KUMON: NJ Franchise Owner Shares Concerns
November 27, 2009
Kumon 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 the franchise issues Mr. Joseph raises. Please feel free to share your opinions below.
Comments from David Joseph, NJ Kumon Franchise Owner
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. Although I’m not affected by encroachment, I directly and indirectly know people that are, as I believe we all do. For owners that are not directly affected now, you may be affected in a few months or a few years because of Kumon’s strategy and implementation plan.
For those who don’t own a center, think of encroachment and cannibalization as a pay cut or a layoff. I use this analogy because you lose money and, in the worst case, you can lose your job.
Kumon’s strategy is to build brand awareness through expansion. In essence make Kumon a household name because there will, so to speak, be a Kumon on every corner.
When I think of educational companies with great brand awareness, I think of Sylvan. However, I don’t see a Sylvan on every corner. In North America, there are approximately 1100 Sylvan centers. Kumon has approximately 1500 centers in North America. Yet the average person is more familiar with Sylvan than they are with Kumon.
Sylvan’s brand awareness was developed through heavy TV advertisement. TV ads and spots can cost a lot of money. The money used for advertisement directly affects Sylvan’s bottom line because that money comes directly out of the corporate budget. Sylvan corporate took a financial risk because they invested corporate money into advertising. I’m not sure what Sylvan’s return on investment was but I feel safe to say they achieved their brand awareness goal.
Kumon’s brand awareness strategy is based on increasing the number of centers. Speaking strictly from a corporate viewpoint, it is a brilliant strategy in terms of capital and return on investment. The majority of the money needed to expand comes from owners buying new center locations. New centers may end up encroaching on existing centers but from the corporate viewpoint that is OK. Corporate believes that there will be an overall increase in enrollment. Again, strictly from a corporate viewpoint, there is a lot of upside with minimal financial risk. The risk, from a corporate view, is generating vocal owners. These vocal owners will limit Kumon’s ability to attract new franchisees.
In order for Kumon to justify expansion, they must justify that the market can handle more centers. That is why I questioned and will continue to question the assumptions used to justify expansion. For current owners, take the time to understand your local market in terms of the number of potential students, family income of the students attending your center(s), where they live, etc and estimate what your market penetration rate is. Your concerns and challenges will be dismissed by corporate if you do not come with hard facts. You will also be more confident when you raise issues.
From the franchisee view, expansion can be positive or negative. It is positive if you are operating in an unsaturated market. However, it is especially dangerous if you have large center(s) or if your center(s) are in a saturated market(s). There are centers in NJ that have lost 100+ subjects because a new center opened up in close proximity. Although those centers are very large, loosing 100+ subjects is a huge hit on the profitability of those centers. This is why some owners, especially in NJ, are very concerned about Kumon’s expansion strategy. For owners that operate in less saturated markets, please understand that if left unchecked, expansion will turn from a positive to a negative very quickly.
I put posts on twitter that eventually resulted in postings on unhappyfranchisee.com. I did not hide my name so that Kumon corporate can find me. Eventually corporate contacted me and we had a heated discussion. To be honest, I was too heated to articulate the reasons I chose to post on twitter so here goes:
1) I wanted to demonstrate how much attention only 1 owner can generate and therefore the true risk of Kumon’s strategy.
2) I wanted to be a voice for those who are concerned about expansion and could not get their voice heard.
3) I wanted to give potential franchisees information on some unstated/understated risks of owning a Kumon center.
4) I wanted to demonstrate the effectiveness of utilizing a low cost alternative media channels.
On point 4, let me be more specific. I don’t have a lot of followers on twitter, yet I managed to reach a very broad audience. How did I do it? I spent a few hours finding my target audience. In this case it was Kumon franchising personal, certain franchising experts, and a few owners that actually used twitter. I crafted messages that spoke to different segments and the rest is history. My point here is that my upfront time was figuring out my goals, figuring out who I should target, and crafting messages to get the results I wanted. It only took a few hours over a weekend to generate the buzz.
Now think about Kumon’s customers. Imagine if Kumon corporate invested the resources into understanding customers segments and helping franchisees reach those segments. That is why I challenged Kumon to gain a better understanding of their customers and develop customer segments. I sincerely believe it is a better investment to gain an in-depth understanding of customers and reach people that will truly value Kumon’s offer rather than simply saturating a market.
In addition, the cost to build brand awareness has dropped dramatically. It is not necessary to spend a lot of money on traditional media to reach a targeted audience. Kumon is a word of mouth business and right now word of mouth can be multiplied 1000 fold by utilizing social media. I’m not saying that every Kumon owner needs to get on twitter. I believe it is actually more effective for Kumon corporate to invest their resources into developing a social media plan. Kumon corporate already knows there is something to it because a lot of Kumon’s franchising team already utilizes twitter to attract potential franchisees.
