Education brands target dense locales
Simon Edwards is a Primrose Schools owner, who also doubles as the Cat in the Hat on occasional reading days.
An accomplished commercial real estate investor, Scott Waltenburg pounced on a chance to open the first urban school in the U.S. for Children’s Lighthouse Learning Centers in Chicago.
The 17,500-square-foot school is expected to open in late May or early June in the city’s north side near Wrigley Field. Young professionals are moving into the region. The stretch includes three highly rated elementary schools.
“It’s a hot area for them, and there was a lack of child care,” Waltenburg says, referring to young professionals.
Other education brands that include real estate ownership as part of their business model are getting into the act, too, including Goddard Schools, Primrose Schools and Rainbow Station.
An urban migration
The trend comes as a projected 2.4 billion more people will move into urban areas globally by 2050, according to the 2014 revision of the World Urbanization Prospects done by the United Nations Population Division.
In the United States, the urban population is expected to rise to 350 million by 2050, up from 265 million this year. Urbanites now account for more than 80 percent of the nation’s population.
For Children’s Lighthouse, the school’s niche will be offering before-and-after school programs for children ages six weeks through fifth grade. Waltenburg hopes that gives it a competitive edge over some similar local rival schools that cater to kids from 2 to 5 years old.
The Chicago facility is among 20 Children’s Lighthouse schools under development in Texas, Alabama, Illinois and North Carolina, most expected to open this year. The Fort Worth, Texas-based franchisor plans to have 75 schools open by late 2016, up from 40 as of March 2015.
Stephen Dixon, the brand’s chief development officer, says the brand’s new growth strategy calls for franchisees to open schools in both suburban and urban markets. He added Children’s Lighthouse looks forward to expanding on the Chicago model as part of its future growth.
“There’s a trend that we’re seeing more parents move closer to city centers, and we want to be a part of that,” Dixon says. “There are many markets in the nation’s top 25 metro areas certainly worth exploring with the urban model.”
Urban and suburban
A booming economy coupled with a rising number of businesses and young professionals and families with children moving to downtown Pittsburgh prompted Matt and Dina Speranza to open a new Goddard School there. The Speranzas are investing $2.2 million to open a nearly 13,000-square-foot facility projected to open in July with offerings including infant and kindergarten programs. Parents working downtown will be able to drop kids off and visit them during the day. The Speranzas own two Goddard Schools and co-own a third one in the Pittsburgh area.
The preschool fits Goddard Systems Inc.’s national plan to open schools in urban and suburban markets. The early childhood education franchisor is teaming up with franchisees to add 20 schools this year and 150 by 2020, says Joseph Schumacher, CEO of Goddard.
Goddard plans to add four urban schools, including the new Pittsburgh school. Since 2008, Goddard has opened urban schools in Manhattan, Chicago, Wilmington, Denver and Cincinnati. “Going into the cities has been successful for us, but we continue to expand in the suburbs, too,” Schumacher says.
The 16 schools planned for the suburbs include Orlando, San Antonio, San Francisco, Des Moines, and Milwaukee and Madison in Wisconsin. As of March, the King of Prussia, Pennsylvania-based Goddard had 428 schools nationally operated by franchisees.
On the revenue side, Schumacher says Goddard Systems plans to work with franchisees individually to help them to boost occupancy in their core program and through such offerings as summer programs, kindergarten and before-and-after school-age care.
For Primrose Schools Franchising Co., key markets for growth in 2015 include Chicago, Boston, New Jersey, Baltimore, Philadelphia, Los Angeles and San Francisco, says Jo Kirchner, Primrose’s president and CEO. Primrose plans to expand its West Coast footprint by opening its first school in Los Angeles in 2016.
The Acworth, Georgia-based franchisor is bullish on those markets due to strong demand for high-quality early education, entrepreneurial interest and real estate opportunities. Plus, Primrose is targeting areas for schools where there are about 2,500 children under the age of 5, living within a three-mile radius. These areas have several available submarkets that meet this criteria.
Its growth strategy calls for both suburban and urban sites. Primrose plans to expand its urban school model in Atlanta and Dallas. Its 300th school opened in March as the second urban location in the Atlanta market. There are two other urban schools now under development in Atlanta and another two expected to open by 2016.
“Responding to demographic shifts with more families now choosing to stay in the city versus moving to the suburbs, we are expanding our strategic focus to continue growing our East and West Coast urban model locations,” Kirchner says.
Focused on increasing enrollment and opening schools in new areas, Primrose aims to grow system revenue by about 12 percent this year over 2014. It plans to open 30 new schools and award more than 45 new franchise agreements in 2015. And, it aims to open its 500th school by 2020.
A smaller footprint
To help cut real estate costs, Rainbow Station is offering a new smaller school model that’s about 14,000 square feet versus its traditional size of 16,000 to 18,000 square feet, says Gail Johnson, president and CEO of the Glen Allen, Virginia-based preschool franchisor. It typically can run $5 million to $6 million to build the larger school.
The smaller version would trim building costs to $3 million to $3.5 million, and out-of-pocket expenses by $400,000 to $500,000. The reduction would help Rainbow Station attract more operators, but the franchisor has not set a timeline when the new model will be offered. Johnson says the brand wants to ensure it is successful in China before rolling it out domestically.
Rainbow Station has three schools under development in the United States it plans to open next year. This year, It plans to sell at least 15 schools domestically and open at least that many in China. As of March, Rainbow Station had 10 schools in the U.S. and three in China.
Further, Rainbow Station is restructuring some curricular programs and adding a new one as part of a strategy to reach a goal of a 7 percent same-store sales increase this year over last year. The franchisor is also in its second-year roll out of a revamped kids daytime summer camp which has proven to be a revenue boost for existing franchisees.
Rainbow Station also is allowing parents to enroll children in an all-day preschool program or choose á la carte enrichment classes to enhance other activities they may be involved in. The tactic is being adopted domestically after being applied successfully at Rainbow Station schools in China.