Tutoring Franchise Failure Rates of the Top Education Brands
Tutoring franchise systems are suffering from high franchisee turnover rates, with many franchise owners reportedly closing their doors or selling their tutoring businesses at fire sale prices. We are asking franchisors and franchise owners: What are the major challenges facing tutoring franchisees? What are franchise companies doing to help them?
(UnhappyFranchisee.Com) Franchises that offer tutoring and test preparation have been hard-hit in recent years, with many well-publicized closings that left parents irate, children tutor-less, and franchise owners in or near bankruptcy.
UnhappyFranchisee.Com analyzed the 11 top tutoring and test preparation franchises, and found an average of 25% franchisee turnover within the last three years.
That means that 1 in 4 tutoring franchise agreements ended prematurely with the franchises being terminated, closing their doors, or transferring to the franchisor or other owners.
For many franchise owners, this means losing their initial investment of $74,754 – $137,009 plus a lot more.
Above Grade Level was the franchise with the highest franchisee turnover rate, just over 54%. Above Grade Level opened its first franchise in 2010, and has suffered 60% turnover since then.
Sylvan Learning (31.17%), Tutor Doctor (31.8%), and Club Z (30.71%) home tutoring were the next three worst, with nearly 1 in 3 franchisees exiting prematurely.
Tutoring franchises with greater than 20% franchisee turnover include Huntington (28.9%), brain training franchise LearningRx (26.95%), The Tutoring Center (25.33%), Eye Level Learning Centers (22.6%), JEI Learning Centers (20.23%) and Kumon with $20.52%.
Mathnasium had the lowest franchise turnover rate with 17% – which is no cause for celebration and would be considered relatively high in other segments of the franchise industry.
Tutoring Franchise Turnover Rates 2012 – 2014
|Franchise||Invest.||# units¹ 2012||# units¹ 2013||# units¹ 2014||Total Agrments²|| Closed/ Transfer³
|$64,073 to $134,100||1481||1466||1452||1827||375||20.52%||Kumon franchise info & discussion|
|599||585||552||802||250||31.17%||Sylvan franchise info & discussion|
Club Z Home
|$32,600 to $56,550||375||379||379||547||168||30.71%||Club Z franchise info & discussion|
|$90,750 – $137,610||337||409||511||616||105||17%||Mathnasium franchise info & discussion|
|$99,195 – $204,320||231||225||218||307||89||28.9%||Huntington franchise info & discussion|
|176||216||226||292||66||22.6%||Eye Level franchise info & discussion|
|$66,000 – $133,900||229||227||238||349||111||31.8%||Tutor Doctor franchise info & discussion|
|$102,300 to $200,750||79||88||84||115||31||26.95%||LearningRx franchise info & discussion|
JEI Learning Centers
|$60,750 to $99,750||52||53||67||84||17||20.23%||JEI Learning franchise info & discussion|
The Tutoring Center
|$90,000 to $132,200||53||58||56||75||19||25.33%||The Tutoring Center franchise info & discussion|
Above Grade Level
|$51,665 to $76,995||18||20||17||38||23||54.04%||Above Grade Level franchise info & discussion|
|ALL Tutoring Center Franchises||$74,754 – $137,009 (avg)||3,630||3,726||3,800||5,052||1,254||24.82%|
¹ U.S. franchise locations reported open at end of year
² Includes both new franchise agreements and franchise resales (transfers)
³ Includes all franchises reported as terminated, non-renewed, reacquired by franchisor, ceased operations – other reasons, and transferred to new owners. While a transfer could reflect a franchise sold for a profit, it often means sold at a loss.
Turnover rate is calculated by total franchise agreements including transfers divided by franchise agreements ended x 100.
Data sources: 2015 Franchise Disclosure Documents (FDDs) of each respective company. Please report any errors to UnhappyFranchisee[at]gmail.com.
Why Are Tutoring Franchises Failing? What Are Franchisors Doing to Help?
According to a report released by IBISWorld, annual revenue for tutoring and test preparation franchises declined as the economic downturn reduced the discretionary income parents had to spend on private tutors for their children.
At the same time, profits were squeezed due to an increase in wages for the highly qualified employees franchisees need to compete with online services.
Tutoring franchises are also having to compete with a surge in Internet-based live tutoring and online supplementary education materials and programs.
What do you think?
Are tutoring franchises becoming obsolete?
What are the challenges facing tutoring franchisees and causing the high turnover rates listed above?
What are franchisors doing to help their franchisees over come these challenges?
Should franchisors with 30%+ turnover suspend franchise sales until they can provide more stable opportunities?
Share your thoughts with a comment below. Official franchisor responses invited and encouraged.
FRANCHISE DISCUSSIONS by Company
ARE YOU A TUTORING FRANCHISE OWNER, TUTOR, EMPLOYEE, EXECUTIVE, PARENT OR STUDENT? SHARE YOUR OPINION BELOW.
