FDD Talk 2021: Primrose Schools Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

• Section I – Background information on the Primrose Schools franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Primrose Schools 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 Primrose Schools franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Primrose Schools 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 Primrose Schools’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019, 2020, and first quarter 2021 average, median, lowest, and highest gross revenues for the Primrose Schools facilities that were active franchises throughout the applicable period (an “active franchise” is a franchise that has opened a facility and has not permanently closed such facility)

• 2019 and 2010 average gross revenues, payroll and taxes, brand fund fee and royalty, other expenses, occupancy expenses, and adjusted operating income (EBITDAR) for the Primrose Schools facilities that were active franchises throughout the applicable period and submitted the required data

Section I – Background Information

23 Things You Need to Know About the Primrose Schools Franchise

Launches Innovative Proprietary Music and Literature Program Nationwide

1.  In mid-September 2020, Primrose Schools launched Harmony & Heart, a new music and character development program that offers a unique approach to music and children’s literature, teaching important music skills while reinforcing these critical social-emotional skills in a fun and engaging manner. In this program, the thoughtful integration of music and books complement each other to teach music skills like rhythm and melody, strengthen cognitive skills like math and language, and help reinforce character lessons such as fairness and empathy.

2.  While character development and music education have been an ongoing part of the Primrose Schools Balanced Learning curriculum since the school’s inception, this exclusive program was designed to help children grow as students, musicians and people, inspiring children to think creatively, listen intently and act compassionately.

3.  Jo Kirchner, CEO of Primrose Schools, said, “Children love music, dancing and listening to stories – and the early development benefits of these activities with young children are undeniable. At Primrose, we saw an opportunity to create an innovative curriculum rooted in music and literature. In a time when social and emotional skills are valued more than ever before, our Harmony & Heart program provides delightful early learning experiences that nurture active minds, healthy bodies and happy hearts in young children and skills that will influence their development for life.”

4.  Primrose Schools sought the expertise of world-renowned children’s authors and experts in early music theory to develop the Harmony & Heart curriculum. The literature collection was developed in partnership with pediatrician and author Laura Jana, MD and children’s author Julia Cook, MS. The music curriculum was developed in partnership with early music learning theory experts Jennifer Sutton McDonel, PhD and Heather Kirby, MM. Designed for infants to kindergartners, children experience this exclusive program at least twice a day at Primrose Schools.

Launches Video Series Focused on Social-Emotional and Character Development

5.  At the beginning of February 2021, Primrose Schools launched Primrose Friends for Life, a free educational video series available to all. Parents can watch alongside their children in this ongoing video series to reinforce positive social-emotional skills as a family. The videos feature 12 Primrose Friends puppets embedded into Primrose Schools’ proprietary Balanced Learning curriculum, each portraying a different positive character trait such as friendship, generosity, and cooperation.

6.  According Dr. Lauren Starnes, vice president of early childhood education research and development for Primrose Schools, “For decades, Primrose Schools has utilized puppetry in the classroom to infuse character development lessons and help enhance creativity, increase collaboration and communication skills, and support positive social-emotional development. Young children learn better through play-based learning and now through this video series, we are able to replicate pieces of the classroom learning experience, bringing it into families’ homes.”

7.  The first five years provide an important foundation to a child’s future success, as the brain develops more rapidly during these formative years than any other point in a person’s life, forming 700 new neural connections every second. As early as six months old, babies begin to show signs of empathy, making the nurturing of social-emotional skills even more important from birth.

8.  Imaginative play helps children make sense of the world, solve problems, learn to regulate their emotions, and develop their voices and opinions while bolstering their self-esteem. This is why Primrose Schools developed and embedded the Primrose Friends puppets into the core of the Balanced Learning curriculum. This purposeful approach to play helps young children learn faster and retain what they learn.

9.  Jo Kirchner, CEO of Primrose Schools, added, “Who children become is just as important as what they know. That’s why character lessons taught by our Primrose Friends are embedded throughout our curriculum – so that we can reinforce these important lessons as early as possible. The pandemic has inspired us to find a way to share Primrose Friends beyond our walls to act on our mission to forge a path to a brighter future for all children. There has never been a more important time for families everywhere to have access to all that Primrose Friends can teach them.”

10.  Every month, new videos will be released for families and their children to watch together at home and learn, providing early learning experiences that nurture Active Minds, Healthy Bodies and Happy Hearts in young children and help foster social-emotional skills that will influence children’s development for life. The video series and other educational resources are available to all at PrimroseFriends.com.

Opens 450th School

11.  In late April 2021, Primrose Schools celebrated the opening of its 450th school, kicking off a busy year of expansion for the company in the greater Washington metropolitan area. Throughout 2021, five fully accredited Primrose Schools are scheduled to open across D.C., Northern Virginia, and Maryland – a 60 percent increase in the D.C. metropolitan market – as the critical need for high-quality early education and care continues post-pandemic and the daycare industry rebounds with the help of recent government support.

