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Gretchen Meienburg

• Size of the facility– Number of dog enclosures and number of cat

enclosures

• What services will you offer– Professional grooming or just spa services

– Dog lodging

– Cat lodging

– Dog Day Care with community play

– Training

– Retail

– Therapy

What words describe your future facility?

What are you going to do that is different?

Develop your mission statement and tag line and build the facility around that.

2

Build a new Pet Care Facility

Purchase or lease a property and develop it

Purchase an existing Pet Care Facility or similar business

Purchase a franchise

Pros◦ Complete design control

Build to your vision/brand

◦ Flexibility

◦ Added value from real estate

Cons◦ Expensive

◦ Difficult to find land in a desired area

◦ Delays in construction Zoning

Weather

Materials not available

Pampered Pets Bed & Biscuit, Napoleon OH

Build

3

Pros◦ Smaller investment

◦ Lease may include build-out contributions

◦ Flexibility

Cons◦ Less control

◦ Landlord if lease

◦ High build out cost

Pampered Pets Bed & Biscuit, Fort Wayne IN

Existing Building added on

New Building on Existing Site

Removed 2 small buildings

Remove existing parking lot

Added 100 feet on to the east side

Added 20 feet to back

Change the appearance

4

16,000 sq ft at completion

After

Removed three bays and a paint booth

Built 58 Deluxe suite

Remodel the interior

Vision to Reality

After

5

Added 44 standard suites

Precast concrete – Mistake!.

Standard Dog Suites

Space Saving

Play YardsOutdoor space – How much do you need?

6

Add turf in 2011

Keep an open mind – paint can do a lot

6 month delay due to permits

Delays can take away $$ for operating cost

Urban Tails Building When Leased

Started out leasing 15,000 sq/ft

First remodeled only 10,000sq/ft

Year 3 remodeled 3,000sq/ft

Year 5 bought the building

Year 8 remodeled an

additional 7,000sq/ft Urban Tails Building 2011

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Lease SpaceBuy Property & Build/Renovate

Pros◦ Requires Less Capital

◦ Provides Flexibility

◦ Build-out Contributions

Cons◦ Landlord

◦ Less Control

◦ LHI – lost $’s

◦ Small Landlord Allowances

◦ Less Business Value

Pros◦ More Business Value

◦ Flexibility to Modify

◦ Control

Cons◦ Requires More Capital

◦ Business Debt

Recently sold facility in Houston TX

Urban Tails Today

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Pros◦ Immediate cash flow, ie. Paycheck for the owner

◦ Much easier to obtain financing

◦ Considerably lower risk than a start up

◦ Client base exists

◦ Trained staff – buyer can focus on growing business

◦ Shortest timeline to start

◦ Allows a learning curve for a ‘new to the industry ‘ buyer

◦ Buyer is buying market share vs. struggling to gain it.

◦ Turn key, all equipment and procedures in place

◦ No need to reinvent the wheel and make costly mistakes

Cons◦ May require image changes

◦ May lose clients

◦ Need to evaluate the current staff – might need to let some go and replace

◦ Jumping in full force

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3 Years Financial Statements & Tax Returns◦ The financial statements should be on the

letterhead of a licensed accounting firm in the state the business is located.

◦ They should include a profit & loss statement showing all the revenue and expenses for operation and a balance sheet showing the business assets.

◦ The tax returns will allow you to see how the current owners are reporting income and booking depreciation. This should be supported by the financial information.

Appraisal This is usually done through the purchasers lender. Appraisals generally value businesses in three ways comparative sales of similar businesses

revenue generation

replacement cost

Do very thorough Due Diligence on all aspects of the business & real estate

Expandability• Expand physically on the existing site

• Expand operationally within the business model

• Check zoning & licenses with municipalities, don’t rely on seller only

Goodwill◦ Intangible asset value assigned to client base of

existing business purchase

◦ Commercial lending institutions will base their financing proposal to a new buyer strictly on the numbers identified in the appraisal.

Real Estate VS Business Operations◦ Separate what the land and buildings are worth

from what the actual business is worth.

Investment Value

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Make purchase decision based on verifiable income only, do not consider unreported cash, it might or might not be there.

