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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of School of Rock’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, high, and low total sales for the 40 company-owned and 138 franchised School of Rock businesses that were open 12 months or more as of December 31, 2019
- 2019 average, median, high, and low total sales for the 40 company-owned and 125 franchised School of Rock businesses that were open 24 months or more as of December 31, 2019
- 2019 average, median, high, and low student enrollment as of January 1, 2019 and December 31, 2019 for the 40 company-owned and 138 franchised School of Rock businesses that were open 12 months or more as of December 31, 2019
- 2019 average, median, high, and low student enrollment as of January 1, 2019 and December 31, 2019 for the 40 company-owned and 125 franchised School of Rock businesses that were open 24 months or more as of December 31, 2019
- 2019 average, median, high, and low total sales for the 138 franchised School of Rock businesses that were open the full year of 2019, grouped by number of months the Schools have been in operation
- 2019 average, median, high, and low student enrollment for the 138 franchised School of Rock businesses that were open the full year of 2019, grouped by number of months the Schools have been in operation
- 2019 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 20 company-owned School of Rock businesses that were operating for at least 24 months as of December 31, 2019
- 2019 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 20 company-owned School of Rock businesses that were operating for at least 24 months as of December 31, 2019
Section I – Background Information
24 Things You Need to Know About the School of Rock Franchise
Launches School of Rock Remote for 40,000 Students
1. In late March 2020, in response to the growing number of citizens being asked to remain in their homes or limit travel, School of Rock, the leader in performance-based music education, announced virtual, one-on-one music lessons for its 40,000 students around the world through its School of Rock Remote program.
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2. “At School of Rock, the health and safety of our students is our top priority, which is why we have rapidly adapted our operations in order to meet students’ needs,” said Rob Price, CEO of School of Rock. “School of Rock Remote along with our School of Rock Method App is a fantastic way to provide continuity and connection. Our instructors are gigging musicians, and they have shown their flexibility to make sure the music goes on.”
3. Students will use video conferencing during their regularly scheduled lesson times to gain access to their skilled music instructor. The new virtual lesson room coupled with School of Rock’s proprietary Method App, SongFirst approach, and Method Books will offer a comprehensive music learning experience that is fun, educational, and safe.
4. In addition to meeting the needs of current students, School of Rock understands that millions of additional people can benefit from remote music education. New students are welcome to join the School of Rock community by contacting their local school.
5. Additionally, Hal Leonard, the world’s largest print music publisher of performance and instructional material, has partnered with School of Rock to provide students a free 60-day pass to SheetMusicDirect.com, a nearly endless library of notation in virtually every genre, including rock. Sheet Music Direct PASS is the world’s leading digital sheet music subscription service.
Launches Artist Sessions Providing Students Live Access to Some of the World’s Most Famous Musicians
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6. In early April 2020, School of Rock began augmenting its newly launched School of Rock Remote program with exclusive access to some of the most famous rock stars in the world. These School of Rock Artist Sessions are giving students live daily online tutorials and Q&As with many of their idols. And musicians with Bon Jovi, Alice Cooper, Guns N’ Roses, Beyonce, and Stevie Wonder were next on the schedule.
7. It all started with a thousand kids talking online to Jay Weinberg, the drummer of Slipknot. Then came live access to Frank Zummo from Sum 41. The P!NK Band jumped in next to give tips and answer questions.
8. According to Rob Price, CEO of School of Rock, “We know everyone at home is looking for ways to engage and explore. That’s why we are collaborating with world-class artists to provide our students with an intimate opportunity to connect. We put the word out and the response has been incredible. I am particularly proud that our team is using this opportunity to advance the cause of suicide prevention.”
9. Professional musicians participating in Artist Sessions are also donating their time and helping to raise awareness for School of Rock’s philanthropic partner, the Society of Prevention of Teen Suicide. Each session is an hour and features artists from various genres. Artist Sessions are only open to currently enrolled students at no additional cost.
Launches New Songwriting Program
10. At the beginning of June 2020, School of Rock launched a new Songwriting Program teaching the fundamentals of songwriting, arrangement, and music theory to help students compose original works. The program became available to schools throughout the month.
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11. As part of the program, students will have one weekly private lesson on an instrument of their choice where they learn concepts, technique, and theory. These principles are then applied in weekly group lessons where students work together on songwriting exercises and lyrical workshops.
12. Every few months, Songwriting Program students will take the stage to perform their original compositions at a local music venue. Or, for those taking the program online, they will remotely record their original songs to produce a demo of the music.
13. Rob Price, CEO of School of Rock, said, “Our goal is to build the world’s largest community of songwriters. Our global community of music teachers will teach students a wide variety of songwriting principles to help them express their musical ideas. Topics include chord progression theory, song arrangement, overcoming writer’s block, songwriting collaboration, lyric construction and more.”
