storage process.”
What Products are Created from Extraction?
Extractions gives cannabis users options when it comes to consumption. “Entrepreneurs have turned the full power of modern chemistry on cannabis,” according to Leafly. “Their goal has been to find ways to extract the cannabinoids giving the plant its character and effects, providing a way to enjoy the sensations associated with cannabis without having to smoke the actual flower.”
Products in highest demand include:
- Tinctures: Cannabis-infused liquid in bottles with droppers that are administered sublingually or under the tongue
- Capsules: Cannabis concentrates ingested orally in capsule form, ranging from single cannabinoid to full-spectrum or strain-specific oil
- Vaporizer Cartridges: Oil-filled cartridges that connect to a battery that are vaporized
- Hash: Vaporized, dabbed, or smoked, hash is a pressed concentration of the cannabis plant’s sticky glands
- Shatter, Wax, and Dabbable Oils: Ingested orally, these are oils refined by a solvent like butane or CO2
Just like with a cultivation and retail business, an extraction facility requires a license to operate. Extraction laws, licensing processes, and regulations vary by state and municipality. That’s the first step, and understanding the intricacies and nuances of extraction comes next. Per Leafly, “The knowledge and care that goes into extracting oils is as complicated as the art of growing the plants they are derived from. Every step of the extraction process demands a balance of art and science, beginning with the selection of starting material and ending with the purging and storage process.”
Federal Cannabis Legislation: What You Need to Know
It seems commonplace that among the main news stories of the day, is a proposed federal congressional bill addressing cannabis reform. There are at least 10 right now with the most promising ones featuring bipartisan support. “Marijuana decriminalization may be one of the very few issues upon which bipartisan agreement can still be reached in this session,” said Rep. Tom McClintock (R-CA), adding “it ought to be crystal clear to everyone that our laws have not accomplished their goals.”
The two main strategies to end cannabis prohibition in the U.S. involve either legalizing at the federal level or creating immunity for states that pass their own legalization laws.
SAFE Banking Act
The SAFE Banking Act (H.R. 1595) would allow banks to work with the cannabis industry in legal states. This bill is unique because it has bipartisan support and it’s being moved along via committee hearing by Senate Banking Committee Chair Sen. Mike Crapo (R-ID) whose home state completely outlaws cannabis. Once opposed to any hearings due to the federal illegality of cannabis, Sen. Crapo has reconsidered. “We now need to, I think, move forward and see if there’s some way we can draft legislation that will deal with the issue,” said Crapo, according to Leafly News.
“Senator Crapo’s willingness to hold a hearing recently on the SAFE Banking Act was very encouraging,” Michael Correia, director of government relations for the National Cannabis Industry Association, told Marijuana Moment. “We’re thrilled to learn that he is open to solving this important issue and we are looking forward to working with the senator,” he added.
The STATES Act
Strengthening the Tenth Amendment Through Entrusting States, or The STATES Act (S. 3032), sponsored by Sen. Elizabeth Warren (D-MA), would amend the Controlled Substances Act and exempts state-approved marijuana activity from federal enforcement. In other words, states with a medical, adult use, or combined program could operate without ever fearing federal interference. The bill was first introduced in 2018 and reintroduced in 2019 with Sen. Cory Gardner (R-CO) signing on as a co-sponsor. The STATES Act was in response to the rescindment of the Cole memo, which President Obama created to protect legal cannabis state from federal interference.
However, there are those who believe the bill stops short of addressing racial and social matters. “We need to reinvest in those individuals and those communities that have been disproportionately impacted [by marijuana prohibition],” Baltimore State’s Attorney Marilyn Mosby, said. “The STATES Act does not do that, and that’s one of the reasons why I’m opposed to it.”
The two main strategies to end cannabis prohibition in the U.S. involve either legalizing at the federal level or creating immunity for states that pass their own legalization laws.
The MORE Act
The Marijuana Opportunity Reinvestment and Expungement Act, or The MORE Act, co-sponsored by House Judiciary Committee Chairman Jerry Nadler (D-NY) and Sen. Kamala Harris (D-CA), assuages those concerns. Considered the most comprehensive cannabis bill yet, it takes a three-pronged approach that addresses descheduling, state-control, and racial and social justice. If passed, the bill would remove cannabis from the Controlled Substances Act, allow states to write their own policies, and require cannabis convictions to be expunged or resentenced.
