FDD Talk 2019: Kiddie Academy 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 Kiddie Academy franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Kiddie Academy franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Kiddie Academy franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Kiddie Academy outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Kiddie Academy’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average revenue, labor expense, occupancy expense, miscellaneous expense, and gross profit for the bottom quarter, top quarter, and all 137 Mature Academies (i.e. franchisee-owned Kiddie Academy outlets that have been open for at least 24 months) that submitted the required expense information to Kiddie Academy

• 2018 average revenue, labor expense, occupancy expense, miscellaneous expense, and gross profit for the bottom quarter, top quarter, and all 36 Ramping Academies (i.e. franchisee-owned Kiddie Academy outlets that have been open for at least 12 months, but less than 24 months) that submitted the required expense information to Kiddie Academy

Section I – Background Information

16 Things You Need to Know About the Kiddie Academy Franchise

Introduces ‘Character Essentials’ Curriculum

1.  At the beginning of September 2019, just in time for the new school year, Kiddie Academy introduced its new Character Essentials curriculum. According to Kiddie Academy, this is an important development in its ongoing commitment to incorporating the latest research and trends into its educational programs.

2.  Character Essentials is a completely-revised and comprehensive program for infants through school-age children. Kiddie Academy began implementing the program throughout its Academies in September.

3.  Richard Peterson, vice president of education for Kiddie Academy, said, “In early childhood education, teaching character education is one part of the larger picture of developing social emotional skills in young children. These are the building blocks for children’s future success not only in school but in life.” Peterson also noted that studies have shown a correlation between exposure to character education programs and increased academic performance in school, as well as decreased disciplinary problems overall.

4.  Character Essentials brings several new elements that will help teachers develop learning experiences that provide a solid foundation and prepare the students in Kiddie Academy’s care for school and life. There are individual programs for each of the seven age groups, infants through school-age children.

5.  Instead of one trait per month, Kiddie Academy now offers a monthly theme that focuses on four traits. Throughout the year, children will be introduced to 48 individual character traits that support the overall monthly themes in the Preschool through School-Age programs. The character themes for each month are:

• January – We Get Along
• February – We Are Unique
• March – We Are Patient
• April – We Are Good Citizens
• May – We Are Responsible
• June – We Are Leaders
• July – We Are Proud
• August – We Are Strong
• September – We Are Friends
• October – We Have Feelings

6.  Peterson added, “Character Essentials teaches common values and character traits to children with the intention of helping them develop into moral, caring and responsible citizens. These programs help children navigate relationships with others and shape their attitudes and actions in society.”

Debuts New Ad Campaign to Spotlight Learning Beyond the Classroom

7.  At the beginning of January 2019, Kiddie Academy launched its new national advertising campaign titled “Learn On.” Fueled by the notion that learning extends far beyond the classroom, the campaign showcases how a child’s curiosity, sparked while at Kiddie Academy, carries into every aspect of their day.

8.  The company is also launching a complementary campaign targeted toward prospective franchisees called “Build On,” which runs in franchise trade print and online outlets, as well as on national radio.

9.  Greg Helwig, president of Kiddie Academy, said, “Our new ‘Learn On’ campaign underscores our fundamental belief that opportunities to teach and expand young minds present themselves every day and everywhere. Kiddie Academy empowers children with valuable tools to help make the most of those opportunities. Given the right environment, they become more curious and collaborative, with the ability to discover and accomplish more. We hope to communicate the potential and fascination for learning that exists in every minute – in the classroom, at home and throughout the community.”

10.  The campaign, developed in partnership with Planit, features a series of 30- and 15-second television spots, print ads, and web and social media spots. One spot shows a little girl learning about geology inside an Academy, then discovering rocks in her own backyard, and finally, showing off a very impressive color-coded rock and gemstone collection. Another depicts a young toddler first learning about the letter C, beginning to see it everywhere – in the curve in a play train set and a broken piece of cereal – and then proudly creating the letter himself.

