Blueprints for Success
Franchise operations have proven to be a force in the world of pet retailing, thanks to the valuable guidance that they provide to storeowners and the consistent experience they offer shoppers.
Starting up a pet retail venture from scratch has never been a simple process. Even under the best of circumstances, enterprising new storeowners face a wide variety of challenges in getting their business off the ground—from finding the right location to crafting a well-rounded product selection to building an effective staff. As a result, the fortunes of those who approach such an undertaking with little or no experience in pet specialty retail are a crapshoot, at best.
The circumstances facing new pet retail entrepreneurs today are far from ideal. Despite the fact that the pet care category continues to grow at a rate that is envied by many other retail segments, new entrants looking to slice off a share of this lucrative market are attempting to do so in an competitive environment that is crowded—maybe even overcrowded—with well-established retail brands.
To have any chance of building momentum behind their own brands, startups have to successfully contend with not only the big-box specialty chains that have blanketed the country with more than 2,500 pet superstores, but also the fast-rising class of regional chains that have become a force in the pet retail landscape over the past decade or so. This is a hurdle that even the savviest retail brand-builders may ultimately find insurmountable on their own.
But prospective pet retailers do not necessarily have to go it alone. The pet specialty channel has proven to be particularly fertile ground for franchise models, which offer entrepreneurs an opportunity to align with and benefit from a level of expertise and brand recognition that can only be developed through years of successful operation. In fact, eight of the top 25 pet specialty retailers in North America, based on number of locations, have at least some type of franchise component. This includes four U.S.-based retailers—Pet Supplies Plus (No. 4), Petland (No. 9), Woof Gang Bakery & Grooming (No. 11) and Pet Depot (No. 18).
Let’s look at each of these winning models—along with one promising, young pet retail franchise brand—to see how they operate and some of the benefits they offer to their store-level partners.
Pet Supplies Plus
Total Start-up Investment: $549,400 - $1,097,400
Initial Franchise Fee: $49,900
Royalty Fee: 2% (gross sales) for the first 12 months, 3% thereafter
Headquarters: Livonia, Mich.
With close to 350 stores currently in operation, and 45 more slated to open this year, Pet Supplies Plus (PSP) is by far the largest pet retail franchise in the U.S. Not surprisingly, this considerable size not only makes PSP a highly recognizable brand among pet owners, it gives the company a decided advantage in negotiating extremely favorable pricing for its franchisees.
“[Our franchisees] can really leverage our purchasing power,” says David Leonardo, senior vice president of franchising for the nearly 30-year-old chain. “We do over $1 billion in purchasing on an annual basis, so we are able to take advantage of all of those vendor relationships and great discounts that we can get but would be pretty much impossible for a single-store mom and pop to negotiate.”
That is not to say that the PSP franchise model completely depends on a rigid, centralized approach to purchasing. The company does offer franchisees license to discover and incorporate unique finds from local suppliers.
“We want to give [our franchisees] the flexibility to run their stores, and if that means sourcing specific foods that are not part of our original set, we would support that,” says Leonardo, noting that many PSP franchisee locations even feature a section dedicated to locally owned suppliers.
PSP also recently introduced its own private-label dog food line, called Redford Naturals. “It’s on par with the higher-end foods, but it’s a lot less expensive,” says Leonardo. “We’re very excited that the early numbers are showing a lot of promise and our customers are really receiving it well.”
PSP’s approach to product selection, combined with a strong emphasis on providing a high level of customer service in every store, goes a long way in providing pet owners with a consistent shopping experience from one location to the next—a valuable benefit for prospective storeowners. Take Renee Otjen, owner of a Pet Supplies Plus store in Elizabethtown, Ky., for example. She and her husband Curtis decided to join PSP as a franchisee after becoming a loyal shopper because they “loved the experience.”
“The experience was very similar, no matter what location we went into,” she says. “We could always count on being greeted at the door, store employees asking if we needed help or had any questions, and someone carrying my big bag of dog food out to the car for me.
“So, as we started thinking about franchises, [PSP] just seemed like the perfect fit because we really loved their value proposition of not treating customers like [a transaction] but rather as neighbors.”
Otjen has been equally impressed by the service she has received as a new franchisee. She says that during the months leading up to her store’s grand opening in November, PSP’s team of experts held her hand through every step of the process. And that level of guidance has not slacked off since she opened her doors.“We have a great district team leader who was on site for our grand opening to help us with the overwhelming turnout,” she says, noting that the team leader continues to make regular visit to offer valuable advice. “He is just a wealth of knowledge, and we definitely get at least a handful of gems every time he visits, whether it’s about merchandising, signage or anything else we need help with.”
Total Start-up Investment: $273,500 - $1,024,000
Initial Franchise Fee: $35,000
Royalty Fee: 4.5% (gross sales)
Headquarters: Chillicothe, Ohio
Founded nearly 50 years ago, Petland is one of the best-known pet retail franchises in the United States. However, that high level of brand recognition has grown well beyond domestic confines as the company has spread across the globe with stores in Canada, Japan, China, Mexico, Brazil, El Salvador and South Africa, with an eye on building an even bigger international presence moving forward.
