Pet Care Industry Outlook: Navigating Challenges and Opportunities in 2026

Market Performance and Revenue Trends

The pet care industry closed 2025 on a sobering note, with revenues largely flat or declining across most geographic markets. Year-over-year growth remained elusive as the sector grappled with fundamental shifts in consumer behavior and competitive dynamics.

Several factors contributed to this revenue plateau. Pet owners are increasingly diversifying their spending across multiple service providers rather than maintaining loyalty to a single facility. Meanwhile, app-based pet care platforms continue to erode traditional brick-and-mortar market share. Perhaps most significantly, Gen Z pet parents are integrating their dogs more fully into daily life—including travel and vacation plans—reducing demand for boarding and daycare services.

Margin Compression Intensifies

While revenue stagnation poses challenges, the more pressing concern for many operators has been profit margin compression. Labor costs continue their upward trajectory, yet many facility owners have hesitated to implement corresponding price increases. This reluctance to pass, or be able to pass, costs along to consumers has resulted in squeezed profitability across the sector.

The Acquisition Landscape: Quality Trumps Quantity

The M&A market has undergone a notable transformation, with consolidators adopting a decidedly more selective approach. The mantra has shifted to “quality over quantity,” with acquiring companies conducting increasingly rigorous due diligence.

Facilities generating the strongest buyer interest share common characteristics: growing revenue trajectories, streamlined operational models, disciplined labor management, and healthy EBITDA margins. Staff stability has emerged as a critical evaluation criterion as well as the quality of facilities. Mirroring the preferences of today’s pet parents, consolidators are gravitating toward modern, high-quality facilities that command premium pricing.

PET|VET M&A: Delivering Results in a Challenging Market

Despite broader market headwinds, PET|VET M&A achieved exceptional results in 2025. The firm closed 33% more transactions than in 2024, representing over $54 million in total sales volume—a testament to both the strength of its seller clients and the effectiveness of its specialized approach.

As the only M&A firm exclusively focused on representing individually owned pet care businesses to consolidators, PET|VET has developed deep expertise in matching quality sellers with strategic buyers. The firm concentrates on representing owners of pet resorts and dog daycares that meet the revenue and EBITDA thresholds consolidators require, creating competitive processes that generate multiple bids. This approach empowers sellers to select not just the highest offer, but the successor company best aligned with their vision for the business’ future and their team’s welfare.

2026 Forecast: Continued Headwinds

We anticipate 2025’s challenges will persist into 2026. Operators should prepare to work harder simply to maintain current revenue levels – hustle is the word! Labor cost pressures show no signs of abating, and consolidators will remain highly discriminating in their acquisition targets.

Strategic Recommendations for Profitability

To position for a profitable 2026, facility owners should consider the following strategies:

Revenue Optimization: Conduct a comprehensive marketing review to maximize client acquisition and utilization rates. Perform a rigorous analysis of all revenue streams, eliminating any that have become loss leaders due to labor costs. Concentrate resources on profitable services that clients value and willingly pay for.

Labor Efficiency: Implement best practices in hiring, scheduling, and workflow management to maximize productivity per labor dollar spent.

EBITDA Enhancement: Even during flat or declining revenue periods, business value can be increased through disciplined expense management. The focus should be on extracting maximum profitability from existing operations.

Positioning for Sale

For operators considering an exit, market conditions in 2026 will favor facilities that meet consolidator criteria: growing and diversified revenue streams, locations in high-density markets, and strong EBITDA margins. These businesses should find receptive buyers among strategic acquirers.

Owner-operators of lifestyle properties in rural markets may see improved selling conditions as lower interest rates activate market activity that has been stagnant. As financing costs moderate, the pool of qualified individual buyers should expand, creating opportunities for exits that have been difficult to execute in the recent high-rate environment.

Conclusion

The pet care industry faces a period of consolidation and maturation. Success in this environment will require operational discipline, strategic focus, and a willingness to adapt to evolving market dynamics. Operators who can maintain profitability despite revenue pressures while building businesses that meet today’s acquisition criteria will be best positioned for long-term success—whether that means continued independent operation or a strategic exit.

For those considering a sale, working with a specialized M&A advisor, who understands both the unique dynamics of the pet care sector and the specific buyers, has never been more critical to achieving lucrative outcomes.  Contact Teija Heikkila to start your exit planning with a free market analysis – teija@petvetsales.com.