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A Multi-Unit Dogtopia Franchise Owner Who Owns The Real Estate With Ryan Muhlbauer

by | Mar 25, 2024 | Podcast

Franchise Master | Ryan Muhlbauer | Multi-Unit Franchise Owner

 

Ryan Muhlbauer got into the pet boom before it was booming. He opened his first Dogtopia in 2017 and has since grown to a second location. Interestingly, he owns the real estate on his second Dogtopia location. Ryan talks with us about how he pulled off owning the dirt and why owning the real estate is an important part of his scaling strategy. He also shares secrets he’s used to scale his multi-unit operation including how implementing EOS was a game-changer.

Listen to the podcast here

 

A Multi-Unit Dogtopia Franchise Owner Who Owns The Real Estate With Ryan Muhlbauer

In this episode, I’m joined by Ryan Muhlbauer, a multi-unit franchisee, and previous entrepreneur who has done a bunch of stuff. This is going to be a fun one. We’re going to weave in some EOS talk, which comes up with every single multi-unit franchisee, and talk to get into the real estate piece because Ryan owns the dirt on one of his dogtopia. Ryan, welcome to the show. I’m glad to have you.

Thanks for having me. I’m happy to be here.

We’ve got a good mutual connection and a business partner of mine friend in confidant of yours, Mr. Andrew Horton, who everybody seems to know Andrew Horton in franchising.

He’s the man.

Getting Into The World Of Franchising

I’m glad he connected us. Andrew is the guy that got you into this whole franchise game. Tell us about that. Tell us about your journey. How did you get into this world and how did you get to where you are?

I’m located up in Minneapolis. I was originally from Iowa. My first few jobs were in the sales realm, which led to a medical device sales job. I’m doing well with that, but had this pull to get into the world of being a business owner. Through previous connections I had with Andrew from when he lived locally here, I started talking with him and going through the whole process and ended up landing, let’s see, it’s been many years ago now that we landed on Dogtopia. It’s a much earlier time of where dog services are from now.

You are the OG in the dog space.

The original Dogtopia had been purchased by a different group. They only had it for about one year. There were 30-some stores open. I think by the time we opened my first store, we were store number 45 or 46, and now we’re above 260. Early on saw some good, and bad, dealt with some pains and that’s the way it goes. My business partner at the time and I saw the opportunity in the space, the growth of the industry for twenty-something years had been growing and then COVID hit. It was a slight slowdown to a quick acceleration with a lot of people getting dogs. It’s been a fun ride.

Your first one was store 46, and then you have a second one. What number store roughly was that?

Somewhere in the early 200s. That one I opened up under a few years ago.

What was the pet space like back a few years ago, which feels like anything before COVID feels like 50 years ago? What were the tailwinds back then? Obviously, the tailwinds have gotten a little bigger I think since then. It’s continued to compound.

I’m going to throw some random numbers out here as I remember them in my brain. They may not be completely accurate, but at that time I want to say the industry itself had grown 24 straight years. It was projected to grow billions of dollars in the next couple of years at that time. I could see the trajectory there. Myself being single at the time and having a dog, no significant other, and no kids at the time, I saw that not only with myself but a lot of other people, knowing the cost of having a family and kids. I weighed those things in, then looking around my market here in Minneapolis, having a dog myself, I had been to a lot of the local competitors. I knew what they were.

Camp Bow Wow was the only big brand in town. They had 1 or 2 stores at the time, I can’t remember. Other than that it was mostly independence. I saw the opportunity. I met the people at Dogtopia and heard their vision of where they want this to go, which is a different vision than I’d heard from anyone else from how they’re weaving in technology and the look and the feel of the rooms and changing the perception of going into a dog space that’s dirty, smelly out in the middle of nowhere to these beautiful rooms with decorative wallpaper, rubberized floors, and higher quality HVAC systems. That’s where we got with them. I saw this path and what I compared it to at the time was early on like core power.

They changed what yoga was and what you thought of yoga. When you thought of yoga, you thought of core power. I still feel like Dogtopia has the opportunity to be that brand when you think of dog daycare with their accelerated growth and what they’re doing. Since then, a lot of competitors have gotten into the space as you know and probably a lot of readers know. It’s getting deeper in that competition, but I was happy to be in it early on.

