How The Spot Experience is teaming with the big dogs to build a national brand

In the mom-and-pop world of pet care, this NFL player turned hedge fund manager is teaming with real estate developers and airlines to build a national brand

By Marie Griffin
Photography by Mindy Best and courtesy of The Spot Experience

On his LinkedIn profile, Mitch Marrow describes himself as someone who “brings unmatched will.” That dogged determination helped get Marrow into the University of Pennsylvania and onto the football field as a defensive end for the Penn Quakers, becoming the only Ivy League player invited to the Senior Bowl national college all-star game in 1998. Marrow set his sights on playing for the NFL and was a third-round draft pick for the NFL’s Carolina Panthers.

Even at 6 feet 4 inches and almost 300 pounds, Marrow wasn’t naturally built to go up against even-more-massive NFL opponents, so, “I just dedicated myself to becoming the strongest,” recalls Marrow, who broke an NFL record with two 585-pound bench-press lifts.

Less intentionally, Marrow also learned how to overcome a major setback. He sustained two back injuries while with the Panthers, the second one ending his career. Although Marrow was with the team for three years, he never got the chance to play in an NFL game.

Next, Marrow channeled his substantial drive into the high-stakes business of hedge funds, working his way up to managing director of a $3.5 billion fund over the course of a decade.

Marrow’s third career — as a dog-care services entrepreneur — came together through a combination of his personal experience, Wall Street training and an awakening entrepreneurial instinct.

A longtime dog lover, Marrow lived with a bullmastiff and a Saint Bernard in Manhattan after leaving the NFL. As Marrow’s hedge fund career took off, requiring long hours and more frequent travel, he tried to find care for the dogs that didn’t make him feel like a bad pet parent, but he was repeatedly disappointed and frustrated.

Meanwhile, at the hedge fund, Marrow investigated potential investments in the burgeoning pet care category. According to the American Pet Products Association, total pet expenditures in the U.S. reached an estimated $55.7 billion in 2013, having grown almost 72 percent since 2003. Even during the Great Recession in 2008 and 2009, the industry had grown. The pet care services segment, which includes grooming, boarding, training, pet sitting and other services, represents less than 10 percent of the total pie, but it had three characteristics that made it appealing to Marrow’s business sense: high growth, high profit margins and a highly fragmented marketplace.

“When I was working at the hedge fund, I did extensive research and visited the top places in New York, Miami, Chicago and L.A. to see what was going on in the industry,” Marrow relates. “We wanted to make an investment in pet services, but no one was doing it at the scale or level we could.”

Thus, Marrow saw an opening for a big, brand-name, national pet services business, and he decided to create it himself.

Beginning with the tail end

Marrow planned his business, from the beginning, to appeal to a deep-pocketed financial investor like himself. He backed into a business model that would check all the boxes on a major investor’s list sometime in the future.

By the time Marrow left the hedge fund in 2010 to start the business, he had enough confidence in his plan to put millions of dollars of his own money on the line.

“I was willing to leverage my football and hedge fund careers — and a significant amount of the capital I had accrued — to bypass the start-up investment phase and fund it myself,” he says.

Marrow purchased two doggie day care and grooming centers, operating under the Canine Club name, on Manhattan’s Upper West Side in January 2011. The Spot Experience name came with a second acquisition of two locations later that year, and Marrow adopted the Spot brand for the fledgling company.

Jeffrey Ginsberg, managing director of Mistral Equity Partners, is working with Marrow in anticipation of an investment in Spot by his private equity firm.

“What Mitch did was different — and I think a lot smarter — than most entrepreneurs,” he says. “He studied the market and said, ‘I think there’s a better way to do this.’ Then, instead of starting from scratch, he went out and bought some locations and spent years tying them together, rebranding them and building a base from which he could grow.”

Marrow developed a deep respect for teamwork through sports, where, he says, “you’re only as good as the rest of the guys on the field with you.” Taking that philosophy into business, Marrow has brought in experts for areas he doesn’t see as core competencies for Spot. For example, the retail side of The Spot Experience (offering food, dog beds, clothing and accessories on-site) and Spot’s “country” boarding and training facility in Norwalk, CT, are run through joint-venture partnerships.

