When Peter Thomas met Amy Nichols, it was a match made in heaven. Dog heaven, that is.
Ms. Nichols is the founder and CEO of the doggy daycare, boarding and spa franchise Dogtopia, owned by U.S.-based Dogtopia Enterprises LLC. The upscale chain, which launched in Tysons Corner, Virginia, in 2002, partly as a solution for Ms. Nichols' own bored Boston terrier Griffin, offers dogs pampered care in playrooms equipped with live webcams so owners can watch their pooches hanging with their pals.
Mr. Thomas, who built the Century 21 real estate franchise in Canada and developed the Four Seasons Resort in Scottsdale, Arizona, was then looking at the pet industry space to make some investments. As chairman of Thomas Franchise Solutions, an investment firm created to support franchise concepts, Mr. Thomas was interested in the rapidly rising pet industry – currently approaching $60-billion annually in the U.S. (according to the APPA American Pet Products Association) and $6.5-billion in Canada (according to the Canadian Pet Market Outlook 2014 report).
After being referred to Ms. Nichols in 2012, the pair entered into a strategic partnership, expanding the brand across the U.S. from 20 to 31 locations. System wide, the company is targeting $18-million this year, with an average revenue of $700,000 per store. Now Dogtopia chairman, Mr. Thomas has acquired the franchising rights in Canada, opening the first Dogtopia Enterprises Canada Inc. location in Coquitlam, B.C. With Canadian spending on pets expected to reach $8.3-billion per year by 2018, Mr. Thomas plans an aggressive growth strategy to open up 40 locations across Canada over the next seven years.
"Dogtopia has the chance to be a trendsetter the way Century 21 was in Canada," says Mr. Thomas, 76, also the proud owner of a Havanese named Good Golly Miss Molly. "The pet industry is a phenomenal space. When I was a kid, the dog stayed outside and played. Now it's family."
To get the American and Canadian points of view on the brand, The Globe and Mail talked to both Peter Thomas and Amy Nichols.
What differentiates Dogtopia? We've got doggy daycare here.
PT: Sure, but a lot of them are backyard operations. It's not unlike the coffee situation when Starbucks came in. You'd have mom and pop coffee shops. There's no collective brand right now. When you think of doggy daycare, a brand doesn't come to mind. That's really what Century 21 did in Canada. We had all kinds of real estate activity and brokers but when Century 21 came to town – uniting the smaller brokers under one brand with the franchise concept – it created a known brand which could compete with the the big guys.
AN: Some doggy daycares are comparable but from what I've seen, none put all the pieces together the way we have, with web cameras, an interactive website and our Dogtopia university, a web-based video portal with training materials. You could never have that with a single store. What we offer is consistency of service and facilities.
When you walk into a Dogtopia, it feels like a hybrid between a hotel lobby and a child daycare. We have rubber flooring in the playrooms which is expensive but better for the dogs' joints and for our people as well. Those are the kinds of things we've refined over 12 years to make things better. The best practices, safety and certifications we provide all add up.
What's been the biggest challenge so far in bringing Dogtopia to Canada?
PT: Finding the right locations. The zoning laws are archaic and very difficult. Once we get a store open and can bring people down to look at it, they understand it better.
What's different about the market here?
PT: We're all human beings governed by passion and goals. We're really not different. I see no problem at all. There's a big mix of cultures but I see similarities in people rather than differences. Dog owners are dog owners.
AN: We expected costs to be a little higher, but there's a lot of room in our business model to make adjustments here and there. Our most expensive cost, whether in the U.S. or Canada, is labour. We're a service business. We need to be sensitive to that and watch pricing. We're not a discounter like Target with razor thin margins to worry about.
More than 90 per cent of our clients pay in advance for daycare. They'll buy 10, 20 or 30 days ahead and get a slight discount. They can choose when they want to bring their dog. It's a lot more flexible than a child daycare where if you don't come, you still have to pay. But that puts the money into the business at the get go. It's very helpful for managing a start-up business and the client likes the convenience.
What are you looking for in a franchisee?
PT: Somebody who wants to run their own business. I like to have people with a business background but it's not necessary because we teach everything. The best prospect is somebody who's been in the corporate world for 20 years. This is an opportunity for them to get out from under the corporate mantle and have their own business. A properly, well run store should make anywhere from $150,000 to $200,000 in a year and that's net.
Being a dog person isn't a necessity but it adds to the fun. However, liking dogs isn't enough. It's so much better if they understand the dynamics of wooing customers. How do you market and keep customers happy? It's more than just common sense.
While you can hire a manager for the store, I don't like the model of absentee business owners. Just putting in the money doesn't go as well as being committed. There's a personal care people put in when they're independent operators. You want the owner to have a presence in the store.
What was involved in setting up the first Dogtopia?
AN: I always knew I wanted to run my own business but wasn't sure what that would be until I had the experience of owning Griffin and being really busy with my job in telecommunications. I had worked in pet stores all through school and had shown and trained dogs growing up, so I started studying the pet industry. I looked to California because lot of trends start out there. The San Francisco SPCA is credited with the very first dog day care in the United States and they were using it to socialize dogs to become better pets. I thought that was fantastic.
Whenever I was travelling for work. I'd check out the pet community. I also did a lot of dog behaviour and dog training seminars. I wanted to make sure I could manage groups of dogs and also properly evaluate their behaviour to be able to put the right dogs together so that everyone was safe. I also befriended an excellent dog trainer in Virginia who specialized in group social dynamics in dogs. She's still a consultant today.
My biggest concern at the beginning wasn't sales and marketing. I felt there was a real need and that out customer was out there just waiting for a good solution.
Ultimately the model was very similar to child daycare but for dogs. They're in separate rooms, but you'll never see fences or caged enclosures. The dogs are always separated by size because their safety was really important to me from the beginning. Dogs are dogs and we have to be mindful of their natural behaviour.
The very first model we set up in 2002 is financially, functionally and structurally very similar to our model 12 years later. By 2004, we'd hit $1-million in annual revenue. That's when I thought this was something special. We needed to look at how to replicate this. Eventually, franchising made a lot of sense.
What was the biggest risk?
AN: The first location. I took on 10-year lease for 9,000-square-feet in an affluent area with expensive rent. Many people told me I was crazy because most doggy daycares up until then, with the exception of the Humane Societies and SPCAs, were small in space. But I had a vision that I could have 100 dogs a day there with three to four playrooms and a good sized team. It made sense that way. Ever since, we've had about 100 dogs a day everyday at that location. It's still our flagship store and number one for revenue.
What's your advice to entrepreneurs who want to turn their business into a franchise?
PT: Spend $450 on a good lawyer who specializes in franchises so you understand what it means to open up a franchise. A franchise is complicated. Then ask yourself, Is that business replicable? A lot of times businesses aren't replicable. You can get one that just grows bigger and bigger if you're successful, but if you move it to another location or town, it just doesn't work.
There a big difference between businesses that can operate nationally versus one location. A charismatic owner can make a business – the successful restaurant with the mum taking the orders and the dad in the kitchen cooking. That model's not replicable. A lot of people think a successful mom and pop is, but you must really check the water to see if it is or isn't.
What does a Dogtopia franchise cost?
PT: It's $42,500 for the actual cost of the franchise rights. Then it costs around $500,000 to open a store that's about 6,000-sq. feet.