That was early, there’s no doubt about it. You saw the tailwinds. You had the itch to do your own thing. You jumped into the escape rooms. You had previous entrepreneurial experience.

They overlapped for a little bit, but I started out in sales. A friend of mine came home from a trip to Europe and had done an escape room there, a physical escape room, and told me about it. I was familiar with the virtual concept of an escape room on an iPad or whatever. I’d never heard of life real escape room experience. He came back and I was in sales then he told me about it. We literally instantly said, “Let’s do it.”

We threw together a little bit of money and he was the business guy. For whatever reason, I got pigeonholed in the creative side of building the rooms myself, and off we went. We were the first here open in the Minneapolis area. It’s hard to know the exact numbers because it was a completely new industry at the time. I was aware of three other ones in the country that I flew out and did before we started doing ours, but there wasn’t a lot out there. We grew that to seven locations before I ended up selling my shares to him mostly here in the Midwest. We looked at franchising that opportunity, but after looking at it in a little more detail, decided to go with our own corporate-owned stores.

From Med Dev To Franchising

OG in the escape room and the doggy daycare. What was it like making the transition from a corporate med device, which I understand is an entrepreneurial gig? You run it like your own business, especially back then. I think it’s got a little different nowadays than it was back then. Were there any big transition points you look back to like, “That was different than what I thought it was going to be. This is better than what I thought it was going to be.” Any big takeaways from that?

I’m sure you deal with what I’m about to say multiple times a week of someone who’s been in like I was in an industry and you’re making good money and you’re successful, but it’s not fulfilling I want to own my own business. I’m sure you hear that all the time. I hear it all the time. What does that look like? I know you’ve referred to it multiple times, but everybody wants this partial absentee or semi-absentee. We all know that that’s not a reality. At that time in my life, I had been successful in that industry. I took a step back on how much money I was making. I was able to do that though because saw where it could take me. My very first job was selling custom clothing for a company called Tom James. You’re probably familiar with that there.

You are not of the same sex that I typically get hit up by the Tom James sales reps here.

That’s probably why I wasn’t very successful or one reason why I wasn’t that successful with it. I had done that. I learned a ton from that. It was a hard job, but it was one of the best first jobs I could have out of school to learn what it’s like to be rejected, learn how to sell, and ask for referrals because that’s the basis of pretty much everything.

It’s all a journey. Every previous experience builds on the next one.

I know why, but through the Tom James experience, I got a chance to meet a lot of business owners. Being from a small town in Iowa, I had this vision that, “If you’re a business owner, you have to be smart. You have to have a ton of money. You have to have this genius idea.” I had all these preconceived notions that, “I can do those things.” What I learned through that Tom James experience was a lot of C-level guys that I would call on and end up developing relationships with I was a young guy. I was ready to listen and learn. What I learned is that a lot of them weren’t any of those things. They weren’t the smartest in the room. They weren’t the richest in the room or at least didn’t start that way.

Sometimes they took a concept or an idea of something that already exists and did it better. The key component I saw through all was that they worked hard and they figured it out. I knew that I was in a job where I was making a hundred cold calls a day working Saturday, putting in the time, and doing drop-offs. I knew I had the hard work element. They started me on that path. When that opportunity came up, I was very fortunate to be able to keep my sales job for a period of time while we started the escape rooms.

Franchise Master | Ryan Muhlbauer | Multi-Unit Franchise Owner

Multi-Unit Franchise Owner: The C-level guys weren’t the smartest nor the richest in the room. They just took a concept or an idea of something that already exists and just did it better and they worked hard.

 

It worked out that way. Not everyone gets that opportunity. I get that I was willing to take that pay up because I was a single guy. I didn’t have a family. A lot of people that come to me, I say, “Those that first year or first few years is hard. You’re going to go from probably working a lot more hours and making less money and it takes a toll on your relationships. You’re sucked into it.”

I learned a lot along my path. I was fortunate that my business partner in the escape rooms had been in business for himself for a number of years. He introduced me to things like EOS, processes and building that. I got my Master’s of Business by being a part of that relationship. I was able to take that along with me. I think all those things fell into place for me and I was able to take that step back, which now has turned into obviously a step forward.

You always had that itch inside of you. Is that itch scratched yet or is it still itching?