It creates further protections from the federal government, including prohibiting federal agencies from denying benefits to people found using marijuana and preventing immigrants from being deported for a cannabis-related conviction. The bill also sets up a 5 percent cannabis tax to establish grants for minorities and low-income communities.
“Racially motivated enforcement of marijuana laws has disproportionately impacted communities of color,” Nadler said in a statement. “It’s past time to right this wrong nationwide and work to view marijuana use as an issue of personal choice and public health, not criminal behavior.”
Amendment to H.R. 3055
This one is perhaps the most significant because it’s an Amendment that passed in the House of Representatives and is attached to an appropriations bill to fund parts of the federal government for fiscal year 2020. Specifically, the Amendment prevents the Department of Justice from interfering with state cannabis laws–covering D.C. and U.S. territories–including those allowing recreational use, cultivation and sales. It was approved by a floor vote of 267-165 with bipartisan support and is sponsored by Reps. Earl Blumenauer (D-OR), Eleanor Holmes Norton (D-DC), and Tom McClintock (R-CA).
“This is the most significant vote on marijuana reform policy that the House of Representatives has ever taken,” said NORML Political Director Justin Strekal. “Today’s action by Congress highlights the growing power of the marijuana law reform movement and the increasing awareness by political leaders that the policy of prohibition and criminalization has failed.”
Each of these pieces of proposed legislation come with “even if” or “even though” caveats. For example, even if the MORE Act were to pass the House, it would have a tougher time in the Senate. Even though the House approved the amendment that prevents the Department of Justice from interfering with state cannabis laws, will it achieve passage in the Senate and Senate Majority Leader Mitch McConnell (R-KY), who, though a champion of legalizing hemp, is opposed to cannabis? Still, the historic amount of cannabis bills and resolutions being drafted and considered by both chambers speaks to progress of cannabis legislation.
Cannabis Public Consumption: The Next Big Industry Development
With cannabis going mainstream and now firmly established as the fastest growing industry in America, business owners and state officials are partnering to create more opportunities for public consumption. Unlike with liquor at bars, restaurants, clubs, etc., one cannot legally purchase cannabis and use it onsite. So what gives? Public or social consumption of cannabis has been viewed as anathema by local governments, especially since it clashes with clean air ordinances. The tide is turning, though, as in the last few months a handful of states have passed new laws allowing licenses for cannabis lounges and other social spaces where consumers can legally consume products.
Alaska Lt. Gov. Kevin Meyer (R) signed new regulations into law in March of 2019, issuing permits to businesses authorizing onsite consumption. The so-called “special onsite use endorsement” stipulates that consumption areas need to be physically separated from retail spaces, either by a wall and a secure door or an outdoor patio. The onus is on business owners to provide security plans and adequate ventilation. As is the case with most public consumption programs, local governments in Alaska will have the authority to prohibit onsite use outright or to tighten restrictions, including limiting consumption to vaping only.
The birthplace of social cannabis lounges in the U.S., California, is expected to open many more in the next couple of years. San Francisco leads the way with the most cannabis lounges, but recent legislation coming out of Los Angeles County will make municipalities like Los Angeles and West Hollywood the next leaders. LA county has been fielding social cannabis business applications since January of 2018, and West Hollywood changed codes and zoning regulations to allow public consumption in certain cafes and smoking lounges, and recently Assembly Bill 1465 was introduced that will allow smoking, vaping, and eating edibles.
“Another big move: West Hollywood will allow chefs to infuse cannabis into pre-planned and on-demand menus for onsite customers at new restaurants,” according to Forbes. “As the cafes come online over the next 12 months, West Hollywood will have more than double the number of cafes and lounges of any other city.”
Colorado is the latest state to pass public consumption. House Bill 1230, set to take effect at the start of 2020, establishes regulations for retail stores to set up social consumption lounges, as well as allowing for mobile and temporary licenses. This means that businesses like music venues, art galleries, yoga studios, restaurants, and hotels can obtain public consumption permits and licenses for limited cannabis sales. There’s also a pathway for awarding temporary licenses for special events.
