Primrose Schools Franchise: Average Sales ($2.46M) vs. Cost ($735K-$8.45M)

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

Section I – Estimated initial investment (franchise costs) for a Primrose Schools franchise, based on Item 7 of the company’s 2023 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Primrose Schools franchise, based on Items 5 and 6 of the company’s 2023 FDD

Section III – Number of franchised and company-owned Primrose Schools outlets at the start of the year and the end of the year for 2020, 2021, and 2022, based on Item 20 of the company’s 2023 FDD

Section IV – News updates on the Primrose Schools franchise opportunity

Section V – Presentation and analysis of Primrose Schools’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2023 FDD, including information on the:

• 2022 average, median, lowest, and highest gross revenues for the top 25%, second 25%, third 25%, bottom 25%, and all 459 Primrose Schools facilities that were active franchises throughout calendar year 2022 (an “active franchise” is a franchise that opened a Primrose Schools facility prior to January 1, 2022 and had not permanently closed such facility by December 31, 2022)

• 2022 average gross revenues, payroll and taxes, brand fund, royalty and MLBC, other expenses, occupancy expenses, EBITDAR, and EBITDA for the 276 Primrose Schools facilities that were active franchises throughout calendar year 2022 and submitted the required data

Section VI – Key ratios, comparables, computations, and analyses for the Primrose Schools franchise opportunity (exclusive content for Platinum subscribers)

Section I – Primrose Schools Franchise Costs

• Primrose Schools (build-to-suit program) franchise costs, based on Item 7 of the company’s 2023 FDD:

• Initial Fee:  $50,000 to $80,000
• Real Estate Fee:  $25,000
• Security Deposit for Lease and Limited Rent Guarantee Fee:  $15,000 to $250,000
• Utility Security Deposit:  $10,000 to $30,000
• School Equipment and Supplies:  $222,000 to $340,000
• Insurance:  $5,000 to $10,000
• Initial Training and Opening Support Fee:  $35,000
• Marketing, Advertising, and Grand Opening:  $40,000 to $105,000
• Transportation Vehicle:  $900 to $42,000
• Licenses:  $4,000 to $7,000
• Miscellaneous Expenses:  $10,000 to $45,000
• Financing Cost:  $55,000 to $75,000
• Additional Funds for 3 Months:  $180,000 to $420,000
• Total Estimated Primrose Schools Franchise Costs:  $651,900 to $1,464,000

Section II – Primrose Schools’ Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Primrose Schools’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2023 FDD:

• Initial Franchise Fee:  $42,000 to $80,000
• Continuing Services and Royalty Fee:  7% of Gross Revenues
• Primrose Brand Fund Fee:  currently, 2% of Gross Revenues, but may be increased by Primrose Schools at any time, but not more than a total of 3% of Gross Revenues
• Local Advertising:  1% of Gross Revenues for the preceding month or $1,000, whichever is greater
• Cooperative Contributions:  1% of Gross Revenues for the previous month, unless members of the Cooperative agree to a higher amount

Section III – Number of Franchised and Company-Owned Primrose Schools Outlets

Franchised

2020

• Outlets at the Start of the Year:  418
• Outlets at the End of the Year:  445
• Net Change:  +27

2021

• Outlets at the Start of the Year:  445
• Outlets at the End of the Year:  465
• Net Change:  +20

2022

• Outlets at the Start of the Year:  465
• Outlets at the End of the Year:  483
• Net Change:  +18

Company-Owned

2020

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

2021

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

2022

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

Section IV – News Updates on the Primrose Schools Franchise

• Primrose Schools Enters Midyear with Additions to C-Suite and 23 New Franchise Agreements Awarded

• Primrose Schools Closes Out 40th Year with Impressive Recognition and Growth

• IFA Honors Primrose Schools CEO as 2022 Entrepreneur of the Year

• Primrose Schools Aims to Fill Michigan’s Early Education and Care Gap with Detroit Expansion

• Primrose Schools Ranked No. 97 on Entrepreneur’s 2023 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Primrose Schools Franchise (Item 19, 2023 FDD)

• This Item 19 presents information about the financial performance of franchised Facilities during the calendar year ending December 31, 2022 (“Calendar Year 2022”) that were active franchises throughout Calendar Year 2022.

• An “active franchise” is a franchise that opened a Facility prior to January 1, 2022 and had not permanently closed such Facility by December 31, 2022.

• This Item 19 does not include data for one franchised Facility with a capacity of 418 children (which is significantly larger than a typical Facility), one franchised Facility that closed due to weather damage in February 2021 and remained closed through the First Quarter 2022, and three Primrose on Premise Facilities (which are not representative of a typical Facility) that were active franchises during the applicable period (the “Excluded Facilities”).