Take aways:
Kumon owners – Don’t just talk about how you lost business to a new center because corporate does not see that as big picture issue. Think in terms of corporate goals, strategies and assumptions used to justify corporate goals and strategies. There are a lot of assumptions that can be challenged. Do your homework and your challenges will carry more weight. If you decide to use public online outlets, do not get yourself dragged into taunts and fights. It’s a waste of your time. Utilize public forums to draw attention to your concerns about Kumon’s expansion strategy. Its not just about you, it’s about everyone that owns a Kumon center.
Kumon Corporate – The expansion strategy has a lot of financial upside but it is very risky if continue to alienate owners. More and more owners will utilize public forums to express their opinions about expansion. NJ is only one market. Imagine if owners in other markets start doing the same thing. Imagine the affect on franchisee recruitment.
The cost of building brand awareness is a lot lower now than just a few years ago due to alternative media channels. If the goal is to build brand awareness, social medial is an effective low cost tool to reach target customers and build brand awareness.
Potential franchisees – If you found this post, you have received insight that most of the current owners did not have at the time they purchased a franchise. It is an interesting time at Kumon. There is a lot of potential but there is also a lot of risk depending on how Kumon moves forward with their strategy. There are some good posts that can help you make a more informed decision. Work with your franchising people but also seek out information from current owners. Ask current owners the benefits and downsides of owning a franchise. Ask their opinion about Kumon’s strategy. I’m sure there are enough owners out there that will give you their honest opinion. Also, if expansion is limited, you can feel safer about your investment.
Final Thoughts: I’m very passionate about business and Kumon. I believe Kumon offers a good service but my opinion is that Kumon’s expansion strategy will escalate franchise franchisee conflict. Escalated conflict will limit both franchisor and franchisee in reaching their goals.
If you’d like to talk to me directly, please find me on twitter. I’m happy to address any questions or concerns.
Sincerely,
David Joseph
WHAT DO YOU THINK? SHARE A COMMENT BELOW. LOGO: Kumon
David,
That was an excellent post. I hope all concerned would act responsibly.
Kelly
David, I see I am going to have to join Twitter so I can follow your comments!
Thank you for this excellent post. I am glad you have KNA’s attention so you can share these vital concerns.
Best wishes,
Nicole,
President, International Association of Kumon Franchisees (IAKF)
I have set up my Twitter Account and am following David and some other key Kumon people – I look forward to seeing you all there.
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
It seems that IAKF officials and some influential Kumon center owners and those owners who are not affected by the expansion plan are pacified by KNA and Nicole’s tactical postings in this forum ( may be in concert with KNA’s move) are sitting idle and do nothing. What’s going on with KNA and IAKF negotiation, if at all some negotiation are taking place ? If so, convey to all of the members the action plans that Nicole and party have came up with. If nothing is done yet, there are owners who want to go on their own before they go belly up. Or is it OK with IAKF that some owners go broke so that others can survive ? Wake up people. This is bad !!!!
Ms. Kelly
Ms Kelly, I am not sure where in the comments I have made here in the three recent blog discussions you infer that:
1) IAKF officials and some influential Kumon center owners who are not affected by the expansion plan are pacified by KNA and Nicole’s tactical postings in this forum and are sitting idle and do nothing
2) Negotiations may not be taking place
3) No action plans have been conveyed
4) It is ok with IAKF that owners go broke.
I gather from the above post that you are very upset, and that must be difficult to deal with. I assure you, I sympathise deeply. Let me help you understand the situation better so you can see how the IAKF is working for franchisees.
In addition to all the hard work done by my board members, I personally spend at least 40 hours a week in volunteer hours running the association, talking to franchisees all over North America, and meeting by phone and in person with Kumon managers on a huge range of franchise issues.
That includes much time communicating with franchisees not only in North America but also with our sister associations in the UK, Australia, Japan and Mexico by email and Skype, and preparing notes from the endless meetings and sharing information between people as much as I can throughout the world. Ultimately the change we need will only come at the level of KIE in Japan in concerted action with the other franchise associations.
Our association membership fee is very reasonable at only 60 dollars a year.
Our members have access via our website to all the information about our ongoing meetings with management, including the meeting the board had with Kusu in October on all the issues you are concerned about (and perhaps even more, as there were many concerns we raised which have not yet come up here).
Since the meeting with Kusu, we have continued to communicate our concerns to him and other managers on expansion and many other things, and are already planning our next face to face meeting with Kusu to follow up in person with all these issues.
