FDD Talk 2019: 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 2019 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 2019 FDD

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

• average and median enrollment numbers, after 12 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2017, 2016, and 2015, respectively

• average and median enrollment numbers, after 24 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2016 and 2015, respectively

• average and median 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, 2018

Section I – Background Information

16 Things You Need to Know About the Kumon Franchise

Opens New Headquarters

1.  In late October 2019, Kumon North America revealed that it had moved its U.S. headquarters from Teaneck to Ridgefield Park, New Jersey. The North American business unit, which now has 19 local branch offices and more than 1,500 learning centers nationwide, started in Larchmont, New York, in 1974, then established its offices in Los Angeles in 1983. It opened its first headquarters in Fort Lee in 1992, moved to Teaneck in 1995, and now has moved to Ridgefield Park.

2.  Mino Tanabe, president of Kumon North America, said, “Kumon’s growth is constant and would not be possible without dedicated associates and instructors across the world. We are proud to provide a comfortable and technological environment that can keep up with our growth, while continuing to inspire children across the United States, Canada, Mexico, and Panama. Our new headquarters will, without question, allow us to prosper and grow, ensuring our future for another 50 years, another 100 years and beyond.”

3.  Tanabe took part in the ribbon-cutting ceremony, along with Ridgefield Park Mayor George Fosdick and more than 100 employees and instructors from all over North America. He continued, “This new space for our headquarters will only further grow our impact across North America. We will continue to work each day to achieve (founder) Toru Kumon’s vision of cultivating self-motivation and a love for learning in as many children as possible.”

Named to Entrepreneur’s “Best of the Best” List for 21st Consecutive Year

4.  Near the end of May 2019, Kumon announced that it was recognized by Entrepreneur Magazine as a “Best of the Best” for the 21st year in a row. Kumon continues to make strides on the overall Franchise 500 list, advancing six spots from last year to No. 14. In addition, the organization ranked at the top of the tutoring industry category earlier this year for the 18th consecutive time.

5.  The Kumon Method aims to unlock students’ full potential by way of identifying and building upon each participant’s “just-right” level of study. The method’s goals for students revolve around increased confidence, self-motivation, critical and analytical thinking, and problem-solving.

6.  Since its founding in 1958 by Toru Kumon, a high school math teacher in Japan who set out to create study aids for his son, the Kumon Method’s global reach has grown exponentially. Over four million students have taken part in the program globally across 51 countries and regions. In 2019, enrollment numbers continue to grow, surpassing 420,000 students across North America since Kumon’s inception.

7.  Thomas Kuczek, center network development manager of Kumon North America, Inc., said, “We are honored to receive recognition from Entrepreneur Magazine for the 21st consecutive year and to be ranked No. 1 in the Tutoring category for 18 consecutive years. As our global reach continues to grow, our commitment to providing high quality educational services across as many regions as possible remains.”

New Location Opened in San Diego Suburb

8.  Kumon continues to grow throughout North America and one of its newest centers opened in a San Diego suburb in early October 2019. Kumon Math and Reading Center of Lemon Grove is owned and operated by Ifrah Aydid.

9.  According to a press release, Aydid has always striven to be the best educator she could be – teaching children ranging from pre-school through high school for years. During her time teaching English as a Second Language students, she noticed their struggle to understand the work, which prompted Aydid’s return to school to receive a master’s in education along with a reading specialist certification.

10.  Aydid acknowledged the fact that the material should be more individualized for those students, but knew it wasn’t possible in that school setting. At the same time, she witnessed her two sons excel in school, years beyond their grade level. They had been enrolled in Kumon since they were three years old, and routinely shocked their own teachers with their advanced knowledge and independent comprehension.

11.  When it came time for a career change, Aydid knew that becoming a Kumon Instructor was the perfect way for her to continue her passion for teaching, while making sure each of her students was at their own appropriate “just-right” level of study.

12.  According to Aydid, “Kumon doesn’t restrict students to their own grade level, which is how both of my sons were able to study years ahead of their peers. Each child is supported and encouraged to reach their own potential through fostered independence and individualized instruction, which is what sets Kumon apart from the rest. My goal is to create confident, hard-working, independent thinkers who can rely on themselves to learn from their mistakes. I know that nurturing each student’s strong work ethic while helping them achieve their personal goals will lead to the overall advancement of the Lemon Grove community.”

Company History

13.  Kumon was founded as the Math Center in 1958 by Japanese educator Toru Kumon in Moriguchi City, Osaka, Japan. Mr. Kumon was a high school math teacher, who originally developed the Kumon Method to aid his son’s studies. The first Kumon used the worksheets that Mr. Kumon had developed for his son. Initially, Kumon grew fairly slow and the second location did not open in Shinjuku, Tokyo until 1962.

14.  As more students began to enroll in the Kumon program, Mr. Kumon released a book titled The Secret of Kumon Math in 1974. The book became a bestseller, which helped the company grow. That same year, Kumon opened its first international school in New York City. At first, these international students were the children of Japanese expatriates, but as word spread about the effectiveness of the Kumon Method, more students enrolled. Throughout the late 1970s, Kumon continued its international growth, opening schools in Taiwan, Germany, and Brazil.

15.  During the 1980s, Kumon expanded its programs and the company continued to expand both domestically and internationally. Kumon kept up this growth over the next few decades and by 2008, the company had more 26,000 centers around the globe with over 4 million registered students. In 2012, Kumon launched Baby Kumon in Japan, but the program has yet to be implemented in its international locations.

Entrepreneur’s Franchise 500

16.  Kumon ranked No. 14 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Kumon 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 Kumon’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:  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

2018

• Outlets at the Start of the Year:  1,494
• Outlets at the End of the Year:  1,509
• Net Change:  +15

Company-Owned

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

2018

• Outlets at the Start of the Year:  26
• Outlets at the End of the Year:  23
• Net Change:  -3

Section V – Financial Performance Representations (Item 19, 2019 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 franchised Kumon Centers after 12 months of operation. This chart does not include company-owned Kumon centers.

Year Franchised Center Opened:  2017 (centers opened during the fiscal year 2017 and still open as of December 31, 2018, excluding Centers that have been transferred to a new franchisee)