Pet Business Booming

The size of an "industry" is not a reliable indicator of the quality of your chances to operate a small business in that industry successfully over the life of a franchise agreement. In fact, the larger an industry already is, the more likely it is that entrenchment by established competitors will make it more UNlikely that you will succeed as a small business operator under a franchise or not.

The aggressive growth rate of the industry is in itself an indicator of rapid replication of already established competitors who are way ahead of you on the learning curve. Franchise training, whether for three weeks or three months, will not get you up to speed with the folks who are already factors in the business. And they probably do not have the extra carrying charges associated with being franchisees.

Size and growth rate are therefore, hardly scratching the surface of information you must assimilate in order to assess the investment worthiness of a business in any such industry. Size and growth rate can be as much discouragers as encouragers in making a small business decision.

Within that gross descriptor lie many micro trends and performance variables that have to be sorted out. Finally, what may look like a hot prospect today may not have the "legs" to endure profitably for the life of the franchise agreement.

If it is not a high service dependent business, one of the main issues today is how close it is to being Wal-Mart ready. If you can go to Wal-Mart and find the business products/services being offered there, all other information of any kind, no matter how encouraging, must be disregarded. Wal-Mart erodes pricing by 15 % or more when it comes into a business. That price erosion comes off your bottom line if you are a direct competitor. When you take 15 % off your projected bottom line into account for the Wal-Mart impact, where does that leave you?

When you have checked Wal-Mart, go visit Target, K-Mart, Lowes and Home Depot and their ilk also to see if it can be purchased there.

If your franchisor has been selling this through their franchisee network, in a large market you can depend for a certainty that the franchisor is trying to find the route to introduce the products/services through these alternative channels of trade.  

In short, there is probably more risk in buying a franchise so positioned. Gross statistics like that do not tell you anything that should make you enthusiastic.

Richard Solomon
www.FranchiseRemedies.com

Seems the busier society gets, the more we want to spoil our pets for having to neglect them.

Michael and Richard, you fortify the well-known saw (at least among successful businesspeople) that lawyers are good for legal advice, not business advice. Attorneys know that they don’t get in trouble for giving the advice that a business deal is bad, but they can if they say it’s good and their client winds up in business trouble. Which obviously could easily happen, no matter how good the business opportunity appears at the time. So they have to stick to the negative if they value their practices and reputations. It also is a big help in avoiding traumatic confrontations.

In my humble opinion, lawyers are essential for legal advice, but it’s obvious that business decisions should be made after careful due diligence and analysis by the businessperson involved. It’s surprising how many businesspeople don’t do that. He who counts on his lawyer (or his accountant, for that matter) to make his business decisions is not going to be much of a success. In fact, again in my humble opinion, on that path lies disaster.

Blue MauMau should have more stories that help us readers find a profitable franchise or business opportunity that will work out well for us. Negative stories of what not to do are helpful, and in many cases very helpful, but in the end don’t put money in the bank from a good, well-run business.

Nothing in the story by Pualani says that people should rush out and get into the pet industry. But then again, a business where people’s hearts and interests naturally lie is an industry that could bear cautious but serious investigation. Hearing about the cons is great. But what’s going to put money in the bank is taking a good, hard look at the pros. And that’s up to the businessperson.

I personally recall a small chain of pet stores whose sales transactions I had occasion to analyze a few years ago. The sales volume per store was quite impressive compared to most other businesses that I worked with. But that is just one example and the only pet business that I can recall from personal experience. I am no longer in that line of work, so can’t speak for the current situation.

Dante

As Michael Vick would say: "Call off the dogs!"

Sheesh... we don't have to jump on everyone who posts an article. I looked at the "comprehensive list" and there was a wide range of zors ranging from the plausible to the "only-if-you-want-to-lose-the-401K" variety. We criticize the IFA-style "franchising is a sure thing" mentality on the grounds that the industry is more complicated than that, and the converse "franchising sucks" mentality is properly criticized on the same grounds.

As to Pualani's overview of the sector:

I have noticed that there is sharp competition in the pet food sector (at least with respect to dogs & cats); big-box retailers like K-Mart & WalMart and major supermarkets like Shoprite (NYC area) are even undercutting Petco. As one who spends so much at Petco that I got their "Top Dog" card, I can tell you that there are very price-sensitive sectors such as food, but there are some service-oriented areas such as grooming where a well-run business (franchised or not) stands a decent chance.

As to the off-topic remark of Dante about lawyers, there is merit. Lawyers and CPAs would do well to remind clients at the outset that the role of the professional is (in part) to point out risk and strategies to mitigate risk. Nothing wrong with that. If you are more risk-averse than your lawyer, that's not a good match!