How Sylvan Learning aims to school its rivals
A teacher with an Arkansas drawl and a sweet smile is leading Sylvan Learning’s charge to get the 30-year-old system growing again. Ashley Hill believes in CEO Jeff Cohen’s vision for the brand—and her shrewd business moves are setting the pace for once-skeptical franchisees.
“I have an elementary ed degree, not an MBA,” says Ashley Hill, the multi-unit franchisee in Jonesboro, Arkansas, who is at the forefront of Sylvan Learning’s attempts to get growing again—and realize a return on a massive investment in technology that its CEO convinced investors will transform the 34-year-old supplemental education company.
“We have the opportunity to be innovative again,” says Sylvan’s CEO Jeff Cohen.
Hill probably reminds most people of their favorite grade-school teacher, with her ready smile and kindly voice. She first bought a franchise because the owner of the center where she worked was either finding a buyer or closing it down. She got a loan only after her parents and her husband’s parents guaranteed the note, which she found “humiliating.” “I considered it taking one for the team,” she recalls about stepping up to buy. “If I didn’t do it, who would?”
She has since developed into a shrewd negotiator with the rights to six centers, including all of central Arkansas, honing her business skills each time corporate has called. In December 2010 they offered Memphis and she agreed on one condition: “If you can cut me a good deal on it—because you work your butt off,” she says.
‘We’re going to be there’
She is also an early adopter of SylvanSync, the new platform for educational materials that teachers deliver via iPad, and that President and CEO Jeff Cohen believes will start a second fast wave of revenue growth akin to its early years. That platform, in turn, is allowing existing Sylvan franchisees with a bricks-and-mortar center to open Sylvan Satellites, sending teachers armed with iPads to a community center or YMCA or school.
“If there’s a way to bring Sylvan there, then heck yeah! We’re going to be there,” Hill exclaims, and she’s not alone. More than 150 satellite locations have been approved with 75 operating in less than a year since launch, adding top-line revenue for each franchisee, and royalties to Sylvan, without adding fixed costs.
Now this teacher has been able to remove everybody’s names off that original note, gaining new loans and credit lines based on her operating history, and she’s setting an example for other franchisees about the future of Sylvan. As for her own future, she claims she is done adding centers, just as she did when she had none, then one, then three, and now the rights to six.
“Six is it! Put that in writing,” Hill says, but just a bit later she gives away the fact that her business mind is already churning. “I’ve had my eye on Northwest Arkansas…..”
Jumping the curve
Jeff Cohen, CEO of Baltimore-based Sylvan Learning since 2008, borrows a sheet of yellow legal paper and draws the classic business growth curve everyone remembers from economics class. The lesson is about as low-tech as it can get and more than a little nerdy, which he admits with a laugh.
Here’s the early years of Sylvan, begun in Sylvan, Oregon, in 1979, and a leader in delivering individual education as a supplement to the schools. Cohen draws the typical steep spurt. The curve flattens, then takes off again in the early ‘90s, along with big growth in franchising in general and education in particular.
By 2008 when Cohen arrived that line was flat, and without him knowing, was about to plunge as the economic crash cut parents’ pocketbooks and their willingness to pay for tutoring services. “Here’s the challenge,” he said at the time. “We’re sitting here, we’re mature. What are you going to do when you’re at the top of the cycle? Probably it’s going to be a downward trend if we didn’t change.
“I said we have an unbelievable brand, so we could sustain ourselves on the brand for years,” Cohen recalls. “But the real fun is to jump off this curve—and start a new S curve. We saw an opportunity to get off that curve.”
Ashley Hill, left, multi-unit franchisee for Sylvan Learning, with CEO Jeff Cohen, are experimenting with the best ways to roll out the new Sylvan Satellites.
The economic crash put urgency behind his words, ironically convincing anyone resistant that change was imperative. “To have someone come and say we’re going to change everything—it was the perfect timing,” Cohen says, who insisted, “This is the moment that we should invest.”
Cohen convinced the company’s primary investor, Sterling Partners, which took Sylvan private in 1997 and owns a wide array of educational companies under the Educate Inc. umbrella. “It was not a hard sell” to Sterling, Cohen says. “We have the opportunity to be innovative again.”
