FDD Talk: What You Need to Know About the Dogtopia Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Dogtopia franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Dogtopia franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Dogtopia franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Dogtopia’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016 average, median, high, and low sales for (i) the franchised (a total of 8) Dogtopia locations that had been open for less than 2 full years as of December 26, 2015, (ii) the franchised (a total of 22) Dogtopia locations that had been open for more than 2 full years as of December 26, 2015, and (iii) the franchised (a total of 20) and affiliate-owned (a total of 4) Dogtopia locations that had been open for more than 3 years as of December 26, 2015

• 2016 total sales, cost of goods sold, payroll expenses, operating expenses, property expenses, administrative expenses, insurance, royalty fees, marketing fund fees, rent, merchant fees, licenses and fees, property taxes, and EBITDA for the highest grossing store (Store A), the lowest grossing store (Store D), and the median grossing stores (Stores B and C) of the 16 franchised Dogtopia locations that submitted the requested information to the franchisor

• 2016 total sales, cost of goods sold, payroll expenses, operating expenses, property expenses, administrative expenses, insurance, royalty fees, marketing fund fees, rent, merchant fees, licenses and fees, property taxes, and EBITDA for the 4 affiliate-owned and operated Dogtopia locations

Section I – Background Information

16 Things You Need to Know About the Dogtopia Franchise

Experiences Record Year of Growth

1.  At the beginning of 2018, Dogtopia put out a press release that reflected on the company’s record year of growth in 2017. By the end of last year, the brand had 65 stores in operation and an additional 110 stores sold and in development. Dogtopia plans to open 40 new stores by the end of 2018 and is on pace to reach its goal of 400 units by 2021. The franchise also debuted in eight new states in 2017.

2.  According to Dogtopia, its momentum has largely been driven by the growing demand for professional pet care services, as well as the brand’s unparalleled franchise support, training, and franchise industry expertise.

3.  Alex Samios, vice president of franchise development for Dogtopia, said, “The demand for superior dog care services is evident in our impressive 15 percent comparable same-store sales growth last year and will only continue as the awareness of our brand grows. With 15 years of industry leading experience, Dogtopia is primed to capture more market share as we continue to attract sophisticated and passionate franchisees.”

Unveils Smallest Footprint Model, Dogtopia Lite

4.  Around mid-September, Dogtopia expanded its investment opportunities with the launch of Dogtopia Lite, the brand’s smallest franchise model. Dogtopia Lite facilities average 3,000 square feet, instead of the 5,000 to 10,000 square-foot facilities currently offered.

5.  The smaller model features two playrooms (instead of the standard three), a smaller spa area, and no training room. Although the new model has less capacity, its size opens the door to non-traditional real estate opportunities in high-density urban markets, residential towers, airports, and corporate campuses, among others.

6.  According to Alex Samios, vice president of franchise development for Dogtopia, “The number of pet parents grows by the day and we want to be able to expand our reach while simultaneously offering a more affordable investment opportunity. The Dogtopia Lite model now gives us the freedom to expand our footprint in urban markets that previously weren’t feasible with our larger facilities. With this new level of flexibility, the sky’s the limit for where and how we continue to grow nationwide.”

7.  The investment for a Dogtopia Lite location is targeted at or below $450,000, and the opportunity is available in markets nationwide. At the time of Dogtopia’s press release, there were already three Dogtopia Lite locations (one each in San Jose, California; Jacksonville, Flordia; and Boston, Massachusetts). Dogtopia said that it had plans to open five additional Lite locations by the end of 2017.

8.  Bill Polk, franchisee of the first Dogtopia Lite in Massachusetts, said, “As a first-time business owner, and longtime dog owner, the Dogtopia Lite model made a lot of sense for me. The ability to build a world-class dog daycare with a smaller footprint and all of the offerings of our other, larger locations will also help me achieve profitability quickly. At the end of the day, if my issue is one of being at or near capacity sooner rather than later, well, that’s a good problem to have.”

Launches Healthy Dog Central

9.  To kick off the New Year, Dogtopia launched Healthy Dog Central on its website. The brand said that it put together Healthy Dog Central to help pet parents keep their dogs healthy. Dogtopia cited the fact that over half the dogs in North America are clinically obese, which contributes to a shortened life span.

