In this FDD Talk 2017 post, you’ll learn the following:
- Section I – Background information on the School of Rock franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a School of Rock franchise, based on Item 7 of the company’s 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a School of Rock franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of School of Rock’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average gross sales, average student enrollment as of January 1, 2016, average student enrollment as of December 31, 2016, and percentage increase in total enrollment from January 1, 2016 to December 31, 2016 for the 15 Company-owned School of Rock businesses and 144 franchised School of Rock businesses that were open during the 12-month period from January 1, 2016 to December 31, 2016 (the “Designated Schools”)
- 2016 average gross sales for the Designated Schools, by sales range (up to $174,999, $175,000 to $274,999, $275,000 to $374,999, $375,000 to $474,999, $475,000 and up)
- 2016 average gross sales, cost of sales, gross profit, management labor, admin labor, rent, other expenses, total expenses, and net operating income for the 15 Company-owned School of Rock businesses that were operating throughout 2016
Section I – Background Information
17 Things You Need to Know About the School of Rock Franchise
New CEO and Chief Development Officer
1. At the end of June, School of Rock announced that it had appointed Rob Price as the company’s new president and CEO. In his new role, Price will work closely with School of Rock’s senior leadership team to enhance the student experience at each school, expand the global footprint, and establish creative partnerships to maximize the brand’s reach.
2. Prior to joining School of Rock, Price served as president of Edible Arrangements and before that he was Chief Marketing Officer at CVS Health. David Zucker, Chairman of the Board at School of Rock, said, “Rob has extensive experience helping strong brands fully reach their potential. He has an impressive track record of engaging team members, operators, and partners in support of rapid business growth.”
3. Price says that as a parent, he understands how music can shape a child’s life and he looks forward to “working closely with School of Rock’s talented franchisees, parents, students, corporate team members, and industry partners to reach many thousands more aspiring rock and rollers.”
4. In early August, Anthony Padulo was appointed as School of Rock’s new Chief Development Officer. Padulo comes to the company with more than 30 years of experience in the franchise space and has spent over 22 years with Dunkin’ Donuts.
5. School of Rock CEO Rob Price said that Padulo’s “proven track record and extensive experience in franchise development will be a major driver in the brand’s growth.” Padulo says that his top priority will be to “position the brand for rapid expansion.”
Top Students Perform at Summerfest
6. In late June, School of Rock announced that over 600 of its most talented students from across the U.S. were picked to take part in the world’s largest music festival, Summerfest. The festival took place in Milwaukee, Wisconsin from July 6-9 and the students had the opportunity to display their hard work and dedication to music. Students were able to learn from mentors who were bandmates for people such as Beyonce, Stevie Wonder, Weezer, Bon Jovi, Alice Cooper, and many others.
7. Dzana Homan, who was CEO of School of Rock at the time, said, “Every year we look forward to giving our students the priceless time with these artists. It’s the least we can do to reward them for the hours of practice they put into their music classes. Part of what makes my job so fulfilling is seeing our kids perform on big stages like this. These are the kind of experiences that teach them to be confident both in their musical ability and themselves as a person.”
8. Over the summer, School of Rock opened several new locations in Schaumburg, Illinois; Elk Grove, California; Haymarket, Virginia; and Libertyville, Illinois. All of the locations celebrated grand openings with a ceremonial guitar smashing, a variety of live music acts, free trial lessons, demos, food and beverages, and other activities.
9. The Schaumburg location is owned by Jason Fein, who owns two other School of Rock locations in Illinois.
10. Elk Grove franchisees Jason Kline and Cecilia Yi had always wanted to open a School of Rock location after seeing students perform almost ten years ago. Their location is the first in the Sacramento area.
11. School of Rock Haymarket is owned by mother and son team Mary and Conner Hitchcock. Conner is a recent music school graduate, who had spent most of his youth at a local music school.
12. School of Rock Libertyville was opened by John Zebell, who always wanted to open a music school and didn’t think it was possible until he discovered School of Rock.
13. The first School of Rock location was opened in 2002 by Paul Green in Philadelphia, Pennsylvania. Green had been teaching individual music lessons out of his home since 1996 and in 2002, he took out a $7,000 loan to open the first permanent School of Rock location, which at the time was named the Paul Green School of Rock Music.