12.  Jo Kirchner, CEO of Primrose Schools, said, “When we launched our first franchise in 1990, we had the vision to bring a premier early learning experience to children across America. What I could not have imagined is that we’d be celebrating the opening of our 450th school as we continue to navigate a global pandemic. After the year we have been through, milestones seem to mean more. The incredible importance of what we do has become apparent to everyone, and we’re more energized than ever to prepare our next generation of leaders.”

13.  Primrose School of Arlington is owned by sisters Saniya Dhala and Zahra Isani. Driven by their shared experiences and dedication to the Arlington community, the sisters made the decision to leave the finance and food industries to open their own Primrose School and help address the growing demand for quality early education and care in their community. They chose Primrose Schools because of its proven model that has been trusted for nearly 40 years.

14.  Saniya Dhala, Primrose School of Arlington franchise owner, said, “My sister and I both share a passion for providing working parents with quality childcare solutions because of the personal challenges experienced trying to find early education and care options for children. There are so many busy working parents like myself in the heart of the D.C. metro area who desire high-quality early education and care near their homes and jobs and we are excited to provide the educational experience and nurturing environment they’re seeking.”

15.  Primrose Schools opened 28 new schools in 2020, with more aggressive growth goals set nationwide in 2021. And across the Washington metropolitan area, the five new Primrose Schools will join 11 existing locations. This footprint and planned growth underscore the increased demand for quality early education programs that provide parents with peace of mind about returning to work.

16.  As the lines between home and work environments remain blurred with continued remote working options, residents and working parents especially want a community where they can have it all. The high-quality early learning and care Primrose Schools provides is a key component to a thriving “Live, Work, Play, Learn” community like Arlington.

17.  Katie Cristol, vice chair of the Arlington County Board, added, “We are thrilled to welcome Primrose Schools to Arlington. There continues to be a great need for high-quality early education and child care options in our community and Primrose Schools delivers that in a convenient setting, close to neighborhoods and businesses.”

Company History

18.  Primrose Schools was founded as Primrose Day School in 1982 by Paul and Marcy Erwin in Marietta, Georgia. The Erwins wanted to offer an early childhood education program that actually focused on educating pre-school aged children. This concept was a success and more schools were opened around Georgia.

19.  A few years later, in 1988, Jo Kirchner, the company’s current president and CEO, was hired as a consultant to help shift the then half-day preschool to a full-day model, as well as to assist in the launch of the Primrose franchising concept. In 1990, Primrose Schools launched its franchising program and Kirchner officially joined the company as its vice president.

20.  Over the next decade, Primrose Schools continued to expand around the United States. The Erwins retired in 1999 and sold Primrose Schools to Greenwich, Connecticut-based Security Capital Corporation. Kirchner was then appointed as CEO.

21.  American Capital Strategies acquired Primrose from Security Capital in 2006 for approximately $63 million. Just two years later, Primrose Schools was sold to Roark Capital Group, which still owns the company. Today, there are Primrose Schools across 23 states.

Entrepreneur’s Franchise 500

23.  Primrose Schools ranked No. 67 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Primrose Schools 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 Primrose Schools’ 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:  367
• Outlets at the End of the Year:  391
• Net Change:  +24

2019

• Outlets at the Start of the Year:  391
• Outlets at the End of the Year:  418
• Net Change:  +27

2020

• Outlets at the Start of the Year:  418
• Outlets at the End of the Year:  445
• Net Change:  +27

Company-Owned

2018

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

2019

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

2020

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

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

• This Item 19 presents information about the financial performance of franchised Facilities during the fiscal year ending December 31, 2019 (“Fiscal Year 2019”), the fiscal year ending December 31, 2020 (“Fiscal Year 2020”), and the first quarter of the 2021 fiscal year (“First Quarter 2021”).

• Primrose Schools has not made permanent, material changes to its concept as a result of the COVID-19 pandemic.

• This Item 19 includes data related to Facilities that were active franchises throughout the applicable fiscal year (or, in the case of the data from the First Quarter 2021, that were active franchises throughout the First Quarter 2021). An “active franchise” is a franchise that has opened a Facility and has not permanently closed such Facility.

• Thus, this Item 19 includes data from Facilities that were temporarily closed for periods of the applicable fiscal year for any reason, which could include, for example, temporary closures for renovations, repairs, or personal reasons, as well as temporary closures due to the COVID-19 pandemic and related government restrictions on the operation of child care facilities.

• This Item 19 does not include data for one franchised Facility with a capacity of 418 children (which is significantly larger than a typical Facility) and any Primrose on Premise Facilities (which are not representative of a typical Facility) that were active franchises during the applicable period (the “Excluded Facilities”).

Part 1 – Summary of Annual Gross Revenues of Facilities by Fiscal Year

First Quarter 2021 (439 Facilities)

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