SylvanSync has been in the works for several years and still has a long way to go, with tens of millions of dollars invested already and several patents obtained and pending. So far two of Sylvan’s courses are available via the platform, with teachers reporting more engaged students and stronger results. Developers are racing to add additional courses until the entire Sylvan curriculum can be delivered digitally rather than via pencil and paper.
Cohen says he makes all his decisions based on two objectives: educational excellence, and he believes the digital coursework taught by a gifted teacher—both key elements to the Sylvan formula—meets that standard. The second is profitability, and here is where he believes the new Sylvan Satellite model that the mobile platform enables will shine.
“This is the game changer. I think the multiplier will be the satellites,” Cohen says, admitting the model is still being worked out, in a partnership with leading franchisees like Hill. “We lay out the vision and you have hundreds of entrepreneurs out there making it better,” he says, and the bottom line looks promising.
“This allows more revenue with no increase in fixed costs,” Cohen says. “By this time next year I think there will be 500 satellites.” Sylvan has about 770 bricks-and-mortar centers, and will award satellite locations only as additions to franchisees with such centers.
Cohen is positive he’s leading Sylvan in the right direction. “It’s a winner and we’re first,” he declares. But the expensive truth is he has made a big bet, committing the company fully to a new direction—and still facing plenty of rivals intent on pursuing strategies of their own.
Education in general is one of the hottest sectors attracting private equity investors these days, meaning plenty of money is backing multiple companies with competing strategic visions.
Tutoring franchises in particular are plentiful, from Kumon with an enormous 25,000 units worldwide and a far lower initial franchise fee than Sylvan, to Tutor Doctor, a home-based model that is smaller domestically but well ahead of Sylvan overseas.
Add the “hidden” rivals for Sylvan and other brands—the hundreds of individuals who offer tutoring services on their own at a much lower rate—and the competitors for funds are many.
Ashley Hill says many franchisees who were initially skeptical of the changes—she puts the number at about 50 percent as recently as last summer—are starting to become supporters. Part of the resistance came from franchisees who had suffered through the flat times that are the hallmark of mature companies, and then the decline post-2008.
“That was a no-brainer,” says franchisee Ashley Hill, about becoming an early adopter of SylvanSync technology. “I couldn’t find a reason not to do it.”
She moved quickly because she saw students were more engaged using iPads, and for a teacher, that’s gold. Plus, corporate offered incentives to early adopters. At first, corporate purchased iPads and leased them to franchisees for 24 months at no interest (the 0 interest rate is no longer in place).
She leased 10 iPads at a cost of about $4,000 for each center. Then there’s a fee every time a student has a session on an iPad, for an incentive rate of $2. (That rate is now $2.50 per session.) Compare that to the former mandate to spend $3,000 to $10,000 to buy a new set of paper-based materials each time Sylvan rolled one out, and the decision was easy. “That was a no-brainer,” she says. “I couldn’t find a reason not to do it.”
She’s still plotting her expansion plan, always with an eye for cutting the best possible deal. “In this world you have to ask for things,” she says, a belief she credits to her stepfather, a CPA who’s been a business mentor all along the way.
Her philosophy, revealed over the course of a long, in-person interview, is all her own, and could be summed up like this: Kindly, and politely, let’s go kick the competitor’s butt.
She laughs when told she’s obviously developed a keen business sense that her polite manner belies. “Maybe it was the way I was raised, maybe it’s being from the South. But I know likability is everything,” she says. “If they don’t like you they’re not going to use your services.”
She instructs her employees never to speak poorly about the competition, even if they bash Sylvan. “When your competition bad-mouths you it’s because they’re scared, and we’re not scared,” she says, adding later she’d rather arm her teachers with a bunch of iPads and send them directly out to compete.
As she figures where to put her satellite locations she has one thing in mind. “Where are our competitors?” she thinks. “So let’s put one right next door.” It’s a lesson spoken like a true tycoon.
For more information on Sylvan Learning visit www.SylvanFranchise.com.