By: Jessica Golden
Laurie Valadez spent years in corporate finance but had always been a passionate dog owner and dreamed of starting her own dog business. For more than two years she researched various dog-oriented franchises and came away most impressed with a Denver-based company called Camp Bow Wow.
“It was so big and established and it was local,” she said. After learning more about the business, she decided the timing was right and took the first step into entering into one of the premier doggy daycare franchises.
Valadez paid the initial $50,000 franchisee fee but what ensued was what she says was a year of frustrations, financial hardship and a cautionary tale of what happens when things go awry in the franchise business.
“I was told by Camp Bow Wow that this area was the last available in Denver and it was a hot commodity,” she said. “After I put the money down, everything changed, she said. Valadez later learned that the upscale residential territory she had purchased didn’t have any available places for her to open her new business and it was a resale from someone who had experienced a similar problem.
Camp Bow Wow persuaded her to look outside the territory in what she describes as less desirable areas by highways and the airport. Valadez said some of the buildings “had bars on the windows” and she didn’t feel safe, let alone comfortable enough to open a business. Valadez believed these locations would make starting her business more challenging and that it would be difficult to appeal to potential customers.
After months of negotiations with Camp Bow Wow, Valadez decided to ask for a refund of the $50,000 she had invested in the initial territory. Camp Bow Wow denied her request for a refund, but offered her the chance to resell the territory she deemed unusable.
Valadez’s story is not unique. CNBC reached nearly half of the 58 former Camp Bow franchisee owners who have left the system or transferred franchises, according to the company’s franchise disclosure document. Many of them were disappointed by the territories, hidden costs, and the overall Camp Bow Wow business model.
Heidi Ganahl is the founder and CEO of Camp Bow Wow, which opened its doors in 2000, and has emerged as one of the most successful pet franchises in the country, reporting that it earned $40 million in 2009 and an estimated $50 million in 2010. Ganahl says success is within reach of all of its franchises.
“If people are struggling, it’s usually because they are not following the system” she tells CNBC. “The reality of starting a business is some people make it and some people don’t.”
Lee Wilson is a Camp Bow Wow owner from Rochester, N.Y. who is happy with the franchise and says he could not have built a business without them. He says that he and his wife, Dana, are reaching the breakeven point after 14 months, “Dana and I are still really, really hesitant to call ourselves profitable.” He acknowledges that the process was challenging. Their first ten months were spent trying to clear zoning hurdles.
Kristl and Lee Franklin, franchisees from outside Houston, Texas have been looking for a location for two years. “We never really expected it to be easy,” says Kristl because the franchisees she and her husband spoke to told them it would take some time to find a spot. They’ve looked at 50 properties that weren’t suitable and are now considering buying a piece of land.
When asked about zoning issues that franchisees have faced, Ganahl responded that she was surprised to hear this, as “that is one of the areas that we excel in,” she says. “We want to do everything to help you get open because that’s the only way we’re successful is if our franchisees are successful,” she explained.
Wilson agrees, “It’s a very simple relationship. They’re not going to be happy if I’m not happy. I think you get a lot of egos in a franchise system. Everyone of us is a mini entrepreneur.” To Camp Bow Wow’s credit, Wilson says, “they herd you along and keep you narrowly focused. We got a whole host of lessons that were just handed to us.“
Another former Camp Bow Wow franchisee doesn’t think the leadership is straightforward about those lessons as it could be. He spoke on the condition of anonymity due to a termination agreement with Camp Bow Wow that bars him from speaking publicly about his experience. “I started talking to people in Austin, Texas and Salt Lake City, Utah and they couldn’t find zonable areas either,” he said. “They sold us a territory they said has been pre-zoned and approved—but they clearly know nothing about zoning.”
After months of searching for a location that met both Camp Bow Wow’s and his municipal district’s guidelines, this franchisee’s city planner sat him down, “He told me that people have been trying to put a dog kennel in this area for years and you’ll never be able to do so.” The former franchisee claims, “Ultimately, they sold me air.”