11.  According to Nicole Salla, vice president of marketing for Kiddie Academy, “Over the years, parents have shared with us the authentic moments that happen outside our Academies that make good on our promise of empowering children every day, not just the time spent with our teachers. The lessons and values we instill at Kiddie Academy continue to make tremendous impact far beyond the classroom.”

12.  Jess Brown, group creative director for Planit, added, “Kiddie Academy’s role in fueling those magical moments of growth that punctuate everyday life became the backdrop to our ‘Learn On’ story line, and the campaign establishes a genuine connection between the parents and the brand. Rather than following category norms, the creative feels high-energy and spirited – capturing the momentum of perpetual learning and the joy of youthful curiosity.”

Company History

13.  Kiddie Academy was founded in 1981 by Pauline Miller and her husband George in Baltimore County, Maryland. Miller was an educator and mother who passionately sought to provide better child care options. She wanted to provide more than just traditional child care and offer a curriculum that inspires the possibilities in each child for their future. After developing the first version of Kiddie Academy’s proprietary curriculum, Miller was ready to open the doors of the first Kiddie Academy learning center.

14.  The first Kiddie Academy was a success and two years later, the company moved into its first corporate office and opened a second Kiddie Academy in the Baltimore County area. Over the next few years, Kiddie Academy opened additional learning centers, but did not start  franchising until 1992. By the end of the 1990s, Kiddie Academy had over 50 locations open around the United States.

15.  Kiddie Academy’s growth continued over the next few decades, while the company also improved its curriculum. In 2007, Kiddie Academy received multi-state accreditation for the first time and also moved into a bigger headquarters, where the company remains today. There are now Kiddie Academy learning centers across 24 states and the District of Colombia.

Entrepreneur’s Franchise 500

16.  Kiddie Academy ranked No. 111 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Kiddie Academy franchise costs, based on Item 7 of the company’s 2019 FDD.

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

• Please click here for detailed information on Kiddie Academy’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  145
• Outlets at the End of the Year:  170
• Net Change:  +25

2017

• Outlets at the Start of the Year:  170
• Outlets at the End of the Year:  197
• Net Change:  +27

2018

• Outlets at the Start of the Year:  197
• Outlets at the End of the Year:  213
• Net Change:  +16

Company-Owned

2016

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

2017

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

2018

• 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, 2019 FDD) and Analysis

• The information below represents an actual historic financial performance representation.

• The information covers calendar year 2018 and was obtained from the financial results reported to Kiddie Academy by its existing franchisee-owned outlets. This information has not been audited or verified by Kiddie Academy or a third party.

• As of December 31, 2018, there were 213 franchised Academies. As of that date, 23 of these Academies (10.7% of the total) had been open and operational for less than 12 full months and have therefore been excluded from the data set.

• Of the remaining 190 Academies, 17 Academies (8.9% of the total) failed to report the required information for the calendar year ending December 31, 2018 and have therefore also been excluded from the data set.

• Accordingly, the financial performance information presented in the tables below represents the results of the remaining 173 Academies (the “Reporting Academies”).

• The results of the Reporting Academies are divided into two groups: Academies open 24 months or more (“Mature Academies”) and Academies open less than 24 months (“Ramping Academies”).

• Financial performance information about Kiddie Academy’s Mature and Ramping Academies includes Gross Revenue, Labor, Occupancy and Miscellaneous Expenses, and Gross Profit.

• All Academies offer substantially the same services and products to the public. However, the actual financial performance among Academies varies substantially.

• The results presented in the tables below indicate the Gross Profit, which is the Gross Revenue minus the listed operating expenses.

• The time periods expressed in the chart below are not meant to be an indication as to when or if an Academy will reach maturity. Each Academy’s growth rate will vary by location, competitive environment, the region and market area in which the unit is located, labor costs, programs, and the individual franchisee’s marketing efforts and management skills.

• Accordingly, the information presented should only be used as a reference guide in conducting an independent analysis of the proposed business.

Part 1 – Mature Academies (Calendar Year Ended December 31, 2018)

All Mature Academies