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 2020 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 2020 FDD
- Section IV – Number of franchised and company-owned Dogtopia outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Dogtopia’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, highest, and lowest gross sales for the 63 franchised and 8 company-owned Dogtopia outlets that were (i) open and operating for the entire 2019 calendar year; and (ii) not owned by a franchisee during part of 2019 and owned by Dogtopia or its affiliate during another part of 2019 (“Qualifying Outlets”)
- 2018 vs 2019 average and median gross sales for the 42 franchised Qualifying Outlets that (i) were also open and operating for the entire 2018 calendar year; and (iii) owned by 1 or more franchisees for the duration of the 2018/2019 measuring period
- 2019 average gross sales, cost of goods sold, ordinary and recurring operating expenses (payroll expenses; property expenses; royalty fees; marketing fees; local store marketing expenses; dog medical expenses; office, equipment, and cleaning supplies), and net profit for the 51 franchised and 8 company-owned Qualifying Outlets that provided Dogtopia with a complete 2019 profit and loss statement no later than Dogtopia’s April 20, 2020 deadline for submission of the profit and loss statements
Section I – Background Information
21 Things You Need to Know About the Dogtopia Franchise
Announces Western Canada Opportunities
1. In mid-August 2020, Dogtopia announced that it was setting its sights on Western Canada for its upcoming expansion plans. With units in Canada and the United States, the award-winning company announced plans to open several new locations through franchise partnerships and strategic development by the end of 2021.
2. After experiencing steady growth within Ontario, including the recent openings of locations in Mississauga, Kitchener, and Barrie, the newest locations were set to open in Don Valley in September and Regina shortly thereafter. Dogtopia will be focusing its next phase of expansion in the provinces of Saskatchewan, Alberta, and British Columbia. The company plans to open approximately 43 locations across Canada resulting in the creation of approximately 1,000 jobs, contributing to the Canadian economy.
3. Dogtopia’s Canadian development is led by President and CEO Kim Hamm, a Canadian native who has worked within different leadership roles at the company since 2015. Hamm and her newly-appointed Canadian leadership team provide a level of sophistication that is unmatched in the pet industry. With a reputation for providing outstanding care in state-of-the-art facilities, Dogtopia’s franchise model has proven successful even in the current market.
4. The brand was recently presented with a special Hall of Fame Award by the Canadian Franchise Association in recognition of their outstanding performance and contribution to the CFA member community during COVID-19. Dogtopia was also named number one in the pet care sector by Entrepreneur in its Franchise 500 ranking.
5. Hamm said, “Throughout Canada, we have seen extreme growth in people welcoming puppies or rescue dogs into their homes and it’s no surprise. During these challenging times, when many of us are spending time at home, dogs offer unconditional joy, love and support. We’ve also seen an increased interest by entrepreneurial Canadians looking for new opportunities, with franchising and our business model providing a solution that is stable despite a volatile COVID-19 reality. Deemed an essential service in many provinces, we feel extremely fortunate to see so many of our locations across the country grow during this time.”
6. Statistics Canada reports Canadians collectively spend over $8 billion in total on their pets, pet food, veterinary and other services annually and the industry continues to grow year over year, meaning opportunities in the pet care industry are increasing rapidly. Dogtopia locations are owned by Canadians with diverse backgrounds and offer those looking to go into business for themselves support every step of the way in a stable and recession-resistant sector.
7. Franchisees experience the Dogtopia difference which includes industry-leading brand awareness, multiple complementary revenue streams, proprietary technology, support from the seasoned franchise leadership team, a four-week initial training program, turnkey real estate and construction services, cutting-edge technology platforms, and a strong financial model and ROI. With many people considering new career paths at this time, Dogtopia is seeing rare opportunities to access both funding and real estate with the chance to open a dog daycare in as little as six months.
Shows Impressive Growth in 2020 Despite COVID-19 Pandemic
8. In late August 2020, Dogtopia announced that it had awarded 36 new franchise licenses that year, with the majority of new franchisees joining over the previous months. Along with the new franchise sales, the company has opened 14 new daycares with 9 more centers planned to open by October, debuting in new markets like Washington D.C. and Connecticut.
