FDD Talk 2021: Kiddie Academy Franchise Review (Financial Performance Analysis, Costs, Fees, and More) (2024)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Kiddie Academy franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Kiddie Academy franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Kiddie Academy franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Kiddie Academy outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Kiddie Academy’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average revenue, labor expense, occupancy expense, miscellaneous expense, and gross profit for the bottom quarter, top quarter, and all 190 Mature Academies (i.e. franchisee-owned Kiddie Academy outlets that have been open for at least 24 months) that submitted the required expense information to Kiddie Academy

• 2020 average revenue, labor expense, occupancy expense, miscellaneous expense, and gross profit for the bottom quarter, top quarter, and all 34 Ramping Academies (i.e. franchisee-owned Kiddie Academy outlets that have been open for at least 12 months, but less than 24 months) that submitted the required expense information to Kiddie Academy

Section I – Background Information

21 Things You Need to Know About the Kiddie Academy Franchise

Appoints New Health and Wellness Advisor

1. In mid-October 2020, Kiddie Academy announced the appointment of Jason Goldstein, M.D., F.A.A.P. to the position of health and wellness advisor. In this newly created role, Dr. Goldstein will advise on the development of new and current health-focused business systems and projects. The move represents the company’s further commitment to the health and safety of its enrolled children and their families, employees, and franchise owners and their staff.

2. Greg Helwig, CEO of Kiddie Academy, said, “The wellbeing of the people who comprise our Kiddie Academy community has always been top of mind, but that focus has grown exponentially due to the global impact of COVID-19. Dr. Goldstein is an integral addition that brings expert, medical insights to our team and helps ensure that our health standards continue to reflect best practices.”

3. An experienced health practitioner specializing in pediatrics and a health advisor for several schools and hospitals, Goldstein will provide guidance to Kiddie Academy’s education and operations team on best practices for pediatric health, nutrition, and fitness. He will also serve as a medical expert for topics relating to healthy habits and the wellbeing of children. Goldstein earned his medical degree at the Johns Hopkins University School of Medicine and did his residency in pediatrics at the Johns Hopkins Hospital, where he is currently on faculty in the department of pediatrics.

4. Helwig added, “The COVID-19 pandemic has resulted in a lot of worry in our country, and Dr. Goldstein’s expertise in pediatric health will inform our efforts to alleviate parents’ concerns about sending their children back into the classroom, as well as easing back into social settings overall. He’ll be a critical force in building out new operating procedures and safety protocols, ultimately providing greater peace of mind for all our staff and families.”

5. Dr. Goldstein said, “I’m honored to lend my knowledge and expertise to the Kiddie Academy team at this pivotal time. This is the perfect opportunity to leverage my personal experiences and learnings to benefit the Kiddie Academy network and beyond.”

Donates $25,000 to Family Promise

6. In late January 2021, Kiddie Academy announced a partnership with national nonprofit Family Promise, designed to empower families experiencing homelessness and set children up for success. Providing an initial gift of $25,000, Kiddie Academy will work together with Family Promise to develop a program for spreading awareness about family homelessness, as well as fundraising in support of the organization’s mission.

7. Greg Helwig, CEO of Kiddie Academy, said, “Family Promise shares our commitment to improve communities and build brighter futures for children.” Together, Kiddie Academy and Family Promise will work to empower all stakeholders – volunteers, donors, community members, businesses, and government officials – to effect change across communities so families can achieve economic stability and children can access a brighter future.

8. According to the National Low Income Housing Coalition’s 30th annual Out of Reach report, across the U.S. the hourly wage required to afford a two-bedroom rental exceeds the wage provided by the most common jobs in America, resulting in an affordable housing crisis. Furthermore, 40% of Americans are currently unable to afford an emergency expense of $400, which may force them into homelessness.

9. As the COVID-19 pandemic persists, many families have experienced increased risk in their housing stability with thousands of US families facing eviction if government protections are not extended. Kiddie Academy believes in developing a foundation for long-term success, and Family Promise’s prevention, shelter, and stabilization model does just that for families in need by providing critical resources across every step of their journey.

10. Claas Ehlers, CEO of Family Promise, added, “We are thrilled to partner with Kiddie Academy to support children and families in need. Family Promise’s aspiration is to change the future of one million children by 2030. Kiddie Academy is a leading provider of early childhood education, and we share a commitment to fostering community and ensuring that every child has the opportunity to succeed.”

11. Family Promise and Kiddie Academy will work together to develop a multi-faceted partnership in which fundraising and volunteerism opportunities provide meaningful and inspiring experiences to both donors and recipients. Using an education-based approach, Family Promise affiliates and the Kiddie Academy franchise system will be invited to work in tandem to address housing and income inequalities as they affect their individual communities.

12. Mike Miller, executive chairman of Kiddie Academy, said, “Kiddie Academy’s initial contribution to Family Promise is the foundation for a system-wide fundraising and resource model to help further the nonprofit’s efforts in solving homelessness for families across the country.”

