Kiddie Concepts: Studying the education market

by Steven Pease, Franchise Times

Children and education franchises are a lot like the kids they serve: some grow faster than others. But while children can rely only on genetics and nourishment, franchises mirror population rates and the market.

“Really, it follows what’s happening with the economy,” Franchise Business Review CEO/President Eric Stites says of the sector. “School budgets are being slashed. Community budgets are being slashed. A lot of general programming for children, whether that’s exercising, music, or sports are being slashed at community, state and regional levels.”

That, in turn, is driving parents to find, and fund, franchised businesses tailored toward educating and entertaining their children.

Whether the business provides childcare, development, or trampolines, there’s no shortage of kiddie concepts. For every tutorial or educational concept—Learning Experience, Sylvan Learning Center, or Kumon— you’ve got others, such as Games2U, i9 Sports, and Skyzone, just waiting for those kids to let loose and get a little exercise.

While children and education franchises are in somewhat of a trend industry, it’s not easy to pin down which trends will turn into long-term profit streams. Stites tends to see entertainment franchises, such as the mobile gaming businesses, as less of a durable concept than an education-focused franchise.
“The need for tutoring is never going to go away,” Stites says. “Then again, the need for children to exercise is not going to go away. But if you look at mobile video-game concepts, the kids only play video games for two hours. That’s very trendy today, but will it survive? I don’t know.”

One thing to keep in mind: The owners and operators of some of those businesses say their work is actually fun. “Investing time in a kidfocused and fun-filled franchise ‘job’ has been far more fun, rewarding and fulfilling than any corporate position I have held in the past,” says Twin Cities Games2U franchisee Jim Sadlovsky, whose sales were up in June and July.

Stites says that while they may not retire as a millionaire, franchisees in child and education service sectors tend to work fewer hours (often in addition to a full-time job) for lower pay, and have higher job satisfaction. More than 80 percent of these franchisees rate their franchise system “above average,” and 78 percent would recommend their franchise to a friend, the Franchise Business Review (FBR) report says.

Popping with population growth

Until recently, childbirth rates were steadily increasing. U.S. Census data shows a 50 percent increase in births since 1950. That’s until the recession of 2008-09, when births fell by 111,000, according to data from the National Center for Health Statistics. This decrease in births has, anecdotally, mirrored the slowdown in childhood and education franchises.

Still, the FBR study lists child services franchises as “one of the hottest sectors for franchising.” The report says franchise companies that provide childcare, retail products, after-school programs, tutoring and other niche services specifically aimed at children, are expected to keep growing.

However, that doesn’t mean there’s built-in profitability, or that they are “recession-proof,” despite posting respectable numbers in a down economy. Eighty-five percent of child-services franchise owners reported personal income of $50,000 or less in 2010, and 67 percent reported earnings of less than $25,000.

No shortage of concepts

Trying to count child-services might require the skill of a Mathnasium. In reality, there are more than 300 franchised brands in the combined sectors.

Investment costs range from $30,000 for a mobile dance instruction business to more than $3 million for a preschool after the property has been purchased. A potential franchisee can expect to pay $345,000 to millions for a day care or school—or $37,000 for a tutoring program.

There isn’t a direct correlation between the price you pay for a franchise and what you get out of it. Ultimately, success depends on how well the brand has been built, and how quickly it can tailor products to changing times and new trends.

(Click here to read original article.)

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