Posted by on October 16, 2020 9:39 am
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FDD Talk 2020: Kumon Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

FDD Talk 2020: 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 2020 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 2020 FDD
  • Section IV – Number of franchised and company-owned Kumon outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
  • Section V – Presentation and analysis of Kumon’s financial performance representations, based on Item 19 of the company’s 2020 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 2018, 2017, and 2016, respectively
  • average and median enrollment numbers, after 24 months of operation, for the top 25%, bottom 25%, and all Kumon Centers that opened in 2017 and 2016, 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, 2019

Section I – Background Information

16 Things You Need to Know About the Kumon Franchise

Ranked No. 1 Tutoring Franchise by Entrepreneur Magazine for 19th Consecutive Year

1.  At the end of January 2020, Kumon announced that it had once again clinched the No. 1 spot in Entrepreneur Magazine’s Franchise 500 tutoring category for the 19th consecutive year. Kumon has also consistently ranked on the magazine’s overall “Best of the Best” Franchise 500 list for the last 21 years, and planned to make that 22 years this Spring.

2.  The Kumon Method aims to unlock students’ full potential by starting at and building upon their “just-right” level of learning. From there, students gain limitless academic independence and confidence along with a love for learning and sharpened study skills. Through daily study and mastery of worksheets, many Kumon students progress to studying years beyond their grade levels during their time in the program.

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3.  Since its founding in 1958 by Toru Kumon, a high school math teacher in Japan who set out to create study aids for his son, Kumon has grown exponentially. With presence in 55 countries and counting, Kumon has over 4 million students enrolled at over 25,000 learning centers, and continues to grow each year.

4.  Thomas Kuczek, center network development manager of Kumon North America, Inc., said, “The fact that we are leading Entrepreneur Magazine’s Franchise 500 List in the tutoring category for the 19th year in a row speaks to the effectiveness and impact of the Kumon Math and Reading Program. As we continue to work to expand Kumon in all of our existing regions and beyond, we remain just as committed to instilling a love for learning in countless children around the world.”

Offers Free Registration as Researchers Warn of a “COVID Slide”

5.  In early May 2020, Kumon put out a press release discussing what experts are calling a “COVID Slide.” According to the release, since many students had not been in a typical classroom setting with a full load of classwork since March, parents were left wondering if their children would be ready for the new school year in the fall.

6.  According to the Northwest Evaluation Association (NWEA), previous seasonal learning loss research shows that during a typical summer break, regression tends to be steeper for math than for reading, and the decline itself is typically more severe in older grades. A report released by the NWEA suggests that because of the break from the classroom caused by COVID-19, there’s a risk for some students returning to school in the fall with only 70 percent of the reading knowledge they acquired from the previous school year, and just half of what they learned in math.

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7.  To combat math and reading loss, Kumon – the world’s largest after-school math and reading program – offered free registration at participating centers from May 1 to July 15. Kumon goes beyond typical tutoring by actively developing critical thinking skills as children progress independently through a carefully-crafted math and reading curriculum. Kumon’s time-tested self-learning program uses engaging worksheets to present new concepts and materials.

8.  From counting to calculus and beyond, the Kumon Math Program enables students to progress all the way up through high school level math. Kumon’s individualized worksheet lesson plan allows students to develop valuable math skills, such as mental calculation and how to solve problems quickly and accurately. The Kumon Math Program keeps kids advancing and never limits their learning. Many Kumon students who start a bit behind not only catch up, but even advance to studying material ahead of their grade level.

9.  The Kumon Reading Program is designed to build the critical reading skills that help children develop a lifelong love of reading – and a solid foundation for academic success. From fairy tales to Shakespeare, the Kumon Reading Program will take a child from learning letter sounds to reading high school-level literary texts. The goal of the program is to help all children cultivate a high level of reading ability, regardless of age or school grade.

10.  In the wake of the COVID-19 pandemic, Kumon instructors have been working hard by way of remote instruction sessions, scheduling personalized worksheet pickup, and more, to make the experience at home as seamless as possible.

Company History

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11.  Kumon was founded as the Math Center in 1958 by Japanese educator Toru Kumon in Moriguchi City, Osaka, Japan. A few years earlier, Mr. Kumon, who was a math teacher, began providing math education based on the concept of self-learning to his son, Takeshi. This is the basis of the Kumon Method.

12.  Mr. Kumon began teaching other kids this self-learning method and Kumon was a success. A second Kumon center opened in 1962 and over the next few years, the company expanded around Japan, supplementing the education of over 10,000 children.

13.  As Kumon continued to grow in Japan, the company opened its first international center in 1974 in New York City. Initially, most students at this center were the children of Japanese expatriates, but word of the Kumon Method’s effectiveness spread and children from all backgrounds enrolled.

14.  Kumon soon spread to other countries and further expanded in Japan. Around this time, Mr. Kumon published The Secret of Kumon Math, which helped fuel the Kumon Method’s popularity and the company’s growth.

15.  During the 1980s, Kumon started adding additional subjects beyond math, including English and various other language programs. Kumon eventually cemented itself as one of the most successful childhood learning centers around the world and by 2008, the company had more 26,000 center with more than 4 million registered students. Today, Kumon has locations in over 55 countries.

Entrepreneur’s Franchise 500

16.  Kumon ranked No. 12 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

  • Please click here for detailed estimates of Kumon franchise costs, based on Item 7 of the company’s 2020 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 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

  • Outlets at the Start of the Year:  1,476
  • Outlets at the End of the Year:  1,490
  • Net Change:  +14

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

Company-Owned

2017

  • Outlets at the Start of the Year:  27
  • Outlets at the End of the Year:  26
  • Net Change:  -1

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

Section V – Financial Performance Representations (Item 19, 2020 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:  2018 (centers opened during the fiscal year 2018 and still open as of December 31, 2019, excluding Centers that have been transferred to a new franchisee)

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Published at Fri, 16 Oct 2020 04:30:44 +0000

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