14. Green’s new school attracted a lot of attention and during the first year it was open, Spin magazine sent Jame Iha, the guitarist for Smashing Pumpkins, to profile Green and the school. In 2003, filmmakers Don Argott and Sheena M. Joyce decided to make a documentary about the school after attending a concert performed by Green’s students. The documentary was titled Rock School and released in 2005.
15. Around this same time, Paramount announced that it was releasing a movie called School of Rock, which featured a would-be rock star teaching rock music to children. Green considered suing the studio over the similarities between his story and the one shown in the movie. In the end, Green decided against it saying that his school benefited from the publicity.
16. Green began franchising School of Rock in 2005 and today there are over 180 locations in the U.S., Mexico, Canada, and the Philippines.
Entrepreneur’s Franchise 500
17. School of Rock debuted on Entrepreneur’s annual Franchise 500 list in 2011 and has ranked every year since then. The company’s highest rank was No. 205 in 2015, while its lowest rank was No. 318 in 2011.
Section II – Estimated Costs
- Please click here for detailed estimates of School of Rock franchise costs, based on Item 7 of the company’s 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on School of Rock’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.
Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis
- Tables 1 through 3 below provide the average annual Gross Sales (as defined below) for 15 Company-owned School of Rock businesses and 144 franchised School of Rock businesses in 2016 (the “Designated Schools”).
- “Company-owned” refers to the School of Rock businesses owned and operated by the franchisor’s affiliate, School of Rock, LLC.
- The Designated Schools only include those Company-owned and franchised School of Rock businesses that were open during the 12-month period from January 1, 2016 to December 31, 2016. The franchisor acquired one franchised School of Rock business during this 12-month period, but it is not included as part of the Designated Schools.
- The Designated Schools all operate under the name “School of Rock” and conduct a business similar to the type of business that you will operate.
- As used in this Item 19, the following definitions apply:
- Admin Labor – Admin Labor includes wages, taxes, benefits, and other employee expenses paid to employees of the Company-owned School that are not directly related to the teaching of the students, which are included in cost of sales or management labor.
- Cost of Sales – Cost of Sales is an amount that reflects the direct costs of the Company-owned School to deliver the services to customers. It includes, but is not limited to, the cost of teacher wages, teacher wages’ payroll taxes, merchant processing, show productions costs, tour expenses, music supplies, merchandise costs, and other program expenses.
- Gross Profit – Gross Profit is Gross Sales minus Cost of Sales.
- Gross Sales – Gross Sales means all revenue generated at, from, or in connection with the operation of the School, including from sales of all products and services conducted at, from, or with respect to the Designated School.
- Gross Sales does not include the sale of products or services for which refunds have been made in good faith to customers, discounts, the sale of equipment or furnishings used in the operation of the School, or any sales taxes or other taxes you collect from customers and pay directly to the appropriate taxing authority.
- The franchisor includes gift certificate, gift card, or similar program payments in Gross Sales when the gift certificate, gift card, other instrument, or applicable credit is redeemed.
- Student enrollment figures are based on the total number of enrolled students from January 1, 2016 to December 31, 2016, respectively.
- Management Labor – Management Labor includes wages, taxes, benefits, profit share, and other employee expenses paid to the general manager employee of the Company-owned School.
- Net Operating Income – Gross Profit minus Total Expenses. This does not include taxes or depreciation.
- Operating Expenses – Operating Expenses include the day-to-day costs in conducting the normal business operations for the Company-owned School.
- Other Expenses – Other Expenses include, but is not limited to, the utilities, brand fund contributions, local marketing and advertising, insurance, licenses, permits, repairs, IT costs and software, professional fees, and other additional expenses.
- Other Expenses does not include royalty fees that you would be required to pay as a franchisee.
- Rent – Rent includes the Company-owned School’s base rent; extra lease charges, such as common area maintenance (CAM) charges; real estate taxes; deferred rent; and related real estate charges.
- Total Expenses – The total of Admin Labor, Management Labor, Rent, and Other Expenses.
- To make the financial performance representation in this Item 19, the franchisor relied on the Gross Sales and student enrollment information collected through its billing and accounting system.
- The franchisor has not audited or verified this information for the franchised School of Rock businesses.
Part 1 – Annual Gross Sales and Average Student Enrollment
- The table below provides the average student enrollment at each of the Designated Schools as of January 1, 2016 and December 31, 2016. The franchisor also provides the average percentage increase in enrollment during that time period.