9. In addition to the rapid growth throughout the last several months, Dogtopia has also been active in its response to the COVID-19 pandemic. Considered an essential service in most states, the brand developed a series of new protocols to keep dogs, pet parents, and team members healthy and safe and has been able to service front-line medical workers. As a result, Dogtopia’s NPS score soared from 88 to 94 during the last several months, proving top satisfaction for those using Dogtopia’s daycare and boarding services.
10. The continued success and growth is due to a variety of factors, including an uptick in puppy and dog adoption during the pandemic, pet parents working from home who need dog daycare to help socialize and exercise their pups, and the brand’s rapid response amidst the COVID-19 pandemic.
11. Safety is of the utmost importance to Dogtopia – so when the pandemic struck, the brand was quick and decisive when developing a plan of how to enhance each daycare center’s safety protocols. Curbside drop off and pickup via Dogtopia’s mobile app, required masks and wellness checks, and in some locations, a UV light system, are practices that have been implemented across the franchise network to ensure safety for both employees and pet parents.
12. Neil Gill, president and CEO of Dogtopia, said, “Whether they’ve adopted a new puppy or have been trying to focus while working from home, now more than ever, pet parents are realizing the importance of dog daycare. That paired with Dogtopia being deemed an essential service and our thoughtful, thorough safety protocols have helped us thrive and spurred our growth. We plan to keep providing the best care possible to each dog we look after even as 2020 continues to throw challenges everyone’s way.”
Chairman Peter Thomas Retires, Names Brand’s Largest Multi-Unit Franchisee as Successor
13. At the beginning of October 2020, Peter Thomas, chairman of Dogtopia and Thomas Franchise Solutions USA, LLC (TFS), announced that he was retiring and named Dogtopia’s multi-unit franchisee Chris Kempner as Dogtopia’s new chairman and general partner. Thomas, in his 80s, recently set out to determine who would take over his role with the national franchise brand. The announcement comes with Neil Gill remaining as the CEO and no changes to the leadership team.
14. As part of Kempner’s role as general partner, his New York-based company Red Barn Franchise Holdings, LLC has purchased Thomas’s interest in TFS, and Kempner now manages the funds that support Dogtopia, in addition to his role as chairman of the board of directors. Thomas will remain invested in Dogtopia as a substantial limited partner. Thomas became the general partner and chairman of Dogtopia in 2012 when there were fewer than 30 daycare centers nationwide.
15. Thomas said, “Between Chris’s experience as a Dogtopia multi-unit operator combined with Neil Gill and the leadership team, I cannot think of a better-suited individual to invest in and take from me the chairmanship of Dogtopia into the future. I believe Dogtopia will have its best shot at greatness with this team moving forward.”
16. Kempner has been involved with Dogtopia for the past three years. Red Barn acquired the largest Dogtopia franchise territory with plans to open more than 30 daycares across the East Coast. Prior to founding Red Barn, Kempner was vice president at private equity firm Metalmark Capital. Kempner has experience in both investing and private equity and has worked in numerous financial positions, including as an investment banking analyst at Goldman Sachs. He received an MBA from Harvard Business School and a bachelor’s degree from Yale University.
17. According to Kempner, “I am deeply honored and grateful for the opportunity to become Dogtopia’s new Chairman and help ensure that as we continue to recover from the ongoing impact of the COVID-19 pandemic, the company is focused and poised to resume its ascent toward daycare category leadership. With our industry-leading approach to providing the safest daycare services available for our pups and a tangible emotional connection with our pet parents, our CEO Neil Gill, the existing management team and the Support Office employees will remain the champions and leaders of that ascent.”
18. Dogtopia was founded in 2002 by Amy Nichols in Tysons Corner, Virginia. Nichols decided to start Dogtopia – which provides socialization, exercise, and education for dogs – after realizing how lonely her dog Griffin was because she had to leave him alone all day while she worked long hours. Nichols felt that Griffin wasn’t getting adequate exercise or socializing with other dogs enough. Nichols then developed the concept for Dogtopia.
19. Dogtopia features large playrooms designed for different types of dogs and also offers baths and other spa services for its canine clients. The first Dogtopia location was a hit and Nichols followed this up with more locations in the area. In 2005, Nichols began franchising the Dogtopia concept and over the next few years, the brand continued to grow around the country.
