Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk 2013: Average Cost of Services Sold, Variable Costs, and Other Costs for Dogtopia Franchised Locations (2013 FDD)

by Franchise Chatter on November 11, 2013

in Franchise Earnings, Pet Franchise

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Highlights of Dogtopia’s Item 19 Financial Performance Representations (2013 FDD) – Part 2

Average Costs for Dogtopia Franchised Locations in Operation 18+ Months

  • The following table shows, for the period from January 1, 2012 through December 31, 2012, the average costs of the 19 locations included in the average Gross Sales table in Part 1.
  • The averages for costs of services sold and variable costs are expressed as percentages of average Gross Sales rounded up or down to the nearest tenth of a percentage; and the averages for other costs (some of which are essentially fixed costs, some of which are highly discretionary costs) are expressed as dollar amounts rounded up or down to the nearest whole dollar amount.
  • Unless indicated otherwise, the averages are based on actual costs in 2012, and are believed by the franchisor to be reasonably reflective of the costs of Dogtopia franchised locations generally.

Explanatory Notes on Cost of Services Sold

  • Dogtopia Interior PhotoRent is the monthly cost for use of the leased space. Some franchisees have chosen to purchase buildings for their Dogtopia locations, and in that case, their monthly mortgages are included under Rent. Your rent will vary based on factors such as your territory demographics, the size of your location, and the build-out tenant improvements you receive from the landlord.
  • Payroll is based on hourly employee wages, full-time manager or assistant manager salaries (in some cases the franchisees), and all related taxes and employer contributions.
  • Supplies consist of all office, cleaning, and daycare supplies. They may include, but are not limited to, paper products for restrooms and cleaning, cleaning chemicals and mop buckets, bowls, bedding, play room toys and equipment, dog food for boarding guests, and front desk office supplies, including ink and paper.
  • Utilities include electric, gas, and in some cases, water. Utilities vary greatly depending on the size of your location, your local utility companies, and your lease. About half of the locations pay for water directly, and about half pay for water as part of their monthly rent.

Explanatory Notes on Variable Costs

  • Royalties are 7% of Gross Sales for all franchised locations.
  • Franchisees are required to spend a minimum of 1% of Gross Sales on local marketing each month. The average franchised location spent 2% on local marketing.
  • All franchised and affiliate locations contribute 1% of Gross Sales to the National Marketing Fund, with the exception of the original location in Vienna, VA, which does not contribute.
  • Merchant services vary based on your merchant services agreement, your provider, and the amount of Visa, Mastercard, and American Express transactions as a percentage of sales. (American Express merchant services fees are considerably higher.)

Explanatory Notes on Other Costs

  • Automobile leases, purchases, and mileage reimbursement are at the discretion of the franchisee. For franchisees who chose to purchase or lease vehicles, this is the average yearly cost reported.
  • Contributions are at the discretion of the franchisee, with the exception of the annual charity drive when 10% of gross spa sales are contributed to a national charity. Most franchisees choose to donate to multiple charities, such as local animal welfare and rescue groups throughout the year.
  • This is the average reported insurance cost for all franchised locations. It includes both business liability insurance as specified in the franchise agreement and workers’ compensation insurance. The cost of workers’ compensation insurance varies greatly depending on total salaries, the state in which you are located, and the experience rating (safety record) of a given location.
  • Miscellaneous costs represent a wide variety of discretionary costs, such as payroll administration, dues and subscriptions, and pest control.
  • Professional Fees are for accounting, bookkeeping, and legal services.
  • Employee Benefits may include health insurance plans, dental or vision plans, retirement plans, and employee recognitions and gifts.
  • Licenses and Permits are for state, county, or local permits that are filed for or renewed on an annual basis.
  • Marketing Events and Collateral costs are for community events participated in or sponsored by the franchised location, and collateral materials such as business cards and brochures.
  • Repairs and Maintenance costs consist of general building repairs, such as drywall work, door adjustments and floor maintenance, as well as HVAC yearly maintenance plans.
  • Retail Product for Sale are optional items purchased by the franchisee for sale in their Dogtopia business.
  • Telephone and Internet costs include the main telephone and fax line for the location, high speed internet access for the front desk, web cameras, and in some cases, a franchisee’s cellular phone if used in the business.
  • Travel and Meals includes all continuing education travel costs and employee meals.
  • Uniforms consist of logoed t-shirts, polo shirts, jackets, and sweatshirts. Dogtopia t-shirts are required to be worn by all staff when working; polo shirts, jackets, etc. are optional items that franchisees may choose to purchase for their employees.

Cost of Services Sold

37+ Months

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