Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

  • Anytime Fitness
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Franchise Chatter Guide: Which Children’s Franchises Offer the Most Lucrative Prospects for Investors?

by Brian Bixler on September 1, 2014

in Child-Related Franchises, Franchise Chatter Guides



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Learning Experience

This Franchise Chatter Guide on the nation’s top children’s franchises was written by Brian Bixler.

The more things change, the more they stay the same in the children’s franchise industry.

“Hot in the beginning, prosperous now and promising for the future, the children’s franchise industry has attracted long-term players who have left their marks, have achieved financial success and now offer a wealth of insight for people wanting to get into this industry,” Entrepreneur wrote when it published an article titled “Trend Watch: Child-Focused Franchises” back in 2003.

More than a decade later, the folks at Entrepreneur could well have repeated the same thing when the magazine published its forecast in the Franchise 500 edition for this year. Instead, it singled out children’s franchises as one of the “Top 5 Franchise Industries to Watch” as the economy recovers.



“The continued success of kid-centered franchises over the past several years is evidence that parents are always willing to sacrifice in order to give their offspring a leg up. And thanks to franchising, they’ve got lots of options, from early-learning child care programs to traditional tutoring to an increasingly diverse collection of fitness, recreation and enrichment businesses,” the January 2014 issue of Entrepreneur states.

Children Are the Future

To understand why the various opportunities in children’s franchises remain potentially lucrative, one need only look at numbers from the U.S. Census Bureau. The latest census figures show there are more than 35 million family households with children under the age of 18 in the United States. Moreover, of those households, more than 24 million of them have kids under age 12.

That has many analysts, not just those at Entrepreneur, continuing to predict good outcomes for those investors who might consider investing in the kids franchise industry, which has many different options for them.

“According to a Newsweek poll, the worth of the children’s educational services industry has more than doubled in the last few years. Supplemental education, computer training, and basic tutoring services are now in demand in every community,” observed franchise consultant Marshall Reddy in exploring franchising trends for the 21st century recently for the Small Business Resource Network.

And the diversity in types of businesses within the industry is just one of the attractions for investors. Opportunities within the sector are also recognized for being among the most affordable franchises—some of which offer franchisees the convenience of working out of their homes.

Industry Overview

Illustrating the eclectic choices offered by children’s franchises, IBISWorld market research has put out three separate reports since 2013 that look at various sectors within the industry, including tutoring and test preparation services, child education and developmental centers, and daycare centers. Franchise Chatter examined tutoring and test preparation services in depth in a report earlier this year.

With enrollment growth in elementary and secondary schools and colleges projected to remain steady in the next five years, IBISWorld predicts continued demand for supplemental education services. College enrollment alone is estimated to increase by 0.8 percent annually on average to 16.5 million by 2018. IBISWorld factored such data into its forecast for tutoring and test preparation franchises to predict revenue increases at an annualized rate of 0.9 percent to $876.9 million by 2018.

In the child education arena, IBISWorld predicts 4 percent annual growth during the next five years with revenue reaching $2.1 billion in 2019.

The firm’s predictions for daycare franchises are also promising because of decreasing unemployment and more parents reentering the workforce, boosting demand for child care services. IBISWorld forecasts industry revenue in that sector will grow at an average annual rate of 2.6 percent to $54.5 billion in the five years to 2019.

Trends

  • Large players in the market will likely benefit from parents’ increased focus on child development and educational programs, a key growth area for the industry. Large players will respond by offering more personalized development services for children. In addition, early education will be used as a strong marketing tool to attract new customers.
  • Industry franchises will increasingly expand their array of technology-oriented activities for children in the next five years, including using cameras, computers and the Internet as interactive learning tools.

Major Players

Knowledge Universe

Founded in 1983 and currently the largest for-profit child care and early childhood education provider in the United States, Knowledge Universe is headquartered in Portland, Ore., and operates about 1,700 centers in 39 states and Washington, D.C., through its six brands: KinderCare Learning Centers, Knowledge Beginnings, CCLC, the Grove School, Champions and Cambridge Schools.



The company scored a coup by acquiring the venerable KinderCare in 2005 in a deal worth $1 billion. That made Knowledge Universe the country’s foremost child care operator.

Overall, the company is considered an innovator in the sector with programs that include introducing Mandarin as a second language for preschoolers and creating the Active Adventures anti-obesity and fitness program. The company is also actively challenging online learning companies and serving K-12 markets with after-school programs and summer camps.

