Michael Hayes recalled the day 1½ years ago when he finally felt brave enough to wear the apparel that bore his company logo, six fanned leaves of a marijuana plant in varying shades of green. “I’d have to be ready for those questions,” he said Tuesday, at ease on the porch behind his marijuana dispensary, Miracle Greens, on SE Third Street in Bend. “But there was no negative feedback.”

Those who said anything typically said, “That’s great,” when the former Marine and bar owner explained that he’s in the cannabis business, too.

The scene around legal marijuana in Bend has changed in the 20 months that Oregon cannabis dispensaries have been selling their products to adults, Hayes said. Not only is cannabis more socially acceptable, the business environment has matured, as well.

“What someone knew three years ago,” Hayes said, “it’s irrelevant today.”

As the number of marijuana businesses in Bend continues to grow, their owners say the demands of running a business are separating the serious contenders from the half-hearted. Cannabis businesses in Bend are building routine business relationships and finding acceptance on Main Street: Seven are members of the Bend Chamber of Commerce.

“The old black market influence is waning,” said Alex Berger, co-founder of Magic Number LLC, a maker of ginger beer and cold coffee drinks infused with the active ingredients in cannabis. “The people who can’t deal with regulations or who cut corners are falling out.”

Likewise, many other businesses and professionals are, for the most part, providing support services, from accounting to carpentry to engineering. Obstacles exist where federal regulation and risk management intersect. Marijuana is still illegal under federal law. Bankers and insurance providers, for example, often will not condone their clients’ taking part in commerce with cannabis businesses.

“The limiting factor for us was finding a place to lease,” Berger said Thursday. “There’s plenty of space and lots of folks are happy to lease, but their insurance carriers or banks say no.”

Licensing rules

Those barriers are not stopping the growth of marijuana businesses in Bend. Twenty recreational marijuana dispensaries, licensed by the Oregon Liquor Control Commission, are open in the city, 12 of them licensed by the city and the remaining eight pending city review, according to information from the Bend Marijuana Operating License Program.

Many of the retail marijuana dispensaries started out as medical marijuana dispensaries and switched to recreational sales by the end of 2016. They are open for business while their owners work through the licensing requirements.

“All applicants are actively working to meet city and state regulations and requirements, so no enforcement action has been taken in the form of stopping currently operating businesses,” wrote Program Coordinator Lorelei Williams in an email Wednesday. “However, new businesses cannot begin operations until they have obtained their state and local licenses.”

At the state level, the pace of marijuana business licensing moved slowly last year due to a staffing shortage at the OLCC and a flood of applications. The Recreational Marijuana Program started out with 38 staffers total, including six support staff.

The OLCC also assigned personnel from its Distilled Spirits Program temporarily to help with licensing, said Mark Pettinger, spokesman for the OLCC Recreational Marijuana Program.

Applications statewide currently number 2,654, he said Wednesday.

The OLCC, in the state budget under consideration, has asked for another 38 positions in the program, including 22 regulatory specialists, the people who conduct background checks and site inspections, of whom seven would be assigned to track medical marijuana producers, Pettinger said.

“As we onboard those staff, the pace of licensing will pick up,” he said.

In Bend as of June 2, seven indoor marijuana growing operations are licensed by the OLCC and one by the Oregon Health Authority, which has oversight of medical marijuana providers. Five are actually growing cannabis and two have city business licenses, according to information provided by the city.

Nine cannabis processors — companies that produce extracts or concentrates of the active ingredients in cannabis or make food and beverages that contain those products — have city license applications under review; eight are licensed by the OLCC and one by the OHA. At least four are in business and two are licensed by the city.

‘More time, money’

Ben Hebert, co-founder of Dr. Jolly’s, a marijuana retailer on SE Third Street, is at work creating a processing facility on NE Second Street. A city business license is pending until work on the facility is complete, according to city records.

Dr. Jolly’s is a vertically integrated company; it grows, processes and sells — wholesale and retail — its own cannabis. It operates two farms and an existing processing facility, including a commercial kitchen for making edibles, Hebert said.

The state requires a license for each category in which the business is involved and for each location. The city requires a business license for each location, which must comply with city building codes and regulations on marijuana businesses.

Hebert declined to say how much the company has invested in its new processing plant, but the city in March issued it a building permit for $50,000 worth of renovations. The work has taken much longer than he anticipated, he said Wednesday.

“It took a lot more time and a lot more money,” he said.

Hebert said the profit margins in the cannabis business are narrowing as expenses add up, but Dr. Jolly’s is still a profitable venture. On a good day, he said, the retail shop pulls in as much revenue as it did in a month when it first opened.

The quality of Dr. Jolly’s products has improved as the business scaled up, he said.

“It’s really night and day from where it was three years ago,” Hebert said.

He said he is also planning to add health insurance and retirement plans for his approximately 30 employees. The business started with three.

“I talked to a lot of other employees of businesses like Deschutes Brewery, who spoke very highly of why they like to work there,” Hebert said. “We’re taking some of those ideas and adding them to our business.”

Be prepared

The key to acquiring a state or local business license is preparation, business owners said. Hayes, of Miracle Greens, converted his former medical marijuana dispensary to a recreational dispensary and moved it from NE Brinson Boulevard to SE Third Street in order to comply with city zoning regulations. He has both his state and city marijuana business licenses. The process was “really easy,” Hayes said.

“You just have to be on top of it,” he said. “There’s a lot of paperwork and a lot of walking around, but they’re there to answer your questions.”

Magic Number is also waiting on a marijuana business license in Bend.

The business partners are renovating a one-story, 3,600-square-foot commercial building on NE Third Street into a production facility with three times the brewing capacity of their start-up in a backyard outbuilding on NW Elgin Avenue. In addition, the original two business owners brought on a third partner, who brought more capital, Berger said.

Thursday, Berger was installing supports beneath the floor to support four new stainless-steel tanks used to brew and mix the infused beverages..

A state inspector had completed a site visit in the past few days, meaning Magic Number should receive an OLCC producer’s license soon. The business needs a certificate of occupancy from a city code inspector in order to acquire its city license. Berger expects to be back in business in two months.

“Before we stopped production in October, we were in 14 shops in Bend, two in Eugene and two in Corvallis,” he said. He expects business to take off again once beverages start flowing from the brew tanks. Demand has only been building up, he said.

“There are not that many players (in the edibles market),” Berger said, “and we’re trying to get going as fast as we can.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com

17434380