FDD Talk 2020: Mathnasium 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 Mathnasium franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Mathnasium franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Mathnasium franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Mathnasium outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Mathnasium’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019, 2018, and 2017 average, median, high, and low gross receipts for the franchised Mathnasium centers that had been open for 12 months or longer as of December 31, 2019, 2018, and 2017, respectively, broken down by quartiles and halves

Section I – Background Information

13 Things You Need to Know About the Mathnasium Franchise

Surpasses 1,000-Center Mark in North America

1.  In mid-November 2019, Mathnasium hit a major milestone, surpassing 1,000 centers in the U.S. and Canada. “When we first started the company, we envisioned this day,” said CEO Peter Markovitz. “We made a conscious decision to be careful and deliberate with our expansion. The importance of what we do – we change kids’ lives – requires the careful selection of entrepreneurs and educators to run our franchise locations. This helps us ensure that the centers we open are successful so they can serve their communities for years to come.”

2.  Mathnasium continues its ascent, bringing its proven and highly-rated services to children outside North America as well. The company has an established presence in the United Kingdom, Vietnam, and the United Arab Emirates, passing the 1,000-center mark globally in March 2019. Since then, it has launched in Australia, India, Myanmar, and Egypt, with master franchise opportunities available in other markets. Now spanning four continents, Mathnasium continues its mission of teaching math to children around the world, so they understand it, master it, and love it.

Hires Two New Senior Management Executives in Anticipation of Continued Growth

3.  In late November 2019, Mathnasium announced that it had tapped two experienced executives to assist the company in reaching new heights. Vane Lucas, SVP, learning center systems, will oversee education, technology, training, general business systems, and new services.

4.  Lucas originally became a Mathnasium franchisee in 2009, after careers in engineering, strategy consulting, and retail banking. He and his wife, Ginger, developed seven successful Mathnasium Learning Centers in the Tulsa and Kansas City areas. Lucas holds a mechanical and aerospace engineering degree from Princeton and a Wharton MBA, so he understands the transformative effect that a tutor in math can have on children and their future.

5.  According to Lucas, “Because I spent years as a Mathnasium multicenter owner, I know first-hand what our franchisees need and where to focus our efforts to make improvements. Math education is so important, and there’s just a tremendous need to supplement what kids are learning in class. By relocating to the home office, I can now help more than a hundred thousand kids each week benefit from an expert tutor in math.”

6.  Bob Kaufman, SVP, North American franchise operations, oversees more than 1,000 Mathnasium Learning Centers across the United States and Canada. A veteran franchising executive with more than 20 years of experience, he previously spearheaded global franchise development and operations for The Coffee Bean & Tea Leaf, where he boosted franchised store count over 400%. Earlier, Kaufman served as SVP of business development and franchising for Tower Records.

7.  Kaufman said, “I am thrilled to join forces with Mathnasium at this pivotal moment in its history. It’s great to be a part of a company with heart and a vision for empowering children and improving their future. I’m looking forward to helping reach even more students.”

Hires New Vice President of North American Operations and Sales

8.  In early May 2019, Mathnasium named Brett Lippel to lead North American operations, covering more than 950 Mathnasium Learning Centers across the United States and Canada. Lippel joins Mathnasium with a disciplined business growth approach to drive the company’s expansion objectives. At the time of announcement, Mathnasium was projected to open its 1,000th center in North America and reach an unprecedented number of children with its math-only supplemental education program.

9.  Lippel has a standout career of demonstrated success as the driving force behind the European expansion of Enterprise Rent-A-Car and as a founding member of TrueCar, which he helped grow to 4,000 dealerships, and a gainful local business owner of several national franchises. As a father of three, Lippel has a passion for helping youths. His most recent company, College-Concierge, aided international students in adjusting to life and culture at U.S. universities.

10.  Shant Assarian, COO of Mathnasium, said, “North America has been the launching pad for our mission to help children around the world develop true understanding, mastery and love for math. Brett’s wealth of knowledge and experience in high unit count operations, his ability to scale a company and his fit with our culture make him a great addition to our company. We strive to provide extraordinary support for our franchisees, and Brett will help us go above and beyond in that arena.”

