Scenthound Franchise Cost Recovered In 4 to 5 Years (2022)
Written by: Shirley Cao
Last Updated by
RocÃo Somoza: July 12, 2022
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Download NowDo you have a dog? Or are you a dog lover? Scentbound offers the optimal opportunity for you to own a business while spending time with dogs! Scenthound franchised business specializes in essential care, wellness, and grooming services for dogs. The services for dogs are principally offered by the franchisees, and focus on five areas of maintenance, Skin, Coat, Ears, Nails, and Teeth. The founders of Scenthound figured that most dogs are not getting the necessary routine care they need to stay clean and healthy.
Thus, they founded Scenthound to provide the care dogs need and educate dog parents by providing an accessible and affordable place!
Scenthound is the first membership-based dog grooming franchise in the U.S. focused on dog wellness. The business model is built on a customer retention framework, which ensures recurring revenue by offering membership options that work for the schedule and budget of every dog parent.
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Who Owns the Scenthound Franchise?
Scenthound is currently owned by Scenthound Holdings, Inc, a Florida company founded in 2013. It first started as mobile dog grooming, then expanded with grooming salons. Through common ownership, Scenthound Holdings, Inc has three affiliates. Scenthound Corporate Stores owns and operates six retail stores. Scenthound Services LLC provides technical support for franchisees and area representatives and directly to Scenthound members. Scenthound IP, LLC is the owner and licensor of our intellectual property.
How is the Scenthound Franchise Positioned in the Pet Care Industry?
Scenthound positions in the booming pet care industry. There are 90 million dogs in the U.S., and people spend more than $123 billion a year on their pets! Over the past 30 years, the percentage of pet owners has increased by double-digit. Additionally, more than two-thirds of the family owns more than one dog.
Unlike other industries, the pet care industry is recession-proof, maintaining its consistent growth since the 1980s. This is primarily due to the steady increase in pet ownership and the awareness of better health care for their dogs. The American Pet Products Association is projecting that the pet industry is expected to see continued growth, especially in pet grooming. By 2027, the global pet care market is expected to grow to $359 billion, a forecasted compound annual growth rate of six percent.
Although the dog wellness market is a niche area, it is becoming competitive over the years. Scenthound competes against national, regional, and local pet care businesses that offer dog wellness services from retail locations or mobile units, kennels, veterinarian offices, and other retail businesses selling similar dog care products and services. Other well-established chains are also considered competitors.
Scenthound Franchise Requirements
Scenthound is looking for candidates who are dog people and people people and people advocating for the improvement of the health and living of the dogs. The ideal candidate should have a minimum liquid capital of $75,000 and a minimum net worth of $300,000.
What is the Scenthound Franchise Cost?
The total investment necessary to begin the operation of a Scenthond franchise business is from $201,375 to $369,825. These totals include a $49,900 initial franchise fee that must be paid to the franchisor. If you enter into a multi-unit development agreement with us, the total initial investment necessary to begin the operation of two franchises ranges from $290,375 to $459,725. This includes $89,900 that must be paid to the franchisor. The total initial investment necessary to begin operations in four locations ranges from $356,275 to $524,725. This includes $154,900 that must be paid to the franchisor. With an additional store, the number of franchise fees is decreasing. Scenthound also offers $5,000 off of the initial franchise fee for the veterans!
Franchise Fee
| Number of Scenters | Fee Amount Due at Signing |
|---|---|
| 1 | $49,900 |
| 2 | $89,900 |
| 3 | $124,900 |
| 4 | $154,900 |
| Additional Scenters | $30,000 each |
Additionally, franchisees are required to pay Scenthound Services, the affiliate of Scenthound Holdings, Inc, $200 per month 30 days after signing the Franchise Agreement and $675 per month after activating the system as a technology fee.
Once the operations begin, franchisees are expected to pay the company a royalty fee of 6%, a brand contribution of 1.5% for gross revenue from the previous week every Friday. 5.5% of gross revenue with a minimum of $25,000 per year and an annual maximum of $40,000 is paid to the local advertising.
How Much do Scenthound Franchise Owners Make?
Scenthound is a relatively new company that recently joined the franchise business model. The first franchise opened on December 14, 2020. Since then, there are 21 operating franchises and six Affiliate-Owned Units as of March 31, 2022. As of March 31, 2022, only five franchises have been open for more than 12 months. The following table represented 11 locations that have been open for six months and more.
Gross Revenue – Three months of cumulative revenue January 1, 2022 – March 31, 2022
| Franchised Units open over six months | Affiliate-Owned Units open over six months | |
|---|---|---|
| Average Reported Unit | $97,500 | $109,500 |
| Median Reported Unit | $96,500 | $126,500 |
| Highest Reported Unit | $133,500 | $132,500 |
| Lowest Reported Unit | $66,500 | $69,500 |
The average three-month gross revenue for franchised units is $97,500, which is similar to that of affiliate-owned units of $109,500. That is, the estimated average annual gross revenue for franchised units will be $390,000. Since it is a relatively new company joining franchising, there is a lack of information to determine whether Scenthound is a viable franchise opportunity.
