🍟 5/12/2022 – The Biggest Club Pilates Franchisee

MEET A ZEE

David Schuck: Club Pilates

This week’s Meet a Zee is with David Schuck, the largest franchisee in the Club Pilates system with 27 locations, and counting.

Founded in 2007, today Club Pilates has 705 locations around the country and is owned by Xponential Fitness ($XPOF). 

David worked as a teacher and mortgage banker before buying his first franchise. Here’s my top 3 learnings from our conversation:

1. Find a Starter Franchise

David first bought into the Liberty Tax franchise. At an investment of just $44k – $79k, it’s a far lower investment relative to other franchises.

This allowed David to dip his toe into entrepreneurship at a lower cost, and also build some cash flow as he expanded his Liberty Tax businesses.

He knew he wanted to move on to a “bigger” brand (which eventually was Club Pilates), but without Liberty Tax, he wouldn’t have had the capital or experience to dive into Club Pilates.

2. Private Equity’s Value

David built up to 12 Club Pilates with a partner before taking on private equity money. When I asked him about what value PE brings, his response was effectively that “you’re trading equity for accelerated growth”. 

What he means is that he could’ve kept 100% control of his operations, but it would have taken him 10+ years to even grow to the 27 locations he now owns since he partnered with them in 2019/2020.

This leads me to my last point..

3. Watermelons vs Grapes

I’d rather own 10% of a watermelon than 100% of a grape” 
-Marc Cuban

I’m a big fan of shark tank so I love anytime I get to use that quote! Every entrepreneur has to weigh what they’re getting in return when they give up equity.

In David’s case, he’s trying to build a 100 million dollar holding company. He’s not afraid to admit that doing that on his own would take decades.

But with the capital and resources that PE offers, he has no problem giving up a sizable % of his business, because in the end his share will still be more valuable than if he stayed on his own!

Fun fact: David still owns his 12 Liberty Tax franchises. To hear our conversation in full, click here!

FRANCHISE OF THE DAY

Three Dog Bakery

Fast Facts

Background

  • Founded in 1990, franchising since 2007
  • Based in Kansas City; 40+ locations open at the end of 2021
  • A bakery that makes tasty desserts and treats for dogs

Fees + Investment

  • Royalty: 5.5%
  • Brand Fund: Currently 0%, can be as high as 3%
  • Franchise Fee: $40,000
  • Initial Investment: $285,872 – $404,959

Financial Performance

  • The below table represents financial information from 33 franchised bakeries that were open and operating for all of 2021

The Wolf’s Take 🍟

I’m not gonna lie, at first I was skeptical of this concept. I mean…a dog bakery?! Sure, as a customer it sounds nice – I’m not opposed to buying Fido a treat for his birthday. But being the person owning the business would give me some pause.

I actually spoke to some members of this brand, and after seeing the FDD and hearing their story, I can certainly see the viability of the business. Here’s why:

1. The Pet Industry 🚀

Pet industry sales exceeded $123 billion in 2021, a 13.5% growth rate from 2020. Of that, food and treats represented $50 billion. 

Thanks to pandemic puppies, ~70 million+ households in the US now own a dog.

Bottom line: the pet industry has been booming, and the tailwinds for pet businesses will last as long as the pets live!

2. Humanization of Pets

Beyond the numbers, it’s clear that families are treating pets more and more like a true member of the family. Given that, owners are more likely to spend money on things such as birthday cakes, treats, etc. 

3. Premium Products = High Margins

Yes, it’s a bakery for dogs (although the food can be eaten by humans), but it’s still a premium baked product, which commands a higher price point.

While I don’t have an answer for what the exact net margins are on this business, I’d expect them to be much higher than the typical 10-12% other food brands have.

Bonus: CPG Products

Three Dog Bakery also has a line of CPG products that’s available in Krogers, Wal-Mart, and other grocers. 

These are what I’d call “watered down” products that can be bought by dog owners, but doesn’t offer the optionality or quality that you can find in the actual bakery.

Thus, it serves more as free marketing for franchise owners as consumers get exposure to the brand via their CPG line of goods.

If you’re looking for a fun way to own a pet business, check out their franchise website below!

Resources

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