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Education Industry Analysis 2016 - Cost & Trends

Education Industry Analysis 2016 - Cost & Trends

Education Industry in 2016 at a Glance

The educational services market is large and growing with multiple types of opportunities available for franchisees. According to the Bureau of Labor Statistics, there are over 100k establishments in the private Education Service industry; almost 200k when including local, state and federal government institutions; combined this industry employs over 3.5 million people. On the private side, the industry is largely fragmented – the fifty largest companies represent just 30% of the total revenue in the industry.

Last year there were 55 million students attending school in grades K-12, all of whom are potential clients for educational services. However, franchise opportunities in the educational services industry are not limited to tutoring school age kids in subjects like math and science - opportunities abound in childcare and early education, career education, art, dance, adult language, test preparation and even driving.

Industry Overview

The vast majority of revenue in this industry comes from tuition or program fees. Gross profits tend to range from 60-90% depending on geographical location and subject matter, and net profit averages out to between 2-10%.

As companies within the industry have grown they have realized some benefits to scale - lower fixed costs and greater operational efficiency; however with that growth has often come a difficulty finding qualified instructors. If considering franchising in this sector it is important to understand the demographics and potential fit in your local hiring pool.

Online training resources, programs and even mobile apps have traditionally been seen as challenges to the industry, but in recent years successful educational service providers have found ways to leverage this technology to their great benefit. Not only are these tools helping students learn in new and exciting ways, but they are helping providers manage students, administrative functions and source material distribution more efficiently.

The growth in this industry is in part attributed to the growing global competitive landscape for higher education, but also for greater recognition of the value of trade schools. Many folks are realizing that the cost of a college education can saddle a person for life - and are opting to skip college, learn a trade and start making money faster and with less debt.

Tutoring and Child Education

Tutoring in the US is a $7 billion dollar industry and a popular franchise option, either based out of the home or at an on-site location. The home-based model employs the franchisee as a broker who acts as an intermediary between educators that provide tutoring and students needing instruction in any number of subjects. Examples of this model include Club Z Tutoring and Creative. Interesting for those considering opportunities in this sector: brokering franchisees of this type do not need to have prior experience in education.

The on-site location based model involves the franchisee having a center at which kids come to be tutored or take classes. In addition to subjects like math and writing, these franchises will also often offer standardized test preparation. Two franchises with this model are Kumon and Huntington Learning Center. The disadvantage of this model relative to the home-based model is that, because it requires real estate, it is more expensive to start.

Some franchises are geared towards younger children and provide a combination of child care and education. It’s estimated that 11 million children under the age of 5 spend at least 35 hours/week in childcare, and there is a growing recognition that early childhood education is immensely important and provides lifelong benefits. Child care is a growing field and the US Bureau of Labor Statistics reports the industry will have some of the fastest employment growth through 2020. In addition to standard child care during the work day, these franchises often also provide after school programs. Child care franchises include Primrose Schools and Rainbow Station.

Artistic Education

Some franchises instruct children in subjects such as music or painting. Similar to the options in tutoring, some of these are home-based – the franchisee for, say, Virtuoso Music, manages the music instructors and matches them up with students eager to learn.

Adult Educational Services

Educational franchises aren't just for the young. Estimates say that there are about 30 million US residents without a high school diploma, and 20% of the adult population has only basic literacy skills. There are various types of franchises designed to teach or train adults either in GED programs, occupational training, language and more.

Franchises are also available to help teach adults business skills – teaching salesmen better sales techniques (such as Sandler Training) or passing on organizational and leadership skills (such as Crestcom); there are also franchises designed to teach financial planning, both for business and personal finance.

911 Driving School teaches defensive driving, license certification, and more.

Other franchises focus on recreational activities, such as dancing or cooking (Fred Astaire Dance Studio, Viva the Chef). This field of leisure education is a multi-billion dollar industry driven by individuals' desires to learn new skills and abilities. But these businesses do tend to be more susceptible to economic downturns as they are more closely tied to personal income than other adult education options.

Franchises can also serve as jumping off points for people looking to enter new industries and learn about new careers. For example, there are franchises to train and certify an individual to become a medical technician. There are others that teach financial trading – stocks, options, futures and more.

The advantage of franchising in the educational services area is that the franchisee has access not only to the positive reputation and brand name enjoyed by these franchises, but also to time-tested educational systems. It allows franchisees to have a role in education without needing the qualifications or skills to be a teacher him or herself.

In addition, working with a large company offers potential marketing advantages not available to a smaller company. Purchasing an education franchise is a great way to succeed financially while also making a positive impact on the community.

Matt Sena is a writer and researcher, a co-founder, a former portfolio manager, a rider and a dad. He earned his MBA in Finance from Kellstadt Graduate School of Business while working at Goldman, Sachs & Co.

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