In fostering a philosophy of lifelong learning, the company has also taken steps to make child care affordable by providing subsidies to one-quarter of the more than 300,000 children enrolled in its programs, according to IBISWorld, which predicts the company will generate $1.9 billion in revenue in 2014.

Bright Horizon Family Solutions

This company differentiates itself from others by being one of the largest employer-sponsored child care and early education companies in the category. The company operates globally by providing child care for more than 850 corporate clients around the world.

More than 80 percent of its centers are accredited by the National Association for the Education of Young Children, making it operate under more stringent standards than those required by states.

The company is headquartered in Watertown, Mass., and was founded in 1986, but has undergone ownership changes in recent years. Bain Capital acquired Bright Horizon Family Solutions in 2008 for $1.3 billion and launched an IPO in January 2013, making it a publicly traded company.

Bright Horizons operates two ways: Its largest growth segment entails managing existing child care and early education centers inside a particular company. In another model, a franchisee would establish his or her own unit near the sponsor’s premises and give priority enrollment to employees or affiliates of the sponsor company as well as outside clients.

With a client base that includes health care, financial services, government and professional services businesses, Bright Horizons experienced strong growth during the past five years, including double-digit growth in 2011 and 2012.

Learning Care Group

Headquartered in Novi, Mich., Learning Care Group provides early education and child care services to children ages 6 weeks to 12 years within its portfolio of brands: The Children’s Courtyard, Childtime Learning Centers, La Petite Academy, Montessori Unlimited and Tutor Time Child Care/Learning Centers. It operates more than 1,000 schools across 36 states, the District of Columbia and internationally.

According to company releases, it has a system-wide capacity to serve more than 100,000 children. Currently, Learning Care Group is the second-largest for-profit provider of child care in the United States with about 17,000 employees.

Formerly owned by Australia-based ABC Centers, which dominated nearly 30 percent of its local child care market and completed aggressive expansion into the United States, Learning Care Group was acquired earlier this year by American Securities LLC, a leading U.S. private equity firm, in partnership with the company’s management team.

The company’s primary strategy has involved purchasing existing child care centers through heavy borrowing. IBISWorld estimates it will generate about $725 million in revenue in 2014.

Primrose Schools

When the economy was going berserk and other companies were reporting lackluster revenue, Primrose Schools was breaking into new markets, including Chicago, New Jersey, Washington D.C., Philadelphia and Boston, and preparing for West Coast expansion throughout California, Oregon and Washington.

The company has been known to encourage growth in certain targeted areas by offering a reduction in royalties from 7 percent to 2 percent to new franchisees. It also attracts franchisees by allowing them to relocate to a new market with incentive: The company’s Accelerated Opportunities Program makes it easier for a franchisee moving more than 100 miles from his or her current residence to enter a new market deemed suitable by Primrose’s real estate team. The relocation package covers up to $35,000 in travel and moving expenses.

Founded in 1982 with the first school in Marietta, Ga., the company began franchising seven years later and has since grown into a national chain located in 20 states. This year it entered new markets in Boston and California and identified 30 other markets in Massachusetts and New Hampshire, where it plans additional, immediate expansion that will bring the total number of schools operating to more than 300.

Primrose offers both child care and preschool programs for children ages 6 weeks to 5 years old. The company also offers after-school programs for older children.

Nobel Learning Communities

Nobel Learning Communities Inc. (NLCI) dates back to 1974, when it became a nonsectarian, for-profit provider of private education. While the company provides K-12 education, its core business includes preschools, elementary and middle schools. The company operates more than 180 schools in 17 states and Washington, D.C., with a total capacity of 25,000 children, according to IBISWorld.

Its more than 20 different brands include Chesterbrook Academy, Merryhill School, Evergreen Academy, Paladin Academy and Houston Learning Academy. In differentiating itself from the competition, Nobel provides high quality private education with small class sizes, skilled teachers and attention to individual learning styles. Nobel Learning Communities also offers an array of supplemental educational services, including before- and after-school programs, the Camp Zone summer program, learning support programs and specialty high schools.

In the past five years, NLCI has engaged in several acquisitions. In 2009, the company acquired Southern Highlands Preparatory Schools and Ivy Kids Early Learning Center in Nevada and Texas. Focusing particularly on the preschool business, NLCI also began acquiring 11 Children’s Center preschools in the Washington, D.C. area. In August 2011, New York-based private equity firm Leeds Equity Partners acquired NLCI.

