FDD Talk 2021: Kumon Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

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

Section II – Estimated initial investment for a Kumon 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 Kumon franchise, based on Items 5 and 6 of the company’s 2021 FDD

Section IV – Number of franchised and company-owned Kumon 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 Kumon’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

average and median enrollment numbers, after 12 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2019, 2018, and 2017, respectively

average and median enrollment numbers, after 24 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2018 and 2017, respectively

average and median enrollment numbers for the top 25%, bottom 25%, and all Kumon Centers that have been open for 3 years or more (“Mature Centers”), as of December 31, 2020

Section I – Background Information

15 Things You Need to Know About the Kumon Franchise

Ranks in Top 10 of Entrepreneur’s 2021 Franchise 500 List

America's Most Lucrative Franchises of the Year

1. In late January 2021, Kumon North America announced that, for the first time ever, the company has ranked in the top ten of the overall Entrepreneur Magazine Franchise 500 List. Kumon’s overall Franchise 500 ranking of No. 6 is the highest it’s ever received, up an additional six spots from their spot on last year’s list. 2021 is also the 20th year in a row that Kumon has been named the No. 1 tutoring franchise in the Franchise 500 List’s tutoring category.

2. John Collins, vice president of center network development for Kumon North America, Inc., said, “To be ranked in the top ten of Entrepreneur Magazine’s Franchise 500 List for the first time and recognized as the number one tutoring franchise for the 20th year in a row is a testament to Kumon’s commitment to both our franchisees and students across North America. Kumon takes pride in creating successful, independent learners around the country no matter the setting, and we aim to continue to do so for many years to come.”

Newest Locations

3. Even as the COVID-19 pandemic continues, Kumon has opened new locations around the United States. One of Kumon’s newest locations opened in early May 2021 in Petaluma, California. The location is owned and operated by franchisee Susan Tran, who first jointed Kumon five years ago as a reading assistant.

4. Tran found immense pleasure getting to know each child’s strengths, needs, and motivations – and having the tools and knowledge to help create opportunities for them to succeed. With Kumon, success is not just academic, it’s emotional – and Tran could see how her guidance was making both kids and their families happier.

5. The timing of opening Kumon of Petaluma during a pandemic is particularly significant. “Many of our children this past year have been experiencing trouble with learning loss, a decrease in confidence, and a lack of enthusiasm for learning,” said Tran. “My goal is to help our students elevate their best attributes, guide them towards a path and pattern of success, and show them that they are capable of achieving beyond their expectations.”

6. In early April, Kit Yuen – who had left Wall Street three years ago to open the first Kumon Math and Reading Center of Madison, New Jersey – opened a second Kumon in Morristown. With the recent increase in learning loss, Kumon of Morristown will help parents feel confident about their kids’ academic advancement. Yuen said, “We always believe in giving back to society. I hope that we will be able to help the children of Madison, Morristown and the surrounding areas continue to be strong in math and reading.”

7. At the beginning of 2021, an elementary school teacher in the greater Austin area, Raquel Macleod, became the new owner and instructor of Kumon of Austin – Mueller. Macleod said, “When the opportunity came for me to integrate my knowledge in education with opening my own business, I didn’t think twice. My passion for teaching, belief in the Kumon Method, and a desire to help and to be more involved in my community were all factors in making this new venture a reality.”

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8. Although she spent much of her career in the public school system, Macleod’s shift to the after-school enrichment program was far from sudden. She has been familiar with the Kumon Math and Reading Program for years and has seen the learning method’s results in many children of family and friends.

9. Kumon is a supplemental education program that aims to unlock students’ full potential by increasing academic independence, confidence, and study skills. Through daily worksheet study, students enrolled in Kumon often end up mastering material far beyond grade level.

10. Macleod added, “What I love most about Kumon is that it helps children of all ages to reach their highest potential – going above and beyond what they ever thought was academically possible. I aim to empower students in this neighborhood and surrounding areas to believe in themselves and their abilities while learning to solve their own problems and achieve greatness.”

Company History

11. Kumon was founded in 1958 by Japanese educator Toru Kumon in Moriguchi City, Osaka, Japan. Mr. Kumon, who was a high school math teacher, wrote math problems for his elementary school-aged son to solve. This was the birth of the Kumon Method.

12. Over the next few years, Mr. Kumon began successfully teaching math to other young children using the Kumon Method. Following the success of the first Kumon location, a second location opened in 1962. Over the next few decades, more Kumon centers opened around Japan.

