FDD Talk 2020: Best in Class Education Center 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 Best in Class Education Center franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Best in Class Education Center 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 Best in Class Education Center franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Best in Class Education Center 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 Best in Class Education Center’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average, median, highest, and lowest total revenues for the 46 franchised Best in Class Education Centers that (i) have been open and operating during the entire 2019 calendar year; and (ii) were not a “satellite location”

• 2019 average, median, highest, and lowest total revenues for the 5 affiliate-owned Best in Class Education Centers that (i) have been open and operating during the entire 2019 calendar year; and (ii) were not a “satellite location”

Section I – Background Information

20 Things You Need to Know About the Best in Class Education Center Franchise

Expands Texas Footprint

1.  At the beginning of December 2019, Best in Class Education Center announced that it was continuing its explosive growth in Texas. The rapidly-growing education center is opening its fourth location in the Frisco and Little Elm area joining centers in East Plano, North Plano, and McKinney. The business is owned and operated by Dallas resident Su Subramanian and is located at 615 Main Street, Suite 111 in Frisco.

2.  Subramanian has partnered closely with her sister, Priya Venkat, in transitioning her centers in McKinney and Plano. Venkat will be assisting Subramanian in opening her Frisco center and will continue to be closely engaged with the operations of the three centers.

3.  Prior to opening her first Best in Class location, Subramanian worked for 12 years at AmerisourceBergen, a Fortune 10 company and a global healthcare solutions leader. She worked as an IT director where she was responsible for supporting applications that were critical to delivering healthcare benefits to patients.

4.  Subramanian has always been proud of helping others excel in their roles and providing guidance to those who need it. She has had firsthand experience with providing superior customer support in her role. She plans on using the same values that brought her immense success in corporate America, in her new role at Best in Class.

5.  According to Subramanian, “I have always been passionate about uplifting others and it is a great feeling knowing that I will have the chance to do that with Best in Class. I am very excited about opening another Best in Class center that will service the Frisco and Little Elm area because I know it will provide key support to students in the area and further aid their development.”

6.  “The support that I have felt from [CEO of Best in Class] Hao [Lam] and the Best in Class franchise team has made this entire process an incredible experience,” Subramanian stated. “Hao is a very inspiring leader and his passion for providing students with the opportunity to grow and develop is very clear. It is easy to be a part of the Best in Class family with the support that they provide and I am excited to share this feeling with Frisco.”

7.  Lam added, “It is clear that Su’s dedication to providing supplemental education opportunities to the students in Frisco and Little Elm is second to none. Best in Class has been warmly received in Texas, and we are thrilled to be adding another location in the area. We cannot wait to begin serving the Frisco and Little Elm education community.”

Announces New Distance Learning Options to Empower Education During COVID-19 Crisis

8.  Near the end of March 2020, Best in Class Education Center announced that it had launched innovative distance-learning tools to keep its students on track during the coronavirus outbreak that is forcing the closure of schools and businesses around the nation. In order to support students during these difficult times, Best in Class Education Center has revolutionized the way it serves customers.

9.  Laura Leddusire, vice president of operations for Best in Class Education Center, said, “We know our parents are concerned about the disruption in their children’s education due to COVID-19. To adapt and serve our customers, we have deployed a new multifaceted support strategy that utilizes traditional educational methods and technology to enable our students to be tutored and receive homework help remotely. Our team is committed to providing parents a variety of alternative and safe ways for their children to access quality education, and distance learning makes that possible. We will continue to adapt as necessary to meet the needs of our customers.”

10.  To keep students’ skills sharp during the current disruption in school calendars, Best in Class centers are supplying annotated homework packets for the students they tutor. Parents can pick up the packets at their local centers for students to work through independently. Students will have access to teachers for help by phone, video conference, or online chat. When parents return the packets, teachers will correct assignments and return them to students with detailed feedback and personal notes. Best in Class staff will also offer virtual office hours and video tutorials on common concepts and difficult homework.

11.  Hao Lam, founder and CEO of Best in Class, said, “We will do whatever we can to advance the education of our young people while protecting the most vulnerable members of our communities. Our team is committed to assisting our families in navigating this difficult time, and we look forward to continuing our important work of empowering students to change their world.”

Franchisees Use House Calls to Sustain Business Through Stay-at-Home Orders

12.  In mid-April 2020, as stay-at-home orders were going into effect around the U.S. as the COVID-19 pandemic worsened, Best In Class Education Center highlighted how the company and its franchisees were finding ways to stay in business. As the COVID-19 outbreak forced closures of schools and businesses around the country, Best in Class revolutionized its business model to offer a number of distance learning options, including annotated homework packets that students could work through independently as well as teacher assistance by phone, video conference, online chat, and video tutorials.