I’ve enjoyed the place that I’ve been able to get to and the lifestyle I’ve been able to build. I’ve been very intentional with that. One core value of mine is my freedom. I think it is for a lot of entrepreneurs or business owners. It’s a big reason why a lot of people get into it. It’s either the money and/or the freedom. I made an intention over many years ago when I got into my first business. I was used to being in sales but having to be present to make money. I said, “I don’t want to do that anymore. If I take a vacation, I’m not making any money. I got to get back.” That’s what I saw with the people around me. That was a big push for me to say, “I can do this a different way.”

It’s taken a long time to get there and a long time to get comfortable feeling doing that, but that was a big part for me. I’ve always been one to be very slow to celebrate any success because I feel like there’s much left on the bone. There’s much more out there. When you get congratulations, that’s like, “The journey is now finished or the race has now been won.” I don’t feel that way. It’s we’ve got much farther to go and I’m having a ton of fun with it.

With your first Dogtopia, had you gotten the business to a point where you had the lifestyle and the money that you were striving for in doing this or did it take the second one and maybe a little EOS influence to get there?

I remember 1.5 to 2 years in, I remember sitting at my store. It was late at night. I was exhausted. I’d been running around all day and I thought, “What did I get myself into? This isn’t what I thought it was going to be.” You’re getting these validation calls. I’m an honest person and I tell people the good and the bad, “This is what you can expect.”

I bet a lot of people would tell you this that in that 1st year to 2 years, if somebody came and wrote you a check to give you your money back, you’d say, “Absolutely, get me out of here,” because you deal with a lot. It did not come with that first one. It took me a while to figure out that for sure I wanted to do the second one, but the decision came through because I felt like what I had learned, I got my Master’s in Business earlier and then now I got my master’s in running a dog business to walk away after one didn’t make sense.

I spent quite a while making sure I found the right location for my second one. I bought the real estate was big for me to find the right real estate took a long time. I would’ve probably done that second location sooner. I knew that there would be a lot of synchronicities and a lot of economies of scale getting to that second store. Once I did it, that one was hectic getting opened, getting up, and ramping up. Once I got the right people in the right places, it changed everything.

There are a couple of big things in there. The first one is the hardest. No matter how you slice and dice this, of any business franchise non-franchise, I’m sure your first escape room was the hardest. I’m sure there are some similarities. Do you feel like it gets easier as you open up additional locations?

You’ve had a lot more people on your show who have a lot more locations than I do. I don’t know if I necessarily feel completely equipped to answer that. In my experience with my two, it has gotten easier and I believe that I could ramp up to three relatively quickly if I decide to do that. That’s also because I have the right team in place. I’ve spent countless hours on culture, processes and procedures and making sure everyone knows exactly what their job is and KPIs if they’re doing a good job or not. Those are all components of EOS or any few other different systems that you can put in place there. Having those in place has helped me ramp up to the point where it would be easier to now do another location. But that’s not the case for everyone.

In a weird way, I think like traditional multi-unit franchising with brick and mortar, if you have the appetite for it. It should get a little easier as you grow because you have more resources and more people. There’s more revenue coming in. There’s a lot more flexibility. That first one’s the hardest because you’re learning the business and at the same time trying to make it successful. It’s almost counterintuitive in a way. The reason this is fresh.

If you find the right people, pay them well, and treat them right, they’ll help you versus when you start you feel like it’s all on you. I was doing everything. I felt like I had to do everything because I hadn’t built that trust with certain people yet over time that trust builds.

If you find the right people, pay them well, and treat them right, they'll help you. Click To Tweet

Hiring And Developing Your Team

Have you picked up any tips or tricks in hiring people as you continue to build your team?

I’m sure plenty of readers will agree with me. Hiring can be very difficult. I know when you’re first starting out, by nature of numbers, you hire 10, 20, or 30 people to open up your first location, you don’t know what you’re doing. They don’t know what they’re doing. There are no senior people around to be leaders no matter how much training you do. By nature, you’re going to lose people. You’re going to lose a much higher percentage in the early years than as you go along.

One of my stores now, we’re only hiring a person every 3 to 6 months and they have to be a rockstar because we’ve now established good people in good locations. I’m very blessed because of that. That’s something to remember as you’re ramping. That takes up more of your time because then people don’t show up. You think you’ve got a rockstar and they’re not. Things that happen. I’ll say this, “I don’t have the secret bullet to finding the right people and or interviewing them.”