13. In 1974, the first international Kumon Math Center opened in New York City. Initially, most of the children that attended this first international Kumon Math Center were the children of Japanese expatriates, but word spread of the effectiveness of the Kumon Method. This led to more children, of all backgrounds, joining Kumon. That same year, Toru Kumon published The Secret of Kumon Math, which became a bestseller, helping to fuel Kumon Math Center’s growth.

14. As Kumon continued to grow, more subjects were added to the curriculum, including Japanese (for non-native Japanese speakers), English (for native Japanese speakers), and other language programs. Today, Kumon is one of the most successful early childhood learning centers in the world, with locations in more than 55 countries.

Entrepreneur’s Franchise 500

15. Kumon ranked No. 6 on Entrepreneur’s 2021 Franchise 500 list. The company also ranked No. 1 in the Tutoring Category for the 20th consecutive year.

Section II – Estimated Costs

Please click here for detailed estimates of Kumon 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 Kumon’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: 1,490
Outlets at the End of the Year: 1,507
Net Change: +17

2019

Outlets at the Start of the Year: 1,507
Outlets at the End of the Year: 1,547
Net Change: +40

2020

Outlets at the Start of the Year: 1,547
Outlets at the End of the Year: 1,568
Net Change: +21

Company-Owned

2018

Outlets at the Start of the Year: 26
Outlets at the End of the Year: 23
Net Change: -3

2019

Outlets at the Start of the Year: 23
Outlets at the End of the Year: 21
Net Change: -2

2020

Outlets at the Start of the Year: 21
Outlets at the End of the Year: 27
Net Change: +6

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

Enrollments are subject-students that are reported to Kumon by franchisees. For example, one student may enroll in Math and Reading subjects. This student would count as two enrolled subject-students. You charge tuition, and correspondingly pay a royalty to Kumon, for each subject-student.

Part 1 – Average Number of Enrollments After 12 Reporting Months

The following chart represents information on the enrollments for franchised Kumon Centers after 12 months of operation. This chart does not include company-owned Kumon centers.

Year Franchised Center Opened: 2019 (centers opened during the fiscal year 2019 and still open as of December 31, 2020, excluding Centers that have been transferred to a new franchisee)

Total Count of Centers as of December 31, 2020: 58
Average Number of Enrollments After 12 Reporting Months: 74
Median Number of Enrollments After 12 Reporting Months: 67
Count (%) of Centers with Enrollments Equal to or Above the Average After 12 Reporting Months: 19 (33%)
Average Number of Enrollments After 12 Reporting Months for Bottom 25% of Centers: 29
Median Number of Enrollments After 12 Reporting Months for Bottom 25% of Centers: 31
Average Number of Enrollments After 12 Reporting Months for Top 25% of Centers: 137
Median Number of Enrollments After 12 Reporting Months for Top 25% of Centers: 129

Year Franchised Center Opened: 2018 (centers opened during the fiscal year 2018 and still open as of December 31, 2020, excluding Centers that have been transferred to a new franchisee)

Total Count of Centers as of December 31, 2020: 34
Average Number of Enrollments After 12 Reporting Months: 82
Median Number of Enrollments After 12 Reporting Months: 78
Count (%) of Centers with Enrollments Equal to or Above the Average After 12 Reporting Months: 14 (41%)
Average Number of Enrollments After 12 Reporting Months for Bottom 25% of Centers: 48
Median Number of Enrollments After 12 Reporting Months for Bottom 25% of Centers: 49
Average Number of Enrollments After 12 Reporting Months for Top 25% of Centers: 124
Median Number of Enrollments After 12 Reporting Months for Top 25% of Centers: 122

Year Franchised Center Opened: 2017 (centers opened during the fiscal year 2017 and still open as of December 31, 2020, excluding Centers that have been transferred to a new franchisee)

Total Count of Centers as of December 31, 2020: 39
Average Number of Enrollments After 12 Reporting Months: 87
Median Number of Enrollments After 12 Reporting Months: 86
Count (%) of Centers with Enrollments Equal to or Above the Average After 12 Reporting Months: 19 (49%)
Average Number of Enrollments After 12 Reporting Months for Bottom 25% of Centers: 43
Median Number of Enrollments After 12 Reporting Months for Bottom 25% of Centers: 45
Average Number of Enrollments After 12 Reporting Months for Top 25% of Centers: 135
Median Number of Enrollments After 12 Reporting Months for Top 25% of Centers: 125

Part 2 – Average Number of Enrollments After 24 Reporting Months

The following chart represents information on the enrollments for franchised Kumon centers after 24 months of operation.