FDD Talk: Kumon 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 Kumon franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Kumon 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 Kumon franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Kumon 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 Kumon’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• average enrollment numbers, after 12 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2016 and 2015, respectively

• average enrollment numbers, after 24 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2015

• average enrollment numbers for the top 25%, bottom 25%, and all Kumon Centers that have been open for 3 years or more (“Mature Centers”), as of December 31, 2017

Section I – Background Information

15 Things You Need to Know About the Kumon Franchise

Sees Record-Setting Number of Enrollments

1.  Kumon North America started off 2018 on a high note as it celebrated a record-setting year in 2017. In 2017, Kumon North America reached its highest total enrollment of over 410,000 students. Enrollment in the United States alone reached nearly 290,000, which is the highest-ever enrollment for the U.S. in the company’s history.

2.  Some of Kumon’s other 2017 achievements in the United States included: 100 new franchises; a 26 percent increase in the number of centers in the last 10 years; and a 59 percent increase in subject enrollments in the last 10 years. In the same press release, Kumon also highlighted that the franchise has been recognized as the top tutoring franchise on Entrepreneur Magazine’s annual Franchise 500 list.

3.  Larry Lambert, vice president of franchise recruitment at Kumon North America, Inc., said, “2018 is a momentous year for Kumon as we celebrate the 60th anniversary of our global operations. Our consistently high industry rankings are a testament to our rich history and dedication to helping children reach their true potential. We are committed to bringing the benefits of the Kumon Math and Reading Program to as many children as possible.”

Holds Second Annual Student Conference

4.  Kumon held its second annual Kumon Student Conference in Calgary, Alberta, Canada on July 18, 2018. Out of thousands of high-achieving Kumon students from the United States, Canada, and Mexico, just 56 were selected to attend the conference. The invited students are studying at least three years above their grade level in math and/or reading at their respective Kumon centers.

5.  Attendees had the opportunity to learn from each other through a variety of enjoyable learning activities designed to foster team building, group discussion, critical thinking, and creativity. In this unique learning environment, students heard from inspirational former Kumon students who have completed the Kumon program, some of whom are now successful professionals.

6.  The students were also encouraged to pursue “J by 6” or the study of advanced algebra and critical reading (Level J in Kumon) before the end of sixth grade. Many of the students selected to attend have already reached this goal, while the rest are well on their way. The goal of completing the Kumon Math and Reading Program, which goes up to calculus and critical reading, is to make students well prepared for the study of high school material. This desire was one of the founding principles of the Kumon Method.

7.  Sung Park, vice president of materials development and instruction at Kumon North America, Inc., said, “The beauty of Kumon is that it’s a learning program based on ability rather than age or grade, which allows our students the opportunity to study above their school grade level. It was our founder Toru Kumon’s vision to nurture as many students around the world who can contribute to their community. With this conference, we are able to celebrate our students’ accomplishments and inspire them to continue developing their skills through program completion and to aspire to become individuals who tackle some of the world’s challenges.”

Expands in New York City Metro Area

8.  At the beginning of May 2018, Kumon opened a new Kumon Math and Reading Center in the Bronx in the North Riverdale neighborhood. There are 43 Kumon Math and Reading Centers in New York City, but this will be just the second one to open in the Bronx. The new learning center in the Bronx is part of Kumon’s 2018 expansion plan of welcoming 100 new franchisees nationwide.

9.  Larry Lambert, vice president of franchise recruitment at Kumon North America, said, “North Riverdale is an ideal location for Kumon’s expansion due to the competitive nature of the educational landscape in New York City and the fact that Riverdale is one of the most sought after residential neighborhoods. As parents continue to prioritize educational opportunities outside of the classroom, we strive to deliver the highest quality of education to meet those needs.”

Company History

10.  Kumon was founded as the Math Center in 1958 by Japanese educator Toru Kumon in Moriguchi City, Osaka, Japan. Before starting the Kumon franchise, Kumon was a high school math teacher who developed self-learning math worksheets for his son, who was struggling with math in school. Kumon believed that the work of an educator is to foster a mindset for self-learning in children. After a lot of trial and error, Kumon created learning materials that enabled his son to work comfortably each day while steadily improving his math skills. These worksheets that Kumon made for his son in 1955 became the prototype for all future Kumon worksheets.

11.  After successfully helping his son, Kumon invited other children in his neighborhood to study at his home and he instructed them in the same way that he had done with his son. All of the children Kumon helped improved academically and he decided to establish an official office in Osaka and open additional Math Centers. In 1962, the first official Kumon Center opened in Shinjuku, Tokyo. By the end of the 1960s, Kumon had over 10,000 students enrolled in its program.

12.  In 1974, Kumon wrote The Secret of Kumon Math, which became a best seller and helped spread the popularity of the Kumon Method. Over the next decade, several more workbooks were published for children and Kumon added several more subjects to its program. Also during the early 1970s and 1980s, Kumon began opening its first international centers in New York, Taiwan, Brazil, and Germany. By the early 1990s, there were over 200,000 students enrolled in Kumon’s international locations. During the next decade, Kumon continued to expand internationally in countries such as England, Spain, Taiwan, Singapore, Mexico, Chile, China, and South Africa.

13.  While Kumon opened new international centers, more programs were being added to the curriculum, including a Japanese learning program for foreign learners, the Penmanship program, and French and German programs for native Japanese speakers. Kumon’s growth continued as it expanded its offerings and by the early 2000s, there were over 3 million children enrolled in Kumon around the world.

14.  In 2010, Kumon started offering its educational services to universities and a few years later the Baby Kumon Program was launched. Today, there are Kumon learning centers all around the world and Kumon has become one of the world’s leading childhood education franchises.

Entrepreneur’s Franchise 500

15.  Kumon has ranked on several of Entrepreneur magazine’s 2018 lists. On the overall 2018 Franchise 500 list, Kumon ranked No. 20. Additionally, Kumon was named the No. 1 tutoring franchise by Entrepreneur for the 17th consecutive year. Kumon also ranked No. 6 on Entrepreneur’s 2018 Top Global Franchises list.

Section II – Estimated Costs

• Please click here for detailed estimates of Kumon 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 Kumon’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

Franchised

2015

• Outlets at the Start of the Year:  1,450
• Outlets at the End of the Year:  1,470
• Net Change:  +20

2016

• Outlets at the Start of the Year:  1,470
• Outlets at the End of the Year:  1,480
• Net Change:  +10

2017

• Outlets at the Start of the Year:  1,480
• Outlets at the End of the Year:  1,494
• Net Change:  +14

Company-Owned

2015

• Outlets at the Start of the Year:  29
• Outlets at the End of the Year:  26
• Net Change:  -3

2016

• Outlets at the Start of the Year:  26
• Outlets at the End of the Year:  27
• Net Change:  +1

2017

• Outlets at the Start of the Year:  27
• Outlets at the End of the Year:  26
• Net Change:  -1

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

• Enrollments are subject-students that are reported to Kumon by franchisees. For example, one student may enroll in Math and Reading subjects. This student would count as two enrolled subject-students. You charge tuition, and correspondingly pay a royalty to Kumon, for each subject-student.

Part 1 – Average Number of Enrollments After 12 Reporting Months

• The following chart represents information on the enrollments for Kumon Centers after 12 months of operation.

Year Center Opened:  2016 (centers opened during the fiscal year 2016 and still open as of December 31, 2017, excluding Centers that have been transferred to a new franchisee)