We’ll do another episode when you find that holy grail of entrepreneurship. Write a book. To start your own show. Do you find the truth like in the old saying, “Hire slow, fire fast?”

I think there’s a ton of truth to that. When you’ve identified someone who doesn’t meet your culture, do everything you can to move on from that person as you’re able. Sometimes I always tell my managers, “Let’s not get handcuffed by someone because we need them to fill hours if they aren’t the right person for us.” I have nothing against them. I have respect for everyone. If we’re very clear about what our culture, agreements, and what it means to work for us, I’m creating that for the whole team. I should rephrase that.

I’m setting the stage for that and allowing the team to create it themselves because I don’t have anything to do with it. I tell them what my vision is and I hope that they buy into it and they take it from there. If you get one, and I’m sure plenty of people can relate to this, you get one person who is going against that. That cancer grows and you know that bad apple ruins the bunch. You got to get them out of there sooner.

As you built your leadership team with your managers, you said you have two GMs, one over each location, and a district manager that runs the show, did you groom them from within your organization who were already there? Did you hire them from the outside and bring them into that role?

I’ve tried both. We have had better luck with mostly hiring from within. I think that has a lot to do with our industry because we ask a lot of our GMs. They need to be dog people. Traditionally, dog people, people aren’t always people. That’s been something tough for us to navigate. If one has one set of skills, you need to teach them the other set of skills. Our job is hard to run a doggy daycare. Pretty much every owner I talk to within the network and if they’ve done other things they say, “This is harder than what I thought it was going to be and what I’ve done before.” You’re dealing with live creatures that live customers that can’t talk per se. You get a lot of people watching on the cameras and making assumptions about what they’re seeing and what they’re not seeing.

You’re asking your people to manage dog behaviors and everything that goes along with that, running operations of something where a dog might come in and, “This is their blanket. This is their toy. They need to have this medication on this night, they need this medication in the morning. Eat this.” There are many minor details that go into not just the operations but also the sales side of something like this. To find a person who can manage all of that and not be completely stressed is hard work.

Back to your original question, we’ve had a lot more luck with the people who have started from within. They learn the business from being in the playroom. We help and mold them into how to be a good manager, how to sell, and how to do these other pieces. Let’s tug on me so much that we’ve developed something. I’m loosely calling our development leadership academy we offer an opportunity once a month. The store that I own is a little bit bigger and we have the luxury of having a small conference room in it.

Franchise Master | Ryan Muhlbauer | Multi-Unit Franchise Owner

Multi-Unit Franchise Owner: We’ve had a lot more luck with the people who have started from within, so they learn the business from being in the playroom. Then we help and mold them into how to be a good manager.

 

Anyone is allowed to show up. We offer food. That’s their bonus for coming there because we don’t pay them. It shows us who wants to come, and who wants to develop. We talk for sure about emotional intelligence. We talk about these things that we don’t always get the opportunity within the day-to-day to teach and develop how to manage people and how to personally grow. I tell my employees, “I want to teach you things that not only will be useful here at our business but that you can take with you as you’re growing and developing if you move on from here.”

It’s like a testing ground to see who emerges. Not only can you train them and help them develop, but it also shows you who the aspirational leaders or those who want to be more involved in the company.

It’s been fun.

You lure them in with some food.

When I was in my late teens or early twenties, “You offer me free pizza, I’ll be there too.”

I bet you, anybody reading who’s a current franchisee, you don’t need a conference room. You can do it at a local brewery or do something. Get creative. You don’t need to have a conference room at your facility to do that. Get creative. Do something fun that is going to recruit the people who want to go there.

It goes back to that building culture piece. Culture is hard. There isn’t a playbook to do that or there’s not a great one. It’s consistency in a lot of different things and doing something like that and being a little more vulnerable and because I’m not in the stores as much, they get a chance to communicate with me and see a different side of me than when you’re running 100 miles a minute in the store. That’s another piece of it that has come out of that. That was unexpected.

Culture is really hard. There isn't a playbook to do that. It's just consistency. Click To Tweet

A Typical Week For Ryan

What does your typical week look like?

I was married in August 2022 to my wife.

Congratulations.