Colorado’s Marijuana Enforcement Division will process licence applications and serve as the state’s regulatory board. Per High Times “Like any industry’s regulatory requirements, businesses will still have to clear a few hurdles before they can let customers light up. First, business owners and cannabis advocates will have to convince local governments to opt in to the new law. Otherwise, the state won’t award a public consumption license. House Bill 1230 also gives local governments the authority to tweak the rules for public consumption. Towns could, for example, only approve certain forms of consumption.”
The Illinois Cannabis Regulation & Tax Act includes an exemption to the Smoke-Free Illinois Act, which prohibits outdoor smoking, allowing cities to determine if they want to permit on-site cannabis use at lounges, bars, restaurants, and other places of business. For now, the state is leaving it up localities to opt in or out to public consumption. The City of Chicago is weighing its options. “The regulations around on-site consumption have not yet been finalized,” said Lauren Huffman, a city spokeswoman in an interview with The Chicago Sun-Times in September, 2019. “We are taking the initial step of introducing zoning regulations so we can start to give businesses certainty around where dispensaries will be located. We have not yet made final decisions around where and how on site consumption will be regulated, but are having ongoing conversations with our partners in the industry, the community and the City Council around the best way to regulate the practice.”
Nevada’s recreational cannabis programs began in 2016, and now public consumption licenses will be granted. The Las Vegas City Council in May 2019 voted to allow existing cannabis businesses to apply for permits to open consumption lounges. Clark County Commissioner and former state senator Tick Segerblom, who is also considered Nevada’s cannabis ambassador, told the USA Today Network, “We’re the new Amsterdam. That should be a concern to gaming companies. They’re concerned about (lounges) making money outside the hotels. They’re worried the longer this goes outside hotels, the more established they’ll get. As a business person, I would be concerned too.”
While Las Vegas cannabis businesses hope to cash in on weed tourism, the gaming community wants to wall off its hotels and casinos. The Nevada Gaming Control Board, which has taken a conservative stance on cannabis, brokered a compromise with the city to create a 1,000 foot buffer between gaming establishments and cannabis lounges.
One business that’s not compromising or sparing any expense is Acres Cannabis, a 19,000 square-foot dispensary set to roll out a social consumption lounge that will include a concert hall and full-service kitchen launched with the Morton family of Morton’s The Steakhouse in Chicago.
According to msn.com, “After the city builds an application, 20 dispensaries – already open or forthcoming in Las Vegas this year – can apply for licenses to open lounges prohibited from selling alcohol. The ordinance excludes dispensaries on The Strip, which is controlled by Clark County, not the city of Las Vegas, as well as Henderson and North Las Vegas.”
What State Will be Next?
The new trend of public consumption is expected to expand, especially with new states like Illinois passing adult use programs. Oregon, currently a medical and recreational use state, appears next on the horizon. If passed, Senate Bill 639 would require the Oregon Liquor Control Commission to regulate social consumption businesses and event spaces, allow for the sale of cannabis in these clubs, tasting tours on farms and expanded legal cannabis delivery into private and temporary residences.
The Essential Staff of a Dispensary
Previously, we wrote about the essential staff of a cultivation facility, and now we turn our attention to dispensaries. Cannabis employment is exploding, and 2019 is projected to be a banner year for new-hires. The most in-demand jobs in medical and recreational markets are dispensary positions because these mostly customer-facing staff provide the greatest opportunity to interact with the general public.
Consumers enter a dispensary for a transactional and educational experience with the expectation of receiving quality customer service. They survey the products, interact with staff, and either buy or take a pass. It sounds simple, but behind the counter and the scenes it’s much more complex, and it starts at the top with the general manager. This crucial position oversees all functions and operations of a dispensary from interacting with vendors, dealing with law enforcement, and managing inventory to handling returns and of course, hiring, managing, and training budtenders and other staff. Certain medical dispensaries require general managers to be physicians, nurses, or pharmacists.
Budtenders play a critical role in creating a positive customer experience.Consumers, especially those new to cannabis, have lots of questions: What’s the difference between indica and sativa? What strain do you recommend for this or that? How is CBD oil different than oil with CBD and THC? What are tinctures? Budtenders spend the majority of their days working face-to-face with customers and providing knowledge and advice about cannabis products.
Administrative Staff Without people streamlining office functions, a dispensary would fail. Administrative staff are the unsung heroes that ensure dispensaries operate as well-oiled machines. They answer phones, handle customer inquiries, verify medical cannabis cards, and maintain patient records, among other duties.
