In 2020, Cannabis Construction Must Offer Security of a Bank, Compliance of a Pharmaceutical Company, Aesthetic of a High-end Retailer
Legal recreational cannabis is a new industry in Illinois—and it’s in dire need of customized facilities. The first month of recreational cannabis sales in Illinois amounted to nearly $40 million. Sales figures spell opportunity both for cannabis companies and for experts in building special-purpose facilities for the industry’s stringent regulations and experience-driven customers.
Andy Poticha, Principal at Cannabis Facility Construction (CFC) has been involved in more than 30 cultivation, processing center and dispensary projects in eight states since 2015. He’s leading renovation projects that offer Illinois more than 35,000 new square feet of cannabis cultivation areas and dispensaries customized for the needs of recreational cannabis customers.
“To become recreational cannabis users’ preferred dispensary, new cannabis license holders must prioritize both compliance and customers in their facility design,” Poticha observes. The design/build process must support two core objectives:
- Prioritize compliance or suffer the consequences. To maintain product supply and operational retail sales, stick to strict protocols and carefully follow building codes related to the handling, storage and distribution of cannabis throughout the supply chain.
- Offer a differentiated customer experience. Product commoditization and restricted in-state cannabis sourcing leads to stiff competition between dispensaries.
“Cannabis companies need to offer the security of a bank branch, the compliance of a pharmaceutical company, and the aesthetic of a high-end retailer,” said Poticha. “Designing for the customer experience, creating welcoming sales environments that are compliant with regulations, is where dispensaries can find true opportunity to differentiate themselves from the competition
For nearly five years, CFC has worked with numerous cannabis companies, including Grassroots Cannabis, a vertically integrated multi-state cannabis company. For co-founder Mitch Kahn, CFC has helped Grassroots embrace these seemingly competing objectives into a cohesive customer experience.
“Partnering with CFC, we have been thoughtful about connecting the design/build process with our customer experience and compliance objectives,” said Kahn. “Together, we identified and solved potential issues early in the design/build process, so that the build-out is supportive of sales, security, and being good neighbors in our communities.”
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.”
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.
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.”
At the conclusion of many a cannabis customer’s journey is consumption of the product. Whether that method is smoking, vaping, ingesting, or topically applying the product, how it arrived on or in your person traces back to the cultivation facility where it was farmed, grown, and groomed. Dispensary shelves and display cases are bedecked with flowers, oils, extracts, shatter, edibles, and more, but none of that exists without cultivation. Canna-business is the fastest growing sector in the country due in large part to the essential staff of cultivation facilities.
Master Grower and Junior Grower
A successful cultivation operation starts at the top with the master grower, whose credentials include backgrounds in horticulture or agriculture and often advanced degrees. Also known as director of cultivation, this person is not only responsible for overseeing the cultivation of all cannabis plants, but managing the entire operation of the facility. They are in charge of all grow house employees and must routinely ensure that the facility is in step with regulations. It may not stop there.
As CNBC reported, “At larger operations, cultivation directors have management responsibility for a team of growers, and the position typically requires frequent interaction with law enforcement to ensure compliance.”
A junior grower or a master grower-in-training, works directly under the tutelage of the master grower. This person is primarily responsible for successfully growing the plants. Duties include planting, cloning, feeding, and proper watering.
Trimmers and Technicians
They call it a plant-touching niche for a reason. Trimmers have direct contact with cannabis plants, and their job is to prune and manicure the plants during harvest season without harming them. Trimmers are tasked with understanding the plant anatomy and the difference between strains. The job requires physical endurance and concentration. “Bud trimmer is an excellent entry-level job,” writes James Yagielo of Hemp Staff. “It’s a great way to break into a marijuana cultivation career with plenty of room for upward mobility.”
Similar to trimmers, cultivation technicians handle pruning duties, but they are more focused on the fulfillment of growing cannabis, including germination, cloning, and transplantation. Quality Control Inspector QC Inspectors ensure that cannabis products comply with health, safety, and potency standards. Many in the field are PhD’s in biology, agronomy, chemistry, or entomology and often
help inspect and enforce marijuana cultivation laws and regulations, as well as those that apply to the use of pesticides.
Director of Extraction
The function of processing or converting the raw materials of cannabis into usable forms, may take place under the same roof as cultivation, especially with companies that practice vertical integration. Extraction falls under the processing umbrella and is the method for turning cannabis buds into oils and concentrates for vaping. The Director of Extraction typically has a solid background in pharmacology or chemistry and designs and runs processing, including laboratory functions and the management of extraction staff.
Cannabis employment increased nearly 700 percent between 2017 and 2018 and is projected to grow another 220 percent in 2019. Legal cannabis was a $9 billion industry in the United States last year and will balloon to $21 billion per year by 2021. Cultivation is where everything begins thanks to staff with the unique skill set to make it happen.