Company History

11.  Mathnasium Learning Center was founded in 2002 by Larry Martinek, David Ullendorff, and Peter Markovitz in the Westwood neighborhood of Los Angeles, California. Martinek was a math teacher, who began writing his own supplemental materials to school curricula. In 1985, Martinek published Math Tips for Parents, a guide for parents and teachers based on his own experiences and his work with his son. This became the basis for Mathnasium’s program.

12.  A year after opening the Los Angeles location, Martinek and his partners began franchising the Mathnasium concept. Mathnasium was a success from the start and several franchise locations opened up over the next few decades both domestically and internationally. By 2019, Mathnasium had grown to 1,000 locations across North America, South America, Europe, Asia, and most recently Australia.

Entrepreneur’s Franchise 500

13.  Mathnasium ranked No. 29 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Mathnasium franchise costs, based on Item 7 of the company’s 2020 FDD.

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

• Please click here for detailed information on Mathnasium’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  697
• Outlets at the End of the Year:  786
• Net Change:  +89

2018

• Outlets at the Start of the Year:  786
• Outlets at the End of the Year:  860
• Net Change:  +74

2019

• Outlets at the Start of the Year:  860
• Outlets at the End of the Year:  935
• Net Change:  +75

Company-Owned

2017

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  11
• Net Change:  +0

2018

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  13
• Net Change:  +2

2019

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  7
• Net Change:  -6

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

• The following is a historic financial performance representation for the period from (i) January 1, 2019 through December 31, 2019, (ii) January 1, 2018 through December 31, 2018, and (iii) January 1, 2017 through December 31, 2017.

• It includes average and median annual Gross Receipts of Mathnasium’s existing centers that had been open for 12 months or longer as of December 31, 2019, 2018, and 2017, respectively, broken down by quartiles and halves.

• “Gross Receipts” means the annual gross receipts from all sources in the operation of a Mathnasium Center, including student tuition, registration and testing fees, sales of learning materials, hourly per student private tutoring, and any other approved services.

• “Gross Receipts” excludes only sales tax receipts that you must by law collect from customers and that you pay to the government, any customer refunds actually paid, and coupons or promotional discounts approved by the company.

• As of December 31, 2019, there were 935 franchised Mathnasium centers in operation. Of the franchised Mathnasium centers, 88 were not included in this financial performance representation because they had not been open for 12 months or longer as of December 31, 2019.

• In addition, 4 franchised Mathnasium centers who had been open for at least 12 months were not included because they had not reported their Gross Receipts to the company for the full 12-month period.

• As of December 31, 2018, there were 859 franchised Mathnasium centers in operation. Of the franchised Mathnasium centers, 88 were not included in this financial performance representation because they had not been open for 12 months or longer as of December 31, 2018.

• In addition, 9 franchised Mathnasium centers who had been open for at least 12 months were not included because they had not reported their Gross Receipts to the company for the full 12-month period.

• As of December 31, 2017, there were 786 franchised Mathnasium centers in operation. Of the franchised Mathnasium centers, 106 were not included in this financial performance representation because they had not been open for 12 months or longer as of December 31, 2017.

• In addition, 5 franchised Mathnasium centers who had been open for at least 12 months were not included because they had not reported their Gross Receipts to the company for the full 12-month period.

• The annual averages and medians of Gross Receipts for franchised Mathnasium centers open at least 12 months and reporting throughout the year shown were calculated by Mathnasium based on reports on Gross Receipts furnished to Mathnasium by its franchisees. Neither the submitting franchisees nor Mathnasium audited this information.

• The financial information below does not reflect the costs of sales, operating expenses, or other costs or expenses that you will incur and that must be deducted from the Gross Receipts to obtain your net income or profit.

2019 Average Gross Receipts for Mathnasium Centers Operating 12 Months or More

Top 25% of Centers by Gross Receipts