In this FDD Talk 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 2018 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 2018 FDD

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

• 2017 average, median, high, and low total sales for the 16 company-owned and 133 franchised School of Rock businesses that were open during the 24-month period from January 1, 2016 to December 31, 2017

• 2017 average, median, high, and low student enrollment as of January 1, 2017 and December 31, 2017 for the 16 company-owned and 133 franchised School of Rock businesses that were open during the 24-month period from January 1, 2016 to December 31, 2017

• 2017 average, median, high, and low total sales for the 133 franchised School of Rock businesses that were open during the 24-month period from January 1, 2016 to December 31, 2017, grouped by number of months the Schools have been in operation

• 2017 average, median, high, and low student enrollment as of December 31, 2017 for the 133 franchised School of Rock businesses that were open during the 24-month period from January 1, 2016 to December 31, 2017, grouped by number of months the Schools have been in operation

• 2017 average total sales, cost of sales, gross profit, management labor, admin labor, rent, marketing expense, IT expense, imputed royalties, other expenses, total expenses, and net operating income for the 16 company-owned School of Rock businesses that were operating throughout 2017

• 2017 median total sales, cost of sales, gross profit, management labor, admin labor, rent, marketing expense, IT expense, imputed royalties, other expenses, total expenses, and net operating income for the 16 company-owned School of Rock businesses that were operating throughout 2017

Section I – Background Information

18 Things You Need to Know About the School of Rock Franchise

Partners with Hal Leonard to Bring Sheet Music to Students

1.  In early March 2018, School of Rock announced that it had partnered with Hal Leonard, the world’s largest print music publisher. Through the partnership, Hal Leonard will be the preferred supplier of digital sheet music, through its website SheetMusicDirect.com, for all School of Rock students and faculty.

2.  The first-of-its-kind program will make customized charts available to School of Rock’s students and teachers for classes taught in their programs and camps. The students will have access to the content in the school, at home, or via mobile devices through subscription and à la carte programs. The two companies are partnering to create customized teaching materials as well.

3.  Rob Price, CEO of School of Rock, said, “Our unique performance-based music education program relies on a vast catalog of high-quality sheet music. Our students and instructors will now have unparalleled access through SheetMusicDirect.com as well as a conduit for our own content distribution. We are also excited to be a strong voice in support of copyright protections for the composers we so admire. We invite all music educators to stand with us on this effort.”

4.  The program was launched in the spring of 2018. Doug Lady, senior vice president of Hal Leonard, added, “Hal Leonard is thrilled to be working with an innovator like School of Rock through this unique program. Our collective goal is to make more music makers by providing accurate, legal print music to their students to help them learn the songs, jam together and then perform!”

Welcomes New Talent to the Finance and Franchise Leadership Teams

5.  In early April 2018, School of Rock announced new additions to its finance and franchise development teams to support its rapid global growth. John Cappadona was named chief financial officer; Laurie Sweeney joined School of Rock as controller; and Brian Galvin was appointed the new director of franchise development.

6.  Rob Price, CEO of School of Rock, said, “I’m excited about the talented team we are building. School of Rock’s unique combination of music lessons and performance-based music education is fueling compelling growth in existing schools, strong franchise sales, and expansion to international markets. John, Laurie and Brian will help accelerate this momentum.”

7.  Cappadona was most recently vice president of finance at Sentient Jet, a leading private aviation company. Before that, Cappadona built the financial planning and analysis team at W.B. Mason Company. He has also held key roles at Olympus and Boston Scientific.

8.  Before joining School of Rock, Sweeney served as assistant controller at W.B. Mason after 15 years at Papa Gino’s, where she progressed from accounting manager to controller. Sweeney has also worked in non-profit manufacturing and services.

9.  Galvin comes to School of Rock after serving in a similar capacity at Rita’s Italian Ice. In addition to his franchise sales experience, Galvin has worked for multi-unit franchisees, and has run his own franchises.

Partnered with Fox for “Bohemian Rhapsody” Release

10.  At the beginning of September 2018, School of Rock announced that it had partnered with Twentieth Century Fox Film to celebrate the release of the Queen biopic “Bohemian Rhapsody.” School of Rock and Twentieth Century Fox Film teamed up in a variety of co-marketing programs, including PR events, in-school curriculum, promotions, and sweepstakes.

11.  On September 5, Freddie Mercury’s birthday, School of Rock and Twentieth Century Fox Film put on a once-in-a-lifetime press day where entertainment writers interviewed the cast of “Bohemian Rhapsody” and were also invited to learn and play iconic Queen songs, taught by School of Rock staff and students. This press experience allowed writers to experience the thrill of performing Queen’s classic songs before enjoying the band’s live performance at their Las Vegas residency show later that evening.

