In this FDD Talk post, you’ll learn the following:
- Section I – Estimated initial investment (franchise costs) for a Pet Supplies Plus franchise, based on Item 7 of the company’s 2022 FDD
- Section II – Initial franchise fee, royalty fee, and marketing fee for a Pet Supplies Plus franchise, based on Items 5 and 6 of the company’s 2022 FDD
- Section III – Number of franchised and company-owned Pet Supplies Plus outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD
- Section IV – Background information on the Pet Supplies Plus franchise opportunity, including relevant news updates
- Section V – Presentation and analysis of Pet Supplies Plus’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:
- 2021 average weekly gross sales, annual gross sales, gross margin percentage, labor expense, rent, royalty and NAF (National Advertising Fund) fee, and EBITDA for the 248 franchised Pet Supplies Plus stores that were open and began operating prior to January 1, 2021 (“Reporting Franchised Stores”), grouped by number of years in operation (1 year, 2-3 years, 4+ years, and all Reporting Franchised Stores)
- 2021 average weekly gross sales, and annual gross sales for the 297 franchised Pet Supplies Plus stores that opened prior to January 1, 2020, grouped by number of years in operation (1 year, 2-3 years, 4+ years, and all Reporting Franchised Stores)
- Section VI – Key ratios, comparables, computations, and analyses for the Pet Supplies Plus franchise opportunity (exclusive content for Platinum subscribers)
Section I – Pet Supplies Plus Franchise Costs
- Pet Supplies Plus franchise costs, based on Item 7 of the company’s 2022 FDD:
- Initial Franchise Fee: $49,900
- Inventory: $160,000 to $230,000
- Equipment: $126,700 to $275,000
- POS Equipment Installation: $3,150 to $4,150
- Full Store Preprinted Shelf Labels for Product: $120 to $150
- Training: $4,000 to $8,000
- Advertising Grand Opening: $20,000 to $30,000
- Insurance: $2,000 to $7,000
- Leasehold Improvements: $25,000 to $715,000
- Prepaid Rent/Security Deposit: $0 to $10,000
- Legal and Accounting: $4,000 to $10,000
- Pre-Opening Labor: $10,000 to $35,000
- Set Up Fee: $10,000
- Additional Funds – Initial Period (6 Months): $40,000 to $140,000
- Total Estimated Pet Supplies Plus Franchise Costs: $454,870 to $1,524,200
Section II – Pet Supplies Plus’ Initial Franchise Fee, Royalty Fee, and Marketing Fee
- Pet Supplies Plus’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:
- Initial Franchise Fee: $35,000 to $49,900
- Royalty: 2% of monthly Gross Sales for first 12 months of operation; 3% of monthly Gross Sales after first 12 months of operation
- Advertising: 3.5% of Gross Sales; 2/3 toward local spend as directed by Pet Supplies Plus and 1/3 into the National Advertising Fund (NAF) with a maximum annual total contribution (local and NAF) of $100,000
Section III – Number of Franchised and Company-Owned Pet Supplies Plus Outlets
- Outlets at the Start of the Year: 234
- Outlets at the End of the Year: 261
- Net Change: +27
- Outlets at the Start of the Year: 261
- Outlets at the End of the Year: 302
- Net Change: +41
- Outlets at the Start of the Year: 302
- Outlets at the End of the Year: 374
- Net Change: +72
- Outlets at the Start of the Year: 218
- Outlets at the End of the Year: 218
- Net Change: 0
- Outlets at the Start of the Year: 218
- Outlets at the End of the Year: 217
- Net Change: -1
- Outlets at the Start of the Year: 217
- Outlets at the End of the Year: 229
- Net Change: +12
Section IV – Background Information on the Pet Supplies Plus Franchise
15 Things You Need to Know About the Pet Supplies Plus Franchise
Expands Offerings to Include Prescription Products
1. In mid-September 2021, Pet Supplies Plus expanded its offerings to include prescription pet medications and food. Available online, this expanded array of products allows Pet Supplies Plus to continue to meet evolving pet parent needs – truly becoming a one-stop shop for busy pet owners. Pet Supplies Plus will offer Hill’s Prescription Diet, Purina Pro Plan Veterinary Diets, flea and tick treatments, heartworm medications and more, with brand name and generic prescription options available.
