The whine of a power saw blanketed the cluttered job site at 2205 NE Division St. in Bend in late April, but store manager Brad Wehde said he felt comfortable the place would be open for business in early May.

New construction added 2,800 square feet to The Herb Center, a retail marijuana shop, more than tripling the size of the original store inside the adjacent, 77-year-old stone cottage. When it opens, the new building will be the largest and oldest marijuana shop in Bend, according to Wehde.

“We’ve got over $750,000 into the expansion, not counting the purchase of the land, just this building here,” he said. The Herb Center applied in July for a building permit at the site, listing the estimated project value at $565,000.

The Herb Center, founded in 2010 by Linda and Brent Goodman, is one of many expansion projects underway in Bend by cannabis business owners. Since January, the city of Bend has issued building permits for construction projects worth another $757,000 to cannabis companies to build new processing and production facilities or to remodel storefronts into marijuana retailers. During the same period, cannabis businesses applied for permits for another $84,000 worth of new construction.

Demand for weed in Oregon is fueling that building boom. Retailers sold $2 million worth of cannabis in Oregon the week of Dec. 25; the following week that number jumped to $4.5 million and climbed to $5 million by mid-January before falling slightly in following weeks, according to a February report by the Oregon Liquor Control Commission Recreational Marijuana Program. A temporary limit on the amount of cannabis a consumer could purchase was raised Jan. 1 to 1 ounce from each shop per day. Based on the latest report on marijuana sales tax collected by the Oregon Department of Revenue, retailers across the state sold about $26 million worth of cannabis in March.

In Bend, the largest building permit issued to a marijuana business in the first quarter went to Lunchbox Alchemy, a maker of edible forms of cannabis, for $500,000 worth of construction on a new facility on Layton Avenue. The building has 9,000 square feet for intake, processing, production and shipping, along with an employee break area. Plans include a 3,000-square-foot mezzanine for office space.

“Our focus is in creating product and catching up to the massive demand for our product right now,” said company CEO Burl Bryson. “We’ve never been able to produce enough product. This facility will give us that ability.”

The outlook was not always so bright. After October, the company imposed rolling layoffs and scaled down the number of products it made while the company transitioned from a licensed medical marijuana business to one licensed by the OLCC to process marijuana into edibles for the adult-use, recreational market.

The marijuana market endured a rapid series of regulatory changes that created a bottleneck at testing labs and a shortage of product before recovering this year.

“We’re forced to be efficient, to bootstrap capital,” Bryson said. “We spent January and February with zero cash flow. There’s been a couple times when we looked at each other and didn’t know if we’d get through the next month or so. You come out the other side of that and feel like you survived the battle.”

Lunchbox Alchemy is best known as the maker of squibs — fruit-flavored gels infused with THC, the psychoactive ingredient in marijuana — and butane hash oil, sometimes called shatter, a cannabis extract.

Dried marijuana leaf, commonly smoked, is the best-selling cannabis product in the state, according to the OLCC Recreational Marijuana Program. In the last week of January, the latest figures available, marijuana retailers each sold an average of $17,500 worth of weed, $5,000 worth of extracts and about $2,250 worth of edibles.

“We do that in two days or a day,” said Wehde, of The Herb Center. “Trying to do that volume out of 800 square feet is pretty amazing. We outgrew that building a long time ago.”

Federal, state and local government regulations are still the highest barriers to business expansion, said business owners interviewed for this story.

Wehde said county regulations that limit the amount of marijuana a farm can grow, or canopy size, keeps production levels below that of any other farms. The county commission adopted marijuana regulations in June after a sometimes contentious series of hearings. A marijuana grower with more than 20 acres but less than 40 acres, for example, may have a maximum 10,000-square-foot canopy area, according to county regulations.

The Herb Center grows its own marijuana and processes its own extracts and concentrates, but with additional retail space and demand for more products, it plans on selling products from other growers and processors, he said

Federal regulations that outlaw marijuana are another frequent complaint among marijuana business owners. Because marijuana is outlawed by the federal government, marijuana businesses cannot easily acquire bank accounts or take the same tax deductions for business expenses that other businesses take.

“The federal government takes a lot more out of this business than we are able to show in profit,” Bryson said.

Nonetheless, the marijuana business has no shortage of willing investors, mostly individuals or private investment firms. To build the new facility, said Bryson and company founder Cameron Yee, Lunchbox Alchemy looked for investors willing to buy a stake in the property — a real-estate investment — rather than sell equity in the business itself. Bryson said he and Yee are still working out the details of a plan to bring on the capital needed to expand and still keep the cost to borrow low.

As business enterprises, successful marijuana companies are models of efficiency, Bryson and others said, that stay lean and creative in order to survive.

“We’re small business, we’re job creators, we are taxpayers,” he said. “We are dream Republicans.”

The cannabis business continues to evolve in ways that resemble any other business and are especially visible at the retail counter, said Jeremy Kwit, founder of Bloom Well, another Bend cannabis shop on NE Division Street.

Kwit is turning a former Home Federal bank branch at one of Bend’s busiest intersections, at N U.S. Highway 97 and NE Empire Avenue into a second Bloom Well shop. The former bank vault simplifies the security measures required by state, he said.

“We can roll racks of inventory in and out,” Kwit said.

The former bank back offices provide work space for processing and packaging cannabis, storage space for business supplies and a break room. Up front, Kwit said, he’s working to streamline the customer experience. For example, dried flower will come prepackaged, rather than pulled directly from a glass jar that customer service representatives typically open to allow customers to smell or inspect the weed. Prepackaging also reduces the amount of time a customer has to wait on a purchase, but has other benefits, Kwit said.

“It assures our clients that our cannabis is handled one time, by one person with gloves on in a hygienic, sanitary working environment,” he said.

Smells are still free, just as they are at the Jimmy John’s sandwich shop that shares the building, Kwit said.

He expects to nearly double the number of his employees to about 20 by the time the new store opens. He said Bloom Well pays “competitive wages,” provides training, tracks performance and pays for its employees to take professional development courses at Central Oregon Community College.

“Employee training and development makes a difference,” Kwit said Monday. “It’s the in-store experience that really distinguishes one shop from another. We work really hard to create that experience.”

The Herb Center employs about 50 people year-round, including 16 at the retail store, and hires additional workers during the summer and fall, Wehde said. Pay varies but an entry-level employee starts at around $10, he said.

At Lunchbox Alchemy, the company pays an average wage of about $20 an hour with benefits, including a health plan, Bryson said. Bryson and Yee said they employ a diverse work force.

“Typically, we don’t have to advertise for people,” Bryson said. “Lunchbox is known as a great place to work.”

— Reporter: 541-617-7815,

jditzler@bendbulletin.com

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