TAGS: Tutoring franchise, Tutoring franchises, education franchises, education franchise opportunity, Kumon franchise, Sylvan franchise, Mathnasium franchise, Tutor Doctor franchise, Club Z franchise, Huntington franchise, LearningRx franchise, The Tutoring Center franchise, Eye Level franchise, JEI franchise, Above Grade Level franchise
6 thoughts on “Tutoring Franchise Failure Rates of the Top Education Brands”
As a highly qualified tutor who has investigated a few tutoring franchises, I can tell you one important reason why tutoring franchises are failing. The franchise offers no value added to the tutoring process while charging parents way too much, and paying the tutors way less than they are worth. Tutoring franchises are middlemen that don’t contribute anything except a fancy facility that drives costs up and is unneeded and not wanted.
It would be like a franchise coming to town, claiming that their car repair place is really great, spending loads on advertising and marketing, then charging double the going rate for car repairs, and offering the mechanics 1/4-1/2 of their current hourly pay.
Only the most ignorant car owners would patronize that establishment. Only the most shoddy mechanics (who couldn’t keep jobs elsewhere) would accept that hourly pay.
For a franchise to prosper it has to add value. Just because someone creates a franchise around a highly skilled profession, does not mean those professionals and the clients they serve are going to participate. The entire notion of a franchise is that it’s a turnkey package allowing you entry into a particular market. When was the last time you wanted to patronize the local unskilled turnkey lawyer, doctor, accountant, or financial planner?
What Terry says is true in principle, and that is exactly why Mathnasium does better than the rest of the pack. The added value of their diagnostics, curriculum, and proprietary methods is enormous over what the typical independent tutor would be able to provide, even one who is amazing at math and good with kids.
The problem with tutoring franchises is that they provide a 1 to 1 service, which is a serious limiting factor on any business. They also lack income streams to be anymore than a part time business.
Children’s education businesses work because the tutor/student ratio is 1/20.
For parents – If you want to throw your money, there better ways. Take your kids to some activities like jumping, bowling or any other physical activity centers.
And for education – If you want your kid to excel, utilize the resources provided by their school. There plenty of practice material out there online (that is what your kid do at these learning centers). None (I really mean NONE) of the education franchise will do anything better to your kids.
All of them are designed to get money from parents for teaching nothing.
All the best!!
I have been investigating the tutoring franchises. The profitability of these institutions are amazingly low. This is primarily driven by high royalties. See below (number includes marketing $$) –
Mathnasium – 17%
Kumon – 40%
Sylvan – 26%
Huntington – 40% (every call is charged)
Club z – 25%
Eye level – 25%
Add following expenses – Rent, instructor charges, utilities, supplies and insurance.
Question is why not open fast signs or molly maid or other franchises that charge similar investment amount and generate higher profits (EBITDA). In fact some of these businesses rake in $500K revenue on average and sales to investment ratio is more than 3:1.
My two cents
I am currently employed at one of these franchises as an in-home tutor (soon to be formerly employed). I can provide my insight as to why this model isn’t great for franchisees, instructors, parents, or students.
The person who interviewed me for the position asked almost no relevant questions about my background, experience, or preferences. I have a liberal arts degree but am very comfortable with advanced math and science courses all the way through the college-level. He ran a background check which of course shows my BA, however he took me at my word for the math and science. Of course, in my case this was not a problem. However, as a parent this would concern me. I could’ve easily been embellishing about my skills and this would’ve never been verified. In fact, the only formal test I was given to qualify me to tutor at this company for EVERY subject, was a reading test at a middle school level. This was all the center provided in terms of my testing.
Upon accepting the position, I received zero training or instruction. I was simply sent to the home of a student and began tutoring. I do have prior experience so this was no problem, but I never even met the person who interviewed me (over the phone). This wouldn’t make me feel great as a parent, especially if I’m spending $50/hr for someone to come to my home.
Of this $50, as the instructor I make less than half of that. I am not compensated for prep time, for making phone calls, for materials…nothing. Only time that is spent in the home is compensated. Therefore, anything I do in my own time to prepare, research, buy materials, or expand my understanding of a topic go towards making the company look better without any reward for me.
This is the main reason I am leaving. Of course, this is to leave out all of the comments I have about the general incompetence of the two people running the franchise. And there are A LOT of comments I have about that.
I really do love tutoring. The best way to provide service to the parents and students, and to make sure that I receive a fair compensation, is to work out an agreement with each individual family. This has proven to be an effective method for everyone involved.
The franchise owners are the definition of middlemen. They provide no value to the instructor or the student. In fact, I flat out refuse to use the materials they provide because they are subpar and not individualized.
In short, I 100% agree with Terry’s comment.