2022 Scenthound Average Franchise Sales (Single Unit): $390,000
| Initial investment (midpoint) | % Profit margin of average franchise sales | Estimated Profits | Time to recoup investment |
|---|---|---|---|
| $285,600 | 15% | $58,500 | 5 years |
| $285,600 | 20% | $78,000 | 3.7 years |
| $285,600 | 25% | $97,500 | 3 years |
Based on the average sales provided by Scenthound franchise locations, at an average of a 20% profit margin it will take around 4 years to recoup your investment. You may not get a 20% profit margin which would elongate getting a return on your investment.
Is the Scenthound Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Scenthound franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise pet care industry as well as selling price multiples for larger systems where more transaction data is available.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.55
$1 Million – $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.9
When you go to sell a Scenthound franchise based on the median multiple of 0.55 and net sales of $390,000, it would sell for $214,500. This is lower than the midpoint investment of $285,600.
As an owner of multiple Scenthound franchises, you do have the ability to make a significant profit. Scenthound franchise owners with over $5 million in sales have a median multiple of 0.9. So, if you had 3 Scenthound franchises this would be $1.17 million in sales. Therefore, selling your multi-unit franchise system could amount to $1.05 million. The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
How Many Scenthound Units Have Opened and Closed?
As we mentioned above, Scenthound has just begun its franchise business model in 2020. With 17 more franchisees joining the business in 2021, we can expect 33 more in 2022!
2022 Scenthound Units
| Year | Outlets at the Start of Year | Outlets Opened | Terminations | Non-Renewals | Reacquired by Franchisor | Ceased Operations – Other Reasons | Otulets at End of the Year |
|---|---|---|---|---|---|---|---|
| 2019 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2020 | 0 | 1 | 0 | 0 | 0 | 0 | 1 |
| 2021 | 1 | 17 | 0 | 0 | 0 | 0 | 18 |
Scenthound Income Statement Takeaways
| 2021 | 2020 | |
|---|---|---|
| Revenue | ||
| Franchise Fees | $1,691,320 | $26,390 |
| Royalty Fees | 256,285 | 488 |
| Brand Fees | 42,714 | 81 |
| Total Revenues | 1,990,319 | 26,959 |
| Cost of Sales | 729,406 | 13,383 |
| Gross Profit (Loss) | 1,260,913 | 13,576 |
| Operating Expenses | ||
| Franchise Expenses | 76,962 | 15,284 |
| Selling Expenses | 424,872 | 249,804 |
| General and Administrative | 708,992 | 449,593 |
| Total Operating Expenses | 1,210,826 | 714,681 |
| Net Ordinary Income (Loss) | 50,087 | (701,105) |
| Other Income/Expenses: | ||
| Other Income | 31,041 | 7,731 |
| Interest Expense | (314) | (17,354) |
| Net Income (Loss) | $80,814 | $(710,728) |
There was a significant increase in the revenue of franchise fees and royalty fees due to the joining of 17 franchisees. In 2021, the total revenues were approximately $2 million, a 91.8% increase from 2020. Although there was an increase in expenses, the resulting net income was $80,814, recovering from a $710,728 net loss in 2020.
Scenthound Cash Flows Statement Takeaways
Liquidity is one of the most important measurements of a company’s ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, operations, and expansion of franchised locations. According to the cash flows statement, Scenthound has a $356,123 increase in cash and cash equivalents. At the end of the fiscal year, its total cash and cash equivalents amounted to approximately $449,610.
Balance Sheet
| 2021 | 2020 | |
|---|---|---|
| Cash Flows From Operating Activities | ||
| Net Income (Loss) | $80,814 | $(710,728) |
| Adjustments to Reconcile Net Income to Net Cash used in operating activities: | ||
| Depreciation & Amortization | 18,301 | 1,934 |
| Decrease (Increase) In Operating Assets: | ||
| Accounts Receivables | (139,418) | – |
| Other Current Assets | (10,381) | 18,039 |
| Deferred Expenses | 257,741 | (480,042) |
| Decrease (Increase) in Operating Liabilities: | ||
| Accounts Payable | 15,009 | 54,432 |
| Deferred Revenue | 236,386 | 952,811 |
| Other Current Liabilities | (67,859) | 68,540 |
| Due to/from Affiliated Companies | 13,983 | 325,564 |
| Net Cash Provided By (Used In) Operating Activities | 404,576 | 230,550 |
| Cash Flows From Investing Activities: | ||
| Purchase Fixed Assets | (20,576) | (4,703) |
| Acquisition of Intangible Assets | (20,352) | (19,725) |
| Net Cash Provided By (Used In) Investing Activities | (40,928) | (24,428) |
| Cash Flows From Financing Activities: | ||
| Borrowings on Long-Term Debt | – | 53,800 |
| Payments on Long-Term Debt | (7,525) | (40,000) |
| Debt Conversion | – | (225,000) |
| Net Cash Provided By (Used In) Financing Activities | (7,525) | (211,200) |
| Net Increase (Decrease) in Cash and Cash Equivalents | 356,123 | (5,078) |
| Cash and Cash Equivalents, Beginning of Year | 93,487 | 98,565 |
| Cash and Cash Equivalents, End of Year | $449,610 | $93,487 |
Summary
If you are a dog lover, Scenthound is definitely an optimal business to own! The industry of pet care is growing and will still be growing. The recurring revenues ensure a stable business, even during recessions. With an average of $285,000, you can recoup your investment in less than 5 years. If you have extensive management experience and plan to open 3+ Scenthound stores, it is worth evaluating as a franchise! You are able to recoup your investment in 4 or 5 years.