Part 1 – Summary of Annual Gross Revenues of Facilities by Quartile in Calendar Year 2022

Top 25%

• Number of Facilities:  115
• Average Gross Revenues:  $3,371,598
• Number and Percent at or Above Average Gross Revenues:   40 / 35%
• Median Gross Revenues:  $3,196,667
• Lowest Gross Revenues:  $2,809,945
• Highest Gross Revenues:  $6,132,906

Second 25%

• Number of Facilities:  115
• Average Gross Revenues:  $2,588,153
• Number and Percent at or Above Average Gross Revenues:   51 / 44%
• Median Gross Revenues:  $2,572,592
• Lowest Gross Revenues:  $2,402,257
• Highest Gross Revenues:  $2,809,630

Third 25%

• Number of Facilities:  114
• Average Gross Revenues:  $2,216,409
• Number and Percent at or Above Average Gross Revenues:   58 / 51%
• Median Gross Revenues:  $2,225,740
• Lowest Gross Revenues:  $2,008,047
• Highest Gross Revenues:  $2,396,483

Bottom 25%

• Number of Facilities:  115
• Average Gross Revenues:  $1,679,680
• Number and Percent at or Above Average Gross Revenues:   70 / 61%
• Median Gross Revenues:  $1,769,284
• Lowest Gross Revenues:  $768,636
• Highest Gross Revenues:  $2,007,398

Total

• Number of Facilities:  459
• Average Gross Revenues:  $2,464,499
• Number and Percent at or Above Average Gross Revenues:   211 / 46%
• Median Gross Revenues:  $2,402,257
• Lowest Gross Revenues:  $768,636
• Highest Gross Revenues:  $6,132,906

• Part 1 includes data from 459 Facilities that were active franchises throughout the entire Calendar Year 2022 (out of 483 Facilities that were open franchises as of the end of Calendar Year 2022).

• It does not include (i) 19 Facilities that opened during Calendar Year 2022 and (ii) five Excluded Facilities. It also does not include one Facility that permanently closed during Calendar Year 2022 (which had been open for at least 12 months prior to closing).

• No Facilities were reacquired by Primrose Schools during Calendar Year 2022.

Part 2 – Profit and Loss Statements

• The following tables set forth the historical average profit and loss statements for certain Facilities based on information reported to Primrose Schools by its franchisees.

• Part 2 includes data from 276 Facilities that were active franchises throughout the entire Calendar Year 2022 (out of 483 Facilities that were open franchises as of the end of Calendar Year 2022).

• It does not include (i) 19 Facilities that opened during Calendar Year 2022, (ii) five Excluded Facilities, (iii) 38 Facilities that were transferred to a new franchisee during Calendar Year 2022 (and, therefore, did not report a full year of expenses), (iv) 20 Facilities that submitted data that was incomplete or otherwise inconsistent with the categories that Primrose Schools has presented, (v) five Facilities that submitted data in which the reported EBITDA was more than 2.5 standard deviations from the mean, and (vi) 120 Facilities that did not timely submit data.

• It also does not include one Facility that permanently closed during Calendar Year 2022 (which had been open for at least 12 months prior to closing).

• No Facilities were reacquired by Primrose Schools during Calendar Year 2022.

Profit and Loss Statement for Calendar Year 2022 (All Included Facilities – 276 Facilities)

Total Gross Revenues:  $2,519,028 (100.0%)

Payroll and Taxes

• Payroll (Excluding Taxes):  $1,004,533 (39.9%)
• Payroll Taxes:  $106,653 (4.2%)
• Total Payroll and Taxes:  $1,111,186 (44.1%)

Brand Fund, Royalty, and MLBC

• Brand Fund Fee:  $41,846 (1.7%)
• Royalty Fee:  $173,047 (6.9%)
• MLBC and Local Advertising:  $28,439 (1.1%)
• Total Brand Fund, Royalty, and MLBC:  $243,332 (9.7%)

Other Expenses

• Food:  $94,130 (3.7%)
• Educational Supplies:  $38,771 (1.5%)
• Bank Charges and Credit Card Fees:  $14,905 (0.6%)
• Bus Operating Expenses:  $4,835 (0.2%)
• Employee Benefits:  $38,620 (1.5%)
• Professional Fees:  $25,067 (1.0%)
• Field Trips:  $4,325 (0.2%)
• Cleaning Charges:  $12,780 (0.5%)
• Miscellaneous Taxes and Licenses:  $9,131 (0.4%)
• Office Supplies and Postage Expense:  $13,587 (0.5%)
• Printing and Promotional Clothing:  $2,687 (0.1%)
• Staff Training:  $5,603 (0.2%)
• Supplies (General):  $12,799 (0.5%)
• Telephone Expense:  $7,869 (0.3%)
• Uniforms:  $3,643 (0.1%)
• Miscellaneous Expenses:  $39,016 (1.5%)
• Total Other Expenses:  $327,767 (13.0%)

Occupancy Expenses

• Insurance – General Liability:  $25,410 (1.0%)
• Maintenance (Building, Grounds, Equipment):  $68,070 (2.7%)
• Utilities:  $52,260 (2.1%)
• Rent:  $276,634 (11.0%)
• Total Occupancy Expenses:  $422,373 (16.8%)

Total Expenses:  $2,104,658 (83.6%)

EBITDAR:  $691,005 (27.4%)

EBITDA:  $414,371 (16.4%)

• “EBITDAR” means adjusted operating income/earnings before interest, taxes, depreciation, amortization, and rent. “EBITDA” means adjusted operating income/earnings before interest, taxes, depreciation, and amortization.

• “Gross Revenues” includes the total of all revenues generated from any learning, recreational, and child care services and any other activities, products, or services sold or performed by a franchisee, and by persons other than such franchisee, in connection with such franchisee’s business or otherwise at or through its Facility, less sales, use, or service taxes actually collected and paid to the appropriate taxing authority.

• The data included in this Item 19 is based on information reported to Primrose Schools by its franchisees. This data has not been audited, nor has Primrose Schools independently verified the data it received from the franchisees, although it has no reason to believe that the information provided to it is not complete, correct, and accurate.

• Some outlets have sold or earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.

Section VI – Primrose Schools Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️

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