2. By working with Vetsource, a pet health company that provides innovative pharmacy, technology, and business services and one of the only major pharmacies that partners closely with veterinarians, Pet Supplies Plus is helping ensure pet owners and their beloved pets remain under the supervision of their veterinarian and receive the care and products they need.
3. According to Chris Rowland, CEO of Pet Supplies Plus, “Our team – which is filled with animal lovers – understands firsthand how pets truly become a member of each family. Providing online ordering of prescription medications and food is just another way we’re enhancing our offerings for each and every pet. Our neighbors already know they can trust us to provide quality food, treats, toys, beds and everything else necessary for pets, but now we can take that a step further and really help put pet owners in touch with specially formulated prescription diets, medication and more to keep their furry friends safe and healthy.”
4. Prescription orders placed online through Pet Supplies Plus are routed to the pet’s veterinarian for electronic processing through Vetsource. “Since Vetsource was founded, we’ve remained steadfast in our commitment to supporting veterinary practices with tools and technology that make their lives easier and ultimately help them focus on providing quality pet care,” said Kurt Green, president and CEO of Vetsource, based in Portland, Ore. “By enabling electronic approval of prescription orders placed through Pet Supplies Plus, we’re able to ensure veterinarians have visibility into whether pet owners are receiving the prescription products their pets need and adhering to therapy recommendations.”
5. As a fully licensed pharmacy in all 50 states, Vetsource acquires medications safely and directly from pharmaceutical companies. Each prescription passes through industry-leading safety checks conducted by Vetsource’s pharmacists and pharmacy technicians, all of whom are trained in veterinary pharmacology. This provides an unparalleled level of expertise and ensures neighbors receive prescription products that are safe and appropriate for their pets.
Launches New Customer-Oriented Loyalty Program
6. At the beginning of November 2021, Pet Supplies Plus announced the roll out of their new and improved loyalty program – Pet Supplies Plus Rewards. Free to enroll, this new program will give neighbors the freedom and flexibility to redeem their points for rewards to use on products and brands they trust most for their pets. Member benefits include earning points with every purchase, opportunities to earn bonus points, access to members-only pricing, early and exclusive access to new products and events, and a surprise on their pet’s birthday or adoption day. All members will also have access to a personalized member dashboard where they can track and redeem points and discover content specially tailored for them and their pet(s).
7. Members will earn five points for every dollar spent, with the chance to earn additional points during promotions. For every 1,000 points earned, members can redeem a $5 reward in the form of a coupon that can be used on any product at Pet Supplies Plus. All rewards will come in $5 increments. Members can earn bonus points by completing activities on their member dashboard, and additional rewards are earned by making repeated product purchases within the same brand.
8. Chris Rowland, chief executive officer of Pet Supplies Plus, said, “When we were looking at ways to improve our loyalty program, we wanted to put the power back in the hands of our neighbors. Here at Pet Supplies Plus, we are community-based in nature, so our goal was to create an interactive and engaging program that benefits and rewards neighbors whenever they shop at our local stores.”
9. All members enrolled in the existing Preferred Pet Club and Neighbor Rewards Program will automatically be transitioned into the Pet Supplies Plus Rewards program upon accepting the terms and conditions of Pet Supplies Plus Rewards, which can be completed by logging into their account online. Preferred Pet Club and Neighbor Rewards Program are being retired with the rollout of Pet Supplies Plus Rewards, but the benefits of both programs, including members-only pricing and earning free product, will be incorporated into Pet Supplies Plus Rewards.
Celebrates 600th Store Opening
10. In mid-December 2021, Pet Supplies Plus celebrated its 600th grand opening in Gresham, Oregon. The local entrepreneurs of the 600th store are Tom and Julie Meehan. Tom has extensive retail experience and is excited to own his own family-run business. As a loyal customer of Pet Supplies Plus, he is familiar with the value of the services and wide assortment of high-quality products available to his neighborhood’s pet parents. According to the American Pet Products Association (APPA), pet product sales have surpassed $100 billion. This explosive industry growth is spurring ownership interest with many pet-passionate entrepreneurs like the Meehans.
