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

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

• Section II – Estimated initial investment for a Primrose Schools 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 Primrose Schools franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Primrose Schools 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 Primrose Schools’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average, median, high, and low revenue for the 13 Smaller Facilities and 320 Larger Facilities (separately stated) that were open and operating throughout the entire 24-month period from January 1, 2017 to December 31, 2018

• number and percentage of Smaller Facilities that achieved 2018 revenues of more than $1,500,000; $1,250,000 to $1,499,999; and $845,000 to $1,249,999, respectively

• number and percentage of Larger Facilities that achieved 2018 revenues of more than $2,500,000; $2,100,000 to $2,499,999; $1,500,000 to $2,099,999; and $659,000 to $1,499,999, respectively

• 2018 average gross revenue, total expenses, and EBITDAR for the top third, middle third, bottom third, and all 216 Larger Facilities that were open and operating throughout the entire 24-month period from January 1, 2017 to December 31, 2018, and submitted complete and timely financial information to the franchisor for the full period

Section I – Background Information

15 Things You Need to Know About the Primrose Schools Franchise

Announces Plans to Expand Footprint in 40+ Markets

1.  In mid-June 2019, Primrose Schools acknowledged the brand’s strong success in 2018, achieving 10 percent year-over-year growth and generating more than $780 million in system-wide revenue. At the end of 2018, local franchise owners operated 395 Primrose Schools across the country, with schools open two or more years generating average gross revenues of $2.1 million in 2018. This momentum has continued into 2019, with the company awarding 14 new franchises so far this year to open locations in target markets nationwide.

2.  The company’s continued success has fueled its ongoing nationwide expansion and increased interest from real estate professionals to collaborate with franchise owners to open new schools across the country. Primrose kicked off 2019 with more than 160 schools in development and 38 new locations slated to open by year-end, including the milestone 400th location.

3.  To support its ongoing franchise development efforts, Primrose recently appointed Steven Fricker as chief development officer to oversee strategic expansion as the company enters a period of accelerated growth, as well as ensure franchisees are provided support through all stages of the school development process.

4.  Fricker said, “Primrose is meeting a critical need for children and families in the U.S., as the demand for high-quality early education continues to grow nationwide. Current Primrose Franchise Owners are enriching young minds and positively contributing to the communities they serve, while benefiting from our unmatched support that empowers them to maximize the performance of their schools.”

5.  With quality early education in high demand across the nation, Primrose has identified several markets where there is an exceptional need and thus significant potential for success, including South Florida, Chicago, and Southern California, among others. The brand is seeking potential franchisees in these target growth areas who are looking for a meaningful investment opportunity that is rewarding personally and professionally for franchise owners.

6.  Additionally, Primrose is actively seeking real estate professionals to assist in identifying future school locations in more than 40 markets throughout the U.S., including Boston, Baltimore, and Nashville. Primrose locations attract a high-end demographic of customers and offer the unique benefit of bringing a reliable, steady stream of foot traffic twice a day, each weekday. This consistency coupled with the brand’s flexible site requirements reinforces why a Primrose school can be a valuable addition to suburban, urban, mid-market, corporate, and mixed-use settings.

7.  The brand’s real estate development strategy fits a variety of environments, with options including purchasing land and constructing traditional freestanding one- or two-story buildings; leasing space in multi-tenant office buildings and retail centers; and renovating purchased and leased single-tenant properties. Primrose also offers extensive conversion capabilities and has supported franchisees with acquiring and converting a wide range of one- and two-story buildings, including medical facilities and churches, into new school locations.

8.  Fricker added, “The rising demand for high-quality early education coupled with our premier brand leadership reinforces why Primrose schools are an excellent amenity for developers looking to attract and retain tenants. We have a full pipeline of Franchise Owners looking to identify locations that meet their geographic and market needs, and who are ready to purchase or lease sites that fit our ideal criteria.”

Celebrates Opening of 400th Location

9.  In early June 2019, Primrose Schools announced the opening of the brand’s 400th location, reaching a major milestone in its hometown market of Atlanta. Owned and operated by four local franchise owners, Primrose School of Atlanta Westside will create approximately 40 jobs and serve more than 200 children at full capacity in the rapidly developing Westside neighborhood.