Thank you very much. We made a plan at that time to take a multiple-month honeymoon. We ended up taking under eight weeks to fly around the world. I determined that in 2022, the plan was to go off and do that New Year’s Eve of the end of 2022 going into 2023. I had about seven months and I opened my new store. Things were hectic there. We were trying to all the chaos that comes along with that. I knew, “I got this runway and I got to get this place running on its own by then.” It put it under a lot of pressure. It was great because it was like, “I know at this date at this time I’m taking off. I’m going to be gone for 7 to 8 weeks. These guys got it figured out.”

It was scary. When the time came, I almost didn’t go. I knew it was going to be one of the best things that I could do because I experienced the same thing in my first business. It’s scary to let go. It’s scary to not have that touch point with every single customer because you’re the face. I knew every single customer, every single dog that came into our doors the first four years at my first location in order to scale too hard to maintain that. I’m sure there’s a way, but I couldn’t figure that out.

You gave yourself a date and you were basically like, “Come hell or high water.” You hadn’t figured out. You gave yourself a deadline to work backward off of. Let me ask you this, “Were you able to enjoy your honeymoon?”

I was. There are a couple of calls here and there that I took to help my district manager. He had been on board for about six months at that point but we had no GMs. It was hectic. It was chaos, but he figured it out. He’s a wonderful part of my team. I hope he’s a part of my team for a very long time no matter what we do. I guess my point to that is when I came back from that 7 or 8-week hiatus, I knew immediately I was not going to jump right back into operations. You guys have gotten this far on your own. I’m going to provide a little more structure with some level ten meetings with some KPIs and scorecards we continue to tweak and change that as we go.

They know exactly what’s expected of them. It allowed me to give them the freedom and the autonomy to do what they need to do. That was about March 2022. Since then, I have a pretty free and open schedule. Mondays are my meeting days we go over numbers from the previous week. My DM and I talk about anything that’s on his mind. We identify the biggest concerns at each store, and what his plan is for those, to make sure he has the plan to improve those. When we wrap up with that, we have our level ten with our GMs. They join us. We do the same thing with them. We go over our scorecard. We look at our three-month averages, where are we going? we make sure we’re all on the same page.

You work Mondays then you’re off for the rest of the week?

The rest of the week depends on what we have going on. They have their own individual meetings that I’ll pop into randomly here or there. Otherwise, I’m working on more visionary things from home. I love spreadsheets. I’m a numbers guy. I do things like that. I’m thinking what bigger picture things can we do to move numbers? I’ve been researching and identifying my next opportunity.

Benefits Of EOS

That’s what you get a lot of time on here. Let’s call Andrew and start kicking around ideas for your next venture. Well done. You got to a mountaintop. It’s not the last mountain you’re going to climb, but to get the business to a point where you’ve opened up that flexibility in your lifestyle and at the same time, probably help drive up the value of your business if you ever wanted to exit it down the road because a buyer’s going to come in and say, “This thing operates without Ryan’s day-to-day involvement.” You mentioned EOS, we talked a little bit about it offline. How did you come to know about EOS and what Im impact has it had in you building the business to get it to the point where it is now?

We ran it my first business. I’ll give credit to my first business partner of introducing it to me. When I exited that business and started the Dogtopia, I didn’t immediately implement it in the first store. Mainly, I was very hands-on with that technically I had a GM the whole time. At that point, I didn’t think it made sense to do it with the two of us. Now I regret that. Our meetings had agendas but it wasn’t as straightforward. Once I got to the second location, and the crux of it was I had a friend who recently sold his plumbing business for a nice paycheck and he ran EOS. I don’t know the different department heads. He invited me to his EOS meeting and he said, “Come check it out.”

Instantly. I was there, my eyes were opened. It reminded me of the power of EOS, which I think is looking at the numbers together as a team, holding each other accountable, and having the different GMs from each store come together and see what each store is doing. There’s a natural competitive nature there. You don’t want to leg behind. I forgot that to me that’s the power of sharing those numbers, holding people accountable. Literally within I think three days of being in that meeting, I instantly made my own scorecards. I reread the book. We were sitting down and we were having our first one. I jumped on it immediately. I hear a lot of people when I talk to them about you, “I’ve heard of that. We have a plan to do that down the road. We have to find the right implementer or it’s expensive.”

I tell them, “You need to start immediately. You don’t need an implementer. Read the book or have your top team read the book. Put something together that makes sense for you. It doesn’t need to be exactly perfect and it will evolve over time.” I’ve helped a few of my other friends in their businesses implement implemented as well because I’m passionate about it. It does change your business. If you’re someone sitting here saying, “I want to work on my business and not in my business,” to me, that is the best playbook out there if you don’t know exactly how to do that.