I also update our members through the email forum about other discussions and initiatives not yet posted to the website, and we have a monthly members’ teleconference where members get to talk to me live via Skype about all of the things I am working on.
So, members are fully in the loop, and you would be aware of everything we are doing.
Even non-members can simply contact me at any time, and many of them do, to find answers to their questions about what is happening. I am always available by email and phone.
The IAKF is an independent franchisee association. We are not Kumon employees and so do not follow their direction in what we do. Our approach of constructive, win-win engagement comes from sound advice from Andrew Selden and his decades of experience about what works in franchising.
We work every week with the franchisees in the US East as well as our other chapters and any other franchisees who are open to working with us on an ongoing action plan to deal with expansion and other issues.
For example, a member made me aware yesterday that Phoenix branch franchisees are very worried about expansion too, and I was able to have a very productive phone meeting with a franchisee this morning, and share all the information she needed to work with her colleagues on a local action plan.
If people feel that in spite of all of this, they would be better off on their own, they are certainly most welcome to try. However, concerted action in alignment in a win-win fashion is far more productive.
I look forward to hearing from you further. Perhaps I could give you a call sometime? Please let me know when you would find it convenient to discuss this further.
Best wishes,
Nicole
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- West Village, 80 Carmine Street, NYC
- Chinatown, 123 Baxter Street, NYC
- Upper East Side, 1582 First Avenue, NYC
- Battery Park City, 2 South End Avenue, NYC
- Upper West Side,700 Columbus Avenue, NYC
- Harlem Central, 2235 Frederick Douglas Blvd., NYC
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 located anywhere in North America. These specially reduced rates are not for Kumon North America.
Shabbir Khalfan
Signs2000 Corp
Potential Fall Out from Franchise Encroachment http://djpaboro.wordpress.com/
Thanks, DJ, I have responded over here
http://www.unhappyfranchisee.com/kumon-franchise-owner-complains-of-overexpansion/#comment-18293
Thank you all for an enlightening discussion. I am planning to attned the introductory seminar tomorrow at Lawrenceville, NJ. I am glad that I stumbled on this blog this evening. From what I understnad, Kumon offers no territory protection to tis franchisees. Also, I am concerned that it expects the all partners to quit thier full time employment . I was thinking of opening up the business with family members, one of whom can devote thier time fully to developing the business while the other two can focus on instruction etc. in the evening hours. Logically, that should not be an issue. Somehow, Kumon does not allow for such an arrangement. Any thoughts?
T Bose:
If you would be so kind, come back after the presentation and let us know how it went, what your perceptions are, etc.
Thanks
T Bose, you are correct in the lack of territory protection. As you can see by this blog the company is massively expanding in your area and you would need to take that into consideration. Also, it is correct all Kumon franchisees are expected to operate at full-time without other sources of income.
Feel free to contact us should you have any further questions. And I too would very much like to hear your impressions of that seminar.
Best wishes,
Nicole,
President, International Association of Kumon Franchisees (IAKF)
Is this Japanese corporate greed? Just like Toyota which compromised safety in the Japanese company’s quest for growth, KUMON compromises “job security” of Franchisees over their quest for global dominance. Other long time instructors have been forced to close. Others are being forced to close.
What good is buying a Franchise when Kumon can arbitrarily change the 5 year renewable contract. The contract is non-negotiable. Other instructors had no choice but to sign it. Years later they were forced to close because their centers do not fit that perfect Kumon Center Profile current management wants them to have. And since management changes over time, so does the profile. With this change out goes the old. When will it stop?
Kumon management is too rigid, it has become too greedy. The corporate culture has got to change.
KO, I have watched the growing number of closures of centres which could not afford to go into commercial and for other reasons with sadness and alarm.
Like you, I have been following the Toyota story with great interest.
Notice how Akio Toyoda has been distinguished in many press articles:
“When Japanese companies run into deep trouble, the chief executive officer often resigns with a bow and public apology, as Haruka Nishimatsu did during the recent collapse of Japan Airlines.
“Toyota Motor Corp. is different. The chief’s family name is on every car, and Toyota is a flagship. Japan, too, is different, and what happened to Akio Toyoda in Washington this week wouldn’t have happened in Tokyo.
“To many Japanese, Mr. Toyoda’s treatment by U.S. lawmakers at a widely-watched hearing in Washington would have seemed rude. Rather than demanding he step down from the helm of his grandfather’s company to take the fall for the auto maker’s massive recalls, many industry officials and analysts in Japan and Canada are rallying behind him after his handling of the congressional hearings.” http://www.theglobeandmail.com/report-on-business/fears-rise-about-a-return-of-japan-bashing/article1483437/
Why the rallying? Well, he seems to be facing up to his responsibilities.
