KUMON Franchise Owner Complains of Overexpansion
November 23, 2009
According to the Kumon franchise website, Kumon is “an after-school math and reading program that employs a unique learning method designed to help each child develop the skills needed to perform to his or her full potential.”
With an international network of independently owned and operated franchises, Kumon claims it the largest and most established program of its kind in the world. States the website: “Kumon has nearly 250,000 students enrolled at more than 1,500 individually owned and operated Math & Reading Centers in U.S. and Canada alone.”
One would think that having brand dominance of the supplemental education market would be a benefit for Kumon franchise owners… unless continued expansion results in cannibalization of sales between competing franchisees. We received an email from “concerned owner” who worries that, among other things, Kumon is overexpanding at the expense of existing owners.
Concerned Owner writes:
Many Kumon franchise owners are concerned about recent expansion of Kumon in seemingly saturated areas. The corporation is using generic criteria to evaluate potential market areas, namely family income and a specific number of children in K-8. The generic criteria is not adjusted based on disposable income, cost of living, and who actually contributes to average family income. The exclusion of important market data has led the corporation to overestimate their market potential and an unjustified expansion plan.
Kumon corporate also does not have a good understanding of their customer. Kumon offer a good value but they do not know the segment of customer that respond to the value. Instead, they are trying a shot gun approach to increase brand awareness. They are trying to sell expansion as an investment in brand awareness but awareness is no substitute to a targeted message to the customer segment that responds to a companies value prop. Again, this lack of market knowledge and poorly thought out increase in brand awareness leads to over expansion.
In more saturated areas, such as the tri-state NY, NJ, CT area, the corporation is just trying to open up centers in close proximity to some of their largest centers. The corporation does not seem to care that an owner can lose 20 to 30% of their revenue because the corporation hopes to net an additional 5 to 10% growth between the 2 centers. Kumon corporate does not put in capital for the center, that responsibility is on the franchisee. Because the franchisee puts up the capital, Kumon does not share in the risk of the current and new owner. For the current owner, its a loss because they are losing on their top line. For the new owner, they will not get an adequate payback on their investment (build out, furniture, advertisement, etc). Kumon corporate does not care because they can get an extra 5 to 10% without risking anything.
The poor market data, cavalier attitude towards existing/potential franchisee owners, and no risk sharing between franchiser and franchisee leads me to believe that a Kumon franchise may no longer be a wise investment.
Most franchisors have an expansion strategy based on market saturation. Their goal is to dominate viable markets with the greatest possible presence in order to create strong brand recognition, to squeeze out competitors and to maximize systemwide revenue. Overexpansion can result in franchise encroachment, perhaps the greatest source of franchise litigation and unhappy franchisees.
What do you think? Is Kumon Math & Reading franchise doing what it needs to do to create a strong system, or is it overexpanding to the detriment of its franchise owners?
ARE YOU FAMILIAR WITH THE KUMON FRANCHISE? WHAT DO YOU THINK? SHARE A COMMENT BELOW.
Prospective Franchisees, beware of the trap. Kumon Franchise agreement is one sided and they can install another center one block away from you. This is what’s happening right now in NJ. A large number of prospective franchisees are scheduled for training in January . Ask the Kumon Franchisor for the 2009 and 2010 expasion list. You will see clusters of Centers planned within 2-3 miles radius. Ask them all the centers around your target location or ask a current francise owner near by you for the details.
It takes years to recover the money you spend for the build outs and furnitures. Also look into the fact that how many centers have been closed with in a year. If Kumon opens another center close to you, you have to compete with other centers for the available students. You may have to cut your fees to attract students to your center. Do you also know that the Kumon royalty fee is over 30%?
This Japanese Franchisor does not understand the American culture and they are trying to copy the Japanese expansion model here.
The concerns expressed here come out of a very challenging and high-stress situation which we as the International Association of Kumon Franchisees are doing our utmost to address.
We are in constant negotiations with the high-level employees of Kumon North America on many topics to do with our franchise, and, while we know it will be a long process to address all the issues, we are encouraged that considerable progress is being made in real consultation on many fronts.
The great strength of franchisees in New Jersey is that they are working together in very constructive ways on things like profitability studies to analyse how to improve their businesses, marketing studies to grow their centres better and other initiatives to address their situation.
They have the highest representation of association membership (over 80%) and have demonstrated in a recent meeting with the CEO of Kumon North America a very admirable professionalism and creativity in moving the Kumon Vision forward.
I am proud to support these franchisees and others throughout North America in their efforts to use their considerable skills and areas of expertise to develop and maintain their Kumon franchises and to have a positive impact on the Kumon North American system as a whole.
Best wishes,
Nicole,
President, International Association of Kumon Franchisees.
We need real action from “top managment”. More often than not, they ignore concerns of owners and push on with their own agenda.
Kumon is pushing expansion because they want to build brand awarness. However, how much money does Kumon invest if their brand awarness strategy is based on center expansion. Very little. The capital cost is on the new franchise owner. Existing franchise owners that may have locations in nearby locations will loose out because these new centers poach their customers. This strategy only favors the corporation and not the franchisee.