14. In response to the COVID-19 pandemic, School of Rock launched School of Rock Remote where students use video conferencing during their regularly scheduled lesson times to gain access to their skilled music instructor. That has expanded with entire groups of students collaborating online together from their own remote locations. The idea of embracing songwriting will take that experience to a whole new level.
Updates Curriculum to Feature More Music Created by Black Artists
15. In early October 2020, School of Rock announced it was enhancing its proprietary curriculum to feature more music created by Black artists. The goal is to further educate students on the Black community’s history and central contributions to the development of Rock and Roll.
16. To start, School of Rock has added new feature shows to its performance-based curriculum. Each of these programs encompass 20-25 songs from Black artists. As part of the curriculum, students will learn to perform these songs and discover important lessons about the complex experience of marginalized communities. New shows include “Roots of the British Invasion,” “The Music of Memphis,” and “The Music of New Orleans.”
17. “We teach musical proficiency through rock because contemporary songs offer an effective toolkit, particularly in group performance. Just as importantly, popular music opens a door to history. We have an obligation to honor those Black artists without whom there would be no Rock and Roll, and by extension no School of Rock,” said Rob Price, CEO of School of Rock.
18. Additionally, utilizing the collective knowledge of the talented instructors across the School of Rock system, the company has published on its website a series of articles and interactive content on the historical contribution of Black artists to Rock and Roll. Early Rock artists featured include Etta James, Ray Charles, and Sister Rosetta Tharpe, in addition to more recent innovators like Prince, Tracy Chapman, and Gary Clark Jr.
19. “This project has been energizing, and it inspires us to better understand and teach the stories of other groups’ contributions to the art form,” continued Price. “We also hope that by better understanding our musical past, we can contribute to a more harmonious future.”
20. School of Rock was founded as the Paul Green School of Rock Music in 2002 by Paul Green in Philadelphia, Pennsylvania. Green had been offering music lessons from his home since 1996 and modified his teaching method to supplement traditional instruction with group practice, with the goal of putting on a concert. Eventually, Green decided to rent a place that would be big enough for individual instrumental instruction as well as larger performance spaces for full band practices.
21. Green’s School of Rock became locally famous and caught the attention of the Viacom television channel VH1. A documentary began filming Green and his students with the intention to develop a reality series. However, after months of filming, production was halted as the Viacom movie studio Paramount announced it would be releasing a fictional film to be called School of Rock. While the film was clearly based on Green’s School of Rock, he decided not to pursue legal action as he felt the publicity would be good for his school.
22. After a few more years of running School of Rock, Green was bought out in 2009 by investor Sterling Partners and the management team he had brought in, headed by former Clear Channel executive Matt Ross. Sterling Partners dropped Green’s name from the company and shortened it to School of Rock.
23. Over the next decade, School of Rock continued to grow and there are now locations around the United States, Canada, Mexico, and the Philippines.
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24. School of Rock ranked No. 219 on Entrepreneur’s 2020 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 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- 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: 151
- Outlets at the End of the Year: 174
- Net Change: +23
- 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
- Outlets at the Start of the Year: 41
- Outlets at the End of the Year: 42
- Net Change: +1
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- The tables below present historical performance information for the 40 company-owned School of Rock businesses that were operating as company-owned Schools for the full 12-month period from January 1, 2019 to December 31, 2019 and the 138 franchised School of Rock businesses that were open for the full 12-month period (the “Designated Schools”), along with certain subsets or additional information as presented below.
- 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.
- “Company-owned” refers to the School of Rock businesses owned and operated by the franchisor’s affiliate, School of Rock, LLC, or its wholly-owned subsidiaries.
- The Designated Schools do not include the following: 9 franchised schools that were open less than five days per week, 28 franchised schools that were open less than 12 months, and 2 School of Rock franchise businesses that were reacquired by the franchisor or its affiliates in 2019.
- In addition to presenting information regarding all of the Designated Schools, this Item 19 also provides information for the following subsets:
- The “New Designated Schools” include only those 13 franchised Designated Schools and no company-owned Designated Schools that were open between 12 and 24-months as of December 31, 2019.
- The “Established Designated Schools” include only those 125 franchised Designated Schools and 40 company-owned Designated Schools that had been open 24 months or more as of December 31, 2019.
- The “Established Company Designated Schools” include only those 20 company-owned Designated Schools that had been operated by School of Rock, LLC and/or its affiliates for 24 months as of December 31, 2019.
- 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, and benefits and other employee expenses paid to the general manager employee of the company-owned School. Management Labor excludes profit sharing expense, as this would not be paid by a franchisee.
- 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, 2019 to December 31, 2019, respectively.
Part 1 – Annual Total Sales and Average Student Enrollment (All Designated Schools)
- Part 1 below provides the annual Total Sales (as defined below) and average student enrollment information for all Designated Schools in 2019.