20. Then, in 2012, Nichols signed an agreement with Thomas Franchise Solutions to expand the company to 400 units by 2021 across the United States and Canada. While Dogtopia has not yet reached this goal, there are locations all across North America.
Entrepreneur’s Franchise 500
21. Dogtopia ranked No. 54 on Entrepreneur’s 2021 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Dogtopia franchise costs, based on Item 7 of the company’s 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 36
- Outlets at the End of the Year: 50
- Net Change: +14
- Outlets at the Start of the Year: 50
- Outlets at the End of the Year: 67
- Net Change: +17
- Outlets at the Start of the Year: 67
- Outlets at the End of the Year: 102
- Net Change: +35
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 5
- Net Change: +1
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 8
- Net Change: +3
- Outlets at the Start of the Year: 8
- Outlets at the End of the Year: 12
- Net Change: +4
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- For purposes of the various financial performance representations, the following terms have the meanings given to them below:
- “Gross Sales” includes all amounts invoiced and/or collected by you from all goods and services sold at, from, or relating to your Business, regardless of manner of payment, including payments by cash, check, credit card, debit card, on credit, or via barter transaction. Gross Sales also includes all other revenues that you receive relating to your Business, including the proceeds of any business interruption insurance.
- “Cost of Goods Sold” includes all hard costs incurred for care of dogs at the facility, including the costs for dog food, dog treats, fresh water, and environmental/cleaning costs of the dog areas.
- “Net Profit” is calculated as Gross Sales minus Cost of Goods Sold and Ordinary and Recurring Expenses. For purposes of this financial performance representation, “Net Profit” does not include any deduction for interest, income taxes, depreciation, or amortization.
- “Ordinary and Recurring Expenses” is calculated as the sum of the following expenses:
- Payroll Costs (includes payroll, payroll tax, payroll processing fees, workers’ compensation, training and professional development costs, recruitment costs, employee uniform costs, employee medical expenses relating to dog scuffles, and payroll benefits, but excludes distributions and personal payments made to the business owner);
- Property Expenses (includes rent, maintenance and repairs, utilities, internet and security, insurance, licensing and permit fees);
- Royalty Fees;
- Marketing Fees (includes contributions to the brand and system development fund);
- Local Store Marketing Expenses (includes digital marketing fees paid to Dogtopia, expenses incurred for local store marketing that are paid directly to third-party suppliers, and expenditures for promotions and events);
- Dog Medical Expenses (includes veterinary and other costs to treat dogs); and
- Office, Equipment, and Cleaning Supplies (includes all office related expenses, equipment, office cleaning supplies, bank fees, software, computers, printing, postage and delivery, dues and subscriptions, and IT support).
Part 1 – 2019 Gross Sales for Franchised Qualifying Outlets
- In order to be a Qualifying Outlet for purposes of the 2019 Gross Sales financial performance representation (Parts 1 and 2), the Dogtopia business: (i) must have been open and operating for the entire 2019 calendar year; and (ii) must not have been owned by a franchisee during part of 2019 and owned by Dogtopia or its affiliate during another part of 2019 (i.e., outlets that were reacquired by Dogtopia or its affiliate from a franchisee during 2019 or that Dogtopia or its affiliate sold to a franchisee during 2019).
- In 2016, Dogtopia changed the trade dress for Dogtopia facilities. Some of the outlets that opened before 2016 still reflect the older trade dress. Despite the difference in trade dress, these outlets are still considered “Qualifying Outlets” because they are substantially similar to the franchised Dogtopia business offered under the Disclosure Document. There are no other material differences between the operations of the Qualifying Outlets and the franchised Dogtopia business offered under the Disclosure Document.
- As of December 31, 2019, there were: (i) 102 open franchised outlets, and 63 of these outlets are Qualifying Outlets; and (ii) 12 open company-owned outlets, and 8 of these outlets are Qualifying Outlets.
- Of the 102 franchised outlets that were open as of December 31, 2019, 39 did not qualify as “Qualifying Outlets” because they were not open for the entire 2019 calendar year.
All Franchised Qualifying Outlets