[...] an earlier post about the Kumon franchise complaints, Concerned Owner complained that Kumon’s reliance on incomplete demographic data has led the [...]
John: All that you say is true! There has been a movement in franchising in the past ten years to move away from granting protected territories to franchisees because, as you say, the capital cost is on the franchise owner, and the franchisor profits from the gross sales of the franchisees, even when the franchisee is operating in the red. It is the franchisor who owns a business of his own, and franchisees, under law, are merely resources (assets) to be used by the franchise systems.
Two franchises operating or teetering at break-even are better than one franchise operating at a profit for the franchisor. Breakeven franchisees are indentured for the long terms of the contract because of liquidated damages clauses contained deep in the small print of the franchise agreement. The franchise agreement is generally a malicious legal trap for franchisees who buy in good faith from franchisors who do not always act in good faith.
Unfortunately, “churning” and “encroaching” are protected under the FTC Rule and State Statutes as long as the terms of the contract spell out that the franchisor is not granting a protected territory, etc.. and as long as the franchisor discloses in compliance with the law and secures the signature of the new franchisee on the unbargained and take-it-or-leave it franchise agreement.
http://thegreatfranchisingrobbery.blogspot.com
Do some research Carol, and read section 3.3 of the franchise agreement where is states there is no exclusive territory (plain and simple). People complaining about it now obviously don’t understand what they agreed to (although it’s pretty well laid out in the agreement).
It’s a contract. Language is spelled out. I’m sure if someone had a interest rate on their business loan at 8%, they wouldn’t want their lender changing it unilaterally to 10%. Same thing with this contract. They’ve agreed to the terms (in this case no exclusive territory), and they have to live with it (unless the zor will negotiate, which they aren’t required to do).
Yes JD! Decent and honest persons do sign these unbargained unilateral contracts because they wouldn’t believe that franchisors would be so indecent and dishonest as to sell them a franchise that will cost them hundreds of thousands of dollars, and then premeditate destructive encroachment in the terms of the contract because they are protected from this kind of fraud under cover of regulation and the malicious contract!
They wouldn’t believe that their government pimps for the franchisors and the other special interests who benefit from the cheap labor and the cheap venture capital of franchisees!
Happy Thanksgiving, JD. I am grateful that I live in a country where I can freely critizize my government and call them out when they engage in lies and disgraceful behaviour.
Who do you work for?
http://thegreatfranchisingrobbery.blogspot.com/
You are so naive. I actually imagine that your family was similar to the type of ownership that Sean wrote about earlier in reviewing someone’s Twitter feed. It’s always someone else’s fault.
The contract is plain as day. No exclusive territory. If it says that, people are aware of it and shouldn’t be shocked if it happens (and should think worse case scenario when signing the agreement). If you don’t like the terms, you walk away. Plain and simple. The government has nothing to do with this. There is no denying that there is no exclusive territory. Get it through your head. These people signed a bad contract that they weren’t forced to sign.
How’s that blog of yours doing? You’ve written one entry in three months (maybe because you can only talk about one thing).
As I’ve said before, I haven’t worked in franchising in over 4 years, but I find it funny how people complain about things that are spelled out pretty easily in the franchise agreement.
JD… this serves as a warning for other people thinking about getting into the franchise… thank you for pointing the exact section people should be wary of.
You are really angry… Why so? Do you work for Kumon Corporate?
JD, you are right, everything is very clear in the Franchise Agreement, no territory and so on. This is what our association franchise lawyer says whenever people talk about challenging Kumon legally. That is not an option. because Kumon is perfectly within its rights. People need to read that FA very carefully, that just makes good business sense.
When I talk to other Kumon centre owners, I see that people just had no idea how extensive expansion could be. People tend to come into Kumon with all kinds of assumptions, really loving the program which is fantastic and unique in the world, and not getting how difficult it can be to deal with the issues that have been raised as well as others.
It is Thanksgiving there, I understand (I live in Canada so ours was last month). Believe it or not, we do have things to be grateful for as franchisees in Kumon, in addition to the things I mentioned in my first post.
Our franchisee association is included in the disclosure document of the Franchise Agreement, and this is because of a relatively new change in franchise law in the US, so we have been in for the past two years and new franchisees who read their document carefully can find us right away and get on track.
I am grateful that I have the opportunity to meet with colleagues across North America, in fact via the internet we also can keep in close touch with our sister associations in the UK, Australia, Japan, and Mexico. Through these discussions, I glean a fuller picture of Kumon worldwide. I see a very passionate and caring group of franchisees who understand the power of Kumon to change the lives of children for the better.
In my talks with employees of Kumon North America, I also am encouraged with how many of them want to see positive change. Our new CEO, Hideki Kusuzawa, is someone who is deeply concerned about the need for a better system, and is actively looking for ways to make it so.
We may not always agree as franchisees with the company about the ways and means to move toward a better Kumon North America. But as long as we remain in constructive and respectful dialogue, we can work together towards our common goals, of which we have many.