Cannabis is the fastest growing industry in the country, expanding at an annual rate of 28 percent and expected to reach a value of $146 billion by 2025
There are efforts on the federal level to ease banking restrictions on cannabis businesses, most notably the States Act, but cannabis still remains a cash-only business. As such, dispensaries need physical security to protect assets while not scaring off customers. “While security is a tough game, you don’t want to set a tough tone between your security guard and cannabis consumer,” according to Marijuana Retail Report. “Work with your security staff to ensure that they embrace and understand the customer experience you are developing in-store. Since they are the first point of contact, ensure that they are helping consumers feel welcome and invited, yet are able to maintain a zero-tolerance stance on any customer activities that could present a perceived threat to your dispensary, staff and other customers.”
Cannabis is the fastest growing industry in the country, expanding at an annual rate of 28 percent and expected to reach a value of $146 billion by 2025. To keep up with the demand, not only does more product need to be cultivated, but it has to be sold to consumers. It takes the skill and knowledge of essential dispensary staff to keep these businesses running.
How Much Does It Cost To Start A Dispensary & Craft Grow
Cannabis Legalization News – Thomas Howard Podcast Featuring Andy Poticha
Tom Howard: It’s clearly 2:00 p.m. on a Wednesday, and so it’s cannabis legalization news time. We’ve had a huge week in cannabis legalization news. Illinois became … hey Miggy … what number is it?
Tom Howard: 11. The big number 11, and we also have a guest joining us. It’s Andy Poticha. Say hi, Andy.
Andy Poticha: Hello.
Tom Howard: Awesome. Well, we’re going to round up the news, and then Andy is going to discuss with us his unique knowledge about something that’s so hot right now. The cost of getting into a cannabis cultivation facility in Illinois. They’re called, The Craft Grows or a dispensary, but first, I think the biggest news of the week was of course that JB Pritzker signed it into law. Now, it’s number 11, but there’s been a lot of other really cool federal news, and Miggy have you heard anything on the west coast? Is there anything that you’re working on for weednews.co.
Miggy: No. Not me, per se. I mean state-by-state has been great also with New York and Texas and Ohio, but those are all more medical and one is decriminalization. The Banking Act.
Tom Howard: The Banking Act. I’m actually going to present to everybody, that’s another thing. So FinCEN did just release, and says that FinCEN publishes these on a quarterly basis, but of course it takes them a little bit of time to get the actual date. This came out this past week, and it’s current as of April 1. When the quarter ends here in about a week for June, these numbers will be updated and then FinCEN will publish that in another couple of months.
Tom Howard: But you can see the sharp uptick right there. Q3 2018. Basically JB Pritzker won, and then maybe this was also some New York thing. They don’t really publish those, but this is the number of banking institutions that are lending to marijuana. Interestingly enough, the thing that you see when you are lending to marijuana a lot, and hopefully my screen was on there, is –
Miggy: Hey, Tom.
Tom Howard: They file nondisclosure agreements and all that other stuff to kind of keep it secret, but this uptick, and a fairly large uptick according to the number of banks that are actually banking cannabis, somewhat corresponds to the stuff that’s been coming out of Congress. This is a really fresh news. This is from the Marijuana Moment, just from like a half hour ago.
Miggy: Oh nice.
Tom Howard: Right. And if you’re not familiar with what’s going on in the federal level, especially when it comes to banking and cannabis, it has to do with two things. One is the defunding of the war against marijuana for everything, not just medical, but state law marijuana. Second is the continuing pushing of the Safe Banking Act, placing it into the funding bills itself. As we get up the fiscal cliff, the fiscal cliff happens every year September 30 because that’s when the federal budget actually ends. The budget that will be passed that will continue to fund, that’s how hemp was legalized. That’s how the first war on marijuana was defunded back in 2014, through Rohrabacher-Farr Amendment just for the medical. It looks like the budget for 2020, plus Illinois going open for business, will really signal it’s time to go. It’s time to lend to cannabis businesses, and I would not be surprised if New York next year legalizes it. I think 2020’s going to be the biggest year for cannabis legalization ever. What about you, Miggy?
Miggy: No, I totally agree, especially since the House agrees to protect the legal states. That’s a huge step towards legalization, like you said. Just like jury nullification but in a financial way of how to attack prohibition.