12.  School of Rock also incorporated Queen songs into its current curriculum across the schools in its system. Students learned traditional music concepts through the performance of Queen hits such as “We Are the Champions,” “Another One Bites the Dust,” and more. Select School of Rock locations were even invited to private screenings of the film to celebrate the release.

13.  Rob Price, CEO of School of Rock, said, “It’s a natural fit for School of Rock to partner with Bohemian Rhapsody. Our revolutionary curriculum is designed to reinvent music lessons through learning and performing classic rock. Through School of Rock’s collaboration with this film, we know the next generation of rock musicians will have a greater appreciation for the legacy of Queen’s music.”

Company History

14.  School of Rock traces its origins to 1996 when founder Paul Green began offering music lessons from his home. Green offered individual lessons as well as group lessons and soon discovered that the kids taking group lessons improved more than the individual children receiving traditional music lessons. After this, Green modified his teaching method to supplement traditional instruction with group practice, with the goal of putting on a concert. In 1999, Green’s most advanced students put on their first public concert.

15.  Not long after this, Green took out a loan of $7,000 in 2002 and opened the first permanent Paul Green School of Rock Music location in Philadelphia. Around this same time, VH1 and Viacom shot a documentary about Green and his “Rock School.” Also during this time, the “School of Rock” film starring Jack Black was in production and many people who knew Green felt that Black’s character was based on Green. Green briefly thought about suing the film, but decided against it as he felt that his school benefited from the press surrounding the Jack Black movie.

16.  Later in 2002, Green opened a second School of Rock location in Downingtown, Pennsylvania to maintain an acceptable student to teacher ratio. Over the next few years, Green continued to open additional School of Rock locations in New Jersey, Delaware, San Francisco, New York City, Austin, Salt Lake City, and many other cities in the country.

17.  In 2009, Green was bought out by investor Sterling Partners and the management team he had brought in, headed by former Clear Channel executive Matt Ross. Since then, School of Rock has continued to grow and is now the largest after-school music program in the United States. School of Rock also has international locations in Canada, Mexico, the Philippines, and a handful of other countries.

Entrepreneur’s Franchise 500

18.  School of Rock ranked No. 163 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of School of Rock 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 School of Rock’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:  120
• Outlets at the End of the Year:  144
• Net Change:  +24

2016

• Outlets at the Start of the Year:  144
• Outlets at the End of the Year:  150
• Net Change:  +6

2017

• Outlets at the Start of the Year:  150
• Outlets at the End of the Year:  156
• Net Change:  +6

Company-Owned

2015

• Outlets at the Start of the Year:  14
• Outlets at the End of the Year:  15
• Net Change:  +1

2016

• Outlets at the Start of the Year:  15
• Outlets at the End of the Year:  16
• Net Change:  +1

2017

• Outlets at the Start of the Year:  16
• Outlets at the End of the Year:  20
• Net Change:  +4

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

• Parts 1 through 5 provide certain historical performance information for 16 company-owned School of Rock businesses and 133 franchised School of Rock businesses in 2017 (the “Designated Schools”).

• The Designated Schools only include those company-owned and franchised School of Rock businesses that were open during the 24-month period from January 1, 2016 to December 31, 2017.

• The Designated Schools do not include the following: 12 franchised schools that were open less than five days per week, 11 franchised schools that were open less than 24 months, and 4 School of Rock franchise businesses that were reacquired by the company during the 24-month period.

• 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.

• “Company-owned” refers to the School of Rock businesses owned and operated by the franchisor’s affiliate, School of Rock, LLC.

• 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, which is included in 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 Total Sales minus Cost of Sales.

• IT Expense – IT Expense includes all IT and Software costs.

• 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.

• Marketing Expense – Marketing expense includes but is not limited to brand fund contributions, local marketing, and advertising.

• Net Operating Income – Gross Profit minus Total Expenses. This does not include taxes or depreciation.

• Operating Expenses – Operating Expenses includes the day-to-day costs in conducting the normal business operations for the company-owned School.

• Other Expenses – Other Expenses includes but is not limited to the utilities, insurance, licenses, permits, repairs, 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 Schools’ 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, IT Expense, Management Labor, Marketing Expense, Rent, and Other Expenses.

• Total Sales – Total Sales means all revenue generated at, from, or in connection with the operation of the School, including from sales (net of discounts) of all products and services conducted at, from, or with respect to the Designated School.

• Total Sales does not include the sale of products or services for which refunds have been made in good faith to customers, 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 Total 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, 2017 to December 31, 2017, respectively.

Part 1 – Annual Total Sales and Student Enrollment

• The charts below provide the average and median 2017 annual Total Sales at the Designated Schools, and the average and median student enrollment at each of the Designated Schools as of January 1, 2017 and December 31, 2017.

• The franchisor also provides the average and median percentage increase in Total Sales and enrollment during that time period.

A.  Annual Total Sales (2017)

Company-Owned