Best wishes,
Nicole,
President, International Association of Kumon Franchisees, North America
Kumon’s actions in the not so recent past do not reflect section 3.3. Kumon once worked with new and current franchisees to identify a location that minimized cannibalization. The “veteran” instructors, that have owned centers for a few years have experienced Kumon’s arbitration on new locations.
Kumon is no longer arbitrating locations. This is a new behavior on the part of Kumon corporate. At one point, there was a general rule of a 5 mile radius. Now, there are no rules. Kumon set an expectation that they will work with current and future franchisees to identify an appropriate location. Kumon may have the right to put a location where ever they want, but their behavior in the past set an expectation that Kumon will not simply place a location in close proximity to an existing location.
On a side note to Jane: You may have not been there when the new CEO, Hideki Kusuzawa, asked a veteran instructor “What are you complaining about?” when the instructor said he lost 20% of his students to a new center that opened up in close proximity. The new CEO is more concerned about the number of centers than, using the new CEO’s term, micro issues. The CEO is a direct reflection on how the rest of Kumon management works and behaves.
Jane, I don’t find Mr. Kusuzawa’s comment to the instructor objectionable in the least.
The instructor was drawing business from a vacant territory that he did not have the rights to. The instructor should be thankful for the 20% bonus he got by having a headstart in a fresh new market. He should be thankful that it was a franchisee and not a competitor that opened nearby. Now he can combine resources and do joint advertising with the new center.
I think the franchisees complaining don’t get the fact that as markets mature they have to adapt. They can’t just get the lowhanging fruit that was available when they were alone in the market. They’ve got to dig in and fight for every bit of business in their local area. Yes, the franchisor’s going to pack them in tight as possible because that’s how the chain becomes dominant. You’re just going to have to work harder.
To guest: put up your money and see how you feel. If you actually own a center, wait till one pops up in your backyard.
BG: I don’t mean to be unsympathetic, but businesses don’t operate on how you feel. You signed a franchise agreement that clearly states you have no protected territory. That’s the deal you made. Odds are you didn’t hire an experienced franchise attorney or advisor to review the document prior to signing it. Perhaps you didn’t even read it (many don’t). Now you know better.
Franchisees think the world should operate on what they think is right – from their viewpoints, preconceived notions and assumptions. They think 100+ pages of legal agreement is just a formality but it’s not… it’s the deal.
Most franchisors, of course, do not try to dispel those misconceptions until after the ink’s dry and the check’s cleared. Their websites and brochures are all touchy feely we’re all in this together. But the truth is that they are focused on the big picture and that doesn’t always jive with your individual self interest.
Sorry but that’s the reality of it.
Oh.. So when the main channel to the customer is not happy, they should just sit quiet and take it. Sorry Guest, we are going to get a lot louder now.
Your right, we should not operate on how we feel. We operate to make money. When money goes away action must be taken. We have a contract but we can warn other potential franchisees. That is the purpose of the complaints.
Again, you must not own a center… sounds like you are rep for Kumon corporate. That’s the reality of it.
BG is right! At least franchisees, because of Internet Sites like this, can warn prospective franchisees and current franchisees can talk with each other and share their performance statistics that will act as a warning to new buyers.
JD says the government has nothing to do with the process but, of course, you can’t buy a franchise in the US unless the franchisor discloses to you under the provisions of the FTC Rule, The FDD from government and the Contract is a seductive package that implies that the franchisor is legitimate and selling something of value to the public.
Prospective franchisees, who buy in good faith, mistakenly believe that the franchisor can’t profit unless they profit and don’t understand the franchisor’s goals of encroachment and saturation in which so often many franchisees are sacrificed, Prospective franchisees don’t get true disclosure of the real risk factors from the franchisor before they put their signature to the contract because of the ineffective FTC Rule that intentionally protects and subsidizes the franchisor.
JD is an accountant who defends the status quo of franchising and the law and who apparently enjoys reading the sad stories from those who lose everything. It apparently makes him feel better when he can chastise these people for not reading and understanding the take-it-or-leave it contracts. Always easier to blame the victims and not to fault the constructive fraud of the “package” from hell.
http://thegreatfranchisingrobbery.blogspot.com/
guest, I think it would be helpful were you to identify yourself. Do you represent the official position of FRDD on this matter? If so, I think I need to go back to Kusu to discuss this approach with him.
Nicole
Guest ,
It took years to harvest those lowhanging fruits. I am sure you were not there to help harvest those fruits. This land is vast and lowhanging fruits are every where. Why to focus on the small land a franchisee leased from the community to cultivate and grow these fruits. Come on! don’t hide under FA clause and do what is right.
If one worked hard to buid the business, he/she should be the one to reap the benefits. Concetration of several franchisees in one small area all will result in a fight for these lowhanging fruits. What you care? You get your 30%.
Few years ago Kumon elevated the large centers to a high achiever status and invited them to lavish retreats in Mexico and other exotic places. It was good that a center grow big then. Now it is bad. One could not relocate his center to a new location down the road then as doing so would hurt another center. This was the policy then. Now it is opposite. Kumon did not communicate this policy change to franchisee. Yes, FA is one sided and the future franchisees should be aware of it. This discussion will continue unless there is changes in the thinking of Kumon higher management.
