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FDD Talk 2017: What You Need to Know About the Sylvan Learning Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on November 2, 2017

in Child-Related Franchises, FDD Talk 2017: Children's Franchises, Franchise Earnings, Tutoring Franchise

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Sylvan Learning Photo by socialwoodlands

In this FDD Talk 2017 post, you’ll learn the following:

  • Section I – Background information on the Sylvan Learning franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Sylvan Learning 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 Sylvan Learning franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Sylvan Learning’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2016 average, median, high, and low gross revenue for the top 25%, mid-upper 25%, mid-lower 25%, and bottom 25% of the 433 licensed Sylvan Territories that operated continuously during the 24 calendar months of 2015 and 2016 and provided revenue reports to Sylvan

Section I – Background Information

14 Things You Need to Know About the Sylvan Learning Franchise

Strong Quarter 1 Growth and Plans for Continued Development in 2017

1.  Sylvan Learning enjoyed a year of growth in 2016, which, according to CEO John McAuliffe, sets Sylvan up for “bigger things” in 2017. Sylvan ended 2016 with 55 franchise sales and by the end of Q1 of 2017, the company had signed 15 new franchise agreements. Georgia Chasen, Senior Director of Franchise Development at Sylvan, said that the company is “looking forward to matching or surpassing last year’s franchise deals of 55 sales.”

2.  Among the 15 new franchise agreements, four were for new territories – Leesburg, Virginia; Reston, Virginia; Minneola-Garden City, New York; and Tustin Foothills, California. There will also be a new center opening in Fort Worth, Texas and three new centers in Vietnam.

3.  The company says that its growth is being fueled by the growing demand for its unique suite of services, especially its EDGE program, which features innovative courses in coding, robotics, engineering, and advanced math.

Acquires Citelighter’s Technology and School Contracts

4.  Sylvan Learning announced in early May that it had acquired an education technology startup, Citelighter, which offers a browser-based tool that aims to increase students’ writing competency. Citelighter also features a series of scaffolds designed to guide students through the steps involved in researching, organizing, drafting, and editing a writing assignment.

5.  According to Citelighter’s co-founder and CEO Saad Alam, Sylvan made an “offer that was really good,” but financial terms were not disclosed. The acquisition by Sylvan only covers Citelighter’s technology and school contracts – not its employees. Only one customer support employee from Citelighter will join Sylvan, but Sylvan is still in talks with Citelighter’s overseas software development team about bringing them onboard.

6.  At the time of the acquisition, Sylvan said that the Citelighter program will be used over the summer in a new research writing program for high school students in the Baltimore and Boston centers. If the test program goes well, Citelighter will be available at all Sylvan Learning centers in 2018.

Evolves to Match the Needs of Today’s Children

7.  In late August, Sylvan Learning’s CEO John McAuliffe appeared in a segment on Cheddar news network to talk about the company’s continued growth and evolution to match children’s changing needs. To meet the growing interest in STEM (science, technology, engineering, and mathematics) education, Sylvan has increased robotics, coding, engineering, and math programs.

8.  McAuliffe said the goal of Sylvan’s new STEM programs is to “capture children at a young age and engage them with hands-on, fun activities.” He also said that STEM tutoring accounts for about 10 percent of Sylvan’s services and he expects that number to increase significantly in the coming years.

9.  In recent years, Sylvan has also seen an increase in the need for “middle lane” programs, which are for children who wish to keep up with their workloads, but are neither behind nor ahead of their peers. To accommodate these students, Sylvan has developed new programs, decreasing the overall average time a child spends at Sylvan.

Company History

10.  Sylvan Learning was founded in 1979 by Barry Fowler in Portland, Oregon. Fowler was a former school teacher who also worked with the education company The Reading Game. The first learning center was located at the Sylvan Hill Medical Center Building. Sylvan began franchising in 1980 and by 1983 there were dozens of franchises and the company moved its headquarters to Bellevue, Washington.

11.  In 1985, Fowler sold the company to KinderCare Learning Systems, an Alabama-based chain of childcare facilities that was expanding the scope of its business. Sylvan Learning struggled under KinderCare’s ownership as the company had grown beyond its means.

12.  KinderCare sold Sylvan Learning in the early 1990s to Douglas Becker and Christopher Hoehn-Saric for $8 million. The company eventually recovered and by the end of 1997, Sylvan Learning had annual revenues of $246 million and began offering other services in addition to student tutoring, such as teacher training, computerized testing, and distance learning.

13.  Sylvan Learning was sold again in 2003 to Apollo Management and the company is currently owned by Sterling Capital Partners and Citigroup Private Equity. Currently, there are over 750 Sylvan Learning centers around the world.

Entrepreneur’s Franchise 500

14.  Sylvan Learning has only appeared on Entrepreneur’s annual Franchise 500 list a few times in the past decade. The company’s highest rank was No. 44 in 2010, while its lowest rank was No. 484 in 2016. Sylvan Learning also ranked on Entrepreneur’s 2012 Top Global Franchises list at No. 67.

Section II – Estimated Costs

  • Please click here for detailed estimates of Sylvan Learning 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 Sylvan Learning’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

  • With respect to the Sylvan System, as of December 31, 2016, Sylvan had 458 licensed Territories in the U.S. with 508 overall licensed Centers, which provide revenue reports to Sylvan.
  • Of these, 433 licensed Territories and 481 licensed Centers operated continuously during the 24 calendar months of 2015 and 2016.
  • For a consistent comparison, this Item 19 reflects only those 433 licensed Territories and 481 licensed Centers. This Item 19 does not include revenue from any additional Territories that closed or opened during 2015 or 2016.
  • Of the 433 licensed Territories that are subject of this Item 19, 430 Territories used SylvanSync in 2016, and 3 Territories did not.

2016 Sylvan Territory Gross Revenue by Quartile

  • This table reflects the total Gross Revenue from the Sylvan business of the 433 reporting Sylvan Territories for 2016.
  • The table divides the group into quartiles, based on Gross Revenue by Territory. In addition, the table reflects the Gross Revenue for the top and bottom Territories within each quartile.

Top 25% of Territories by Gross Revenue (108 Territories)

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