10.  Jo Kirchner, CEO of Primrose Schools, said, “Achieving the 400th location milestone just miles from where Primrose began and where we recently relocated our headquarters is especially rewarding. We are proud to bring premier early education and care to Atlanta’s Westside along with our mission to create a brighter future for all children. Along with our Franchise Owners, we look forward to giving back to and serving this community for years to come.”

11.  The opening of Primrose School of Atlanta Westside marks the 46th Primrose location in the Atlanta, Georgia area. In conjunction with the company’s growth locally, Primrose is also breaking growth records across the country, with 160 schools in the development pipeline and 38 locations slated to open in 2019.

12.  Primrose School of Atlanta Westside is owned by two local couples: Jennifer Bunting-Graden and George Elba, and Natalie and Chris Williams. Jennifer and Natalie met while working as lawyers in Atlanta and both struggled to find quality care options for their children. Driven by their shared experiences and dedication to the Atlanta community, they made the decision to open their own Primrose school and help address the growing demand for quality early education and care.

13.  Bunting-Graden said, “As working parents in the Atlanta area, we understand the uphill battle many families face in finding trusted child care. We’re thrilled to help fill this need in the community and look forward to addressing other critical needs on Atlanta’s Westside by becoming an active, engaged member of this neighborhood.”

Rewards Excellence with Contributions to Local Communities

14.  At the beginning of April 2019, Primrose Schools awarded 12 locations with donations to local charities for demonstrating its values of serving with passion, living with integrity, treating others with respect, and giving without expectation. The recognition is part of the company’s Wow Moments Awards program, which celebrates actions that bring to life Primrose values and the character traits developed daily in Primrose classrooms.

15.  According to Annette C. Heng, chief school excellence officer for Primrose Schools, “Special moments of kindness, respect and going above and beyond for others happen every day in Primrose schools across the country. It is with intention that Franchise Owners, teachers and staff model positive values and exceptional character for children daily. The Wow Moments Awards program is one way we celebrate their outstanding efforts that ultimately prepare children for success in learning and life.”

16.  Of the nearly 400 Primrose schools across the country (at the time), the following 12 schools were recognized for the special moments they created in 2018:

• Primrose School of Peachtree Corners (Atlanta, Georgia) hosted a daddy-daughter dance class to encourage healthy habits in young children and create fun memories for families. The school will donate its $1,000 winnings to Bert’s Big Adventure.

• Primrose School of Bent Trail (Dallas-Fort Worth, Texas) celebrated its pre-kindergarten and kindergarten graduates in a big way, lining the school driveway with individual signs for each graduate, surprising students with confetti canons during the ceremony, and livestreaming the event for family members who were unable to attend in person. The school was voted the grand-prize winner of this year’s Wow Moments Awards and will receive $3,000, which will benefit the Dallas Elite Track Club.

• Primrose School of West Allen (Dallas-Fort Worth, Texas) turned a classroom into a science lab by setting up an interactive science table and inviting students up to explore different substances, like syrup, using their senses. The school will donate its $1,000 winnings to The Samaritan Inn.

• Primrose School at Highlands Ranch Business Park (Denver, Colorado) students delivered handwritten notes and gifts to their local sheriff’s department to show support as the community mourned a fallen officer. The school will donate its $1,000 winnings to the Douglas County Fallen Officers Fund.

• Seven Primrose schools in the greater Houston area (Houston, Texas) collected more than 3,000 books to help rebuild the library of a local elementary school, which was destroyed by flooding from Hurricane Harvey. The schools will donate their $1,000 winnings to Upbring, a nonprofit that provides supportive services to children and families who have experienced abuse. Participating schools included: Primrose School of Cinco Ranch, Primrose School of Eldridge Parkway, Primrose School of Kelliwood, Primrose School of North Mason Creek, Primrose School of West Cinco Ranch, Primrose School of The Westchase District, and Primrose School of Woodcreek Reserve.

• Primrose School of Midlothian Village (Richmond, Virginia) students hosted a superhero-themed luncheon to thank first responders for the work they do in their community. The school will donate its $1,000 winnings to the Camp Bruce McCoy-Brain Injury Association of Virginia.

17.  Many of these moments were inspired by the Primrose-exclusive Balanced Learning approach. Designed by subject-matter experts, the approach nurtures every aspect of children’s development – from instilling foundational science skills to practicing generosity.