Kelly.
Official or not, the position of “guest” is what owners are dealing with and future owners will deal with.
I don’t represent any official position and am not a Kumon insider.
BG said “Official or not, the position of “guest” is what owners are dealing with and future owners will deal with.”
BG is correct. I’m just stating the reality of the situation. You’re business owners now. No one is going to change their practices simply because you think they should and because you thought the deal was different than it is.
I’m not saying you shouldn’t fight to change things you should. Franchisors are strategic, while franchisees are emotional. Why is it in their best interest to change their practices? If you can’t show them that, from their best interest, they won’t change simply because you think it’s the right thing to do.
Carol is completely offbase. Just because the SEC approves a stock doesn’t mean that it’s a good or even fair deal and you won’t lose your money if you buy it. The FA is in black & white. The problem franchisees don’t even bother to read Franchising for Dummies before they make the biggest investment of their lives.
Kelly wrote: “Concetration of several franchisees in one small area all will result in a fight for these lowhanging fruits. What you care? You get your 30%.”
Why does the franchisor care if the franchisees have to compete among themselves? After all, they made the conscious decision to not grant territories. Won’t the best centers that provide the best results get the business they deserve? Won’t having more centers in a given area drive out and keep out competitors? Won’t 5 centers in a given area generate more revenue for the franchisor than only 3 centers?
Won’t the franchisees be able to co-op their advertising dollars and split the costs of local and regional advertising campaigns?
Maybe this franchisor really knows what its doing and it’s the franchisees who need to change their thinking.
Guest, you say, you are not representing an official position and not a Kumon insider.
Yet you seem to know so very much about the background to a remark made at private meeting between the company and a specific group of franchisees.
“The instructor was drawing business from a vacant territory that he did not have the rights to. The instructor should be thankful for the 20% bonus he got by having a headstart in a fresh new market. He should be thankful that it was a franchisee and not a competitor that opened nearby. Now he can combine resources and do joint advertising with the new center.”
How do you know all this if you are not a Kumon insider?
To speak so freely about people’s private affairs in a public forum and not disclose your identity seems very questionable to me, in terms of business ethics. If you were the franchisee in question, how would you feel if some anonymous person did this to you?
Nicole
Nicole:
I have been involved with franchising for a long time. This may be a new topic for you but, believe me, the same private conversation that you think is specific to Kumon has been replayed since dinosaurs roamed the Earth.
It’s pretty simple, really. Franchisors, in general, want to open as many locations as possible. They want to pack as many franchises into an area as they can. They want to saturate each market and leave no money on the table.
Franchisees think they should have the whole state to themselves and see any other locations anywhere near them as a threat. They understandably care only for their own self-interest and have no interest in the big picture.
So I know the arguments that ensue… that’s all. If this resembled a real conversation, it was inadvertent but not surprising.
So let me share a view that will assure you I’m no corporate shill: I think you should fight for the changes you think are fair even if you don’t have them in the contract. Legally you have no leverage but you can make it very difficult for them to sell new franchises if you are not silent about your objections on the Internet. The conversation here is a good start, but you, Concerned Owner and the others need to argue with facts and reason.
I don’t think a Kumon insider would make that point.
Guest,
You sounds like a lawyer. mmm Who could that be? It is a good advice from the guest who stated ” Legally you have no leverage but you can make it very difficult for them to sell new franchises if you are not silent about your objections on the Internet. The conversation here is a good start, but you, Concerned Owner and the others need to argue with facts and reason”.
There are plans in place to make the facts and reasons known to the public by twittering, facebooking and going to other news media should this problem presists and the KNA ignores and fails to address the concerns of the Franchisees who are really affected by the KNA expansion plan.
Kelly.
Guest says “Carol” is completely off base” and goes on to say “just because the SEC approves a stock it doesn’t mean that it’s a good or even a fair deal and you won’t lose your money when you buy it.”
He doesn’t, however, tell you that under SEC Rules, the SELLERS, who will profit, have to disclose MATERIAL facts to the BUYERS or be subject to private lawsuits for fraud and misrepresentation. Under the FTC Rule, there is NO private right of action for fraud because there is no fraud if the franchisor is compliant with the disclosure rules —-and even when the franchisor isn’t compliant, this isn’t fraud and is just a violation of an Administrative Rule that can’t be used in a state action for common-law fraud. Catch 22.
Under the FTC pre-sale disclosure rule, it appears that the FTC has deemed that the historical financial performance statistics of the UNITS that comprise the system (concerning profitability and failure-success of founding franchisees) Do not have to be disclosed by the franchisor, the seller, to new buyers of the franchise. A franchise purchase is treated uniquely under FTC Rule in that the franchisor can use franchisees, past and present, as references upon which to perform due diligence in order to, himself, evade disclosure of material information about unit performance to the new buyers.
