Mathnasium: $344K Average Sales vs. $112K-$149K Franchise Cost

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

Section I – Estimated initial investment (franchise costs) for a Mathnasium franchise, based on Item 7 of the company’s 2024 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Mathnasium franchise, based on Items 5 and 6 of the company’s 2024 FDD

Section III – Number of franchised and company-owned Mathnasium outlets at the start of the year and the end of the year for 2021, 2022, and 2023, based on Item 20 of the company’s 2024 FDD

Section IV – News updates on the Mathnasium franchise opportunity

Section V – Presentation and analysis of Mathnasium’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2024 FDD, including information on the:

• 2023 average, median, highest, and lowest gross receipts for the 832 franchised Mathnasium Centers in the continental United States that were open and operated by the same franchisee for 12 months or longer as of December 31, 2023, broken down by quartiles

• 2023 average reported accrual basis revenue, instructor payroll, office supplies and furniture expenses, professional fees, other variable expenses, rent, utilities and other fixed expenses, royalties and marketing fees, and operating profit achieved by 830 franchised Mathnasium Centers in the continental United States for the 2023 calendar year, all of which have been open and operated by the same franchisee for at least 12 months in the continental United States as of December 31, 2023 and provided Mathnasium with complete 2023 P&Ls before the issuance date of the 2024 disclosure document

• 2023 average, median, high, and low gross receipts per center for the franchised Mathnasium Centers that were open and operated by the same franchisee for 36 months or longer as of December 31, 2023, broken down by the number of Mathnasium Centers that each franchisee owned and operated as of December 31, 2023 (1 center, 2 centers, 3-5 centers, 6+ centers)

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

Section I – Mathnasium Franchise Costs

• Mathnasium franchise costs, based on Item 7 of the company’s 2024 FDD:

• Initial Franchise Fee:  $49,000 for your first franchise; $26,500 if you are buying an additional franchise
• Expenses While Training:  $2,500 to $3,000
• Technology Fee:  $186 to $1,116
• Rent (1st and last month’s rent):  $6,000 to $14,000
• Paint, Carpet, and Tenant Improvements:  $5,500 to $13,500
• Furniture, Signs, Equipment, and Supplies:  $10,000 to $17,000
• Insurance:  $1,200 to $1,500
• Business License and Registration:  $250 to $1,000
• Professional Services (legal and/or accounting):  $1,300 to $2,000
• Phone and Utilities:  $500 to $1,000
• Video Surveillance and Related Equipment:  $500 to $2,500
• Pre-Open Advertising:  $4,000
• Additional Funds for 4 Months:  $32,000 to $40,000
• Total Estimated Mathnasium Franchise Costs (1st center):  $112,936 to $149,616
• Total Estimated Mathnasium Franchise Costs (subsequent center):  $90,436 to $127,116

Section II – Mathnasium’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Mathnasium’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2024 FDD:

• Initial Franchise Fee:  $49,000 for your first franchise; $26,500 if you are buying an additional franchise

• Monthly Royalty:  initially, 10% of your monthly Gross Receipts from all sources as a result of operating your Center. Beginning in the 24th month of operation of the Center, the greater of (i) the 10% monthly royalty or (ii) $1,500

• Base Royalty:  $650 per month (and, as applicable, an additional $650 per month following each Base Royalty Acquisition)

• Monthly Marketing Fee:  $250 plus 2% of your monthly Gross Receipts from all sources as a result of operating your Center

• Digital and Local Marketing Fee:  a minimum of $1,000 per month

Section III – Number of Franchised and Company-Owned Mathnasium Outlets

Franchised

2021

• Outlets at the Start of the Year:  927
• Outlets at the End of the Year:  948
• Net Change:  +21

2022

• Outlets at the Start of the Year:  948
• Outlets at the End of the Year:  951
• Net Change:  +3

2023

• Outlets at the Start of the Year:  951
• Outlets at the End of the Year:  968
• Net Change:  +17

Company-Owned

2021

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  3
• Net Change:  -4

2022

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

2023

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  4
• Net Change:  +1

Section IV – News Updates on the Mathnasium Franchise

• Mathnasium’s Top Operator Eyes Big Growth After Snapdragon Investment

• How a $40k Acquisition Led to a Franchise Empire

• Kobad and Nancy Bugwadia of Mathnasium Named Franchisee of the Year by International Franchise Association

• Mathnasium Kicks Off 2024 with Impressive Growth After Achieving Record Student Enrollments and Awarding 80+ New Franchises in 2023

• Mathnasium Reports Impressive Mid-Year Growth, Awards 50+ New Franchise Agreements YTD

• Why Mathnasium Franchises Score an A-Plus

• Mathnasium Franchisee Recognized as a 2023 Franchise Rock Star

• Mathnasium Ranked No. 97 on Entrepreneur’s 2024 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Mathnasium Franchise (Item 19, 2024 FDD)

Part 1 – 2023 Gross Receipts Performance

• Part 1 sets forth a historic financial performance representation for the period from January 1, 2023 through December 31, 2023. It includes average and median annual Gross Receipts of Mathnasium’s existing franchised Mathnasium Centers in the continental United States that were open and operated by the same franchisee for 12 months or longer as of December 31, 2023, broken down by quartiles.