Tom Howard: There’s jury nullification. That’s great, but you’re already being prosecuted. You’re on trial. Imagine if you could just stand up during a trial and be like, “Excuse me, Your Honor. There’s no money for this trial.”
Miggy: Yeah, yeah. That’s for sure. Defunding the war on drugs. I think that’s the best way to put it. FYI, when you had the chart on the screen, on YouTube, I was a predominant screen.
Tom Howard: That gets back to, I really need, and if anybody’s out there that is majoring in YouTube, and also social media SEO and has a paralegal degree, I will hire you because I am doing this all myself. And it’s sad. Somebody could be managing this, and then I could get back to work for the clients, which are just blowing up my phones. It’s going great, but that’s one of the reasons why we brought our guest on. He has actually designed and built cannabis facilities in Illinois. Andy.
Andy Poticha: Yes?
Tom Howard: How many of these facilities have you built?
Andy Poticha: In Illinois, we have completed four dispensaries and one cultivation, and are working on one cultivation and another dispensary at this point. That’s just in Illinois. We’ve been doing work in other states outside of Illinois as well. We’re working on our 8th state, actually.
Continue reading “How Much Does It Cost To Start A Dispensary & Craft Grow”
Success Story Part 2: Converting a Historical Restaurant Into The Greenhouse Dispensary
Part 1 of our Success Story focused on the historical journey of the restaurant bar that became the focal point of the Greenhouse Dispensary in Morris, Illinois. The story continues below, detailing how Cannabis Facility Construction fulfilled The Greenhouse’s vision of converting the Rockwell Inn into a dispensary, while honoring the restaurant’s legacy as a source of community pride.
Not a Traditional Design-build Project
Converting a restaurant into a dispensary presented many challenges, including:
Earning the Trust of the Community
One of the biggest questions we faced was: How do we create the optimal retail space that is focused on the client while preserving the history of the old space? For us, a true partnership revolves around the trust and buy-in from all stakeholders. We were sensitive to the fact that we were introducing a new industry and purveyor to this jurisdiction. Showing respect for the community helped us achieve the buy-in we needed.
Wear and Tear
Given the age of the restaurant facility and its use, it was hardly in the same condition as buildings we previously worked with. For starters, it was a large, free-standing property with multiple additions created throughout its history. Some areas had concrete floors and others, wood floor joists. Often we’d encounter rotted wood and other material deterioration. Compared to a retail space, restaurants have unique issues like grease, dirt, and rodents that we don’t encounter when remodeling, for example, a clothing store inside of a strip mall.
We determined that the lot sat below street level, and consequently, the sewage had not been pumped into a lift station. We discovered that over the years, the restaurant only had band aids in place to address the problem.
Reclaiming the 150 Year-Old Bar
We had to figure out how to make this beautiful, legendary bar functional for staff and valuable to the customer experience. It now serves as the centerpiece of an open and comfortable space where visitors interact with budtenders and learn about the products.
Leveraging Our Trade Partners
We used a talented group of trades and suppliers to complete the project. Across the board–from plumbers, electricians, and millworkers to heating, flooring, life safety, HVAC, security and sprinkler system specialists – our trusted partners played key roles in the renovation.
It All Comes Together
The result of our renovation is 5,200 square feet of usable space, outfitted with an inviting waiting area and an open and comfortable shop with the reclaimed bar as its hub. Understanding, learning, and operating in buildings that are 50-150 years-old is where we cut our teeth. The whole idea of opening up walls, making discoveries, and maximizing value for our clients is what we live for. We’ll give the last word to Mitch Kahn, CEO and founder of Grassroots, a national leader in medicinal cannabis, and the parent company of Greenhouse: “It really is just a neat building with character that we wanted to keep, from the tin ceiling to the bar that’s over 100 years old, and retrofit it to our purposes. We saw the promise of remodeling an old building and turning it into a modern facility.”
Illinois Recreational Cannabis: What You Need to Know
“In the interest of equity and criminal justice reform, I look forward to signing this monumental legislation,” said Illinois Governor, J.B. Pritzker, following the passage of House Bill 1438 on Friday, May 31, 2019. The 66-47 vote made Illinois the 11th state to legalize adult-use cannabis and the first to do so through the state legislature. Vermont’s program was approved through its legislature but does not permit commercial sales. Approval in other states occurred via referendum.