Apparently, this FTC regulatory policy was the response to the grim statistics surrounding small business failures. Obviously, they knew that if 50% of franchisees would fail at sometime in the first five years, and this got around, or was reflected in the offering ciruculars, the FDD’s, this would sure slow franchising in the economy.
About the rest, Guest is right. You, Kelly, are on the right track. At least, the franchisees, themselves, can, with immunity, discuss their own performance statistics with each other and look for solutions because of the Internet, and if the performance of the franchise is not good, this will mean that the franchisor will lose new buyers and might want to cooperate with solutions that might help the franchisees. This is a new movement in franchising that is frightening the franchisors when it reduces new sales.
Guest says “legally, you have no leverage” and I agree. This was the intent of franchise regulation that would protect the 50% who would survive past five years in the service of the franchisor from the 50% who would not survive for five years.
http://thegreatfranchisingrobbery.blogspot.com/
Guest, Kelly and Carol -
Re guest’s comment:
“Legally you have no leverage but you can make it very difficult for them to sell new franchises if you are not silent about your objections on the Internet. The conversation here is a good start, but you, Concerned Owner and the others need to argue with facts and reason.”
It is kind of you to provide advice.
In IAKF, we have the benefit of counsel from Andrew Selden of Briggs and Morgan, and with his 40 years’ experience in franchising, we have all that we need to continue our constructive engagement with the company, thanks very much.
In fact, even just this week we have met on a number of occasions with different levels of management on many key issues, and are very satisfied with the quality of our dialogue.
Nicole
Nicole:
No need to be smug. I made the “advice” statement to correct your mistaken belief that someone at your meeting was posting as “guest.” and to save you the embarrassment of incorrect accusations. You were also mistaken that I am attorney. I’m sure the esteemed Mr. Selden would confirm no lawyer would be posting private discussions anonymously on the net.
You say “we have all that we need to continue our constructive engagement with the company… and are very satisfied with the quality of our dialogue.” Maybe your satisfaction is why the franchisees feel compelled to go public.
BG wrote: “The IAKF needs to actually use their “power”. Right now it just seems like an arm of Kumon corporate.”
Re-read my posts, guest. I did not make accusations, merely asked questions.
I did not say you were an attorney. Perhaps you are confusing me with another poster here.
It would appear you are making provocative statements in an attempt to elicit an emotional response from me.
Any Kumon franchisee who wishes to discuss how the IAKF could better represent her or him is always welcome to contact us and discuss it with us. We would be delighted to listen to their input.
Nicole
This is a serious issue and it is good that Kumon has a franchisee association that is in dialogue with corporate. Hopefully they will have a real effect and Kumon will not go down the road that Curves has. If you want to see the end result of overexpansion read the Curves posts on this blog. You can use the company search in the top right. especially read all the comments on Robert Lay’s story:
http://www.unhappyfranchisee.com/curves-robert-lays-story/
Curves sold as many as they could even in tiny markets. Their franchisees fail and they charge them fees for closing then resell their territories. Hopefully Kumon won’t come to that.
Dear victim,
That is a very scary cautionary tale. I once considered buying a Curves franchise, thank goodness I didn’t. Thank you for sharing that with us.
Nicole
Hello, My name is David Joseph and I own a minority share in a center located in NJ. I’m putting up this post to make my views plain and clear to everyone. My statements here are mine and mine alone. I’m concerned about Kumon’s strategy. I’m not concerned about issues involving associations, products, services, or contracts. I also don’t care about rants and insults that are now popping up on this page.
I’m concerned about Kumon’s strategy because I’m seeing encroachment and cannibalization…
Ed. Note: David Joseph’s comment has been upgraded to a full post. Please read it here:
KUMON: NJ Franchise Owner Shares Concerns
Also read the message from franchisee association president Nicole Smith:
KUMON: Franchisee Association Pushes for Change
To submit rebuttals or guest posts, please email us at unhappyFranchisee[at]gmail.com
Thank you, David for this excellent post. I hope that KNA marketing team comes to understand the potential of Twitter and Facebook for brand awareness.
Nicole
[...] educational franchise owner David Joseph originally posted the following as a comment on the post KUMON Franchise Owner Complains of Overexpansion. We’ve moved it here because of length, the quality of the content and the importance of [...]
EXKUMON INSTRUCTOR SPEAKS
In response to the unhappy instructor who started this conversation. I feel for the plight of many passionate and dedicated Kumon instructors who worked hard to grow their business from ground zero. Here are my comments and let me spell it clearly to all instructors and prospective instructors in plain language. It is very obvious to me that the goal of the Kumon franchisor is to earn more profit (as all businesses are profit driven) at the expense of the poor instructors under the guise of promoting brand awareness. In short, it is GREED.
Kumon Company does not share the franchisees’ vision to grow their center anymore as it now prefers small centers in every corner. Their first move is to break the big centers apart by putting a center in close proximity to these successful centers. This is a win (Kumon) –Lose (franchisee) strategy. Which is true for most franchises but here is the truth:
1.) If you are an instructor with about 200 subjects and have no plans of growing your business (small scale) you may stop reading now because you are not affected by the over expansion issue. You can worry later or stop working to grow your business because as soon as you grow, Kumon may open a new center next block. Your growth is the only market indicator whether to expand or not for Kumon.