11. Chris Rowland, CEO of Pet Supplies Plus, said, “Pet Supplies Plus’ tremendous new store growth is not only from new owners joining our pack but also from owners who have been with us for 30 years that continue to open new stores. Our friendly, local neighborhood pet store reputation is based on the passion our owners have for the pet industry and serving their community. They love what they do and know that we support them with purchasing, marketing, technology, eCommerce and more.”
12. Pet Supplies Plus was founded in 1988 by Harry Shallop and Jack Berry in Redford, Michigan. At the time, pet supply store franchises didn’t exist and Shallop and Berry wanted to overhaul the industry. Shallop and Berry wanted to make it easier to shop for pet supplies and were inspired by the layout of grocery stores. They made sure their store had well-stocked wide aisles with organized shelves. This first store was a success and franchising started in 1989.
13. Over the next few decades, Pet Supplies Plus continued to expand around the United States. By the early 2000s, there were more than 200 stores in operation. A decade later, in 2010, Pet Supplies Plus was acquired by Irving Place Capital, a private equity group. Under Irving Place Capital’s leadership, Pet Supplies Plus pushed national expansion further and hit a milestone of 400 stores in 2017.
14. In late 2018, Pet Supplies Plus was acquired by Sentinel Capital Partners, who sold the company in early 2021 to Franchise Group, Inc. for around $700 million in cash. Today, there are Pet Supplies Plus locations across 36 states.
Entrepreneur’s Franchise 500
15. Pet Supplies Plus ranked No. 20 on Entrepreneur’s 2022 Franchise 500 list.
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Pet Supplies Plus Franchise (Item 19, 2022 FDD)
- This Item sets forth historical gross sales information for franchised outlets for the measurement period of January 1, 2021 to December 31, 2021 (the “Measurement Period”), which was provided to Pet Supplies Plus by its franchised Stores.
- During the Measurement Period, there were 374 franchised outlets and 229 affiliate-owned outlets, which is a total of 603 outlets.
- Pet Supplies Plus has not audited or independently verified the data submitted by the Stores and no assurance can be offered that the data does not contain inaccuracies that an audit might disclose.
Part 1 – Average Gross Sales, Gross Margin, EBITDA, Rent, Royalty and System Advertising Fund Fee, and Labor Expense for Reporting Franchised Stores (January 1, 2021 to December 31, 2021)
- Part 1 sets forth average weekly and annual gross sales data, gross margins, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), rent expenses, royalties and system advertising fund fee expenses, and labor expenses for the 248 franchised Stores that were open and began operating prior to January 1, 2021 (the “Reporting Franchised Stores”).
- The Reporting Franchised Stores’ performance data is segmented into groups by vintage. During the Measurement Period, there were 374 total franchised outlets.