The bill, which passed 38-17 in the state Senate two days earlier, focuses on social equity and addressing Illinois’ financial deficit. Chicago Crain’s Business reports that, “Illinois expects sales to eventually reach $1.5 billion to $2 billion a year, producing $500 million in revenue for the cash-strapped state.”
Following the November, 2018 midterm elections, we commented on what Governor Pritzker’s election victory would portend for the future of cannabis in Illinois. Once he signs the bill, it will be the law of the land.
Here’s what you need to know about the new law:
Growing and Selling
Recreational sales will begin on January 1, 2020, with priority given to businesses with current medical licenses. They will be eligible to start cultivating, producing, and selling cannabis for retail use.
According to the Chicago Tribune, “Only the 20 existing licensed medical marijuana cultivation facilities will be licensed to grow it initially. Next year, craft growers may apply for licenses to cultivate up to 5,000 square feet, with preference given to applicants from minority areas disproportionately affected by the war on drugs, such as the South and West sides of Chicago. Medical marijuana dispensaries and new retail stores will be licensed to sell it.”
The bill allows for Illinois residents 21 and older to possess up to 30 grams or roughly one ounce of cannabis flower or bud. They are also allowed five grams of cannabis concentrate or 500 milligrams of THC in a cannabis-infused product. Adults visiting the state can possess up to 15 grams of cannabis. Growing plants at home will remain illegal except for certified medical patients.
Impact on Convictions
Central to the bill was the expungement of cannabis convictions.
“While the usage of cannabis has been the same across all racial groups, the actual incarceration charges have been shown to be seven times more likely for people of color than Caucasians,” said Illinois State Senator. Heather Steans (D-Chicago), the Senate bill’s main sponsor. “This bill is going to set the model, I believe, the gold standard, for how to approach social equity issues related to cannabis legalization.”
Here’s what’s at stake for convicted felons, according to the Chicago Tribune: “The governor will pardon past convictions for possession of up to 30 grams, with the attorney general going to court to expunge or delete public records of a conviction or arrest. For possession of 30 to 500 grams, an individual or a state’s attorney may petition the court to vacate and expunge the conviction, but prosecutors may object, with a judge to make the decision.”
Per ABC News and the Chicago Tribune, consumers will be taxed in the following way:
- A 10% tax will be levied on cannabis products containing less than 35% THC
- 20% for cannabis-infused products like edibles
- 25% for THC concentrations of more than 35%
Additional state and local taxes apply and can be as high as 9.75%, including:
- 3% municipality
- 3.75% county in unincorporated areas
- 3% in Cook County (Chicago)
Opting In or Out
Similar to other adult use programs, local governments may opt in or out. According the Chicago Tribune, “Municipalities and counties may ban cannabis businesses within their boundaries, but may not ban individual possession. Any person, business or landlord may prohibit use on private property. Colleges and universities may continue to prohibit marijuana use.”
Where You Can and Cannot Consume
Usage at home is permitted as long as it’s out of view of the public. Places where use is strictly prohibited include: public areas, school grounds, in any motor vehicle, in a correctional facility, around someone under 21, while driving a boat or flying a plane, or by a school bus driver, police, fire or corrections officer while on duty.What Else?
Cannabis remains a Schedule 1 illegal drug by the federal government; however, federal law enforcement tends not to prosecute possession of small amounts or businesses complying with state programs.
Medical cannabis was also a winner at the eleventh hour of the legislative session. The House passed the bipartisan SB 2023, which will make the Compassionate Use of Medical Cannabis Pilot Program Act permanent while broadening its scope. Illinois State Representative Bob Morgan’s (D) reauthorization bill removes the program’s July, 2020 sunset and adds more patient qualifying conditions, including chronic pain and autism.
The bill also permits advanced practice nurses and physician assistants to recommend medical cannabis in addition to physicians and increases the number of caregivers that patients can use to access the program. Similar to the adult-use program, the reauthorization bill emphasizes equity standards and will award five dispensary licenses to ensure equal opportunity.
“It is critical for the state that the pilot program be reauthorized and revised,” said Morgan in a press release. “The initial program placed a significant regulatory burden on patients. With the passage of SB2023, the new program will streamline the process and help patients suffering from debilitating medical conditions.”