2.) If you are an instructor with over 200 subjects and look towards growing your business or a prospective instructor who dream of growing your business (as all businessman dream), you may carefully weigh on these issues before you sign any franchise agreement with Kumon.
The reality is that it is not easy to get 200 subjects initially it may take 2 years or more specially if you are in a place where market is already saturated and if your goal is only 200 subjects, in a commercial space, you should have a spouse who is gainfully employed because you will barely be able to pay your bills. In short, you are just surviving or barely getting by depending on how you run the business. Kumon instructors are aware of the stress and hard work associated with this business and that is why only those who are very passionate thrive and succeed to grow in this business. These are the very instructors that Kumon is trying to break apart.
What the current Kumon management does not realize is that the success of these instructors comes from the passion and dedication to the Kumon Method that they share with its founder Toru Kumon. I have great respect and admiration to its founder, (I wonder what the founder will think if he was here today), however, Kumon has become a big business venture that some Kumon managers have forgotten its roots and humble beginning or they have forgotten that their franchisees are business people and NOT THEIR EMPLOYEES.
With Kumon’s current expansion strategy, I think it is better off them to just GET OUT OF THE FRANCHISING BUSINESS and hire instructors instead because their strategy right now is just like hiring instructors (“franchisees”) as employees who are willing to put up the a capital for their business and it’s up to them to survive in this saturated market. It is a brilliant strategy that will only benefit them but not their franchisees. In this strategy, the franchisor can capitalize on potential franchisees’ money and resources to cover the cost of build out, other fees and headaches associated with establishing a new business like legal fees, township zoning fees, and other professional fees if you need to apply for variance (planners, engineers, architect etc which are very expensive fees). On top of these fees are the lost rental fees if you want to reserve a good commercial space. Advertising and marketing fees that are shouldered mainly by the prospective franchisee and the return to the company is brand awareness which means more business for them but not for the franchisee. PLEASE, IN THIS ECONOMY, LET US NOT TAKE ADVANTAGE OF THE PEOPLES HARD EARNED MONEY.
I don’t see how a franchisee association can address this issue with Kumon management but instructors can expect for the worst and hope for the best. Their best hope is if Kumon will CHANGE THE MANAGEMENT and with the change, may bring a more viable solution to this problem, A WIN –WIN SOLUTION for franchisees and franchisor not just the franchisor. I think if Kumon has to do something to resolve this issue, they should do it NOW. STOP THE CURRENT EXPANSION PLAN AND SET A REASONABLE DISTANCE BETWEEN CENTERS SO EVERY INSTRUCTOR WILL BE ABLE TO GROW AND BE HAPPY. Right now you have just crushed the businesses of those labored for so long, walk the talk to help Kumon grow in this country.
I don’t want to cause panic to all the successful instructors who are affected and crushed by this overexpansion strategy and prospective franchisees but to caution you of the potential damage a franchisor can do to your business. Another grim reality is that you may not even be able to sell your business because no one wants to buy a business that doesn’t have the potential to grow.
I want to end this conversation with this note.
To all passionate and dedicated educators around the world: There is a vast and huge market around the globe for better education and teaching method especially in the US due to its deteriorating quality of education. As Kumon instructors, you are better positioned to design a new and alternate method that will directly address the ailing education system so I challenge you all to come up with a more comprehensive and less tedious method or program that will directly address and help children around the world BETTER THAN KUMON.
Wonder why I left Kumon? Because I am a business person and I don’t want to be treated like an employee. I love the Kumon method but I hate the franchise business. I know about the overexpansion problem because I still have friends who are Kumon instructors and their depressive plight.
Anu,
I agree 100% with you. Kelly
Thanks to all instructors, and the insiders for speaking your mind. It gives me the inspiration to take this matter to the next level. Lets expand this conversation to other online forums, groups and networking sites. Lets make people know how mean Kumon corp is. I have made a personal decision to spend an hour everyday trying to post and address this matter on other sites like Yahoo groups/ MSN groups/ AOL/ Google groups/ BBB and many many others. If Kumon still doesnt want to solve this issue, our next step should be to go to the media ( Print and Television). This is just a begining.
Bottomline: Encroachment is not healthy for the Franchisor nor Franchisee.
Anu, Kelly and John:
Anu, I know a number of former colleagues who have left Kumon and are running their own businesses.
While I sympathise with their feelings and had hoped they would be successful, in fact the longer they are away from Kumon, the more poorly they tend to do with their new businesses.
As franchisees, we often underestimate the power of the brand to bring in new customers. My friends who are running different programs have seen their numbers gradually decline over time if they were starting with a student base from Kumon (some were able to avoid the non-compete due to having signed an earlier franchise agreement or not having signed at all). If they started from scratch, they struggled from day one to get a foothold. The tutoring market is extremely competitive – without a large company behind you for branding and marketing, it is very, very hard to make a go of it.