“Petland will be opening its first location in the Middle East-North Africa region in Jeddah, Saudi Arabia this year,” says Steve Huggins, vice president of business development/international relations for Petland Inc.. In addition, “Petland master franchisees will be opening stores in Nicaragua, Guatemala, Honduras, Egypt, Turkey, United Arab Emirates, Bahrain, Lebanon, Kuwait and Qatar in the years to come.”
Aside from its worldwide aspirations, what sets Petland apart from other players in the world of franchised pet retail, according to company officials, is its long history of following its mission of “matching the right pet with the right customer, and meeting the needs of both.”
“At Petland our trained pet counselors are knowledgeable about pets and pet care,” says Huggins. “Petland features pets, and they play a major role in the experience that customers receive when visiting [our stores]. Petland customers and families visit often and tend to stay longer [than they do at] traditional retailers, visiting with the pets and learning about pet care.”
The fact that selling pets is a cornerstone of the Petland retail model makes it all the more important that the company aligns itself with the right franchisees. This means finding responsible, conscientious and caring partners that are well equipped to care for the animals in their charge. It also means finding entrepreneurs who can handle the day-to-day challenges of operating an effective retail operation.
“We need franchisees who possess strong management skills and have an entrepreneurial spirit,” explains Huggins, noting that although industry experience is not necessary, it can be helpful. More importantly, franchisees must possess strong operational, marketing and sales skills. “[They] must be able to work together to identify opportunities to improve sales, profits and cash flow,” he says.
Pairing these qualities in a franchisee with the power of the Petland brand has proven to be a recipe for success time and time again. This has certainly been the case for Carl Swanson, owner of a Petland store in Naperville, Ill. Attracted to the retail brand “due to its longevity in the pet industry, a competitive royalty and its ability to provide guidance to us as new franchise owners,” Swanson got his first exposure to the franchise 25 years ago, when he worked in a Petland location as a college student.
Describing his experience with the Petland franchise as “a truly a wonderful partnership,” Swanson points to the support that his business receives from the company as being instrumental.
“It is one thing to seek advice or counsel from a friend or trusted business advisor, but having a multitude of Petland experts at our disposal is of significant value,” he explains. “Many corporate employees have owned a Petland store and have walked a mile in my shoes. The willingness to share and help us succeed has been tremendous.”
Woof Gang Bakery & Grooming
Total Start-up Investment: $100,600 - $179,900
Initial Franchise Fee: $35,000
Royalty Fee: 5% (gross sales)
Headquarters: Orlando, Fla.
One of the younger franchises in the pet retail world, Woof Gang Bakery & Grooming is also one of the hottest, opening 70 stores (including three corporate locations) since it was founded in 2007. That number is expected to jump to 85 stores by the end of the year, and to 110 stores in 2017, according to founder and CEO Paul Allen, who says that the company receives around 150 applications from prospective franchisees every month.
Despite the company’s aggressive growth rate over its first decade in business, there are limits to how big Allen envisions the Woof Gang Bakery & Grooming chain will eventually become. For example, he is not currently interested in developing the franchise in California or about 20 other states, instead preferring to concentrate on states in which the company already has locations.
“I think we can become a 500-store chain in a 12-state market, including about 70 or 80 in Florida,” he says, noting that anything bigger would be unreasonable to expect in his lifetime.
But the development of the Woof Gang Bakery & Grooming franchise has not just been about growth; it has also involved a significant evolution in its business model.
“The model of Woof Gang Bakery has come a long way since we started,” says Allen. “Today, it is a heavy grooming and service company.
“When we talk to prospective new franchisees, we talk about the fact that a lot of people want to run a pet store, but the truth is that there’s not a lot of money to be made in pet food alone. So, we talk about the success of the service side—the success of grooming, the success of animal clinics, the success of yoga for dogs or doggie massage. Today, services are what really run the company; the retail side is just an add-on.”
Having joined the Woof Gang family early on, Kay Hodgson, owner of Woof Gang Bakery & Grooming in Orlando, Fla., has had a front-row seat in watching the progress of the company’s business model over the past seven years. She says the change is indicative of Allen’s approach to ensuring that the franchise is delivering a high value to its partners at store level.
“I’ve seen the company grow like crazy over the last seven years, and he is always looking for ways to improve the company and support franchisees,” she says, adding that Allen’s efforts—whether they have been directed toward adding services or negotiating better pricing from vendors—have gone a long way in improving profit margins company-wide.
Another way in which Woof Gang Bakery & Grooming has been able to drive margin growth for its franchise storeowners, as well as help set them apart from the competition, is through the introduction of its own private-label products. The line, which includes 28 flavors of treats and about 60 chews and bones, is competitively priced and unique to Woof Gang stores, which have the freedom to pick and choose which products, sizes and even packaging types they want to offer.
“It has become huge for us,” says Allen, noting that the company employs several full and part-time corporate staff members to oversee the line.
Total Start-up Investment: $267,000 – $555,000
Initial Franchise Fee: $35,000
Royalty Fee: 5% (gross sales)
Headquarters: Glendora, Calif.
