In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the LearningRx franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a LearningRx franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a LearningRx franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned LearningRx outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of LearningRx’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• total revenue charged, total revenue collected, total expenses, net operating income (based on collections), and average revenue (case size) charged per student for the LearningRx affiliate-owned center located in Colorado Springs, Colorado for the period of October 1, 2019 through September 30, 2020

• revenue charged per program offering (assessment, ComprehendRx, Einstein, LiftOff, MathRx, miscellaneous, ReadRx, and ThinkRx) as a percentage of total revenue charged for the LearningRx affiliate-owned center located in Colorado Springs, Colorado for the period of October 1, 2019 through September 30, 2020

• total local marketing expense, marketing development fund, royalty payment to franchisor, bank and credit card fees, facilities, insurance, payroll (administrative), payroll (trainers), miscellaneous, outside services, supplies, travel and entertainment, and total expenses for reporting period for the LearningRx affiliate-owned center located in Colorado Springs, Colorado for the period of October 1, 2019 through September 30, 2020

• average, median, high, and low gross receipts; average monthly local marketing; average annual referrals; average prospect to assessment conversion rate, assessment to student conversion rate, and prospect to student conversion rate; and average case size for the top 25%, mid-upper 25%, mid-lower 25%, and bottom 25% (by gross receipts) of the franchised LearningRx centers open during the full fiscal year October 1, 2019 through September 30, 2020

• average annual revenue by monthly marketing spend ($4,000+, $3,000+, $2,000+, and <$2,000) for the franchised LearningRx centers open during the full fiscal year October 1, 2019 through September 30, 2020

• average annual revenue by 5-mile radius population (100,000+ and <100,000) for the franchised LearningRx centers open during the full fiscal year October 1, 2019 through September 30, 2020

Section I – Background Information

18 Things You Need to Know About the LearningRx Franchise

CEO Creates Video Series to Keep Kids’ Brains Active During COVID-19 Pandemic

1.  At the beginning of April 2020, Kim Hanson, a former elementary school teacher, a mother of four, and CEO of LearningRx, never anticipated the day when families with school-age children would lack the tools they need to keep their kids’ brains active in the midst of a national stay-at-home lockdown. “My heart goes out to the 56 million kids whose daily school lessons have shifted from the classroom to the family room – many without enough curriculum to keep their brains busy throughout the day. It’s a challenge for parents, who are also working from home, to guide their kids’ learning. They’ve been thrust into at-home schooling and are scrambling to fill the void. I really wanted to do something to help them.”

2.  That’s when Hanson – with help from her nephews, a niece, and daughter who was home from college – decided to create a “Train Your Brain Tuesday” video series, filmed from the family’s kitchen table. Each 30-minute video was pre-recorded. While Hanson conducted brain training exercises with family members, she showed kids how to do the same exercises at home. Parent participation was encouraged, but not required. Episodes focused on strengthening one or two brain skills at a time – from attention and reading skills, to math, remembering, processing speed, and more.

3.  Each episode also included at-home brain-building activities that could be downloaded for free, including the book “Unlock the Einstein Inside: Applying New Brain Science to Wake Up the Smart in Your Child.” The book was co-authored by Hanson and her father, Dr. Ken Gibson, who founded LearningRx.

4.  Hanson added, “We want to host free, virtual brain training demonstrations around every kitchen table in America. Kids love the cognitive exercises we do with them because the lessons are both challenging and fun. Parents love the training because it engages their kids with 1-on-1, participatory brain exercises that fill teaching voids that they (the parents) or educators can’t, because of the time-challenged circumstances we’re living in.”

Opens First International Location in Canada

5.  In mid-October 2020, LearningRx opened its first center in Canada. Franchising since 2003, the company’s brain training centers have served more than 100,000 families and completed more than 6,000,000 brain training sessions to date. LearningRx is best known for the cognitive improvements its programs provide to people who struggle with ADHD and attention issues, dyslexia and reading challenges, and other brain-based differences related to math, memory, and traumatic brain injury.

6.  The first center in Canada is owned and operated by husband-and-wife team Khai Woo and Jeri Situ. Woo, a mechanical engineer who taught high school math and technology, sees the LearningRx franchise as an opportunity to continue his work educating youth. Situ, a financial advisor and experienced franchisee, says LearningRx provides a means for the couple to work for themselves, help their community, and invest in a franchise system with a proven track record of financial success.

