Post on 18-Jun-2020
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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.
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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
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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
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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
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Added 44 standard suites
Precast concrete – Mistake!.
Standard Dog Suites
Space Saving
Play YardsOutdoor space – How much do you need?
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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