FDD Talk 2018: LearningRx Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

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

• Section II – Estimated initial investment for a LearningRx franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a LearningRx franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned LearningRx outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of LearningRx’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• total revenue charged, total revenue collected, total expenses, and net operating income (based on collections) for the LearningRx affiliate-owned Center located in Colorado Springs, Colorado for the period of November 1, 2016 through October 31, 2017

• average revenue charged, case size, rating on final surveys, percentage of students to consultations, advertising expenses, bank and credit card fees, facilities costs, insurance, miscellaneous expenses, royalty fee, supplies, taxes (non-payroll), travel and entertainment expenses, and percentage available for salaries and profits for the 5 Micro Franchise LearningRx Centers, 66 Standard Franchise LearningRx Centers, and 70 LearningRx franchisee-owned Centers open during the full fiscal year October 1, 2016 through September 30, 2017 (separately stated)

Section I – Background Information

12 Things You Need to Know About the LearningRx Franchise

Expands Franchise Information on Website

1.  At the end of September 2017, LearningRx launched a new page in the franchise information section of its website. The new cost page covers things like initial franchise, training, and marketing fees; signage and rental estimates; inventory costs; insurance policies; and furniture and fixture costs. Initial investments are offered for two categories: micro franchises and standard franchises.

2. LearningRx also put up a review page for prospective franchisees. This page offers potential franchisees a glimpse of the LearningRx franchise system from the inside out. The company said that the ratings and comments left on that page so far, reflect the fact that LearningRx’s franchisee satisfaction (NPS) rating is one of the highest among franchise systems.

Named a Top 100 Franchise by Franchise Gator

3.  At the beginning of 2018, LearningRx once again earned a spot on Franchise Gator’s Top 100 Franchises, with a ranking of #66. According to Franchise Gator, rankings are mostly based on a formula created from various Items of the Franchise Disclosure Document that focus on financial stability, growth, transparency, engagement, continuity, and sustainability.

4.  The brand celebrated its spot on Franchise Gator’s list along with being named Best Education Franchise by Franchise Rankings. LearningRx was also proud to be listed under Entrepreneur’s 10 Hottest Franchise Business Categories for 2018.

Annual President’s Day Contest

5.  In early January 2018, LearningRx launched its annual President’s Day video contest. Every year, LearningRx looks for videos of people quickly reciting, from memory, all 45 U.S. presidents in order while performing other tasks and blocking out intense distractions. The contest is designed to encourage kids and adults across the country to create videos that demonstrate the memory and focus skills they have developed with LearningRx brain training.

6.  Tanya Mitchell, LearningRx’s chief research and development officer, said, “This is one of the first things we have students master in our brain training programs. It quickly strengthens long-term memory, attention and other cognitive skills, and it also gives a big boost of self-confidence. Many of these kids have struggled in school for years, so when they can quickly learn all the presidents they finally feel smart and confident, often for the first time ever.”

7.  The winner of the contest was announced on February 19. Ben Daugherty, a 13-year-old who went through a LearningRx one-on-one brain training program at the LearningRx Chattanooga East center, impressed the judges by playing the electric guitar and singing all 45 presidents in order.

Company History

8.  LearningRx was founded in 2002 by Dr. Ken Gibson in Colorado Springs, Colorado. Although the company was founded in the early 2000s, the company’s beginnings go back to 1968 when Dr. Gibson opened his first optometry practice with the goal of helping kids with learning and reading problems. In 1972, Dr. Gibson started his own preschool when he was unable to find a school that he felt would advance his daughter’s learning.

9.  Over the next few years, Dr. Gibson continued to open learning centers and develop and refine his programs. After several decades of research and implementing learning programs that produced satisfactory results, Dr. Gibson opened the first LearningRx location and decided to immediately start franchising the concept.

10.  In 2015, LearningRx, along with other companies selling “brain training” programs, was sued by the Federal Trade Commission for deceptive advertising. The following year, LearningRx settled with the FTC and agreed not to make the disputed assertions – such as the claims that LearningRx’s programs permanently improve serious health conditions like ADHD (attention deficit hyperactivity disorder), autism, dementia, Alzheimer’s disease, strokes, and concussions – unless they had “competent and reliable scientific evidence,” which was defined as randomized controlled trials done by competent scientists.

11.  Despite the lawsuit as well as the negative reception by the scientific community, LearningRx currently has nearly 70 locations across the United States.

Entrepreneur’s Franchise 500

12.  LearningRx did not earn a spot on Entrepreneur’s 2018 Franchise 500 list. However, the brand
was listed under Entrepreneur’s 10 Hottest Franchise Business Categories for 2018.

Section II – Estimated Costs

• Please click here for detailed estimates of LearningRx franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on LearningRx’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

For the fiscal year ended September 30

Franchised

2015

• Outlets at the Start of the Year:  83
• Outlets at the End of the Year:  78
• Net Change:  -5

2016

• Outlets at the Start of the Year:  78
• Outlets at the End of the Year:  75
• Net Change:  -3

2017

• Outlets at the Start of the Year:  75
• Outlets at the End of the Year:  70
• Net Change:  -5

Company-Owned

2015

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  1
• Net Change:  -1

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

Part 1 – Financial Performance Information for Affiliate-Owned LearningRx Center in Colorado Springs, Colorado for the Period of November 1, 2016 to October 31, 2017

• The financial performance figures in Part 1 represent historical information for the LearningRx affiliate-owned Center located in Colorado Springs, Colorado for the period of November 1, 2016 through October 31, 2017. This location has been operating since 2003.

A.  Revenue, Expenses, Income, and Profit for the Period of November 1, 2016 to October 31, 2017