7.  Situ said, “More than 80% of learning challenges are caused by one or more weak brain skills. These are hidden weaknesses that most people don’t know they have. LearningRx has helped clients ages 5 to 95 by sharpening their cognitive skills to help them think faster, learn easier, and perform better.”

8.  The disruption of COVID-19 has left many professionals reexamining their careers and life-long goals. Many educational and business professionals are exploring franchise opportunities for the chance to leave corporate careers behind and work for themselves. LearningRx is meeting the need for potential franchisees.

9.  Natalie Speakman, director of development for the LearningRx franchise, reports, “Our proven business model serves two primary purposes: it allows franchisees to positively change lives for a living and it’s a system that aligns with our corporate goal – to deliver a service that makes learning easier and faster for the clients we serve every day.”

10.  Woo added, “With the substantial learning loss students are expected to experience due to their extended absence from one-on-one classroom learning, families are eager to find ways to boost the underlying cognitive skills that make learning easier. This community – from the schools and neighborhoods to the teachers’ federation and churches we both attend – has been part of our growth, prosperity and livelihood for years. Now it’s time to return the favor.”

Named a ‘Top Education Franchise in High Demand During a Pandemic’ by Franchise Business Review

11.  In mid-November 2020, LearningRx made Franchise Business Review’s list of “Top Education Franchises in High Demand During a Pandemic.” According to the publication, education franchises are providing a valuable service during the coronavirus pandemic as many parents try to balance working and school requirements. “As more people head back to the office as businesses slowly reopen, the demand for educational support during the pandemic is greater than ever,” reports Franchise Business Review. “Franchises that fill that need by providing instructional support, childcare services, and youth recreational programs are seeing a sharp uptick.”

12.  LearningRx and the other franchises listed were given high satisfaction ratings by current franchise owners in key areas like training and support, leadership, core values, and financial opportunity, on independent franchisee surveys.

13.  Kim Hanson, CEO of LearningRx, said, “One of the big questions we get right now is regarding the difference between tutoring and personal brain training. Although both can help students who are struggling, they provide different solutions to different problems. Tutoring delivers material that was missed the first time. For example, if your child is a strong learner but is behind in school due to an extended absence, tutoring can help them catch up on the material they missed. LearningRx’s one-on-one brain training is designed to help improve the weak cognitive skills that help enhance learning in any subject. Our programs target and train the weak brain skills – such as memory, processing speed, and attention – to strengthen the root cause of learning struggles.”

Company History

14.  LearningRx was founded in 2002 by Ken Gibson in Colorado Springs, Colorado. The program that LearningRx is based on traces its history back to the late 1960s and Gibson’s work as a pediatric optometrist, as well as his brother Keith Gibson’s work as a clinical psychologist. Ken Gibson noticed that some of the children he saw struggled with learning due to their poor vision and he set out to research how people process visual information.

15.  Gibson spent the next few decades coming up with a formula for developing the best cognitive skills. He found that the steps needed to develop his training program were always the same: Trials + Results = More Research + More Development. Eventually, Gibson developed a program that he was satisfied with and produced results.

16.  A year after opening the first LearningRx, Gibson began franchising the concept and by the end of the year, there were 27 locations sold. Although LearningRx continued to grow around the U.S. over the next decade, by 2015 the company ran into trouble with the Federal Trade Commission (FTC), which was cracking down on companies selling “brain training” programs or other products intended to improve cognitive function.

17.  LearningRx was sued for unsubstantiated claims it made about its program, including that its programs could “permanently improve serious health conditions like ADHD (attention deficit hyperactivity disorder), autism, dementia, Alzheimer’s disease, strokes, and concussions.” Since then, LearningRx has rebranded and now says that its games are “designed by scientists to challenge core cognitive abilities.” Additionally, LearningRx now helps adults strengthen their skills.

Entrepreneur’s Franchise 500

18.  LearningRx did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of LearningRx franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Please click here for detailed information on LearningRx’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  70
• Outlets at the End of the Year:  65
• Net Change:  -5

2019

• Outlets at the Start of the Year:  65
• Outlets at the End of the Year:  60
• Net Change:  -5

2020

• Outlets at the Start of the Year:  60
• Outlets at the End of the Year:  52
• Net Change:  -8

Company-Owned

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

2020

• 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, 2021 FDD) and Analysis

Part 1 – Affiliate Locations Only

• The financial performance figures in Part 1 represent historical information for the LearningRx affiliate-owned Center located in Colorado Springs, Colorado for the period of October 1, 2019 through September 30, 2020, a pandemic year. This location has been operating since 2003.