Realize that you can’t have it all when purchasing an existing facility, focus on what is most important to you

Have a good team of professionals working with you; broker attorney & CPA

Be realistic if you have the skills to run the facility you're interested in

Local commercial real estate companies

Private kennel brokers

www.nationalkennelsales.com

Business brokers

www.bizbuysell.co

Dog Fancy Magazine

Social Media sites

• Pros– Proven operating systems

– Assistance and support

– Marketing materials

– Training

– Name recognition in some markets

• Cons– Very little design flexibility

– Weekly royalty payments

– Limitations on operations

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Buying a Franchise Provides Model to Follow

Requires Same Start-up Steps

Operating Procedures & Training Provided

Minimal National Brand Recognition in Pet Industry

Loss of Control in Operating Business

Creating a Franchise Need to Provide Unique Value Added to Buyer

Build Brand Recognition

Significant Legal Investment

Quality Assurance

50 run upscale boarding facility (one year old); permitted for expansion to 100 runs

Cat Lodging Dog Lodging

Dog Daycare

Grooming

Retail

Rapid growth & opportunity to significantly further increase income

Located next to animal hospital on busy highway

$2,000,000

Financing Costs◦ 10-20% equity required ($200,000 minimum)

◦ 10 year term

◦ $1,800,000 financed

◦ 6.5% rate

◦ SBA Guaranty fee financed ($48,750)

◦ $21,000/month payment

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Monthly Cash Flow Amount

Mortgage $21,000

Payroll $30,000

Advertising $ 2,000

Utilities $ 3,000

Supplies $ 500

Facility Costs $ 500

Insurance $ 500

Other Expenses/Payments $ 2,500

Total Monthly Cash flow $60,000

Income Rate Amount

Dog Boarding 50 runs @ 50% occupancy; $50/night

$37,500

Cat Boarding 10 suites@25% occupancy; $20/night

$ 1,500

Dog Daycare 50 daily@65% occupancy; $30/day

$19,500

Grooming 15 daily@65% occupancy; $35 /dog

$ 8,000

Retail $ 5,000

TOTAL $71,500

Real estate value (appraisal)

What is the ROI?

Prepare financial forecasts◦ Current occupancy & rates

◦ Current expenses

◦ Expandability

Size of facility

Services & Income growth

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Business start-up costs Land acquisition costs or Lease Negotiation

costs Construction Cost Examples

Full service facilities Include grooming & daycare/training rooms Excludes land, impact fee, design, & engineering Excludes furniture, fixtures & service specific

equipment Variances due to site costs, building types, exterior

finish, flooring selections, etc

Information courtesy of Turnkey, Inc

Site work for utilities, drainage, dirt preparation

Building Foundation Metal building costs

Enclosures HVAC Flooring, Walls & Windows Finishing Plumbing & Electrical

Fencing

Economies of scale with larger square footage

Finish selections directly impact cost per square foot

Demolition existing

Walls & flooring

Fencing

HVAC

Enclosures

Plumbing & Electrical

Economies of scale with larger square footage

Finish selections directly impact cost per square foot

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Category New – 106 15,000 sq/ft

New – 757,000 sq/ft

New – 565,300 sq/ft

Bldout –15217,000 sq/ft

Bldout-565,300 sq/ft

Site work $21.98 $17.47 $13.38 n/a n/a

Building $21.60 $22.29 $26.98 n/a n/a

Foundation

$12.60 $10.57 $11.70 $0.85 $2.26

Enclosures $9.53 $10.14 $11.70 $9.18 $14.15

Fencing $6.13 $3.57 $8.30 $0.64 $2.36

HVAC $8.67 $7.43 $7.55 $6.00 $7.55

Other $51.29 $48.42 $59.56 $50.07 $55.23

Total $131.80 $119.89 $139.17 $66.74 $81.55

Construction cost information courtesy of Turnkey, Inc

Carpentry, Trim Carpentry

Suspended ceilings

Partition Walls

Doors & Windows

Masonry

Cabinetry

Hardware

Painting

Tile, etc

Plumbing & Electrical

Appliances

Landscaping

Specialties

Field Expenses

Miscellaneous Finishes

Key Points for Success

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Demographics

Supply and demand

Local zoning codes

What defines a “kennel” or “dog daycare” in your city?

Local laws pertaining to Pet Care Facilities

Web Searches

Contact Local Veterinarians

Create Pricing Matrix

Visit the Competition◦ Be Honest w/ Plans

◦ Ask for Overflow Referrals

Major policies will affect your bottom line and how you approach finding a space◦ Single enclosure and all dogs go outside

◦ Totally indoor

◦ Community play or day lodging

◦ Late pickups or overnight person?