Joins the Early Care & Education Consortium

13. In late July 2021, Kiddie Academy joined the Early Care & Education Consortium (ECEC), a nonprofit alliance that serves as a unified voice for early education and care around the world. Greg Helwig, CEO of Kiddie Academy, will serve as an acting board member for an organization whose work is more relevant than ever as the nation reevaluates the critical role of child care in the context of the COVID-19 pandemic.

14. Radha Mohan, executive director of ECEC, said, “We’re thrilled to have Kiddie Academy as a new member of the consortium. Kiddie Academy’s long-standing record of providing high-quality early education and care to children across the nation makes them a trusted and respected voice in the field. We look forward to continuing our work with Kiddie Academy to advance our shared goal of ensuring all families have access to high-quality, affordable and accessible early childhood education options of their choice.”

15. The ECEC represents over 6,500 child care programs in 48 states, the District of Columbia, Puerto Rico, and select international locations. Members of the ECEC work to amplify the voices of providers of high-quality programs and services that support families and children from diverse cultural and socio-economic backgrounds.

16. Kiddie Academy works to create a community that shapes and inspires children for the future. As part of ECEC, Kiddie Academy will contribute its unique perspective on educational child care to collaborate with peers and advocate on behalf of children and families.

17. Greg Helwig, CEO of Kiddie Academy, said, “Community Begins Here is a cornerstone of our values here at Kiddie Academy. This ‘community’ extends far beyond our Academy walls. We’re dedicated to working towards a future that empowers children and families with the confidence and creativity to grow with every interaction in and out of the classroom through high-quality education. ECEC’s work furthers this mission every day and we’re honored to be a part of it.”

Company History

18. Kiddie Academy was founded in 1981 by Pauline and George Miller in Baltimore County, Maryland. Pauline Miller, a mother and educator, wanted to provide better child care options that went beyond typical child care. Miller developed a program that made learning fun. The program was a success and the Millers had to open additional locations in the area to keep up with demand. The company continued to grow throughout the 1980s and the Millers’ son, Michael, also joined the company.

19. The Millers began franchising Kiddie Academy in 1992 and two years later, the brand expanded its program to include infants and toddlers. Kiddie Academy continued to grow around the United States over the next few decades. During the early 2000s, Kiddie Academy added a summer learning program to keep kids sharp while school was out.

20. Kiddie Academy’s expansion continued in the 2010s and the company also updated its programs, integrating modern technologies and teaching methods. Today, there are Kiddie Academy locations across more than 30 states and the District of Columbia.

Entrepreneur’s Franchise 500

21. Kiddie Academy ranked No. 129 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Kiddie Academy franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Kiddie Academy’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year: 197
• Outlets at the End of the Year: 213
• Net Change: +16

2019

• Outlets at the Start of the Year: 213
• Outlets at the End of the Year: 246
• Net Change: +33

2020

• Outlets at the Start of the Year: 246
• Outlets at the End of the Year: 270
• Net Change: +24

Company-Owned

2018

• Outlets at the Start of the Year: 1
• Outlets at the End of the Year: 1
• Net Change: 0

2019

• Outlets at the Start of the Year: 1
• Outlets at the End of the Year: 1
• Net Change: 0

2020

• Outlets at the Start of the Year: 1
• Outlets at the End of the Year: 1
• Net Change: 0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• The information below represents an actual historic financial performance representation.

• The information was obtained from the financial results reported to Kiddie Academy by its existing franchisee-owned outlets for the full calendar year ended December 31, 2020 (the “2020 Reporting Period”). This information has not been audited or verified by Kiddie Academy or a third party.

• As of December 31, 2020, there were 270 franchised Academies. As of that date, 31 of these Academies (11.5% of the total) had been open and operational for less than 12 full months and have therefore been excluded from the 2020 Reporting Period data set.

• Of the remaining 239 Academies, 14 Academies (5.9% of the total) had failed to report the required information for the full calendar year ending December 31, 2020, and one Academy reported anomalous data. The results of these Academies have also been excluded from the 2020 Reporting Period data set.

• Accordingly, the financial performance information presented in the tables below for the 2020 Reporting Period represents the results of the remaining 224 Academies that had reported results as of December 31, 2020 (the “2020 Reporting Academies”).

• The results reported for the 2020 Reporting Academies are divided into two groups: the 190 Academies open 24 months or more as of the end of the 2020 Reporting Period (the “2020 Mature Academies”) and the 34 Academies open less than 24 months as of the end of the 2020 Reporting Period (the “2020 Ramping Academies”).

• Financial performance information about Kiddie Academy’s Mature and Ramping Academies includes Gross Revenue, Labor, Occupancy and Miscellaneous Expenses, and Gross Profit.

• All Academies offer substantially the same services and products to the public. However, the actual financial performance among Academies varies substantially.

• The results presented in the tables below indicate the Gross Profit, which is the Gross Revenue minus the listed operating expenses.

