Dog Day Care Franchises: Dogtopia's Story

A year after leaving her job as a sales representative for Verizon, Amy Nichols started a dog spa in 2002. She sold her house for $80,000, moved in with her boyfriend, and received a small business administration loan for $75,000. But why scrape by on borrowed money for your own store when dog-loving franchisees are so willing to give?

By 2005, the Tyson's Corner center was so successful that Nichols decided to pursue her dream of a national chain of dog day care centers. She says she hadn't considered franchising until she attended a franchise event in Washington, D.C. "I got really excited at the idea," she says. "These people will own their business, they'll have the pride of ownership I have but be part of a system where we can help them and train them."

Dogtopia's first franchise opened in Houston in 2006; since then, her company has sold 34 franchises, of which 20 are up and running. The franchises, along with centers Dogtopia owns directly in Tyson's Corner, Bethesda, Md., and Cary, N.C., generated $6 million in revenue last year. (The Cary facility was originally owned by a franchisee but closed in May. Dogtopia reopened it in August.)

The cost to start a Dogtopia franchise ranges from $242,900 to $458,300, depending on location. That includes a franchise fee of $40,000. Franchisees also pay Dogtopia 7% of gross sales.

USA Today writes that doggie day care looks like a reasonable investment because it is in a growing segment. Americans spend more than $43 billion on their pets, nearly double from a decade ago, according to the American Pet Products Association. Despite the recession, the trade group projects that spending will increase 4.9% to $45.4 billion this year. Next to veterinary care, the association says, the fastest-growing sector of the industry is pet services, which includes day care.

That's just bad logic. Just because pet services is up doesn't mean that dog day care is booming.  What's next? A franchisor that says because pet services is growing that pet pot smoking services must be up too?

Nichols believes in a market that sprinkles her franchises from sea to shiny sea, four to each state, not including Guam or Puerto Rico. Unfortunately, the new Dogtopia chain is already having problems selling units.

… Nichols believes there's enough demand to support at least 200 Dogtopias nationwide and envisions a day when many of her franchisees will own more than one center. But the credit crunch has slowed her expansion plans. After selling 22 franchises in 2007, Dogtopia sold 10 in 2008, and just two this year.