A.  Revenue, Expenses, Income, and Profit for the Period of October 1, 2019 to September 30, 2020 (COVID-19)

• Total Revenue Charged:  $365,243.63
• Total Revenue Collected:  $333,180.41
• Total Expenses:  $336,722.05
• Net Operating Income (Based on Collections):  ($3,541.64)
• Percentage of Profit (Based on Collections):  -1%
• Average Revenue (Case Size) Charged Per Student:  $6,149.25

• Total Revenue Collected does not include $67,678.88 in Paycheck Protection Program (“PPP”) loan funds received in 2020.

• Total Revenues or “Gross Revenues” means the total of all receipts derived from services or products sold by the LearningRx affiliate-owned Center, whether the receipts are evidenced by cash, credit, checks, gift certificates, scrip, coupons, services, property, bartering, or other means of exchange.

• Gross Revenue excludes only sales tax receipts that you must by law collect from customers and that you actually pay to the government, promotional or discount coupons to the extent that the franchisee realizes no revenue, and employee receipt of services or products, if free, or any portion not paid for by an employee.

• Cash income reports from the accounting software, without any deductions for any fees due to collection method, are used to calculate the royalty amounts due each month.

• The Total Revenue Charged shown in Part 1A is based on the accrual method. These sums reflect the actual amounts billed to clients during the fiscal year commencing October 1, 2019 through September 30, 2020 (“Reporting Period”).

• The Total Revenue Collected shown in Part 1A reflects the actual amount of gross revenues collected during the Reporting Period.

• The amount of the individual expenses that are included in Part 1A are shown in Part 1B for the Reporting Period.

• The Net Operating Income is the actual net income for the Reporting Period before any interest or taxes are paid.

• During this period, apart from the affiliate Center referenced in Part 1, there were 47 total LearningRx Centers operating for 12 months or longer. Of these 47 franchised locations, 11 had Total Revenue Charged greater than the LearningRx Center operated by the Affiliate.

B.  Total Revenue Charged Per Program Offering; Percentage of Revenue by Program Offering for the Period of October 1, 2019 to September 30, 2020

• Assessment Charges:  $16,601 (4.5%)
• ComprehendRx Charges:  $36,657 (10.0%)
• Einstein Charges:  $6,960 (1.9%)
• LiftOff Charges:  $7,176 (2.0%)
• MathRx Charges:  $57,441 (15.7%)
• Miscellaneous Charges:  $9,493 (2.6%)
• ReadRx Charges:  $147,958 (40.5%)
• ThinkRx Charges:  $82,958 (22.7%)

• Part 1B shows the Revenue Charged for each program offered by the Colorado Springs LearningRx Center and the percentage of Total Revenue Charged for each program offered for the Reporting Period.

• All of these programs are available to franchisees to offer as part of a LearningRx Center.

C.  Expenses as a Percentage of Total Revenue Collected for the Period of October 1, 2019 to September 30, 2020

• Total Local Marketing Expense:  $39,211 (11.8%)
• Marketing Development Fund:  $8,357 (2.5%)
• Royalty Payment to Franchisor:  $33,426 (10.0%)
• Bank and Credit Card Fees:  $7,614 (2.3%)
• Facilities:  $35,992 (10.8%)
• Insurance:  $2,035 (0.6%)
• Payroll (Administrative):  $122,508 (36.8%)
• Payroll (Trainers):  $57,976 (14.8%)
• Miscellaneous:  $4,130 (1.2%)
• Outside Services:  $9,730 (2.9%)
• Supplies:  $14,860 (4.6%)
• Travel and Entertainment:  $883 (0.3%)
• Total Expenses for Reporting Period:  $336,722 (101.1%)

• Part 1C shows all the expenses incurred for the Reporting Period other than certain taxes.

• The expenses for local marketing include costs for direct mail, pay per click, print ads, radio, referral fees, television, Internet advertising, and other miscellaneous advertising.

• Payroll expenses include all staff wages, payroll taxes, and health expenses. LearningRx paid $122,508 on administrative payroll expenses and $57,976 on trainer payroll expenses.