On occasion, Marrow has also been willing to open the corporate umbrella of The Spot Group, LLC, for the right partner. Lisa Schoppa, who developed the PetSafe animal travel program for Continental Airlines (absorbed by United Airlines through its Continental acquisition), was recruited by Marrow to join the company and run a new division known as Spot Travel.

Training humans

Champion of the traveling pets

How a smart partnership is taking the fear out of flying with your animals

It may be intuitively obvious that there’s a big difference between a live animal and a piece of luggage, but airlines haven’t always treated animals in transit much differently from the crates that housed them. Lisa Schoppa can take some of the credit for changing that mindset.

In 1998, Schoppa launched the multiple-award-winning PetSafe program for Continental Airlines and ran it through 2010, when United Airlines bought out Continental to form the world’s largest airline at the time. She subsequently worked with United to roll out the program across the company.

What makes PetSafe different from other airline programs to ensure the health and safety of an animal during travel? Initially, it was the fact that there was a program at all, Schoppa says, because there were no people, facilities or other resources dedicated specifically to this task previously at Continental.

“We rolled out something no other airline in the world had ever done, which was an online training program that every person who touched an animal had to take, from the baggage agents and people in the cargo warehouse to the ramp agents loading and unloading the animals,” she explains.

Schoppa met Spot founder and CEO Mitch Marrow while she was handling the transition of PetSafe to United and Spot was the vendor for United’s new pet transit operation at New Jersey’s Newark Airport.

“One of the things that impressed me most when I first met Mitch was the training program at Spot,” Schoppa says. “This was a relatively small company, but Mitch already had a great training program and really good processes for ensuring the care and safety of the animals.”

For his part, Marrow had responded to a request for proposal (RFP) United put out for a third party to run its new pet transit facility at Newark. When Marrow saw that The Spot Experience had people on staff with the certifications and background the RFP specified, “we took a shot,” he says.

Marrow quickly realized that there could be a big opportunity for Spot to grow along with the nascent business of caring for animals traveling by air. “PetSafe has become a business worth about $50 million a year, all told, for United,” he says. “With 60 percent margins, it’s a huge moneymaker.”

As a vendor, Spot gets an annual fee and minimal risk. “We pay our employees. They pay for everything else,” Marrow adds.

As he has done with other Spot partnerships and joint ventures, Marrow sought out the best person to run Spot’s travel division and connected with Schoppa. “Lisa is a now a member of my management team in charge of the day-to-day operations for Spot Travel,” he says.

Not only is Schoppa an expert in the logistics and personnel issues related to animal air transportation, but she also has proven to be a huge asset in the sales process. “She has us meeting with almost every airline,” he adds.

In tandem with Schoppa, Spot secured the contract to operate United’s in-airport kennel facility at Chicago O’Hare International Airport, which opened last summer. Spot has also signed a letter of intent to handle the companion animal section of a massive dedicated animal “terminal” that is being built at New York’s John F. Kennedy International Airport. The facility is scheduled to open sometime this year, according to press reports.

When he was buying his first locations for dog care and services, Marrow forged a pivotal relationship with G. Brewster Smith, an animal behaviorist with a unique way of teaching humans to interact with dogs through behaviors and the way they focused their energy. Smith trained Marrow’s initial dog-care crew in a program that has become Spot’s trademarked Human Alpha Instinct Method.

“The big differentiator for Spot is the level of care our animals get,” Marrow asserts. “That starts with the people and the training. The mandatory 80 hours of initial training is just to make the team.”

The end game is to create a unique environment for the dogs that is cage-free, bark-free, injury-free and accident-free.

“Our Alpha Instinct training program teaches people how to maintain the alpha position with a dog or a group of dogs,” he adds. “At our 72nd Street location, where we have 150 dogs a day in day care, we’ve never had a dog fight or an injury where a dog has gone to the vet,” he adds.

Spot is also designed to be stress-free and “fun,” from a dog’s point of view. For a dog, being the alpha is like work, Marrow says.

“When dogs are in our space, we don’t want them to be working,” he explains. “We want them to be relaxing, playing, exercising and socializing.”

Doggie day care is Spot’s core business because Alpha training has allowed the company to create a unique, signature service and because the frequency of customer interaction that comes with day care builds loyalty with pet families.

“Once people come here on a day in, day out basis, they will use us for grooming, for training, for pick-up and drop-off, for retail,” Marrow notes.