I would never consider starting a competing franchise. Kumon is the best program for after-school enrichment in Math and English in the world, because it does not take a tutoring approach but develops self-learning skills.
Yes, Kumon has its challenges. As a daily practice, long-term approach that is about mastery and developing a solid foundation before going on to advanced study, it is not for the faint-hearted. It demands commitment and hard work on the part of parents and students. But you know what they say, no pain, no gain.
On a personal note, I have been in commercial space since having only about 60 students, since 2001. Still, I have been able to be financially independent since 2003 and have not needed income from my ex-husband to raise my three children and pay house expenses, etc, and this started before I had 200 students. For the past couple of years I have had 250 students or so.
I am not saying that it is easy, and I know different areas have higher expenses that Montreal where my centre is, but it is a question of charging the right tuition and being pro-active about managing one’s expenses.
Kumon has a process for discussion expansion plans with franchisees which works quite well in many areas. What we have to work on are those areas which are trying to over-expand, primarily the US East and California at the moment, and further to strengthen the dialogue process in other areas.
Best wishes,
Nicole,
President, IAKF
Nicole, I think you are one of the small scale business person I am talking about so you are not be affected by over expansion issue. There are a lot of instructors who want to keep their center small and I think, those are the areas where Kumon should focus into growing and put more centers around in order to grow that area not the areas already saturated. I wonder how you will feel if Kumon put center one minute drive from your center.
Most people in business want to maximize their potential to grow and thats what most successful center do thats why they continue to grow. I am not saying that with 200 subjects you cannot earn but it will depend on your cost and how you manage your center. Maybe rent and labor are cheap in your area. How long have aninstructor been in business and how much have they grown maybe a good question to ask to measure success but it doesnt matter anymore because Kumon is not interested with big number anymore.
Anu, I wonder why you came to that conclusion? You are right that I am not at the moment personally affected by over-expansion, since Kumon Canada knows very well that there is no possibility of putting in any centres in my area. I have confirmed this in recent discussions with the branch and with the head of Kumon Canada.
But that is at least in part because of the hard work I have done in our branch along with my local colleagues establishing a dialogue with Kumon Canada about Montreal expansion.
My rent and staffing costs are actually quite substantial, Anu. But it is up to me to charge what I need to charge to balance that out. Thankfully we have the freedom to do that in Canada and the US. That isn’t the case anywhere else in the Kumon world.
It is not that KNA always puts more centres around centres that are growing well. Yes, I have seen that happen before, and it is certainly happening in the US East and California. However, since the expansion plan is so agressive in those areas, it is just as likely to happen around centres that are small. In short, it is happening everywhere in those areas.
I also question your assumption that KNA is not interested in big centres. Ideally, to KNA, every centre would be over 300 students, right? Much more in royalty dollars. True, trying to put in too many centres will not help with that. But this is why dialogue with KNA is so important.
I don’t know how long you have been no longer a franchisee with Kumon. However, I ask you to consider how the fact that that you have given up on the franchise and no longer have first hand knowledge of what is going on, only hearing through your friends who are very upset, may skew your perspective of the overall picture.
Nicole
RE: Kumon peeps on Twitter
@unhappyz – This website’s twitter ID
@djpaboro – David Joseph’s Twitter ID
@leftydknyc – Kumon NA VP Franchising
List of Kumon employees, franchisees, etc. Twitter IDs:
http://twitter.com/UnhappyZ/kumon-franchise/members
To be added to the list, follow @unhappyz here or leave your ID in a comment:
http://twitter.com/UnhappyZ
@IAKFpresident – Nicole Smith’s twitter ID
Nicole, your former colleagues who are not doing good witn their businesses has nothing to do their disassociation with Kumon. I have a successful import/export business. I will not argue about the benefits of Kumon but many peple can argue with you because I still believe in the Kumon method. I still recommend this program to other peole.
I was in Japan and south east few months ago and I heard that there is another learning program gaining popularity in Japan, I think that is the reason Kumon is aggressively pursuing this strategy. Even in US, a lot learning centers are also popping up in every corner. Kumon instructors are not just competing with another Kumon center but also other programs.
As i have stated in my previous post, the solution to the problem is just to put a reasonable distance between centers. How about a 8 to 10 minute drive radius if miles is the problem so we can end this conversation here but 1-2 minute radius is rediculous.
I hope instructors will join force with you. I salute you for your effort to resolve this with your management. Good luck.
Anu, to clarify, I well understand my former colleagues not doing well in their new businesses is not related to Kumon. I was merely responded to your statement :
“To all passionate and dedicated educators around the world: There is a vast and huge market around the globe for better education and teaching method especially in the US due to its deteriorating quality of education. As Kumon instructors, you are better positioned to design a new and alternate method that will directly address the ailing education system so I challenge you all to come up with a more comprehensive and less tedious method or program that will directly address and help children around the world BETTER THAN KUMON.”
My point was that many people have tried to do exactly this on their own. Arguably the only ones who have been really successful, and these were not ex franchisees but people who succeeded in getting a really close look at the program before starting their own, is Enopi.