• In this Item 19, “Gross Receipts” means the monthly Gross Receipts from all sources in the operation of a Mathnasium Center, including student tuition, registration and testing fees, sales of learning materials, hourly per student private tutoring, and any other approved services. “Gross Receipts” excludes sales tax receipts that franchisees must collect from customers and that are paid to the government, customer refunds actually paid, and coupons and approved promotional discounts.

Top 1/4

• Number of Centers:  208
• Average Gross Receipts:  $611,684
• Year-Over-Year %:  15.4%
• Lowest Gross Receipts:  $432,117
• Highest Gross Receipts:  $1,321,280
• Median Gross Receipts:  $546,973
• Number That Met or Exceeded Average:  70
• Percentage That Met or Exceeded Average:  34%

Mid-Upper 1/4

• Number of Centers:  208
• Average Gross Receipts:  $357,440
• Year-Over-Year %:  13.0%
• Lowest Gross Receipts:  $304,808
• Highest Gross Receipts:  $431,783
• Median Gross Receipts:  $300,258
• Number That Met or Exceeded Average:  91
• Percentage That Met or Exceeded Average:  44%

Mid-Lower 1/4

• Number of Centers:  208
• Average Gross Receipts:  $252,541
• Year-Over-Year %:  15.0%
• Lowest Gross Receipts:  $210,455
• Highest Gross Receipts:  $303,697
• Median Gross Receipts:  $249,464
• Number That Met or Exceeded Average:  98
• Percentage That Met or Exceeded Average:  47%

Bottom 1/4

• Number of Centers:  208
• Average Gross Receipts:  $157,599
• Year-Over-Year %:  15.3%
• Lowest Gross Receipts:  $45,506
• Highest Gross Receipts:  $210,351
• Median Gross Receipts:  $163,041
• Number That Met or Exceeded Average:  116
• Percentage That Met or Exceeded Average:  56%

All

• Average Gross Receipts:  $344,816
• Year-Over-Year %:  14.7%
• Median Gross Receipts:  $304,252
• Year-Over-Year %:  13.7%
• Number and Percentage That Met or Exceeded Average:  323 / 39%

• As of December 31, 2023, Mathnasium had 972 Mathnasium Centers in operation.

• Of those, 131 were not included in this financial performance representation because they were not open and operated by the same franchisee for 12 months or longer as of December 31, 2023.

• In addition, 4 franchised Mathnasium Centers that were open and operated by the same franchisee for at least 12 months were not included because they did not report their Gross Receipts to Mathnasium for the full 12-month period and 1 franchised Mathnasium Center was excluded because it was not located in the continental United States.

• As of December 31, 2023, Mathnasium’s affiliate operated 4 Mathnasium Centers, none of which were included in this financial performance representation.

Part 2 – 2023 Reported P&L Expenses

• Part 2 sets forth average accrual basis revenue, median accrual basis revenue, average instructor payroll expenses, average royalties, average marketing expenses, average office supplies & furniture expenses, average professional fees, average other expenses, average rent, utilities & maintenance expenses, and average operating profit achieved by 830 franchised Mathnasium Centers in the continental United States for January 1, 2023 through December 31, 2023 (the “Measurement Period”), all of which have been open and operated by the same franchisee for at least 12 months in the continental United States as of December 31, 2023 (the “Covered Centers”).

• The Covered Centers provided Mathnasium with complete 2023 P&Ls prior to the issuance date of the 2024 disclosure document. 6 franchised Mathnasium Centers in the continental United States that were open and operated by the same franchisee for at least 12 months as of December 31, 2023 were excluded on the basis that they did not provide Mathnasium with complete 2023 P&Ls before the issuance date of the 2024 disclosure document.

• As of December 31, 2023, Mathnasium’s affiliate operated 4 Mathnasium Centers, none of which were included in this financial performance representation.