13.  Carefully tracking news reports from her home in Portland, Oregon, Karnika Jhaveri saw spikes in COVID-19 cases and stay-at-home orders in neighboring states. The owner of the Best in Class Education Center of Portland knew it was only a matter of time before her community would follow suit. Uncertain whether her students would sign up for online classes and determined to save her business, Jhaveri considered how best to serve her students while her center was closed. Just days before the Oregon governor’s strict stay-at-home order took effect at the end of March, she and her husband began printing all of the April homework packets – 400 of them – and she and her husband personally delivered them to the students’ homes.

14.  On the other side of the country in New Jersey, Best in Class location owners Dr. Alissa Gardenhire of South Orange and Ruchika Arora of Moorestown were doing the same thing. While state orders were being issued and updated rapidly, Gardenhire and Arora were busy printing homework packets and delivering them to their students. They were literally dropping them in front of houses, ringing the doorbells and rushing back to their cars to maintain a safe distance. Happy family members waved and thanked the center owners for exceeding their expectations.

15.  Emails from grateful families poured in. “I think this is amazing and applaud your forward thinking,” one parent wrote to Jhaveri. “The kids were excited, too!” Jhaveri lost only four students in April, and they were unrelated to COVID-19 or distance learning. Gardenhire lost only six, and Arora retained more than 80% of her enrolled students.

16.  To further give back to their communities during that time, Gardenhire offered free pre-algebra and algebra classes online twice weekly to students in her school district to supplement the district’s curriculum. Arora offered free online school homework help for students in her neighborhood.

17.  Hao Lam, founder and CEO of Best in Class, said, “I am so proud of these dedicated franchisees. They stayed positive, adapted quickly and worked through these new challenges to ensure their businesses survived. Fueled by their passion for education, they embraced distance learning and made the impossible possible at a local level. They encourage and inspire others in their community and their fellow franchisees to continue our important work of empowering students to change the world.”

Company History

18.  Best in Class Education Center was founded in 1995 by Hao and Lisa Lam in Seattle, Washington. The Lams, who fled Vietnam’s communist government in the 1980s and met each other during the journey, have always valued education. After immigrating to Canada, Hao Lam attended the University of British Columbia, where he graduated at the top of his class with a BA in Mathematics. During that time, he tutored his classmates through complex coursework and difficult exams. This helped Mr. Lam realize that educating others was his ultimate passion in life.

19.  Over the next few years, the Lams opened more Best in Class Education Centers around the Seattle area. To meet the growing demand for their classes, the Lams started franchising Best in Class in 2010. Today, there are Best in Class Education Centers around the United States.

Entrepreneur’s Franchise 500

20.  Best in Class Education Center did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Best in Class Education Center 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 Best in Class Education Center’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:  44
• Outlets at the End of the Year:  47
• Net Change:  +3

2018

• Outlets at the Start of the Year:  47
• Outlets at the End of the Year:  58
• Net Change:  +11

2019

• Outlets at the Start of the Year:  58
• Outlets at the End of the Year:  64
• Net Change:  +6

Company-Owned

2017

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

2018

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

2019

• 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, 2020 FDD) and Analysis

• The following presents certain financial performance information for the 2019 calendar year for each Best in Class Education Center that met certain qualifying criteria (referred to as a “Qualifying Center”).

• In order to be a Qualifying Center, the Best in Class Education Center must: (i) have been open and operating during the entire 2019 calendar year; and (ii) not be a “satellite location.”

• “Satellite locations” are materially different from traditional Best in Class Education Centers. For example, satellite locations are rented on an hourly basis (including from community centers, Boys and Girls Clubs, and in one instance, a Swerve Driving School) and do not have the signage, furniture, or equipment utilized at a traditional Best in Class Education Center.

• Qualifying Centers include Best in Class Education Centers operated by Hao Lam, the franchisor’s Manager and Chairman, as well as Best in Class Education Centers operated by third-party franchisees.

• On December 31, 2019, there were: (i) 57 Best in Class Education Centers operated by third-party franchisees, and 46 of these centers are Qualifying Centers (5 outlets were excluded because they are satellite locations and 6 outlets were excluded because they were not open all of 2019); and (ii) 7 Best in Class Education Centers operated by Hao Lam, and 5 of these centers are Qualifying Centers (2 outlets were excluded because they are satellite locations).

• The financial performance representations below include data from all Qualifying Centers.

Part 1 – Affiliate-Owned Qualifying Centers

• The financial information presented below is for the 2019 calendar year for Qualifying Centers operated by Hao Lam.

Highest Total Revenues