• The time periods expressed in the chart below are not meant to be an indication as to when or if an Academy will reach maturity. Each Academy’s growth rate will vary by location, competitive environment, the region and market area in which the unit is located, labor costs, programs, and the individual franchisee’s marketing efforts and management skills.

• Accordingly, the information presented should only be used as a reference guide in conducting an independent analysis of the proposed business.

Part 1 – Mature Academies (Calendar Year Ended December 31, 2020)

All Mature Academies

• The table below shows the average results achieved by the 2020 Mature Academies.

• Number of Academies: 190
• Average Number of Months Open: 101.59

• Average Gross Revenue: $1,320,440 (100.0%)
• Average Labor Expense: $615,032 (46.6%)
• Average Occupancy Expense: $266,963 (20.2%)
• Average Miscellaneous Expense: $149,590 (11.3%)
• Average Gross Profit: $288,855 (21.9%)

Top Quarter by Gross Profit

• The table below shows the average results achieved by the “Top Quarter” of the 2020 Mature Academies.

• Number of Academies: 48
• Average Number of Months Open: 92.75

• Average Gross Revenue: $1,938,643
• Average Labor Expense: $752,282
• Average Occupancy Expense: $286,297
• Average Miscellaneous Expense: $197,360
• Average Gross Profit: $702,704

• 17 Academies or 35% of the Top Quarter reported Gross Revenue above the reported average. 16 Academies or 33% of the Top Quarter reported Gross Profit above the reported average.

Bottom Quarter by Gross Profit

• The table below shows the average results achieved by the “Bottom Quarter” of the 2020 Mature Academies.

• Number of Academies: 48
• Average Number of Months Open: 109.09

• Average Gross Revenue: $895,289
• Average Labor Expense: $522,161
• Average Occupancy Expense: $267,608
• Average Miscellaneous Expense: $109,092
• Average Gross Profit: $(3,572)

• 23 Academies or 48% of the Bottom Quarter reported Gross Revenue above the reported average. 29 Academies or 60% of the Bottom Quarter reported Gross Profit above the reported average.

Part 2 – Ramping Academies (Calendar Year Ended December 31, 2020)

All Ramping Academies

• The table below shows the average results achieved by the 2020 Ramping Academies.

• Number of Academies: 34
• Average Number of Months Open: 18.39

• Average Gross Revenue: $973,366 (100.0%)
• Average Labor Expense: $479,512 (49.3%)
• Average Occupancy Expense: $255,479 (26.2%)
• Average Miscellaneous Expense: $114,816 (11.8%)
• Average Gross Profit: $123,559 (12.7%)

Top Quarter by Gross Profit

• The table below shows the average results achieved by the “Top Quarter” of the 2020 Ramping Academies.

• Number of Academies: 9
• Average Number of Months Open: 18.49

• Average Gross Revenue: $1,325,947
• Average Labor Expense: $581,866
• Average Occupancy Expense: $238,988
• Average Miscellaneous Expense: $137,125
• Average Gross Profit: $367,968

• 4 Academies or 44% of the Top Quarter reported Gross Revenue above the reported average. 4 Academies or 44% of the Top Quarter reported Gross Profit above the reported average.

Bottom Quarter by Gross Profit

• The table below shows the average results achieved by the “Bottom Quarter” of the 2020 Ramping Academies.

• Number of Academies: 9
• Average Number of Months Open: 18.21

• Average Gross Revenue: $591,236
• Average Labor Expense: $369,092
• Average Occupancy Expense: $243,006
• Average Miscellaneous Expense: $92,782
• Average Gross Profit: $(113,644)

• 5 Academies or 56% of the Bottom Quarter reported Gross Revenue above the reported average. 6 Academies or 67% of the Bottom Quarter reported Gross Profit above the reported average.

Definition of Terms

• Gross Revenue – Gross sales based on actual operating results as reported monthly by franchisees to Kiddie Academy, representing registration fees, tuition, and other amounts charged to families by the franchisee.

• Labor – Employee-related expenses including: wages, salaries, bonus, commission, payroll taxes, training, insurance benefits, and worker’s compensation expenses (where applicable) as reported monthly by franchisees to Kiddie Academy. This also includes the cost of an Academy Director(s).

• Occupancy – Includes rent, common area maintenance, real estate taxes, and percentage rent (if any). This includes other lease-related charges, such as: maintenance, security, trash removal, association dues, and shopping center marketing expenses as reported monthly by franchisees to Kiddie Academy, if applicable.

• Miscellaneous – Includes other (discretionary) variable expenses related to the operation of the business, including: royalties and Brand Building Fees, telephone, advertising, utilities, cleaning services, and postage as reported monthly by franchisees to Kiddie Academy.

• Gross Profit – Revenue minus Labor, Occupancy, and Miscellaneous Expenses. Other non-listed revenue (i.e., state and federal funds, grants, etc.) and expenses (i.e., supplies, food, insurance premiums, etc.) will impact Net Profit.

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