Prior to 2020, pet businesses were booming — grooming services, adoptive services, dog walking, petsitting, pet shampoo. You name it and it was selling. But that all changed earlier this year when COVID-19 forced local and state governments to shut down much of the economy. Many of the jobs that kept those businesses afloat went out the window, and the CARES Act didn’t provide nearly enough aid to mend the damage.
The end result? Thousands of pet care businesses have gone belly up. This is especially true in cities like New York, where coronavirus hit hardest.
Business bankruptcy lawyer Ryan Reinert said, “By the end of the year, you’re going to start seeing more filings of foreclosure cases, and then those go through litigation, and then you end up with bankruptcy as an option. One of the first things that you want to have a very good feel for is: What’s your goal? Is it a normal Chapter 11 case for reorganization, or is it filed under the Small Business Reorganization Act? Do you intend to sell the company?”
Pet business owners will have to make all of these decisions quickly — decisions that are very different from those made on an individual or family basis — to reduce the debt impact.
“If it’s a sale case,” Reinert added, “you want to ensure that the party that’s coming in to acquire your lease can continue to perform and has the same type of financial basis or better as the debtor had at the time that you entered into the case. Often, you end up with a long-term lease as part of that. And that’s a very successful result.”
The good news is this: not all pet businesses have to deal with lease payments unrelated to the home, because that’s where they usually work from.
Also, the market was already changing before coronavirus struck. For example, a whopping 22 percent of the pet products market was dominated by the online marketplace. Coronavirus helped propel companies who were already selling online as a primary mode of business to even greater heights. Those who failed to adapt in time were the ones feeling financial pains the most, and certainly they are the ones most likely to go out of business.
Still, there are other concerns. Because the average consumer has less money to spend, a smaller slice of the pie goes to Fido. Pet product sales were initially forecasted at 5 percent growth for 2020, but those forecasts were then revised to show no growth at all. Supplies diminished by nearly a quarter, and service requests were slashed by about a half. That’s a huge problem for small business owners who relied on profits to put food on the table for their families.
Now that President Trump is being wishy washy about new coronavirus relief aid (and also because Congress might not have come to an agreement anyway), it’s anyone’s guess whether or not help will come soon enough to help businesses just hanging on for dear life.