Franchise Master | Ryan Muhlbauer | Multi-Unit Franchise Owner

Multi-Unit Franchise Owner: If you’re someone sitting here saying, “I want to work on my business and not in my business,” the EOS is the best playbook out there.

 

If you want to hear the one common thing that every single multi-unit franchisee that I’ve talked to offline that I know personally that I’ve had on this show, it’s those three letters, EOS. It comes up every single time. Start with something, like the level ten meetings. First, one is going to be clunky. It’ll be awkward, but you start. The 2nd one’s going to get a little better. The 3rd one’s going to get a little better. You’re going to start to get into a rhythm. That’s where the magic happens. It’s funny you say this.

Don’t be afraid to make tweaks and changes too. That’s important. You need to make it yours and you make it what’s worthwhile.

Improvise on it. Mathis Young who is a fellow doggy entrepreneur who I had on my show has 24 vans on the road for Aussie Pet Mobile, the mobile grooming business. He points to the defining moment that helped him break through to get the business to where it is nowadays to EOS and Vistage what he was in the Vistage group which introduced him to EOS, which you hear these mastermind groups or these peer-to-peer networking groups. There’s always a common theme amongst a lot of high-performing franchisees. You’re there. Why are you talking to Andrew about another brand? Enjoy the live.

I’m doing both. As you think, you’re getting smarter and you, you’ve found better and easier ways to do things when you get time and space between when it was hard you think, “That wasn’t so bad. Let’s dive back into this again.” I’m not done yet. I’ve got plenty of years ahead of me to continue to do it as long as it stays fun.

Owning The Real Estate

Let’s talk a little bit about you owning the dirt, the building and the real estate for your second location because I think that’s fascinating and a lot of people are interested in that idea. I don’t know where to start with this question. Maybe could you take us through a little bit of like what the thought process was to come up with that idea in the first place and then how you went about evaluating potential pieces of property and sizing up those deals to make sure that it made sense?

It was a scary proposition for me because for what I needed, I needed about 5,000 or more square feet standalone, ideally in a high-traffic area. When you started looking at those things, it was full. Now I don’t even know what the cost would be, but then it was $1 million-plus. I thought, “I can’t afford that. There’s no way I’ll be able to do that.” I had all these self-limiting beliefs around the money side of it. I have a close friend of mine who’s become a mentor. I was talking to him about it. He owns a logistics company and he started buying buildings in his late 30s and early 40s.

He told me I was in your same shoes and that not buying my real estate earlier on, it cost me a lot of money. He broke it down for me and gave me that confidence and ended up finding the right buildings. it was the very first building that I toured and knew it was the right space, but it wasn’t zoned correctly and it wasn’t, it wasn’t priced in my market. I think it was 3 or 4 years later we finally were able to get the deal done. It took a while.

It was perfect. some of the advantages that I started to learn by finally having these conversations. I mean, there’s a ton. First and foremost, I mean doing the SBA 504 Loan, which is tied to an asset, but you can do that with a lot less down. It’s pretty easy to get that at 10% or less down. That’s huge. I was able to lock in a twenty-year rate with the SBA. For twenty years, I have had a three-something percent rate, which is unheard of. Wow.

Three in the threes.

The timing worked out for me on that one. That’s another nice benefit. The depreciation is huge. I’m not an accountant, but there are a lot of different ways to work that depreciation especially the leasehold improvements that you put into it. Most often the cost of your mortgage is going to be lower than what market rate rent is going to be. That’s an advantage. You have the option to sublease if your building is big enough.

Right now I sublease some parking spaces to the apartment building next door. Talking about easy money. There are some of the things I got put in my periphery. The other way I look at it is that if times do get tough, you have a little more flexibility to I could sell the business and hold the real estate. I can make my own lease on my own terms, sign that, and then sell the building if I need to. I don’t have plans to do either one of those, but I think for other people it does give you that little bit of extra flexibility as things change in your life.

Did Dogtopia work with you on that idea or did they have other franchisees? Was that a common thing within the Dogtopia system where people owned the real estate?

