Sylvan Learning Franchise Costs: Estimated Initial Investment (Item 7, 2022 FDD)

1.  Initial License Fee:  $34,900

• The Initial License Fee is not refundable under any circumstances.

• The Initial License Fee may be modified if you agree to a Multi-Territory Incentive Plan.

2.  Supplemental Training and Administrative Fee:  $0 to $10,000

• Sylvan currently provides initial training free of charge. Sylvan does not currently, but may in the future elect to charge a Supplemental Training and Administrative Fee of up to $10,000 to new franchisees who enter the Sylvan system through resale transactions. Generally, training costs are included in the Initial License Fee, but this fee is not paid by new franchisees who purchase a territory through a resale transaction.

3.  Travel and Living Expenses While Attending Initial Training:  $0 to $1,500

• As of the issuance date of the current Disclosure Document, all initial training activities are being delivered by Sylvan virtually, through live, online platforms. In the future, Sylvan reserves the right to require in-person training, which would take place at Sylvan’s facilities in Hunt Valley, Maryland.

• Sylvan estimates that the estimated cost for travel, food, and lodging would range from $650 to $1,500 per person in attendance (including between $100 and $800 round trip travel, $150 per day for lodging, and $25 per day per person for meals for the four-day initial training program).

4.  Initial Three Months’ Rent and Security Deposit:  $3,750 to $15,000

• If you do not own adequate space, you must buy or lease space for your Center. Strip malls are the typical locations for Centers.

• Your Center must be a minimum of 1,000 square feet. Sylvan anticipates that, under the business model in the License Agreement, it will approve Center sizes of 1,000 to 2,000 square feet. Center size across the current Sylvan Network varies, with most Centers having between about 1,500 and 2,400 square feet.

• The amount of rent that you pay will vary greatly depending on your geographic location, the type of location in which your Center is located, the size of your Center, and general economic conditions, among other factors.

• Some franchisees choose to operate at SylvanSync Satellite sites in addition to their Primary Centers; doing so is not required by Sylvan. Sylvan does not recommend that you purchase dedicated space for Satellites. You may wish to lease space on a short-term or temporary basis. School libraries and community centers are some possible locations for Satellites.

• The amount of temporary rent that you will pay will vary greatly depending on your geographic location, the type and size of your service site, and general economic conditions, among other factors, but will typically range from $250 to $3,000, and many Satellite locations are used at no cost.

5.  Real Estate Improvements and Site Preparation:  $5,000 to $40,000

• The costs of improving your lease site for your Center are negotiated with the landlord as part of your negotiating your lease. If the landlord provides the improvements at its cost and those costs are financed as part of the lease, you will substantially reduce your initial costs, but your monthly rental costs will likely be higher.

6.  Initial Inventory and Instructional Materials:  $2,700

• Sylvan will specify the initial inventory and instructional materials that you must obtain from third parties; this includes educational materials and manipulatives to help you deliver Sylvan and SylvanSync programs. You may source these from any third party, so long as the materials meet Sylvan’s specifications.

• This amount may change from time to time throughout the year.

• The amounts do not include all shipping costs and taxes, which must be paid by you. Depending on your location and applicable state taxes, your shipping costs should be between approximately $200 and $500, and your taxes will vary.

• At the end of your first year of operations, you will be required to purchase additional Learning Materials for an additional cost.

7.  Specialized Furnishings:  $5,300 to $10,000

• You must purchase certain specialized furnishings for your Center that meet Sylvan’s specifications. You may purchase these from any vendor that can produce furnishings that meet Sylvan’s specifications.

• You may use vendors recommended by Sylvan or any vendor that you choose, but if you source vendors outside of Sylvan’s list of recommended vendors, then you must seek and obtain approval of the furnishings you wish to purchase in advance of purchasing them.

• You are responsible for shipping costs and the set-up and installation of the specialized furnishings.

8.  Other Furniture and Miscellaneous Supplies:  $3,000 to $4,000

9.  Signage:  $4,000 to $8,000

10.  Marketing During Initial 3-Month Period When the Primary Center First Opens:  $10,000

• Across the three-month period beginning in the month before the Primary Center first opens for business in your Territory, you are required to spend a total of at least $10,000 on advertising and marketing approved by Sylvan to promote your Primary Center.

11.  Computer Workstations, Initial Supply of 10 Apple iPad Tablet Computers (7th generation or later), Copier, Printers, Telephone, Internet Access, and Software:  $7,110 to $13,930

• The estimated costs indicated include the costs for three to five computer workstations with operating software at $600 to $1,000 each, 12-21 Apple iPad (5th generation or later) tablet computers at $349 each, 12-21 covers/screen protector kits for the iPads at $10 each, $700 total for a printer and copier (combined or separate), and three months of internet and telephony services at $100 to $230 per month.

• Sylvan provides certain of the other equipment and licensed software at no additional cost to you.

• Computers and other equipment may often be leased over several years. Equipment leases typically require you to pay approximately 10% of the “purchase” price at the outset. To the extent that you are able to lease your equipment, you will substantially reduce your initial costs.

12.  FOA Annual Membership Fee for Initial Period:  $660

• Sylvan’s current policy is that all new franchisees must join the Sylvan Franchise Owners Association (“FOA”). The FOA is an independent franchisee organization that is administered by the Board of Directors of the Sylvan Franchise Owners Association, Inc.

• Sylvan may modify, or repeal, its policy that all new franchisees must join FOA from time to time, at its option.

13.  Miscellaneous Supplies:  $15 to $150

• This estimated amount is $5 per month per active core student. Your expenses for miscellaneous supplies (including, without limitation, markers, buckets, pens, pencils, paper, instructor name tags, incentive gifts for motivational programs, etc.) may differ depending on the number of students you enroll.

• You may have additional costs if you reimburse your employees to travel to a Satellite location. Travel reimbursement depends on how you pay your employees (e.g., on an hourly or on a per-session basis), among other factors.

14.  Hub Technology Platform:  $240

• Sylvan requires that all franchisees use the Hub Technology Platform for its intended uses (for example, recording contacts, scheduling customer appointments, enrolling and scheduling students, tracking attendance, billing customers, and reporting revenue).

• The Hub Technology Platform Fee is $80 per Center per month and is included on franchisees’ monthly billing statements, due and payable by the 25th day of each month.

15.  Contact Center Participation:  $1,500 to $5,000

• Sylvan requires new licensees to participate in the Contact Center Program for the first 12 months of operation of their first Center (from the date the Center opens for business until the first anniversary of that date).

16.  Additional Funds – Three Months:  $7,350 to $30,850

• These expenses include business licenses, utility deposits, initial local marketing, payroll costs, and required insurance. These figures do not include payroll for the owner.

• These figures are estimates and Sylvan cannot guarantee that you will not have additional expenses starting the business.

• Sylvan recommends that in addition to the capital you estimate you will need to reach a break-even point in your operations, you should have available sufficient capital as a contingency to fund the business for a full year.

• This estimate is based on information provided to Sylvan by franchisees, and from Sylvan’s experience in opening and operating corporate-owned Centers.

17.  Total:  $85,525 to $186,930 (figures do not include additional rent)