Pet Supplies Plus Reveals Next Moves
Franchising is part of the DNA for Pet Supplies Plus (PSP), which made the December acquisition of the nearly $1 billion business by Sentinel Capital Partners, a New York-based private equity firm with a strong franchise portfolio, an easy sell for PSP’s management team.
“Having the next ownership be somebody who understands franchising more than our previous equity company was a huge plus,” said Chris Rowland, CEO of the pet store chain and pet supply distributor, which has headquarters in Livonia, Mich.
“I don’t think there will be any major changes in terms of how we operate and our strategy in terms of what we’re going to be—they’ve already made that very clear,” he said.
Rowland added that there was “zero pushback” from the company’s franchise owners, including one man who owns four locations and has been with the company for 28 years.
“I went out very early on in the process and said, ‘Look, we are selling the company and here’s the reason why: It’s the right time, it’s the right move,’” Rowland said.
The previous equity company hired Rowland away from PetSmart about six years ago, and from the time he put down his coffee mug, he’s been busy making PSP into a “franchise business.”
“We want somebody that has more franchise experience, we want somebody that has more capital, and we want somebody that has a longer-term horizon,” he added.
“[Sentinel Capital Partners is] not a private equity company that has a track record of coming in and blowing out management teams and changing what’s there.”
Sentinel liked PSP’s story, Rowland said, and wants to keep it going while making the model better.
“That’s what they bought, and that’s what we sold, and that’s what I signed up for, along with the rest of my management team,” Rowland explained.
The PSP team also liked the fact that Sentinel is a “hands-off type of owner.”
“They actually let the management team do what the management does,” Rowland said.
“That was pretty important, because I believe when you’re living the business every day, you’re probably in the best position to make the best decisions,” he added.
“With that said, having somebody with oversight questioning and making you be a better version of yourself is a good thing.”
Big Plans in Livonia
Rowland said that there are about 100 stores in the pipeline, with half a dozen already opened in December and plans underway to open 50 stores this year. The store openings should accelerate in 2020 and 2021 under the new ownership, according to Rowland.
“They want to support franchising, they want to grow more franchise stores, and they’d like to do it even faster than what we’ve done historically—so that’s all a win.”
Rowland confirmed that the growth will be a mix of franchise and corporate stores.
The company’s current roster of 450-plus stores includes locations in California, Arizona, Florida, New England and the Midwest, but the Pacific Northwest is “a black hole.”
Expansion into states like Washington and Oregon is on everyone’s radar, Rowland said, and Sentinel’s reserves of capital should come in handy in this regard.
Buying other pet chains is also on the table.
“We’d definitely be interested … if there was a competitor that looked compelling and would be a nice addition to our portfolio. [Sentinel] would be a heavy part of that conversation,” Rowland said.
PSP’s stores continue to have positive year-over-year growth, he added, because they are “stealing share from other pet specialty stores, from grocery stores, from mass players.”
PSP does have a direct competitor—PetSmart or Petco—in 90 percent of its markets, noted Rowland, but PSP is competitive because of “superior selection, better pricing and a service model with net promoter scores rivaling Starbucks,” he said.
“We feel like an independent operator, but we have all of the scale and pricing and capabilities of the big national players,” he added.
Some question the brick-and-mortar model in face of the meteoric growth and potential of online sellers. However, Roland pointed out that the company has effectively competed with its online competitors for 10 years. He add that an infusion from Sentinel will significantly help build PSP’s e-commerce business, which he says will “always” be local in nature—three- to five-mile radiuses around its hundreds of locations.
“We want that relationship to stay with the local store and with the local store operator.”
PSP has already instituted “buy online pickup” that’s been rolled out to half its stores—franchises and corporate stores—and will be rolled out to the remaining stores in the next few months.
“You can get in and out of our store in two minutes if you want to, with somebody carrying your food and putting it in your car,” Rowland said.
In addition, PSP is planning to offer “buy online deliver”—a home delivery service—in all of its stores by year’s end.
“We’ll actually be able to deliver it not only same-day but probably within hours,” he said. “We will compete head-to-head with online by the end of 2019 anyway.”
E-commerce is an area where Rowland definitely can see Sentinel’s expertise and capital coming into play.
“The e-commerce business … takes a lot of money to get up and running, and you don’t necessarily see the payback in the first few years,” he said. “So, [Sentinel] has deeper pockets in terms of looking at medium- and longer-term investments that are right for the business and that make sense.
“We were very open about the whole process from day one, about what we wanted, about what we were looking for, why we were doing what we were doing, and, in the end, we delivered exactly what we said we were looking for with Sentinel,” Rowland said.