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How much space do I need? Option 1: Cage-free Option 2: Suite or crate with mandatory group play Option 3: Suite with optional play Option 4: Mix of above, with or without suites

Average facility is over 7,000 sq feet

Facilities house on avg 51 indoor dog enclosures 40 indoor-outdoor 17 cat and 16 dog lux suites

Industry occupancy average at 50.8% (dogs)

75 dog kennels x .50 = 37.5 dogs / night avg

Anticipate 10-30% over occupancy during holidays for same family pets

Business formation

Fencing

Flooring

HVAC

Enclosures ($1,000 - $1,200 each)

Furniture & Fixtures

Acquisition Land Business Purchase Franchise Payment

Construction Leasehold/Building Improvements: $65 - $85 sq/ft Landlord Allowance: $10 sq/ft Construction: $175 - $300 Design & Engineering: $25 sq/ft

Signage Furniture, Fixtures & Equipment (FF&E) Organizational Costs (Start-up

Expenses)$10,000-15,000

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Office = $2500 -3000◦ 2 Computers with printer

◦ Paper, file folders, pens, etc

Software = $2000-3000

Kennel Equipment = $2500 – 3000 Basic

Day Care

Grooming = $7000 – 8000◦ Shampoo, brushes, etc = $300

◦ Cages = $3000- 4000

◦ Tubs = $2000 -3000 each

◦ Tables = $800 – 2000 each

Cleaning = $300 for the first three months

Pet Food = $150 – 250 for first month

Display units = $1000 – 3000

Retail inventory = $500 – 1000

Sources◦ Campbell Company

◦ Pet Edge

◦ Columbus Serum

◦ Premier Products

◦ Ryan's Pet Supplies

◦ Local Vendors

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Service FF & E Item Cost Estimate

Boarding EnclosuresFencing Potty Areas

$1,500 each

Boarding Suite UpgradesTV’s, Luxury Beds,

Decor

$200 - $500 each

Boarding Cleaning System Equipment

$500 - $15,000

Daycare FencingEntry chutesPlaygroup dividers

$1,500 each

Daycare Play Equipment, Furniture

$300 - $3,000

Grooming Bathing System & Dryers

$1,000; $200 - $1,500

Grooming TablesTubs

$300 - $1,500 , $600 -$3500

Retail ShelvingWallboardsDisplay Cabinets

$2,000+

Administrative Area FF & E Item Estimated Cost

Systems Computer HardwareDesktopsServerCabling & Install

$500+$800+variable

Systems Computer SoftwarePet Care

ManagementOffice SuiteMarketingInstallation

$500 - $2,500$150+$300+variable

Systems PhonesSoftwareEquipmentInstallation

$1,500+$50+ eachvariable

Administrative Area FF & E Item Estimated Cost

Reception/Office PrintersPhotocopierCredit Card Processing

$300+ each$300+ each$200-$500

Reception/Office DesksChairsBookcasesFile Cabinets

$100+ each$75+ each$100+ each$150+ each

Support Services AppliancesRefrigeratorsWasher & DryerDishwasher

$100 - $1,000$1,000 - $10,000$300 - $1,000

Support Services Employee LockersBreak Area Table & Chairs

$500 - $1,000$75+; $25+ each

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Service Area Items Estimated Costs

Boarding Water & Food bowlsMatsIdentification collarsFood storage binsCleaning products

$4+ each$10+ each$40+Variable$200+ starter supply

Daycare Water bucketsWaste pick-up tools

$4+ each$20+ each

Grooming Bathing tools: brushes, combs, nail clippersGrooming tools: clippers, blades, shearsTowels

$100+ starter set

$500+ starter set

$30+ dozen

Retail Pricing labels/tags variable

Marketing Brochures, Business cards, Shirts

variable

Administrative Filing suppliesGeneral office supplies

$100+$100+

Safe Pet Care◦ Quality enclosures◦ Good fencing◦ Daycare flooring◦ Webcams

Pet & Staff Health◦ Ventilation◦ Cleaning systems◦ Cleaning products◦ Grooming

equipment

Client Appeal◦ Facility entrance◦ Reception area◦ Tour route

Staff Productivity◦ Software◦ Training◦ Facility design

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Know your start-up costs

Add 20%

Estimate slow growth to industry average by month 18

Create a three-year cash flow

Know how low you can go

Initial walk-thru Leases, like

purchases, are negotiable

Work out a contract

Use a lawyer Environmental

concerns Ask for abatement Deposit & signing

What kind of entity? Corp? LLC?

Federal EIN

State Employer Tax ID

Kennel Permit

Reseller’s Permit

Business License

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Accountant

Payroll service

Legal - general

Legal - real estate law

Broker or realtor

Business mentor (SCORE, consultant)

Insurance agent

Investors

Dog behavior & group play training

Customer care

Human resources

Basic grooming (sanitary cut, bath & brush, de-mat)

Be prepared to teach all of this!

Gretchen Meienburg

gretchen@maycastleconsulting.com

www.maycastleconsulting.com

419-966-0728