I am delighted to hear you still believe in the Kumon method.
Perhaps the competition is one of the reasons Kumon is so aggressively trying to grow in NA. But it is not the main driver. You cite greed, Anu, as being the main driver. However, the reality is that Kumon Japan is facing harsh economic realities and as a consequence they are demanding more of their main producing countries, of which Canada and the US are very important ones.
So what we need to do as IAKF is work with the company on sustainable, non-cannibalising growth strategies. And that is precisely what we are doing. I agree that territory is a key issue and one we must address. It is not as simple as a distance radius, since population density means that the distance that makes sense in Manhattan would be crazy for Arizona, for example. So we need to work on what constitutes an adequate student base for people to grow their centres over 300 students and how to support people in actually getting to those numbers.
People are joining forces with us, Anu, more and more all the time. The local chapters are proving to be the best strategy for accelerated growth of the association as well as local support for franchisees and a base of operations for local initiatives.
I appreciate your kind words and support, and wish you all the best in your own business.
Best regards,
Nicole
Special Announcement :
To All Independently Owned & Operated Kumon Centers
50% discount for all Custom Kumon Window / Glass Door Graphics and Signs
(75% To Only Those affected by Kumon’s Over Expansion in NYC).
Signs2000 Corp. provided and installed most of the Signs and Graphics to all the recent newly developed Kumon owned centers in NYC :
Chelsea, 320 West 23rd Street
Midtown West, 747 10th Avenue
Gramercy Park, 381 2nd Avenue
West Village, 80 Carmine Street
Chinatown, 123 Baxter Street
Upper East Side, 1582 First Avenue,
Battery Park City, 2 South End Avenue,
Upper West Side,700 Columbus Avenue
Harlem Central, 2235 Frederickl Douglas Blvd.,
We no longer provide service to Kumon North America. However, we will gladly service only independently owned and operated Kumon Centers at incredibly lower prices. These specially reduced rates are not for Kumon North America.
Shabbir Khalfan
Signs2000 Corp
signs2k@gmail.com
Potential Fall Out from Franchisee Encroachment http://djpaboro.wordpress.com/
Excellent blog, DJ, thanks so much. I hope that KNA thinks carefully about what you have said. We know that they are following your blogs and tweets, let`s just hope this doesn`t get lost in the shuffle because they are on holiday.
Happy holidays to all,
Nicole
Instructors don’t worry, I use to work for a center in the NJ area, and there is a lawsuit coming.
What do you all think of the recent layoffs of longtime Kumon employees right after the millions spent on the new corporate offices?
Mary, I was very sad to learn of the firings at the end of October of about eight very good people in Material Development and Instruction departments (some chose to leave around the same time, I believe for other reasons). .My understanding is that it was a cost-cutting measure, and that those who couldn’t or wouldn’t move to New Jersey to take part in the new training facility, Kumon University (KU), were fired.
It has been hard on morale for associates to see their peers fired like that.
I hear what you are saying about cost-cutting in the face of the major expenditures on KU and find myself at a loss to reconcile the company’s stated priorities of people potential first with such initiatives. These are the sorts of questions I ask Kusu when we meet.
Regards,
Nicole
More than 8 people were fired. Quite a few of them worked at corporate headquarters already so the fact that they wouldn’t move to NJ wasn’t a factor. I know of one veteran employee who devoted 17 years to Kumon. I was told that each dept. had to let someone go but I know that some depts. never did. When you go there you’ll see how lavish the offices are, with paintings, sculptures, a private staircase between floors.
Ah, the firings at corporate itself, yes, that would have been quite a separate issue that the relocation. I have not gotten information on those.
Speaking of lavish, I was quite taken aback when I saw the new corporate office of Kumon Canada how much money had been spent for posh-looking washrooms, among other things. Our franchise dollars at work, as they say.
Regards,
Nicole
Nicole: I missed out on your post wherein you indicate that Andrew Selden is your attorney.
I believe it was Andy Selden who indicated in an interview with Blue Mau Mau that it was “silly” that the FTC Rule and UFOC’s mandated 22 items of disclosure but didn’t mandate the most important item of disclosure for franchisees — that is, the “earnings claim.”
Hopefully, Mr. Selden will be successful in attacking the “stacked deck” and your franchisor will see the light.
Franchisors do live very lavishly on the profits of the sales produced by those on the bottom of the pyramid who do the work and take the risk. This is the goal of this business model. Franchising is not an “industry” but rather just an exploitive way of doing business that is used across many industries since the licensing of intangibles has become “big business” and “brand” mentality rules the world.
Read: Buying a Franchise! The Great Franchise Hoax! A Business of Your Own?” in a Google Search.
http://thegreatfranchisingrobbery.com
Carol, Andy has been successful in helping many franchisee associations go from a place of very limited influence to one where they are sitting down at the table with the company negotiating for the good of the whole system.
It is our hope that he will help us achieve the same, as we know that in order for Kumon to thrive in the 21st century, it must adapt the way its company is run to be more flexible and open to the input of its franchisees.
Regards,
Nicole