FDD Talk: The Primrose Schools Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2016 post, you’ll learn the following:

• Section I – Background information on the Primrose Schools franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Primrose Schools franchise, based on Item 7 of the company’s 2016 FDD

• Section III – Presentation and analysis of Primrose Schools’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:

• 2015 average, median, high, and low revenue for the 14 Smaller Facilities and 256 Larger Facilities (separately stated) that were open and operating throughout the entire 24-month period from January 1, 2014 to December 31, 2015

• number and percentage of Smaller Facilities that achieved 2015 revenues of more than $1,300,000; $1,000,000 to $1,299,999; and $733,000 to $999,999, respectively

• number and percentage of Larger Facilities that achieved 2015 revenues of more than $2,300,000; $2,000,000 to $2,299,999; $1,700,000 to $1,999,999; and $1,300,000 to $1,699,999, respectively

• 2015 median gross revenue, total expenses, and EBITDAR for the top third, middle third, bottom third, and all 203 Larger Facilities that were open and operating throughout the entire 24-month period from January 1, 2014 to December 31, 2015, and submitted complete and timely financial information to the franchisor for the full period

Section I – Background Information

First Child Care Company to Receive National Accreditation

Primrose Schools was founded in 1982 by Paul and Marcy Erwin in Marietta, Georgia. The company was initially called Primrose Country Day School.

In 1988, Primrose moved from being a half day preschool to one that was full day. This was also the same year that Primrose Schools began franchising as the fourth location opened.

In 1998, Primrose Schools became the first educational child care company to receive accreditation from the Commission on International and Trans-Regional Accreditation (CITA) and the Southern Association of Colleges and Schools Council on Accreditation and School Improvement (SACS CASI), which are both recognized as the gold standard in evaluating high schools, colleges, and universities.

The following year, the Erwins left the company and sold Primrose Schools to Greenwich, Connecticut-based Security Capital Corporation. Less than a decade later, in 2006, the company was sold for $63 million to American Capital Strategies.

Through the years, Primrose Schools has successfully expanded across the United States. Today, there are over 340 locations throughout the country.

Aiming for Another Year of Record Growth

Primrose Schools is aiming for its seventh consecutive year of growth in 2017. The company hopes to outdo its previous record by opening 34 new schools by the end of this year. There are currently 135 locations in various stages of development. Primrose’s long term goal is to have 480 locations by the end of 2020.

The franchise currently has locations in 27 states but is looking to expand into new markets, including Arkansas and Oregon.

Primrose also hopes to continue its urban expansion. There are currently 22 schools in urban locations, with 11 more in development.

Expanding Executive Team as Growth Continues

In late 2016, Primrose Schools announced that it would be adding two new members to its executive team. Annette Cannata Heng joined the team as Senior Vice President of School Excellence and Sarah Funk joined as Vice President of Talent and Performance.

In her new position, Heng will lead strategic efforts to foster a brand-driven, high performance environment for Primrose School Franchising Company and the Primrose Schools system. Funk will be in charge of developing strategies to sustain and strengthen Primrose’s leadership, brand culture, and management capabilities.

Forbes Names Primrose Schools as a Top Franchise to Buy

In the summer of 2016, Forbes ranked Primrose Schools as the third-best high-investment franchise to buy on its annual list of “The Best and Worst Franchises to Buy.” Primrose is the highest ranked early education franchise on the list.

The company was ranked fifth in the 2015 list.

Consistently Ranking on Entrepreneur’s Franchise 500

Over the past decade, Primrose Schools has consistently ranked on Entrepreneur’s annual Franchise 500 list. The company has ranked almost every year. Primrose Schools has earned the No. 62 spot for 2017, which is the highest for the franchise. Primrose’s lowest rank was No. 193 in 2009.

Primrose Schools was named the #1 Child Care Franchise by Entrepreneur in 2017.

Section II – Estimated Costs

• Please click here for detailed estimates of Primrose Schools franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis