“This is the most fun of any business I’ve had. I get to hang out with dogs and make the world a better place,” says Dave Dreiling, founder and CEO of HCI Hospitality.
As he explains the genesis of his latest business enterprise, a wide smile spreads across the face of this hometown serial entrepreneur. If you haven’t heard Dreiling’s name before, you have most likely heard of one of his businesses. As a young entrepreneur, he sold T-shirts out of the back of his car to Kansas State University fraternities and sororities in Manhattan. The business, originally named Greek To Me, later abbreviated to GTM, expanded to team uniforms and apparel and grew to be one of the largest companies in the area. In 2016, the company was bought by Hanesbrands Inc. and renamed to Champion Teamwear.
In 2002, as GTM was growing, Dreiling began to diversify his business portfolio into the restaurant industry, and started Hungry Cats Incorporated, now known as HCI Hospitality. The multi-brand hospitality management company operates Cox Bros. BBQ, Powercat Sports Grill, Coco Bolos and JC’s BBQ & Grill. In addition to these local favorites, the company also operates over 30 Freddy’s Frozen Custard & Steakburger franchises across North Carolina, Texas, Nebraska and four other states.
After selling GTM, Dreiling spent 18 months exploring ways to diversify his remaining restaurant portfolio. He researched various franchise models and eventually realized the best answer had literally been in the backyard of his office building for over 12 years. As the GTM manufacturing facility (located on McCall Road across from Menards) was growing and expanding, Dreiling purchased adjacent properties in order to add more parking for his employees. In 2007, shortly after purchasing one of the neighboring buildings, Dreiling was approached by local business owner Kelly Neel to convert a mechanic’s shop in the building into a pet care facility center. She named the new business the Howl-a-Dayz Inn.
After 10 years of being Dreiling’s tenant, Neel was searching for a business partner. As Dreiling researched “doggy daycare” franchises, he quickly concluded that the industry was ripe for growth and was the diversification he had been seeking.
Dreiling learned that to start a franchise in one of the largest pet daycare companies required $100,000 up-front and 10% royalties on all future sales. In comparison, one Freddy’s location only required $25,000 up-front and 5% royalties. However, Dreiling recognized a desirable trend. The pet care company was adding locations quickly, with many franchisees expanding to a second and third location, indicating that they were clearly profitable, despite the steep franchising costs.
Dreiling decided that he and Neel would be able to figure it out on their own. Shortly thereafter, Dreiling was introduced to Andy Wiltz, a former strategy consultant living in Kansas City. Wiltz had recently opened up his own pet care company called Woof’s Play & Stay in Merriam, Kan., and wanted to grow his brand. Wiltz and Dreiling decided to team up, with Wiltz contributing the brand and operating system and Dreiling contributing capital and administrative support through HCI’s capabilities. While HCI was growing to over 1,600 employees, it had developed significant infrastructure including real estate, finance, HR, operations and IT staff. By introducing Woof’s as a diversified offering within HCI’s portfolio, the ingredients were primed for growth.
After teaming with Dreiling, Wiltz’s second Woof’s, the Howl-a-Dayz Inn, was converted to the Woof’s brand in late 2017. Then, an additional acquisition was made in Leawood, Kan., and two new stores were started from scratch in Topeka, Kan., and Lawrence, Kan. Currently, five more locations are in the works: two in Wichita, one in Columbia, Mo., and an additional acquisition in south Kansas City.
The Importance of Differentiation in a Competitive Market
The American Pet Products Association reports that the overall pet industry will be worth $75.4 billion in 2019. The pet retail sector has generally consolidated with big-box brands like PetSmart and Petco while the pet services sector has continued to be dominated by mom-and-pop stores throughout the country. These stores are generally run by passionate “dog people” who have a love for the business but generally haven’t approached it from a business-disciplined growth perspective. With a highly fragmented and competitive landscape, Dreiling knew that product differentiation would be key to success.
“It’s a race to the top in this industry,” says Dreiling. “There are three kinds of dog owners. First are those that feel that nothing is too good for their pet. Second are those that feel that their pet is part of the family and will spend money on reasonable expenses. Lastly are those that feel that it’s just a dog and it can be easily replaced. We cater to the first and the second groups. The old days of board and kennel are gone.”
It’s evident that those two groups of dog lovers are Woof’s priority because of the unique spaces and services they provide for dogs. When entering the Manhattan Woof’s location (which shares a building with HCI), the “day play” area consists of multiple indoor-outdoor areas with about 50 dogs in each area. Dogs are dropped off each morning and spend the day socializing with other dogs while their owners are at work. The outdoor area has specialized grass-like turf with 6-8 inches of rock underneath. The turf is sanitized and hosed down nightly. An outdoor pool is filled once a week for pool day. During this particular visit, the dogs are enjoying bubble day as they chase bubbles throughout the room, jaws snapping at the bubbles being blown about by the afternoon breeze.
The dogs are separated into packs based on size and temperment, including the high-energy group, bigger dogs and older dogs. First-time dogs go through a meet and greet process where they are brought into a separate room and given time to adjust to the smells of the other dogs in the facility. They are first introduced to a smaller dog and given time to adjust. Then they are introduced to a high-energy dog, and finally the most dominant dog in the pack. According to Dreiling, 95% of dogs quickly adjust and become part of the pack.
“The pack mentality is hard-wired into their brain,” says Dreiling, “Dogs learn more from each other than from humans. They read social cues from each other and get adopted in the pack hierarchy. Socialization can be very important to a puppy. Ideally, a puppy is introduced to 100 other dogs and 100 humans before they are four months old. By experiencing different types of dogs and humans, they learn to understand normal behavior.”
For long-term boarding, Woof’s offers various sizes of accommodations, including adjoining and connected kennels for families. Deluxe suites offer flat-screen TVs for dogs to watch movies or television (Animal Planet is a favorite channel) and webcams for owners to check on their pets.
Providing an amazing customer and canine experience has helped Woof’s stand out in a crowded and competitive market and has provided an opportunity to charge a premium. “When a family finds a babysitter they trust, they want to keep them for as long as possible,” says Dreiling. “It’s the same for us. If we focus on pet health, pet care and pet well-being, we’ve found we can retain our customers and gain new ones through word-of-mouth advertising.”
Through the window from the play area, a German shepherd gazes intently at Dreiling, cocking its head to the side as though listening to his explanation. As Dreiling looks down at the dog, it barks twice, spins around and sprints to the outside play area. There are more bubbles to chase. Dave laughs and continues the tour. Can success strike three times? It sure looks likely, and even if it doesn’t, it’s clear that Dreiling is having fun.
Brandon W. Savage provides fractional COO and management strategy consulting to companies throughout the Flint Hills area. He is also an instructor of strategy, ethics and operations at the Kansas State University College of Business Administration and received his MBA from the Wharton School of the University of Pennsylvania. He and his wife, Cheryl, live in Manhattan, Kansas, with their eight children and cat, Louie. Find him at www.thecxpro.com