Goddard Systems Inc.

The first half of 2014 has proven to be strong for Goddard Systems Inc., according to recent releases by the company. GSI launched 2014 with a targeted franchise development strategy focused on eight markets: New York, Boston, Houston, Minneapolis, Seattle, Philadelphia, Portland, Ore., and Hartford, Conn.

Moreover, the company signed 18 new franchise agreements for opening nine schools in Massachusetts, Missouri, North Carolina, Florida, Maryland and Virginia.

Additionally, 16 schools are under construction in California, Connecticut, Maryland, New Jersey, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Wisconsin.

GSI expects to open a total of 18 schools by this year’s end, according to a release from the company.

The expansion goes along with a five-year plan to increase awareness of its brand of early childhood education nationwide. The five-year development goal calls for awarding 60 new franchise agreements and opening 30 new schools per year by 2019.

Goddard Systems was named the No. 1 child care franchise in the United States by Entrepreneur, a distinction it has earned for the past 13 consecutive years. Last fall, it was also recognized as one of the Top 200 franchise systems in worldwide sales by Franchise Times for the seventh consecutive year.

Headquartered in King of Prussia, Pa., GSI currently licenses more than 400 franchised schools with more than 45,000 students in 35 states.

Kiddie Academy Child Care Learning Centers

The first Kiddie Academy was opened in Baltimore County, Md., in 1981. The company specializes in serving children under the age of 5 through programs that include infant day care to prekindergarten activities. Among other things, Kiddie Academy offers programs for school-age children, summer camps and special programs in sign language and Spanish.

According to IBISWorld, new franchisees must pay an initial franchise fee of $120,000—the highest fee of all major players—and an ongoing royalty fee of 7 percent. Franchisees are also required to hire a state-qualified director and abide by a set of education, training, business management, quality assurance and marketing standards.

Such stringent requirements and higher franchise fees compared with competitors have resulted in slower growth during the past five years, according to IBISWorld, which notes that the number of franchises actually declined in 2010 due to extensive rules and standards that have made it difficult for some franchises to operate.

On the other hand, Opportunity World magazine named Kiddie Academy among 125 of the hottest franchises in 2012. It was the only child care franchise on the list. This year, the company unveiled a new logo that brands Kiddie Academy as “Educational Child Care.”

The Learning Experience

One of the newer kids franchises is rooted in a family’s experience in the child care business. The Weissman family opened The Learning Experience (TLE) child education center in 2001, having founded Tutor Time franchises in 1980. Tutor Time grew to more than 200 centers before it was sold to Childtime Learning Centers in 1999.

The Learning Experience differentiates itself by being all things to all people, serving children of different ages, including stages identified by the company for development: infant, toddler, twaddler, prepper, preschooler and kindergartner. The eclectic curriculum includes academic education, sign language, Spanish, etiquette and physical fitness. And parents interested in exposing their children to the arts will find special programs in music, performing arts, science, math, dance and yoga.

After more than a decade, TLE has 124 franchises across the country and has plans to expand internationally. IBISWorld estimates that total franchise revenue will match an upward trend in number of units, increasing an average of 15.9 percent each year to $92.1 million during the next five years.

Bricks 4 Kids

Entrepreneur names Bricks 4 Kids one of the leading brands in child enrichment-style franchises. With science and engineering being seen by parents as more important to a child’s development, Bricks 4 Kidz is riding the trend as a Lego-engineering program that has been franchising since 2009. This year, it jumped into the No. 1 spot in Entrepreneur’s Enrichment category amid several competitors.

Developed and owned by Creative Learning Corporation, which also owns Challenge Island, CLC announced record revenue and net income for its fiscal year ended September 30, 2013. The company’s revenues for fiscal 2013 were $4.8 million, an increase of 41 percent compared with $3.4 million in fiscal 2012. Net income for fiscal 2013 was $947,000, a 56.7 percent increase compared with fiscal 2012 income of $604,000.

More Opportunities

Franchise Chatter has shined the spotlight on several other companies in the children’s franchise industry, including many that are recognized as leading low-cost franchises. For more information, check out our archives for information on companies such as Club Z!, Bach to Rock, Brain Balance, Children’s Lighthouse Learning Center, Mathnasium, Doodle Bugs!, Engineering for Kids, Kumon and other franchises.



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