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Pet Supply Chain Sniffs Store Deals

March 12, 2010

San Francisco Business Times

Pet Food Express is finding that the recession has made real estate more pet friendly.

The San Leandro-based chain of 35 Northern California pet food stores will open a Burlingame store in a shuttered Blockbuster in August. The company is trying to complete four more deals in 2010, said Michael Levy, founder and CEO of Pet Food Express. He hopes to do up to seven more in 2011.

“We see this as an amazing growth period,” Levy said.

Burlingame’s is not the only failed Blockbuster that Levy wanted to go to the dogs. The company tried to take over a vacant Blockbuster on Lombard Street in San Francisco’s Marina district, only to be shot down by Prop G, the city’s anti-chain store ordinance.

“Certainly the video stores have opened up opportunities for us, and lots of other people,” Levy said. On average, its stores are about 7,000 square feet, though Pet Food Express did open a 12,000-square-foot store in Walnut Creek in November.

Nor is Pet Food Express chary of the bigger competitors. Levy said the Antioch store is just one-third of a mile from a Petco and 100 yards from a PetSmart.

Though Levy wouldn’t discuss revenue or how much the company is growing, he did say that in 2009, stores that had been open at least a year saw double-digit sales increases. The chain is profitable, and self-funds all expansion.

Vacancies caused by the recession have opened up opportunities for companies like Pet Food Express, which is intensely regional - Levy said he has no national aspirations - and knows just what market it wants. 

There is, however, new competition from a big-box concept going to head-to-head with Pet Food Express.

"It hasn't gotten easier in our segment because Petco has a new format store called Unleashed, and it's directly going after our size range and our real estate strategy," said Matt Holmes of brokerage Retail West, which represents Pet Food Express.

For now, the company is sticking with the same strategy and devotion to pets and customers that it has followed since it was founded in San Francisco in 1986.

Its distribution centers are at capacity, and the company will need to expand. It's also adding trucks.

"We don't have aspirations to be national," Levy said. "Our limitations are the greater San Francisco Bay Area and our pocketbooks and being able to find the right locations."

By Sarah Duxbury

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