Franchising is a popular method for expanding business. Through a licensing relationship a franchisor, or business owner, essentially sells a franchisee the rights to open a new business location. For instance, the Kumon franchise has many locations, all of which were sold to various franchisees across the country. Once the Kumon franchisee purchases a franchise, they are granted the right to build their own location using preexisting systems, regulations, etc.
Franchising is an attractive business model for anyone new (or not) to the industry. Unlike an independent business, which requires growing from the ground up, a franchise comes with a pre-established, and usually successful, operational system. Through extensive training programs, franchisees learn all the ropes behind the business, eliminating the daunting trial and error process. Not to mention, a franchise comes with brand recognition is built right in.
FRANCHISING IS AN ATTRACTIVE BUSINESS MODEL FOR ANYONE NEW TO THE INDUSTRY.
Anyone looking to purchase a franchise will be given a Franchise Disclosure Document (FDD). It’s imperative that any franchisee fully understand the components and contents in any business’ FDD. Consisting of 23 different parts, the FDD, a legally mandated document, outlines different key pieces of information involved in franchise purchase. For instance, a Franchise Disclosure Document tells the interested franchisee more about the total fees and costs associated with purchasing the franchise of their choice.
The overall intention of the document is transparency. Both the company and franchisee need to be on the same wavelength in order for the purchase and future management of the business to run smoothly. Click here to see a more in-depth description and analysis of the Franchise Disclosure Document.
The Story Behind the Kumon Franchise
The origins of the Kumon franchise can be traced back to 1954 when Takeshi Kumon’s mother found a math test in his pocket. Takeshi was in his second year of elementary school and his test scores were not meeting their usually high marks. Takeshi’s mother consulted her husband, Toru Kumon. Toru Kumon was a high school math teacher at the time and began to create practice math worksheets for his son to practice.
Toru wanted to emphasize self-learning in Takeshi and his other students. After much trial and error while creating practice sheets for his son, Takeshi go the hang of creating study material. Gradually, Takeshi developed his skills in creating study tools. With his experience teaching high school, Toru Kumon realized that many other students also struggled with their math studies due to their insufficient calculation skills. For that reason, Toru focused closely on developing his son’s calculation skills and created worksheets that would allow Takeshi to learn independently. Toru knew that students needed to learn how to, essentially, teach themselves. Genuine academic ability is best built on independent progress.
Toru and Takeshi Kumon spent a half hour each night studying and practicing various math problems. Before long, Takeshi reached the level of differential and integral calculus when he was just in sixth grade! Witnessing his son’s success, Toru invited other neighborhood children to study in his home, providing them with similar materials as given to Takeshi. Working half an hour each night, Toru’s other students also greatly improved their skills.
In 1958, Toru Kumon decided to open an office in Osaka and several Math Centers. From there, Kumon students increased steadily. Teaching self-learning, Toru Kumon’s goal was to maximize the abilities of his students by giving them tools to study at their own individual level.
Since its origins, the Kumon franchise has emphasized children’s inherent potential to grow. Seeking to develop students’ ability to learn independently, Kumon enhances these skills through a practice of reading, writing, and calculation, while encouraging children to achieve self-fulfillment through education.
Franchising Since 1958
Akira Hamanaka, President and Chair, Board of Directors.
Laurence C. Lambert, Senior Vice President and Director, Kumon University.
Ken Morimoto, Senior Vice President, Research, Development and Technology and Director.
Joseph Nativo, Chief Financial Officer & Treasurer, Senior Vice President, Finance and Admin Department
Atushi Nose, Senior Vice President, Branding/Field Marketing Support Department, Legal Department, Corporate Planning/Special Projects and Director.
Savio Rebelo, Senior Vice Presidnet, Chief Operating Officer and Director.
The Kumon initial franchise fee is $1,000. The prospective franchisee must pay the entire fee upon signing the Franchise Agreement. This fee is not refundable.
Kumon does not offer direct or indirect financing.
Training and Assistance
Initial training at Kumon begins with preliminary homework assignments, training within a Kumon Center, electronic training, and a review of the worksheets and materials used in Kumon tutoring locations. Typically, the Kumon Start-Up training program lasts about six months. Once this program is complete, additional classroom training is required. Only after this is complete is the franchisee awarded a Kumon franchise. However, if the prospective franchisee fails to complete the program, the Franchise Agreement is terminated.
The location of the Kumon Center must be approved before the Franchise Agreement is signed. The franchisor must approve the general location of the Kumon Center before anything can move forward. Kumon considers demographic factors, such as the population density of school-aged children, the proximity to local schools, any nearby competing businesses, etc. Once the Manager of the Kumon Branch Office is the desired location evaluates the site, they decide whether or not it is acceptable.
Typically, franchisees open their Centers approximately five months after signing the Franchise Agreement.
Term of Agreement and Renewal
Restrictions on Sources of Products and Services
Aside from Kumon Workbooks, which the prospective franchisee may choose to sell at their location, the franchisee my only use Kumon’s materials at their tutoring center. All of these materials must be purchased from Kumon directly and all additional materials will be provided. Any other materials that the franchisee wishes to use must be approved by the franchisor.
Kumon offers supplemental instructional materials, referred to as “chargeable items.” These include a variety of products such as solution manuals, pens, maps, or flashcards. While it is not required that a franchisee purchase these items in advance, Kumon does recommend this route, as it is likely that they will be needed in the future.
Purchases for the tutoring center can be made directly through the Kumon list of approved vendors. Kumon does not receive any sort of discount or payment from any of the vendors and there are no purchasing cooperatives in the Kumon franchise system.
Item 9 of the Kumon Franchise Disclosure Document lays out the franchisee’s obligations in a comprehensive table format. Obligations of the franchisee include but are not limited to:
- Site selection and acquisition/lease signing
- Completion of pre-opening purchases and site development
- Completion of start-up and ongoing training
- Payment of all required fees
- Compliance with Kumon standards and manuals
- Advertising obligations
At the end of 2011, Kumon had a total of 1450 Centers in their franchise system, up by 116 locations from the beginning of the year.
Initial Investment Costs
|Name of Fee||Low||High|
|Training Agreement Deposit||$500||$500|
|Expenses While Training||$3,945||$5,460|
|Initial Franchise Fee||$1,000||$1,000|
|Initial Purchase of Materials||$1,000||$1,000|
|Security Deposit, if applicable||$0||$4,500|
|Furniture, Signs, Equipment, & Supplies||$10,000||$20,000|
|Notebook Computer at Kumon Center||$800||$1,500|
|Business License, Name Registration||$340||$340|
|Kumon Lead Management Tracking System||$69,943||$147,050|
|Recommended Reading List||$2,240||$2,990|
|Fingerprinting, Criminal Background Check||$18||$60|
|Payroll Cost for Assistants||$3,600||$3,600|
|New Center Marketing||$2,000||$5,000|