“What probably happened is they wanted to open in one very specific spot, and it didn’t want to open in the rest of their territory where zoning was possible, and they got frustrated,” Ganahl said. The former franchisee says that is not the case—he looked at and was open to more than 150 different building locations.
In Florida, business partners Rick Latta and Terry Converse ventured into the Camp Bow Wow franchise in 2007. Avid dog lovers, they say they wanted to open a doggy day care to treat other people’s dogs the way they treat their own. They now say it was bad decision. “Everything we worked for our entire lives is gone, Camp Bow Wow has totally destroyed us,” says Latta.
The problem, they say, is with the Camp Bow Wow business model and its hidden expenses. After attending an orientation session at Camp Bow Wow, they spoke with Ganahl, who they say confirmed that they were investing in a proven model, and that $250,000 would allow them to open and operate a camp. Latta and Converse say that crucial things were missing from the list of expected costs, such as fire safety equipment and a security system—required items that drove up the cost by $13,000.
Franchisees are also provided with mandatory vendor items that were left off the expected costs list, according to Latta. In the months to come, Latta says Camp Bow Wow failed to provide guidance and materials. “They have no plan, it’s fly by the night,” he says.
Almost two years after opening their camp, as costs continued to escalate and expenses exceeded $370,000, Latta and Converse made the difficult decision to file for bankruptcy. “It has been an absolute nightmare,” says Latta who is currently hoping to save his last remaining asset—his house.
Ganahl says during the introductory orientation she is very clear and upfront about the costs. She says in certain regions like Florida, New York, New Jersey and California, you’re going to pay more money to open your facility. “We always buffer that with an extra $50,000 to $100,000 and we tell people it takes longer in those areas,” she says.
Ganahl says she has a lot of happy and successful franchisees that the franchise has worked brilliantly for. Danielle Streamo is one of those people. “It’s the most fun, amazing job you could ever have in your life,” she says. “I get to play with dogs. I go home dirty, but it’s my own business.”
Streamo, a former mortgage broker, bought into the Camp Bow Wow franchise three years ago. Following some initial zoning difficulties in Georgia, Streamo jumped on the opportunity to take over a property in Colorado whose former owners had gone bankrupt. She says she has pushed past the breakeven point after a year and a half. “I’m sure I did make more money in the mortgage industry, but money doesn’t bring you happiness” she says.
Gary Mansir says the Camp Bow Wow he opened with his wife in Portland, Maine is everything he dreamed it would be and that Camp Bow Wow has been very helpful. “There is value in getting the relationships that they’ve built over the years with different vendors,” Mansir said. “And they’ve thought of everything.”
Mansir says a key part of his and his wife’s success is that their location is perfect. “We’re about as lucky as you can get in finding it,” Mansir said. The key difference from unhappy franchisees is that they bought the land and built the facility from the ground up.
Dozens of Camp Bow Wow franchisees haven’t been so lucky. Franchise attorney Michael Williams of Williams Law, has represented at least one case against Camp Bow Wow. He was not able to speak specifically on Camp Bow Wow cases but says “franchisees are typically out of money by the time it becomes necessary to sue.”
Many people CNBC spoke to were advised to cut their losses and were warned that attorney fees could end up costing an additional $30,000 to $50,000.
One challenge for potential franchisees who are researching business plans is the fact that only 20 to 30 percent of all franchisors choose to include financial information in their franchise disclosure documents. The Franchise Rule,written by the FTC, doesn’t require any franchise to disclose historical financial performance
Camp Bow Wow is one of the franchisors that does provide some information in the disclosure document, in a section known as ‘Item 19.” The document provides the average sales of the camps that have been open for more than a year and it provides a range of percentages of those sales that you will need to run the business. But it does not include profits, so it’s still difficult to determine how much money a franchisee might make.
Lois Greisman, Associate Director of the FTCs division of Marketing Practices nothing prevents the purchaser from asking franchises for their financial information, a question the FTC encourages potential franchisees to ask. “And if the answer is silence,” she says, “well, that’s very telling.”