10.  To encourage pet owners to make sure their dogs are in top physical form, Healthy Dog Central provides free recipes, quick tips, videos, and access to its three subject matter experts – an animal behaviorist, a veterinarian, and an environmental biologist.

11.  In addition to content about proper feeding schedules, foods for shiny coats, vaccines, clean ears, and more, Dogtopia will host weekly interactive Facebook Live segments in which pet parents can ask questions and receive answers along the way. The Live Q&As will take place on Dogtopia’s Facebook page. All Facebook content will also be available at the Healthy Dog Central website.

12.  Dogtopia president and CEO Neil Gill said, “At Dogtopia, happy and healthy pups are at the heart of who we are. Our facilities focus on quality of care by providing a healthy, safe, and fun environment for dogs to develop positive behavior, exercise, socialize, and learn to be a well-balanced pup. While we are proud of the experience we provide for dogs in our care, Healthy Dog Central helps us extend our expertise to pet parents worldwide as they seek to improve their pup’s health in 2018.”

Company History

13.  Dogtopia was founded in 2002 by Amy Nichols and her husband Mike in Virginia. The company not only offers dog daycare, but boarding and dog spa services as well. It was one of the first major franchises in the pet services industry. Dogtopia focuses on providing high-quality pet services that emphasize education, exercise, and socialization for dogs.

14.  Each facility averages between 3,500 to 10,000 square feet, which allows for multiple, spacious playrooms where dogs can be separated by size and temperaments. There are also multiple webcams
located in each facility, which dog parents can access to ensure their pet is doing well.

15.  Dogtopia started franchising in 2005 and has grown to over 65 locations in the United States and Canada. In 2015, Dogtopia was acquired by Thomas Franchise Solutions. Neil Gill was appointed as the company’s new CEO and president, and Dogtopia relocated to Phoenix, Arizona.

Entrepreneur’s Franchise 500

16.  Dogtopia debuted on Entrepreneur’s annual Franchise 500 list in 2014 and has ranked every year since, except in 2016. The franchise’s highest rank was No. 205 in 2018, while its lowest rank was No. 390 in 2014.

Section II – Estimated Costs

• Please click here for detailed estimates of Dogtopia franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Dogtopia’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

• This historical financial performance representation discloses the average and median annual gross sales of all franchised (a total of 30) and affiliate-owned (a total of 4) Dogtopia locations in the United States that were open and operating during all of 2016.

• It also discloses the average and median annual gross sales during 2016 through December 31, 2016 of (i) the franchised (a total of 8) Dogtopia locations that had been open for less than 2 full years as of December 26, 2015, (ii) the franchised (a total of 22) Dogtopia locations that had been open for more than 2 full years as of December 26, 2015, and (iii) the franchised (a total of 20) and affiliate-owned (a total of 4) Dogtopia locations that had been open for more than 3 years as of December 26, 2015.

• This financial performance representation does not include the results of 3 Dogtopia locations that opened during 2016 (and therefore were not open for the full calendar year) and 2 Dogtopia locations that were not in operation for 2 months during 2016.

• For the financial information listed in Part 3, upon the franchisor’s request to all franchisees, it received 16 total statements from its Owner/Operator franchisees. Of those, the franchisor took the highest grossing store (Store A), the lowest grossing store (Store D), and the median grossing stores (Stores B and C) of the total.

• This financial performance representation also contains the actual partial operating financial statement through December 31, 2016 for 4 affiliate-owned and operated Dogtopia locations, as displayed in Part 4.

• The franchisor obtained the gross sales information for franchised locations from sales reports submitted by franchisees. It has not independently audited that information.

• The franchised locations whose average and median gross sales are reported above are substantially similar to the Dogtopia franchised locations the franchisor currently offers in terms of products and services.

• “Gross Sales” is defined in the Franchise Agreement as the total of all revenue derived from operating the location, whether from sales for cash or credit, and irrespective of collection, including sales of merchandise, products, and services, but excluding sales tax, proceeds from the sale of equipment not in the ordinary course of business, and franchisor pre-approved promotional discounts (provided physical evidence of the promotion/coupon is retained).

• The actual average and median annual gross sales volumes reported below do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross sales figures to obtain your net income or profit.

• All of the Dogtopia locations whose information is included below are substantially similar to one another in terms of products and services offered.

Part 1 – 2016 Franchisee Locations – Averages and Median