(Andy Cross, Denver Post file)

Major Colorado pot shop chain lays off 45% of its employees

One of Colorado’s largest chains of marijuana stores on Wednesday laid off 65 employees — or about 45 percent of the company’s total workforce, according to owner Shawn Phillips.

The pot layoffs are believed to be the largest in Colorado’s 16-month recreational era.

Phillips owns nine cannabis stores in Colorado, all of which are part of the Strainwise-branded network, and he called the cuts “drastic” but “temporary” in a letter he wrote to employees obtained by The Cannabist.

“We’ve been working on putting together this staff for the last four or five years,” Phillips told The Cannabist exclusively, “and we had some really good people who are passionate about the business and who wanted to continue on. Hopefully these layoffs are temporary.”

Around 80 percent of the layoffs affected employees in Phillips’ cultivation facilities, he said. His nine pot shops — which include Denver stores The Haven, The Retreat, The Shelter as well as others in Central City, Idaho Springs, Rifle and Wheat Ridge — remain open for business.

“All of the stores are still up and operating,” said Erin Phillips, Shawn’s wife and president of Strainwise, which consults her husband’s shops on compliance, accounting, branding and fulfillment services. “Being that this industry is small, I didn’t want people to think that the stores weren’t up and operating. We’re going to continue to help Shawn and all of his entities.”

The layoffs are a result of complex licensing issues with the state’s Marijuana Enforcement Division, Shawn Phillips said. In looking to expand his total cannabis cultivation square footage, Phillips applied with the MED for another grow license for his not-yet-operational Nome Street cultivation. Based on Phillips’ previous experience with the MED, he expected to have that license earlier this year.

“From a business standpoint we anticipated having those licenses issued back in January,” Shawn Phillips said. “We have a cultivation facility that we’ve put a large amount of money into.”

The facility in question: A 40,000 square-foot grow that would increase Phillips’ overall grow space by 40 percent, he said.

When a couple of Phillips’ new marijuana licenses were denied by the MED, including one for a proposed recreational shop in Pagosa Springs, the MED put Phillips’ existing 39 licenses — including the license for his Nome Street cultivation facility — into a sort of pending status.

“It created a huge financial burden on the company and the loss of revenue that we can’t put in the ground,” he said, “and it put us in a situation where we had to make a business decision.”

A MED representative today told The Cannabist: “This is an active and ongoing investigation, and we cannot provide additional details at this time.”

Marijuana shop owner Shawn Phillips, right, shakes hands with Denver Excise and License technician Jennifer Scott in December 2013 after receiving his license to legally sell marijuana. Phillips now owns nine Strainwise-branded pot shops in Colorado. (Andy Cross, The Denver Post)
Marijuana shop owner Shawn Phillips, right, shakes hands with Denver Excise and License technician Jennifer Scott in December 2013 after receiving his license to legally sell marijuana. Phillips now owns nine Strainwise-branded pot shops in Colorado. (Andy Cross, The Denver Post)

Phillips said he’s appealing the denials and he hopes to start bringing employees back in the coming months. But in the meantime, his wife’s company Strainwise is offering its human resources services to help place the laid off employees elsewhere in the industry.

Phillips said his company pays its state unemployment insurance premiums, so the laid off workers will be eligible to file for unemployment benefits, the state Department of Labor and Employment confirmed.
“They would not be disallowed simply because marijuana has not been legalized nationally,” spokesman Bill Thoennes said.

A cultivation employee of Phillips’ who spoke with The Cannabist on conditions of anonymity said that the mood around the grows today is “more hectic than morose.”

“We’re optimistic that even with a skeleton crew we can get these things done,” the employee said. “The way it’s been explained to us: If we had those licenses when we were supposed to get them, we wouldn’t be in this scenario. Most everybody here seems to understand the situation.”

Shawn Phillips said that hold-ups like this are somewhat specific to the emerging, heavily regulated cannabis market.

“In industries that are maybe more mature, or in industries that don’t have these types of regulated licenses that you’re obtaining, business is a lot more fluid because you can make business decisions based on opening up a store and knowing when that store will open up fairly accurately,” Shawn Phillips said. “But because of the new rules with the medical and recreational and the MED — I guess I’m being told that they’re having some delays in staffing and that sort of thing — it’s hard to anticipate when these licenses are going to land, or when they’re supposed to land. In the past, licenses took 30-60 days to be processed, and that’s what we planned for.

“We’re confident we can work our way through this, but it’s put us in a situation where we’re going to be five months behind schedule.”

Shawn Phillips said Wednesday’s three meetings with the laid off employees were sad but hopeful.

“A third of (the laid off employees) talked to me after we had to let them go, and they said, ‘I understand and want to come back.’ There definitely were a lot of tears,” he said. “We employ a lot of people with families. We provide health insurance. I wholeheartedly believe that this is a temporary situation and we’re going to get through this, and if I didn’t we wouldn’t have handled things the way we handled them yesterday.”