Spot’s best friends

From the beginning, Marrow felt he had discovered a formula for rapid expansion, conversion of capital and marketing efficiency — all wrapped together — in the form of partnerships with the developers of dog-friendly luxury residential rental buildings. As long as he could provide high-end, reliable, concierge-level dog-care services, he thought, real estate developers would want The Spot Experience as an amenity, just like the on-site health clubs the industry has embraced.

He also knew the real estate relationships would make it easier for him to sell investors on funding his dream of building a nationwide pet services company.

“What makes the Spot model tick is that we get the best space in a complex because we have an amenity that attracts tenants,” Marrow explains. “Because Spot is an amenity, residential partners are willing to take up the cost of building out the space to our specifications. That allows us to conserve capital and grow faster. On top of that, we can ask for a year of free rent and below-market rent after that. In return, the developers can get a percentage of the revenue we make in their space.”

Deals with real estate companies allow Spot to “lock up” the buildings’ dog owners. While residents would be free to go outside to find other dog-care services, no other company would be able to come in, Marrow notes.

Marrow also imported the business model of the health club into the Spot business plan.

“People pay an initiation fee of $200 per year to become members,” says Marrow. “That gives the customer access to our packages, which bring the prices of our services down a lot. For example, without a package, it would cost $51 to put your dog in day care for one day, but a day care package brings the cost down to $30 a day.”

Unleashing potential

Not everything has gone according to Marrow’s plan, of course. For one, it took longer than he expected to start making deals with real estate developers.

“It took me two years to get the first contract with a residential developer, Rockrose Development, which had 51 dog-friendly buildings,” he says. As of spring 2014, Spot had signed six partnerships with multilocation residential real estate companies.

Marrow originally imagined that each agreement with a real estate partner would lead, relatively quickly, to the opening of an on-site facility to serve a building or group of buildings, but he had to modify that plan once he started working with developers. Rather than shoehorning and retrofitting Spot locations into the often inferior space available in existing buildings, “we realized we would have to be a lot more careful with the selection of our facilities,” he notes.

While waiting to get better and more customized space for Spot as new buildings opened, which can take years, Marrow made adjustments to his plan so that his existing locations could act more like “hubs” for several partner buildings, and that meant getting more involved in pet transportation. In addition to making use of custom vans sporting Spot’s orange-and-black color scheme, Marrow utilized his team of dog walkers — all of whom are vetted, trained, insured and employed by Spot — to bring dogs to and from day care every day.

In May, the first on-site Spot location in a residential building is scheduled to open within Silverstein Properties’ Silver Towers complex along West 42nd Street near the Hudson River. Residents of Silver Towers and neighboring River Place will receive complimentary Spot membership, and their pets will enjoy the services of the new 9,000-square-foot facility. While Marrow insists that the quality of the facility will not be superior to the three pre-existing Spot locations, he notes that it will have twice the amount of useable space as Spot’s second-largest unit.

Spot at Silver Towers will also have a physical therapy and wellness program overseen by a veterinarian, a new joint-venture partner. The program will be rolling out to the other locations, Marrow adds.

Jay Bergson, who has been part of the Spot leadership team since May 2013, says Spot’s best, most experienced people are headed for Silver Towers. “A big part of our culture is to promote from within and give our employees an opportunity to build a career with us,” he says. “We hired additional people in advance of the opening of Silver Towers so they could be trained and adjust to our culture in time to cover for the tenured people who are moving over.”

Marrow hasn’t backed away from his determination to grow Spot into a nationally recognized, premium pet-care services brand. His revised plan is to be more conservative in expanding the number of locations while focusing his organization on getting the model right so that it can be scaled more rapidly later.

“We want excellent locations that can handle the kind of volume that fits our model. The selection of the location — where it’s going and who the partner is — is critical, and we want to make sure each one is staffed appropriately,” he says. “We’re not in a rush to make mistakes.”

From Ginsberg’s perspective, Marrow’s ability to make these kinds of adjustments is essential. “To be a successful entrepreneur, you have to be incredibly stubborn and dedicated to your goal, but, to really grow a business, you have to have the exact opposite capability, which is the maturity to acknowledge when something needs to be changed and go with it,” he says. “Mitch has both of those qualities.” CEO

Marie Griffin is a freelance writer based in the New York City area. Contact us at editorial@smartceo.com.
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