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, Planet Fitness has many franchise locations, all of which were sold to various franchisees across the country. Once the Planet Fitness 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 Business
It all began in 1954 when a young boy’s mother found a math test in his pocket. That boy’s name was Takeshi Kumon, and he was in his second year of elementary school. Seeing that his test results were not as good as they usually were, his mother consulted her husband about what to do. Her husband was Toru Kumon, a high school math teacher at the time. To address his wife’s concern, Toru then began making math worksheets for his son, Takeshi.
Toru Kumon believed that the work of an educator is to foster a mindset for self-learning in children. So he went through much trial and error when creating learning materials for his son so Takeshi would be able to work comfortably with the materials each day and to steadily develop his skills. Based on his experience as a high school teacher, Toru Kumon knew that many senior high school students had problems with their math studies because of insufficient calculation skills. Therefore, he focused on developing Takeshi’s calculation skills, and created materials that made it possible for his son to learn independently. This was because, through his own educational experiences, Toru Kumon knew that students could only gain genuine academic ability by making progress on their own.
Toru Kumon wrote out calculation problems on loose-leaf paper for Takeshi, and the materials that he created from 1955 became the prototype for today’s Kumon worksheets. Takeshi quickly developed his ability through studying the materials created by his father for half an hour every day. As a result, he was able to reach the level of differential and integral calculus when he was just a few months into the sixth grade. Following his success with Takeshi, Toru Kumon invited some children from the neighborhood to come and study at his home, and instructed them in a similar way to how he had instructed Takeshi. As a result, all of them greatly improved their academic ability. Seeing this, Toru Kumon wished to develop the potential of as many children as possible with his learning method. In 1958, therefore, he decided to establish an office in Osaka and open more Math Centers. From that year the number of Kumon students began to increase steadily. With reaching high school level material through self-learning as the goal, Toru Kumon’s aim was to develop the ability of students to the maximum by enabling them to study at a level appropriate for each individual.
Children have an inherent potential to grow. Through their practice of reading, writing, and calculation, students develop the confidence to learn on their own. We at Kumon consider education to be the nurturing of children’s ability to achieve self-fulfillment in the future and realize their dreams and goals. Born out of a father’s love for his son, Kumon is not restricted by the barriers of language, culture or history. As more people hear about the benefits of the Kumon Method, it continues to reach greater numbers of students throughout the world.
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|