Average

Reported Accrual Basis Revenue:  $360,324 (100.0%)

Variable Expenses

• Instructor Payroll:  $69,791 (19.4%)
• Office Supplies and Furniture:  $7,173 (2.0%)
• Professional Fees:  $3,463 (1.0%)
• Other Variable Expenses:  $49,740 (13.8%)
• Total Variable Expenses:  $130,168 (36.1%)

Fixed Expenses

• Rent:  $48,786 (13.5%)
• Utilities and Other Fixed Expenses:  $4,964 (1.4%)
• Total Fixed Expenses:  $53,750 (14.9%)

Royalties and Marketing Fees:  $60,663 (16.8%)

Operating Profit:  $115,743 (32.1%)

• Revenue information reported on franchisees’ P&L statements differs from the reported Gross Receipts in that the P&L does not include any accounting adjustments made by franchisees in reporting Gross Receipts for the purpose of calculating royalty payments.

• “Accrual Basis Revenue” is defined as revenue that is recognized at the time it is earned, regardless of when payment is received.

• “Instructor Payroll” is defined as the cost of hourly employees and independent contractors who offer instruction to enrolled students and excludes owner salary or draw and management salaries, bonus payments, and benefits.

• “Royalties” are defined as base royalty fees, monthly royalty fees, technology fees, and marketing fees paid to Mathnasium.

• “Marketing” is defined as the cost of local Mathnasium Center marketing efforts.

• “Office Supplies and Furniture” is defined as the cost of furniture (e.g., chairs, tables, etc.), office supplies, and computer equipment (e.g., papers, pencils, laptops, electronic tablets, etc.) used in normal business operations.

• “Professional Fees” are defined as fees paid to third-party service providers, such as attorneys, accountants, and other consultants who provide professional business advice and guidance.

• “Other Expenses” are defined as the sum of other operational costs required to operate the Mathnasium Center, including business licenses, permits, training expenses, travel and entertainment, and any miscellaneous business expenses not captured in the other defined categories.

• “Rent, Utilities and Maintenance” are defined as all costs related to the leased operating space, repairs and maintenance, telephone, internet, utilities, and other occupancy expenses.

• “Operating Profit” is defined as the Average Accrual Basis Revenue, minus the sum of the above reported average expenses. The percentage presented above was determined by dividing the average Operating Profit by the Average Accrual Basis Revenue.

Part 3 – 2023 Gross Receipts by Number of Mathnasium Centers Owned and Operated by Franchisee

• Part 3 sets forth a historic financial performance representation for the period from January 1, 2023 through December 31, 2023. It includes average and median annual Gross Receipts of Mathnasium’s existing franchised Mathnasium Centers that were open and operated by the same Franchisee for 36 months or longer as of December 31, 2023, broken down by the number of Mathnasium Centers that each Franchisee owned and operated as of December 31, 2023.

• The chart below shows the Average Gross Receipts per included Mathnasium Center, broken down by the number of Mathnasium Centers that each Franchisee owned and operated as of December 31, 2023.

1 Center

• Average Gross Receipts:  $333,054
• Number of Centers:  306
• Number of Franchisees:  306
• Median Gross Receipts:  $300,776
• Lowest Gross Receipts:  $69,205
• Highest Gross Receipts:  $1,139,564
• Number and Percentage That Met or Exceeded Average:  117 / 38%

2 Centers

• Average Gross Receipts:  $343,302
• Number of Centers:  128
• Number of Franchisees:  64
• Median Gross Receipts:  $286,277
• Lowest Gross Receipts:  $72,697
• Highest Gross Receipts:  $1,066,592
• Number and Percentage That Met or Exceeded Average:  45 / 35%

3-5 Centers

• Average Gross Receipts:  $421,755
• Number of Centers:  113
• Number of Franchisees:  32
• Median Gross Receipts:  $355,082
• Lowest Gross Receipts:  $85,379
• Highest Gross Receipts:  $1,242,600
• Number and Percentage That Met or Exceeded Average:  44 / 39%

6+ Centers

• Average Gross Receipts:  $419,845
• Number of Centers:  122
• Number of Franchisees:  11
• Median Gross Receipts:  $367,372
• Lowest Gross Receipts:  $82,561
• Highest Gross Receipts:  $1,321,280
• Number and Percentage That Met or Exceeded Average:  52 / 43%

• “Franchisee” is defined, collectively, as: (a) an individual or entity to whom Mathnasium or its affiliate has granted a Mathnasium franchise pursuant to a Mathnasium franchise agreement; and (b) any and all other entities owned by or affiliated with such individual or entity that are also parties to Mathnasium franchise agreements with Mathnasium or its affiliate.

• The above results were calculated by Mathnasium based on reports furnished to it by its franchisees. It is important to note that neither the submitting franchisees nor Mathnasium audited this information.

• Some Mathnasium Centers have earned this amount. Your individual results may differ. There is no assurance you will earn as much.

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