Reporting Franchised Stores
- Store Count: 26
- Average Weekly Gross Sales: $34,398
- Average Annual Gross Sales: $1,788,684
- Annual Gross Margin %: 40.9%
- Annual EBITDA: $7,529 (0.4%)
- Annual Rent: $173,558 (9.7%)
- Annual Royalty and SAF Fee Expense: $54,606 (3.1%)
- Annual Labor Expense: $317,329 (17.7%)
- Store Count: 44
- Average Weekly Gross Sales: $44,237
- Average Annual Gross Sales: $2,300,319
- Annual Gross Margin %: 40.6%
- Annual EBITDA: $170,780 (7.4%)
- Annual Rent: $183,802 (8.0%)
- Annual Royalty and SAF Fee Expense: $76,852 (3.3%)
- Annual Labor Expense: $331,090 (14.4%)
- Store Count: 178
- Average Weekly Gross Sales: $58,128
- Average Annual Gross Sales: $3,022,650
- Annual Gross Margin %: 37.4%
- Annual EBITDA: $340,948 (11.3%)
- Annual Rent: $175,146 (5.8%)
- Annual Royalty and SAF Fee Expense: $83,269 (2.8%)
- Annual Labor Expense: $328,487 (10.9%)
Average of All Stores
- Store Count: 248
- Average Weekly Gross Sales: $53,176
- Average Annual Gross Sales: $2,765,127
- Annual Gross Margin %: 38.1%
- Annual EBITDA: $275,802 (10.0%)
- Annual Rent: $176,515 (6.4%)
- Annual Royalty and SAF Fee Expense: $79,125 (2.9%)
- Annual Labor Expense: $327,779 (11.9%)
Franchised Stores Opened Prior to January 1, 2020
- Store Count: 38
- Average Weekly Gross Sales: $34,508
- Average Annual Gross Sales: $1,794,432
- Store Count: 56
- Average Weekly Gross Sales: $41,215
- Average Annual Gross Sales: $2,143,205
- Store Count: 203
- Average Weekly Gross Sales: $56,085
- Average Annual Gross Sales: $2,916,426
Average of All Stores
- Store Count: 297
- Average Weekly Gross Sales: $50,521
- Average Annual Gross Sales: $2,627,079
- “Gross Sales” is defined as the total revenue earned by a Store.
- “Gross Profit” is calculated by subtracting “Cost of Sales” from Annual Gross Sales.
- “Cost of Sales” includes the cost of acquiring merchandise including all pet food, pet supplies, pets, and products required in connection with pet grooming and bathing services, net of discounts, rebates, allowances, and freight charges.
- “Annual EBITDA” for each Reporting Franchised Store is defined as the Annual Gross Sales for each Reporting Franchised Store less Cost of Sales and “Store Operating Expenses.”
- “Store Operating Expenses” include all expenses required to operate the Store, including wages, payroll taxes and benefits, occupancy costs, supplies, credit card fees, advertising, royalties, system advertising fees, and other costs, but exclude start-up expenses, depreciation, amortization, interest, and income taxes.
- “Annual Rent” for each Reporting Franchised Store includes all expenses required to occupy the Store, including base gross rent, real estate taxes paid to landlord, building insurance paid to landlord, and common area maintenance paid to the landlord.
- “Annual Royalties and National Advertising Fees” for each Reporting Franchised Store includes all fees paid to Pet Supplies Plus as royalties and payments to the National Advertising Fund (NAF).
- “Annual Labor Expense” for each Reporting Franchised Store includes all direct labor expenses required to operate the Store, including wages, payroll taxes and benefits, and specifically including the salary of the Store’s manager and other supervisory personnel. It does not include salary, distributions, or “interest” taken by ownership, or salary paid to district managers unless those individuals spend at least 70% of their time directly operating an individual Store.
- Your revenues will vary depending upon the location of your Store.
- This analysis does not contain information concerning all of your potential operating costs. The figures above do not include certain costs associated with the establishment and operation of a Store, including initial franchise fees, build-out, and equipment costs. The above figures also exclude finance charges.
- Interest expense, interest income, depreciation, amortization, and other income or expenses will vary substantially from Store to Store, depending on the amount and kind of financing you obtain to establish your Store, as well as your credit history.
- Revenues and expenses will vary. In particular, the revenues and expenses of your business will be directly affected by many factors, such as:
- (a) the geographic location of your Store;
- (b) competition from other similar stores in your area;
- (c) your local advertising and promotional efforts;
- (d) whether you operate the business personally or hire a general manager;
- (e) employment conditions in your area;
- (f) your product and service pricing;
- (g) vendor prices on materials, supplies, and inventory;
- (h) employee salaries and benefits (life and health insurance, etc.);
- (i) insurance costs;
- (j) your customer service skills;
- (k) how well you maintain your Store;
- (l) your inventory management skills;
- (m) your occupancy costs; and
- (n) customer loyalty.
- There is no assurance you will do as well. If you rely upon Pet Supplies Plus’ figures, you must accept the risk of not doing as well.