The Napalm Factory is a manufacturing plant in charge of the production of napalm in Paradise, accessible only through the Napalm Factory Exterior area. According to several advertisements seen all over the town, the napalm is used to "kill weeds" that are getting to strong or high. The Postal Dude himself notes on Thursday that he needs to remove some weeds (which are never actually seen outside his trailer), so he proceeds to go to the factory. Once in the factory, the Postal Dude can either pay for it at the counter or break into the place without paying. If he pays, he will get access to the factory without being wanted by the Police, while entering without paying will prompt the Police to attack him and try to arrest him.
Once the Postal Dude finds the Napalm Launcher, an employee of the factory suddenly begins to vomit on the control machines, causing them to explode. A huge container spills liquid napalm over some pipes, causing a major explosion and wreckage in the factory. The Postal Dude must find alternative ways to get out of the factory, including walking through a pipe maze, jumping from a broken part to another over a napalm river, until he finally finds an employee who indicates a way out through a drain system. Though it may seem like a fast way to die (watching the employee jump in, while humorous, does little to add enthusiasm) the only way to escape the factory is by jumping in, the Dude will appear at a drainage ditch at the Exterior.
Amusingly, if the Dude chooses not to pay and makes a mad dash to the napalm without killing anyone, the cutscene of the factory blowing up will show several police and armed employees (who were chasing the Dude) getting gibbed and ragdolled by the explosions. Not surprisingly, the Friday edition of Paradise Times notes that the Napalm Factory closes "again forever".