Pet Depot is a franchise that focuses on combining retail fare with pet-related services. The company’s business model incorporates grooming, boarding and even pet hospitals, essentially turning its 42 stores into one-stop-pet centers, and that is exactly what attracted Cherryl Vernon, owner of Market Street Pet Depot in Gilbert, Ariz.
After she and her husband, Dr. Bruce Vernon, DVM, were bought out of the Banfield Pet Hospital franchise location they owned for 14 years, they found Pet Depot to be the perfect fit for their next enterprise because of its diverse array of offerings.
“We were nervous to open a veterinary hospital with no other services attached to it,” she says. “We know that customers really like the convenience of having multiple services for their pets in one location, instead of having to go to four different places,” she says.
Although she was initially nervous about operating a retail store, given the fact that she and her husband had no experience in this area, Vernon felt assured that the Pet Depot team, led by company president Roman Versch, would provide the guidance necessary to take on this added dimension to the business. That assurance, she says, turned her apprehension to excitement.
“I was excited to create a store that was unique,” says Vernon. “Since Pet Depot is really committed to helping mom-and-pops open their own pet store, we were able to design it the way we wanted. It feels like a cross between a high-end boutique and a pet store.”
In addition to offering retail products and veterinary services, Market Street Pet Depot offers boarding, training, DIY bathing and professional grooming services. It is a mix that Vernon says Versch and the Pet Depot corporate team have been essential in implementing.
It should probably come as no surprise that Pet Depot franchisees like Vernon place a lot of value in the guidance they receive from Versch, given his 45 years of experience in the pet industry. It is this experience, combined with the ongoing experience he has in operating two corporate locations—in West Los Angeles and LaVerne, Calif.—that has enabled him to develop and maintain a truly turnkey model that assists franchisees with everything from business plan development to financial operations to real estate negotiations.
“The corporate stores keep us directly connected with the business,” says Versch. “I have been in every situation imaginable, so we are ready to help franchisees get through anything.
“Many independent retailers don’t have a plan. With Pet Depot, our franchisees have access to a model and structure that enables them to follow a proven path to compete with the big-boxes.”
But while storeowners can expect the stability of structure and a high level of support from the Pet Depot franchise, they still enjoy the freedom to make their stores their own—an important consideration for many entrepreneurs.
“We are one of the largest entrepreneur-driven companies out there,” says Versch. “And we are the most freedom-oriented franchise in the pet industry.”
Add this to the list of things that Vernon loves about being part of the Pet Depot family. “It doesn’t feel like a franchise to us,” she says. “It feels like our own business.”
Total Investment: $150,000 - $450,000
Initial Franchise Fee: $25,000
Royalty Fee: 4% (gross sales)
Headquarters: Bozeman, Mont.
Debuting its franchise model earlier this year, Dee-O-Gee is still very new to franchising. Owner Josh Allen and his wife Holly, a co-owner, have long believed that they have a winning retail concept in the two-store operation and are bullish on its potential for growth. However, they view the remoteness of their location as an inherent impediment to expansion into new markets on their own.
“We are confident in our brand and knew that we would expand somehow,” says Allen. “Unfortunately, the next town with a population big enough to support an expansion is hours away. So, a company-owned expansion is just not the best choice.”
Once the decision was made to go the franchise route, the Dee-O-Gee owners teamed up with expert consultants and spent the better part of two years developing a business plan and the necessary resources. “The process was expensive,” says Allen. “We wanted to do everything top-notch, and we had to get ourselves prepared to help franchisees.”
The result is a franchise model that focuses on selling high-quality, natural pet foods that are unique to the independent pet specialty channel along with services such as professional grooming and doggy daycare. The target store size is between 1,500 and 7,500 square feet, depending on the services offered.
While the Dee-O-Gee concept offers franchisees an opportunity to get in on the ground floor of what is still a fresh, young enterprise, Allen says that the company’s partners can expect the same level of support that is provided by bigger, more established franchise players—if not more. That is because he and Holly will be directly involved in getting every new franchise location up and running. This includes providing assistance with site selection, store design and construction, supplier relationships and management training.
In addition, franchisees will receive help with marketing their businesses, including a microsite on the Dee-O-Gee parent website, where each franchisee can post blogs, offer event sign-ups and tie in with their social media accounts. “It will have a very local feel,” Allen says of the web-based approach to promoting Dee-O-Gee franchisees.
So far, Allen has been quite happy with the way the Dee-O-Gee franchise is being received by the industry. “We’ve been surprised with the response we’ve gotten already,” he says. “We have gotten a number of inquiries in just a couple of months, and we’re in serious discussions with a handful of them.”
However, it would be a mistake to assume that the abundance of initial interest means that Dee-O-Gee locations will start popping up all over the country soon. Allen prefers to take a measured approach in rolling out new stores, if for no other reason than to make sure that the company is building something sustainable over the long term.
“We didn’t get into franchising to get really big, really fast,” he says. “If we can do a couple of locations this year, and make sure we do them really well, it will validate that our model works this way.”