18.  Heng added, “The winning moments illustrate what the Primrose experience is all about. Through our passionate people, Balanced Learning approach and commitment to excellence, we deliver an unparalleled early learning experience to children, families and communities across America.”

Company History

19.  Primrose Schools was founded in 1982 by Paul and Marcy Erwin in Marietta, Georgia. The Erwins wanted to provide high-quality early childhood education and care. The Primrose Schools concept was a success and additional schools opened in the area.

20.  In 1988, the Erwins brought in Jo Kirchner, the company’s current president and CEO, as a consultant to help shift the then half-day preschool to a full-day model, as well as to assist in the launch of the Primrose franchising concept. The fourth Primrose school opened that same year and franchising launched two years later in 1990. Also in 1990, Kirchner officially joined Primrose Schools as the company’s new vice president.

21.  In 1998, as Primrose continued to grow, it became the first educational child care company to receive accreditation from the Commission on International and Trans-Regional Accreditation (CITA), the Southern Association of Colleges and Schools Council on Accreditation and School Improvement (SACS CASI), and the North Central Association Council on Accreditation and School Improvement (NCA CASI).

22.  A year later, the Erwins retired and sold Primrose Schools to Greenwich, Connecticut-based Security Capital Corporation, after which Kirchner was named president and CEO of Primrose. Over the next few years, Primrose Schools continued to grow. In 2006, American Capital Strategies acquired the company from Security Capital for approximately $63 million. Primrose Schools was sold again in 2008 to Roark Capital Group, which remains owner of the company today. Kirchner has remained president and CEO throughout all of Primrose Schools’ ownership changes.

Entrepreneur’s Franchise 500

23.  Primrose Schools ranked No. 55 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Primrose Schools 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 Primrose Schools’ 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:  310
• Outlets at the End of the Year:  340
• Net Change:  +30

2017

• Outlets at the Start of the Year:  340
• Outlets at the End of the Year:  372
• Net Change:  +32

2018

• Outlets at the Start of the Year:  372
• Outlets at the End of the Year:  395
• Net Change:  +23

Company-Owned

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:  0
• Net Change:  -1

2018

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

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• The data below has been generated using financial reports submitted by franchisees. The franchisees entered all data into their financial reports and the franchisees were responsible for categorizing their expenses according to guidelines Primrose Schools provides.

• Primrose Schools has not audited or verified these financial reports nor has it asked questions of the submitting franchisees to determine whether they are in fact accurate and complete, although it has no information or other reason to believe that they are unreliable.

• Primrose Schools did not use any reports that were incomplete or for which the information was presented in a manner that prohibited it from applying the information to one of the categories below. The data also does not include franchisees that failed to submit complete financial reports when Primrose Schools prepared this information.

• For purposes of this Item 19, the “Summary Period” means the 24-month period from January 1, 2017 to December 31, 2018.

• Primrose Schools considers franchised Facilities with a capacity of less than 145 children to be “Smaller Facilities” and franchised Facilities with a capacity of between 145 and 296 children to be “Larger Facilities.”

• There is one franchised Facility with a capacity of 418 children, which has not been included since it is not representative of a typical Facility (the “Excluded Facility”).

• At the end of Primrose Schools’ 2018 fiscal year, there were 334 franchised Facilities (including 13 Smaller Facilities, 320 Larger Facilities, and 1 Excluded Facility) that had been in operation throughout the entire Summary Period.

• This Item 19 does not include data from two franchised Facilities that closed during the Summary Period (neither of which were open for less than one year), since such Facilities were not open for the entire Summary Period.

Part 1 – Summary of Annual Revenues of Franchised Schools During the Period January 1, 2018 Through December 31, 2018

• The three tables directly below set forth the historical average annual revenues during the period between January 1, 2018 and December 31, 2018 achieved only by franchised Facilities that were open and operating throughout the entire Summary Period, excluding the Excluded Facility.

• A total of 334 franchised Facilities, including 13 Smaller Facilities and 320 Larger Facilities, were open and in operation throughout the Summary Period and are represented in the three tables.

• The Facilities represented in this Item 19 are located in Alabama, Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Maryland, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, and Wisconsin.

Table 1 – Average, Median, Low, and High Revenue

Smaller Facilities (13 Total)