“The Japanese executive testified before a U.S. congressional committee and answered often-testy questions from lawmakers. By undergoing the public scrutiny himself, he said he is “trying to protect [American Toyota workers], but in the end when I met them in person and had an opportunity to talk to them face to face, I realized it was the other way around. It was every one of those 200,000 people who work for Toyota that was protecting me,” he said.
“When that realization came, perhaps America doesn’t understand it but my heart was overwhelmed with emotions, and I cried.”
http://blogs.wsj.com/chinarealtime/2010/03/03/tracks-of-his-tears-why-akio-toyoda-choked-up/
This most recent quote to assuage fears in China is very interesting too. Toyoda said: ““Mapo tofu in China, Japan and the U.S. is still called mapo tofu, though the taste is somewhat different. To compare cars to food is probably not the best example, but we hope everyone can understand that when we make cars, we factor in regional differences in road conditions, consumer habits and usage criteria.” http://blogs.wsj.com/chinarealtime/2010/03/02/toyoda-on-mapo-tofu/
It is a wonderful quality of franchises to recognise the need for adapting the product to local needs and many successful franchises do this to great effect.
The IAKF board looks forward to our next meeting with KNA’s CEO to see how he will respond to the many questions that have been asked by Kumon franchisees since our last meeting.
Regards,
Nicole
I am considering a Kumon franchise at the moment. Glad I stumbled upon this blog. Things that I do not understand about this franchise are:
- Kumon is only open for a few hours a day for a few hours a week. What are franchisees expected to do the rest of the time ?. I heard elsewhere that franchises cannot have any other activities conducted in the same space…. bummer. What do people do in really pricey realestate markets like NYC where just the rent could be 95% of the expense ?
- I am aghast that Kumon does not provide any form of territory protection. So potentially if I open up one, I can have another one cropping up in a few days around the corner. Yikes!!
Dear KumonCurious,
Good questions!
Kumon requires a lot of work for the franchise owner on a daily, weekly and monthly basis besides running the centre, especially in the first years while the on-going training requirements take a lot of one’s time. At all times, there is planning and preparing the students’ files, communicating with prospective and existing parents, marketing, professional development and other work.
The trouble that many franchisees have is keeping the workload down to a comfortable forty hours or so a week, I assure you, not trying to find things to do with their spare time!
You are right that franchises cannot have other activities to offset the rent and that can be very challenging in high rent areas like NYC. But rent is only one of the three major expenses of a Kumon franchise – the other two are royalties and staff.
Right now, Kumon is on a curve of rapid expansion, especially in some areas. Potential franchisees would be wise to speak to franchisees in the area they are planning to open to understand what expansion plans have been typical of the area, how many new franchises have opened lately, and how those franchises are doing in terms of growth and profitability.
Feel free to contact us if you need more information,
Best of luck in your investigations,
Nicole,
President, International Association of Kumon Franchisees.
Ms. Smith:
With the current state of affairs and the current policies and practices related to Kumon’s North America expansion, does IAKF recommend and/or endorse the Kumon franchise opportunity?
In your opinion, would most Kumon franchise owners recommend the Kumon franchise to individuals seeking an educational business opportunity in the US or Canada?
Guest, more good questions, thank you.
But they are not easy to answer, because of, among other things, the great range of situations present within Kumon North America (KNA). The extremely variable expansion plans and policies from branch to branch are only one aspect of the differences of experience for the franchisee across KNA.
These differences would also affect how Kumon franchise owners would feel about recommending the Kumon franchise to individuals seeking an opportunity within KNA.
Interestingly enough, there was a survey given to franchisees in the fall of 2008 about their personal experiences of success in their businesses, and I seem to remember that one of the questions was if we would recommend Kumon as a franchise. It would be helpful if such a survey were to be done again and the answers contrasted with the previous, for then I could give you an up-to-date and accurate answer to your question instead of a subjective guess.
What I can say for sure from speaking to many franchisees all over the world is that the Kumon program itself is viewed by Kumon franchisees as something very special and I would say most are highly loyal to the program, seeing the positive results it brings to our students in academic and other ways.
In the IAKF we add to that belief in the program a belief that working together as franchisees and with KNA will continue to make the Kumon franchise in North America a better opportunity.
This is not a blind belief but one based on significant positive advances in KNA especially over the past few years in terms of the training and professional development which is increasingly available, the improvements in the paper and computer resources for our businesses and the increasing awareness of the need for a successful and profitable business model.
Best wishes,
Nicole