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 2019 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 2019 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 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of School of Rock’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 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, 2017 to December 31, 2018
- 2018 average, median, high, and low student enrollment as of January 1, 2018 and December 31, 2018 for the 16 company-owned and 133 franchised School of Rock businesses that were open during the 24-month period from January 1, 2017 to December 31, 2018
- 2018 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, 2017 to December 31, 2018, grouped by number of months the Schools have been in operation
- 2018 average, median, high, and low student enrollment for the 133 franchised School of Rock businesses that were open during the 24-month period from January 1, 2017 to December 31, 2018, grouped by number of months the Schools have been in operation
- 2018 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 2018
- 2018 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 2018
Section I – Background Information
25 Things You Need to Know About the School of Rock Franchise
Rolls Out App
1. In late October 2019, School of Rock announced the next phase to its groundbreaking approach to teaching musical proficiency with the launch of the School of Rock Method App. The combination of one-on-one instruction, group rehearsals, live performances supported by the School of Rock Method Book, and now the App, provide students an engaging and exciting start to their musical journey.
2. According to Sam Dresser, School of Rock’s vice president, education, “School of Rock’s integrated approach to music education is unlike any other. It engages and challenges students, and results in amazing musical proficiency. With the Method App, students now have an invaluable and creative tool to assist with and encourage at-home practice between lessons.”
3. Students start their musical journey at School of Rock by learning to play songs that inspire them. Through this SongFirst® approach, classic songs like AC/DC’s “Thunderstruck” and Led Zeppelin’s “Stairway to Heaven” are used to teach technique and theory. Students are also given a proprietary Method Book – the roadmap for School of Rock’s educational approach that outlines musical concepts and techniques, teaches sight reading, and more.
4. The addition of the School of Rock Method App allows students to practice the concepts learned in the Method Book. School of Rock teachers use the app to assign songs and exercises between in-school lessons and group rehearsals. Students then learn the songs and complete exercises. They can even practice playing with a band because the app provides backing tracks along with song transcriptions.
5. Students can also manipulate playback, tempo, and backing track audio to help make learning easier. The Method App is only available to students and parents of students enrolled at a School of Rock.
6. Rob Price, CEO of School of Rock, added, “We are always looking for ways to improve our teaching methods and provide the best experience for our students as we continue to grow School of Rock across the globe. The School of Rock Method brings music education to the next level, and we are excited for students to take hold of these tools to amplify their musical abilities.”
Opens 250th Location
7. In mid-October 2019, School of Rock celebrated the opening of its 250th location, in Ipanema, Rio de Janeiro, the first of eight schools that will open in the South Zone of Rio de Janeiro. The milestone signals School of Rock’s larger international development strategy to strengthen the company’s position as the premier music education brand in the world.
8. Paulo Portela, CEO of School of Rock’s master franchisee in Brazil, will open 117 schools, in addition to the 33 already contracted, for a total of 150 schools throughout Brazil over the next few years. Portela also has been awarded master franchise agreements for Spain and Portugal. The first School of Rock sites in Lisbon, Madrid, and Barcelona are targeted to open in 2020.
9. According to Portela, “Rio de Janeiro is central to Brazilian musical history and ‘cariocas’ love rock ‘n roll. The Ipanema School, along with the first Rio area school in Barra da Tijuca, show our commitment to sustaining that heritage. I am thrilled for the opportunity to accelerate and increase future growth across Brazil, Spain and Portugal.”
10. School of Rock also continues to expand its conversion program, which rebrands existing music education businesses and turns them into School of Rock locations. The company recently converted its first independent music school to a School of Rock in Lafayette, Louisiana. The next conversion will be the Brazilian independent music school EM&T in Sao Paulo, becoming the largest overall School of Rock site in the global system with approximately 800 enrolled students.
11. Rob Price, CEO of School of Rock, added, “This is an incredibly exciting time to be part of School of Rock as we work diligently to ramp up our international development strategy and reach thousands more aspiring musicians across the world. We are planning for long term global growth fueled by a passionate community, curriculum innovation, and new strategic partnerships.”
12. Price traveled to Brazil to finalize and mark these milestones, as well as observe an exciting partnership with Rock in Rio. The School of Rock House, an experiential booth located at the event, gave the more than one million festival goers the opportunity to “play Rock in Rio” as well as get to know the brand.
13. An estimated 20,000 attendees unleashed their inner rock star at the School of Rock House. Chad Smith, the drummer for the Red Hot Chili Peppers, helped School of Rock Brazil celebrate its impact on the lives of its students.
14. Smith, in disguise, surprised 60 School of Rock students, jamming with them, going head-to-head with some talented fellow drummers, providing advice, and taking photos. One scholarship student was graciously invited to join Smith backstage at Rock in Rio and get pre-concert mentorship with the band’s bassist, Flea, who gave her tips on how to excel on the Bass.