Yes, they provide assistance with the real estate side and they have a brokerage that they use. I decided to use my own broker after I had done it once because I had somebody that I trusted and knew pretty well. They don’t talk about it a lot for whatever reason. I will say, on the downside, I believe the Dogtopia FDD states anywhere from around $750,000 to over $1 million in initial startup costs. By being the real estate owner, you’re going to have to come up with all of that yourself versus getting some tenant improvement dollars, which is something that they try to help you negotiate on to get that upfront cost down a little bit out of pocket. I was a little bit on my own on that, but some of that was by my own making.

You did it a good time when real estate was affordable and interest rates were low. You got in for 10%. Were you able to bake in extra costs for operating costs like working capital for opening that additional location or was that strictly straight-up real estate?

The 504 does not allow you to work in additional capital. However, you can work with your bank on getting an extra loan through them or you can also apply for a standard 7A and you can get working capital through the 7A. I was in a good place where I had enough cash saved from the first location to be able to use that as my working capital.

You nailed it, like the tax benefits. If you can pull that off and the math makes sense on owning the dirt, the tax paper benefits of it off that depreciation and whatnot.

Especially when you’re early in your career, those are the things you don’t fully grasp and understand. When you start to meet more people, especially people who have accumulated a little more wealth, you start to realize almost all of their own real estate, whether it’s residential or commercial.

When you start to meet more people, especially people who have accumulated a little more wealth, you start to realize that almost all of them own real estate. Click To Tweet

Have you ever heard the term depreciable income-producing asset?

I have. I don’t know if I could give you the definition of it.

You’re doing it right. It’s an income-producing asset like real estate or even a business with equipment and stuff you can appreciate, but you can play the whole with a depreciation of being a non-cash loss on the P&L you can help reduce that legally taxable income at the end of the year.

Especially here in Minnesota, we pay our fair share and more taxes. When you go to exit, like I did my other business, then they tax you again. I am all about taking advantage of legal opportunities out there that exist for business owners.

What’s Next?

That’s why it’s well worth finding a good accountant who can help advise you and navigate that tax journey to legally minimize your taxable income. Keyword legally. That’s cool. What’s next for you? What are you cooking next?

I’m open to the opportunity of expanding my Dogtopia business a little more if the right opportunity comes about. That’s in my periphery.

Would you do it without owning the real estate? Would you do a third without owning the real estate?

It would have to be a very specific situation, but most likely not. I feel like that’s the route to go when you have your own business in it. I’m looking at a few other nonfranchise opportunities still within the dog space that I think would have some synchronicities. You guys mentioned a couple of different things. I listened to you on the Wolf and there are some things in there that I started looking into a little more. I’m still in pretty early stages on what next looks like and who I want to do that with.

I know you talked a lot around, “There’s a lot of money out there to be had and to find, but not necessarily a lot of operators, not a lot of people that are looking to invest the majority of their time.” That’s an interesting piece. How I look at that is these people or anyone that I meet that says, “I want to be a business owner.” It’s like, “How do you find that young hungry person that you know will work hard, partner with them, and give them the opportunity to do what I did and work hard at it and have a piece of the equity and something that they can build on.” That’s a beautiful thing to be able to provide for someone.

Are you thinking of it from the investor’s perspective or from the operator’s perspective?

I look at it from the, let’s call it, consulting by way of equity maybe. Using the things that I’ve learned to help an operator grow a little bit faster based on the mistakes I’ve made and having some equity. That’s an opportunity. I’m keeping my eyes and ears open. It’s fun how opportunities continue to show up. You feel it out and do your due diligence and something will make sense here in the next few months.

You’ve done a good job putting yourself in a position to have the time to properly analyze and do the due diligence and all the different opportunities that you have coming across your desk. Well done.

Thank you.

I look forward to maybe one day you can teach me how to wakeboard at Horton’s lake house one day because I don’t know how to do it, but into the house. He’s got a good setup there.

Fun fact, I had been wakeboarding, I think for or wake surfing for three years. The 360 was always out of my grass I landed my very first one behind his boat. I have him to thank for hitting my first 360 behind the boat.

If somebody wants to get in touch with you to talk franchising, how can they get in touch with you?

It’s RyanMuhlbauer.com. Shoot me a message on that. I’m happy to talk to anyone at any time if I can be of service.

I appreciate you hopping on. Congratulations on your success.

Thank you very much. Thanks for all you do.

 

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