• The Facility expenses include rent, insurance, property taxes, utilities, Internet, and CAM charges. This Facility has 2,237 square feet. Your expenses may be more based on the total square footage of your facility and the rental rates in your territory.

• Miscellaneous expenses include expenses such as the Better Business Bureau.

• Outside Services include legal and accounting services and technology fees and IT support.

• The Supplies include student Kits and general office supplies.

• The Royalty is based on the amount of Total Revenue Collected.

Part 2 – Franchisee Information Only

Top 25% of Centers by Gross Receipts

• Average Gross Receipts:  $440,144
• Median Gross Receipts:  $399,351
• Number of Centers Meeting or Exceeding Average for Category:  4 or 8% of Centers
• Range of Gross Receipts for Category:  $359,325 to $710,473
• Average Monthly Local Marketing:  $3,806
• Average Annual Referrals:  44
• Average Prospect to Assessment Conversion Rate:  65%
• Average Assessment to Student Conversion Rate:  48%
• Average Prospect to Student Conversion Rate:  31%
• Average Case Size:  $8,998

Mid-Upper 25% of Centers by Gross Receipts

• Average Gross Receipts:  $267,911
• Median Gross Receipts:  $266,120
• Number of Centers Meeting or Exceeding Average for Category:  6 or 13% of Centers
• Range of Gross Receipts for Category:  $222,187 to $338,572
• Average Monthly Local Marketing:  $2,799
• Average Annual Referrals:  26
• Average Prospect to Assessment Conversion Rate:  65%
• Average Assessment to Student Conversion Rate:  46%
• Average Prospect to Student Conversion Rate:  30%
• Average Case Size:  $9,031

Mid-Lower 25% of Centers by Gross Receipts

• Average Gross Receipts:  $182,960
• Median Gross Receipts:  $179,513
• Number of Centers Meeting or Exceeding Average for Category:   5 or 10% of Centers
• Range of Gross Receipts for Category:  $158,068 to $219,128
• Average Monthly Local Marketing:  $1,916
• Average Annual Referrals:  22
• Average Prospect to Assessment Conversion Rate:  64%
• Average Assessment to Student Conversion Rate:  46%
• Average Prospect to Student Conversion Rate:  29%
• Average Case Size:  $6,735

Bottom 25% of Centers by Gross Receipts

• Average Gross Receipts:  $103,701
• Median Gross Receipts:  $108,633
• Number of Centers Meeting or Exceeding Average for Category:   7 or 15% of Centers
• Range of Gross Receipts for Category:  $42,053 to $157,765
• Average Monthly Local Marketing:  $1,512
• Average Annual Referrals:  8
• Average Prospect to Assessment Conversion Rate:  60%
• Average Assessment to Student Conversion Rate:  44%
• Average Prospect to Student Conversion Rate:  27%
• Average Case Size:  $7,977

Average Annual Revenue by Monthly Marketing Spend

Monthly Marketing Spend of $4,000+

• Average Annual Revenue:  $385,768

Monthly Marketing Spend of $3,000+

• Average Annual Revenue:  $316,896

Monthly Marketing Spend of $2,000+

• Average Annual Revenue:  $233,099

Monthly Marketing Spend of <$2,000

• Average Annual Revenue:  $180,426

Average and Median Annual Revenue by 5-Mile Radius Population

100,000+

• Average Annual Revenue:  $271,148
• Median Annual Revenue:  $247,702

<100,000

• Average Annual Revenue:  $151,312
• Median Annual Revenue:  $157,765

• Average Revenue Charged is based on the accrual basis. These numbers reflect amounts billed to clients during the fiscal year October 1, 2019 through September 30, 2020, but do not reflect actual collections during that period.

Part 3 – Average Center Monthly Sales for October 1, 2019 to September 30, 2020

• This table includes average Center monthly sales for the fiscal year period from October 1, 2019 to September 30, 2020 for 46 Centers that were open for the full fiscal year in 2019 and 2020.

• October 2019:  $23,505
• November 2019:  $22,099
• December 2019:  $21,327
• January 2020:  $22,383
• February 2020:  $26,239
• March 2020:  $18,083
• April 2020:  $11,173
• May 2020:  $15,776
• June 2020:  $26,376
• July 2020:  $20,854
• August 2020:  $18,410
• September 2020:  $24,524

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