15. One of the pressing opportunities that the School of Rock leadership team has identified in its global expansion is to ensure that young people without financial means get access to music. In celebration of the developments in Brazil, School of Rock has committed to work with Associação Para Iniciação Musical (AIM), a nonprofit focused on creative opportunities for children in the country’s most vulnerable communities. School of Rock will make the largest single donation in AIM’s history to help expand access to musical education in the favelas that surround the markets in which the brand operates.
Launches Worldwide Talent Search with Atlantic Records and Artist Partner Group
16. At the beginning of April 2019, School of Rock, in partnership with Atlantic Records and Artist Partner Group (APG), launched a major worldwide artist search called Center Stage. This incredible new talent search will provide the opportunity for musicians around the world to be seen by record label executives.
17. Beginning in April, singers were able to submit a five-minute audition video in hopes of being one of approximately 25 selected individuals flown out to Los Angeles for an invaluable industry experience. These artists will perform in front of Atlantic Records and APG executives at a private artist showcase. They will record songs at APG’s studios with professional engineers. While not every applicant will receive this showcase opportunity, 100 applicants that show promise as artists will receive a scholarship to a School of Rock camp of their choice.
18. Rob Price, CEO of School of Rock, said, “School of Rock is one of the largest communities of creators in the world. We pride ourselves on taking students out of a practice room and putting them on to the stage. With Center Stage, we’re giving these talented artists the potential to reach their biggest audience yet. It’s an honor to be a central part of that journey.”
19. The program is open to all vocalists aged 13-19 years old living in a country where School of Rock operates, including the U.S., Canada, Mexico, Brazil, Chile, Peru, South Africa, Australia, and the Philippines. Vocalists do not need to be School of Rock students in order to participate. However, only School of Rock students auditioning for Center Stage will receive personalized feedback from School of Rock staff on their submissions that will help them continue to grow and develop as musicians.
20. Mike Caren, CEO of Artist Partner Group, added, “One of my top priorities is to break down the barriers of entry in the industry. School of Rock has valuable resources to develop one’s artistry, and Center Stage is a unique platform for the discovery of talent.”
21. School of Rock was founded in 2002 by Paul Green in Philadelphia, Pennsylvania and initially called the Paul Green School of Rock Music. The music education program developed by Green began back in 1996 when he started offering individual music lessons from his home. After Green invited some students to practice with his own band, he noticed that they improved much more than the students in traditional solo lessons. Green modified his program to include group practices and this grew into School of Rock.
22. Green’s music program was a success and had garnered a lot of attention. Viacom TV channel VH1 proposed a reality TV program about School of Rock and even did some filming. While the reality show offer didn’t go anywhere, filmmakers Don Argott and Sheena M. Joyce decided to make a documentary about Green and the school.
23. Around this time, Green found out that the Viacom movie studio Paramount was releasing a film starring Jack Black titled School of Rock. Although Green felt that the movie borrowed many elements from his own life, he decided against a lawsuit because the movie would benefit his School of Rock, providing it with more exposure.
24. Over the next few years, Green continued to expand School of Rock and started franchising in 2005. A few years later, 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. After the acquisition, Green’s name was dropped from the company’s name and it officially became School of Rock. Today, there are School of Rock locations in the United States, Canada, Mexico, and the Philippines.
Entrepreneur’s Franchise 500
25. School of Rock ranked No. 239 on Entrepreneur’s 2019 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 2019 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 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 144
- Outlets at the End of the Year: 150
- Net Change: +6
- Outlets at the Start of the Year: 150
- Outlets at the End of the Year: 156
- Net Change: +6
- Outlets at the Start of the Year: 156
- Outlets at the End of the Year: 151
- Net Change: -5
- Outlets at the Start of the Year: 15
- Outlets at the End of the Year: 16
- Net Change: +1
- Outlets at the Start of the Year: 16
- Outlets at the End of the Year: 20
- Net Change: +4
- Outlets at the Start of the Year: 20
- Outlets at the End of the Year: 41
- Net Change: +21
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
- The tables below provide certain historical performance information for 16 company-owned School of Rock businesses and 133 franchised School of Rock businesses (the “Designated Schools”).
- “Company-owned” refers to the School of Rock businesses owned and operated by the franchisor’s affiliate, School of Rock, LLC.
- 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, 2017 to December 31, 2018.
- The Designated Schools do not include the following: 5 franchised schools that were open less than five days per week, 27 franchised schools that were open less than 24 months, and 25 company-owned School of Rock businesses that were reacquired by the company from franchisees in 2017 and 2018.
- 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.
- 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, 2018 to December 31, 2018, respectively.
Part 1 – Annual Total Sales and Student Enrollment
- Part 1 below provides the annual Total Sales (as defined below) and average student enrollment information for the Designated Schools in 2018.