FDD Talk 2020: 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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

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

• 2019 average revenue, labor expense, occupancy expense, miscellaneous expense, and gross profit for the bottom quarter, top quarter, and all 179 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

• 2019 average revenue, labor expense, occupancy expense, miscellaneous expense, and gross profit for the bottom quarter, top quarter, and all 18 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

23 Things You Need to Know About the Kiddie Academy Franchise

Celebrates Largest Growth Year in Company History

1.  In mid-January 2020, Kiddie Academy celebrated the conclusion of its most expansive year in company history. Founded in 1981 with a single location in Baltimore County, the rapidly expanding family-owned business grew to 246 locations across 29 states, including the District of Columbia, with a total of 35 Academies opened, 81 franchise agreements signed, and achieved over $350M in total systemwide revenue in 2019.

2.  To further prepare for its continued growth, Kiddie Academy formally announced a series of leadership promotions, including Greg Helwig to chief executive officer (formerly president), Nicole Salla to chief marketing officer (formerly VP of marketing), and Richard Peterson to chief academic officer (formerly VP of education).

3.  According to Helwig, the recent promotions complement the overall success of the company as well as create more opportunities for staff to ascend. “Increasing the number of employees, along with promotions from within, is a direct result of Kiddie Academy’s growth as an entire system across the country,” notes Helwig.

4.  Additionally, Josh Frick was elevated to president of Kiddie Academy (formerly chief development officer), Jeff Brazier to chief development officer (formerly VP of franchise development), and Casey Miller to executive vice president (formerly director of franchise development).

5.  Michael J. Miller, executive chairman of Kiddie Academy, said, “Starting our family business in 1981 with one location in Baltimore County, MD, and a vision to support educational child care, it is humbling to see how we have positively shaped thousands of children’s lives over the last nearly 40 years. Aside from the families and communities we’re a part of, what keeps Kiddie Academy thriving is our people. And I couldn’t be more excited to be a part of the next generation of company leaders that will continue to innovate and evolve the Kiddie Academy brand.”

6.  Miller also said that Kiddie Academy expects to open an additional 35 franchised locations across the country by the end of 2020, bringing its total Academy locations to 280, and systemwide sales increasing by 21 percent to $440M. With nearly 60 percent of the Kiddie Academy system being multi-unit owners, he anticipates an increase in internal growth as additional multi-unit franchise owners sign on.

7.  The company also anticipates 16 percent corporate employment growth in 2020, with 16 new hires anticipated. It has also added multiple remote employees in Illinois, Minnesota, California, Texas, and New Jersey over the last year and plans to continue to expand upon its national, corporate presence in the years to come.

8.  Helwig added, “Multi-unit franchise development has been an instrumental part of our growth strategy. It’s one of our biggest internal mechanisms for determining how happy our franchisees are and how the brand is performing. If franchisees are fulfilled, making connections in their community and hitting or exceeding their financial goals, they are much more likely to open a second, third or fourth location.”

Provides In-Classroom Option for School-Aged Children

9.  In early August 2020, Kiddie Academy announced that it was committed to supporting families whose school-aged children are distance learning by providing a safe, healthy environment where they can attend virtual sessions, do homework, and connect with other students and teachers daily.

10.  This alternative to distance learning at home gives children support for virtual learning, the opportunity for physical activity in a safe, developmentally appropriate environment, and socialization – one of the most crucial aspects of children’s development.

11.  The full-day program includes before and after school care as well, allowing parents themselves the opportunity to work a full day without distractions and further provides the assurance they need for their children to make the most of virtual learning.

12.  Additionally, Academies are integrating their proprietary Life Essentials curriculum – from STEM Daily Challenges to creative activities – between virtual learning times, so children have even more opportunities to keep learning and growing.

13.  In addition to the new option for children who are distance learning, some Academies are offering full-day private Kindergarten programs, following state regulations and guidelines combined with Kiddie Academy’s proprietary Life Essentials curriculum.

14.  According to Greg Helwig, CEO of Kiddie Academy, “Many parents of school-aged children are struggling with their kids not going back to a classroom for the fall semester or perhaps the entire year. For some, it is nearly impossible to remain productive working from home or returning to a physical job location, while also supervising young children during virtual school five days a week. We’re proud to offer parents a viable solution so they can do what’s best for their families. It allows both children and parents an opportunity to thrive, despite these unprecedented challenges.”

15.  Since physical space and available resources vary by location, Kiddie Academy franchise owners will work with local public education system requirements and within local licensing regulations to offer the following benefits to school-aged children:

• Dedicated spaces for virtual classes with reliable and secure WiFi;
• Supervised area for schoolwork completion;
• Socialization with other school-age children;
• Resources for staff professional development;
• Opportunities for physical activity and chances to play outdoors;
• Enhanced scheduling to ensure children are completing school assignments;
• Keeping track of student platforms and login information;
• Creating a reliable virtual learning environment while establishing new routines for students;
• Nutritious meals and snacks throughout the day.

16.  Kiddie Academy prides itself on its Health Essentials procedures, designed to help stop the spread of infectious germs into Academies. This new program is an enhancement of the procedures already in place to help ensure children, their families, and Kiddie Academy’s staff stay healthy and safe.

17.  From daily health monitoring for staff and students and frequent, thorough handwashing, to strictly enforcing its illness policy for staff and students, each Academy is well equipped to ensure children and staff remain as healthy as possible.

18.  “The health and safety of our students and families remains of paramount concern to us,” added Helwig. “Cleaning and disinfecting will be a priority, children and staff will enforce social distancing while indoors as much as possible and Kiddie Academy staff will wear masks at all times.”

Company History

19.  Kiddie Academy was founded in 1981 by Pauline and George Miller in Baltimore County, Maryland. Pauline Miller, who is a mother and educator, was looking for better child care options when she decided to develop her own program. Miller’s program was a success from the start and over the next few years, more locations opened to keep up with demand.

20.  In 1992, Kiddie Academy opened its first franchise location and two years later, expanded its program to include infants and toddlers. By the end of the 1990s, Kiddie Academy grew to 50 locations around the U.S.

21.  In the next decade, Kiddie Academy continued to grow. It established a summer program and a Curriculum Advisory Board, and received multi-state accreditation.

22.  Kiddie Academy expanded even further in the 2010s and opened its 200th location in 2017. The company also evolved its curriculum to include modern technologies and teaching methods. Today, there are Kiddie Academy locations all around the country.

Entrepreneur’s Franchise 500

23.  Kiddie Academy ranked No. 108 on Entrepreneur’s 2020 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 2020 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 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

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

2019

• Outlets at the Start of the Year:  213
• Outlets at the End of the Year:  246
• Net Change:  +33

Company-Owned

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

2019

• 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, 2020 FDD) and Analysis

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

• The information covers calendar year 2019 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, 2019, there were 246 franchised Academies. As of that date, 35 of these Academies (14.2% 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 211 Academies, 14 Academies (6.6% of the total) failed to report the required information for the full calendar year ending December 31, 2019 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 197 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, 2019)

All Mature Academies