This article is based on a video originally recorded on Vetted Biz Youtube Channel.
Code Ninjas franchise is a child focused educational program that teaches kids a variety of subjects such as computer programming, coding, math, logic, and teamwork. Code Ninja’s curriculum teaches kids to code using games that they already know such as two popular names in the industry: Minecraft and Roblox.
The first Code Ninjas Center began operations March 2017 in Pearland, Texas. Currently Code Ninja has 243 franchised locations and 4 company or affiliate owned locations.
A “Code Ninjas Center” operates from a fixed retail location designed to make the location welcoming, comfortable, and easily identifiable for customers
Code Ninjas Centers operate from retail locations ranging from 1,200 to 2,400 square feet.
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Franchisees also have the option to choose to add an optional Dojo2Go mobile ‘edutainment’ trailer to your franchise. “Dojo2Go” enables franchisees to host external gaming events and parties for schools, businesses, and other events within their respective territory.
David Graham founded the company and was the Manager since inception until August 2020. In August 2020, Mr. Graham became the Chairman of the Board. Mr. Graham had previous experience in the educational coding business. As from 2010 to 2016 he was the President and CEO of Coder for Rent LLC in the Houston Texas area.
How Much is a Code Ninja Franchise?
Code Ninja Franchise Fee
$31,000
The initial license fee for a Code Ninja franchise is $31,000. This is the upfront fee that must be paid when opening a Code Ninja franchise.
Code Ninja Franchise Cost
The estimated total investment necessary to begin operation of a Code Ninja franchise ranges from $130,3000 to $348,550.
You also have the option to pay an additional $80,000 to $100,000 if you choose to add an optional Dojo2Go mobile ‘edutainment’ trailer to your franchise.
Additional Cost Breakdown
The following costs are part of the upfront costs included in the initial investment. Many of these are one-time fees that are needed to launch the franchise.
Additional Cost Breakdown
| Business Licenses & Incorporation | $200– $1,000 |
| Leasehold Improvements | $30,000 – $165,000 |
| Furniture, Fixtures, Equipment, and Supplies | $35,000 – $70,000 |
| Architect / Engineering Fees | $2,500 – $10,000 |
| Rent, Security Deposits and Utility Deposits | $4,000 – $12,000 |
| Other Professional Fees | $500 – $3,000 |
| Insurance Deposit | $500 – $4,000 |
| Initial Inventory of Product and Supplies | $5,000 – $12,000 |
| Training Expenses | $5,000 – $12,000 |
| Grand Opening Advertising | $500 – $2,500 |
| Additional Funds (For the initial 3 months of operations) | $15,000 – $30,000 |
| Total Estimated Initial Investment | $130,300 – $348,550 |
| Optional: Dojo2Go Mobile | $ 80,000 – $ 100,000 |
Franchise royalty fee
The Code Ninja franchise royalty fee is 6.5% of net sale or the minimum amount of $500. The franchisee must pay the higher of the two.
How Much Do Code Ninja Franchise Owners Make?
Code Ninja Franchise Sales Figures
Code Ninjas Holdings LLC does not disclose any individual retail location sales in Item 19 of their Franchise Discloser Document (FDD). However, if you are purchasing an existing outlet, the company may provide you with the actual financial records of that outlet.
We can access and analyze Code Ninjas Holdings LLC’s income statement and therefore are able to gauge a rough estimate of the sales of each location.
Code Ninja Holdings LLC Royalty Income was $ 1,771,304 in 2020.
This represents 6.5% (Royalty fee) of the net sales of all franchised locations. By having these two numbers we can infer 2020 total net sales (only franchise locations)= $ 27,250,830
To discount the locations that recently opened, we take the franchise location total from the prior year’s end. In this case, there were 194 franchise locations at the end of 2019.
Estimated single location net sales $27,250,830/ 194 = $ 140,468.
Code Ninja Franchise Sales are estimated to be $140,000 per year. This figure might be lower than a typical year given the 2020 pandemic.
Code Ninja Franchisor Income Statement (December 31, 2020)
| Revenue | |
| Franchise revenue | $ 3,185,554 |
| Sales revenue | $ 352,023 |
| Royalty income | $ 1,771,304 |
| Royalty income – related party | $ 608,291 |
| Rebate income | $ 372,304 |
| Administrative fees | $ 529,377 |
| One-time income | $ 688,155 |
| Total Revenue | $ 7,507,008 |
| Operating Expenses | |
| Advertising | $ 630,999 |
| General and administrative | $ 533,159 |
| Rent | $ 468,911 |
| Professional fees | $ 924,265 |
| Salaries and wages | $ 3,083,837 |
| Commissions | $ 439,621 |
| Conferences | $ 1,792 |
| Travel | $ 184,754 |
| Royalty expense – related party | $ 608,291 |
| Amortization | $ 4,399 |
| Cost of goods sold | $ 2,654 |
| Bad debt | $ 178,826 |
| Depreciation | $ 32,675 |
| Total Expenses | $ 7,094,183 |
| Net income from Operations. | $ 412,825 |
| Other Income | |
| Other expense | $ (52,249) |
| Exchange gain | $ 5,214 |
| Interest expense | $ (3,089) |
| Interest expense – loan cost amortization | $ (70,000) |
| Paymentirkind interest expense | $ (167,496) |
| Net Other Expense | $ (287,620) |
| Net Income before State Margin Tax | $ 125,205 |
| State Margin Tax | $ (42,109) |
| Net Income | $ 83,096 |
Code Ninja Franchisor Income Statement Key Insights
Overall, Code Ninja is a profitable business, with a net income of $83,096 in 2020. The highest revenue stream is from Franchise Revenue which accounts for over $3 million. Royalty Income, which is 6.5% of net sales of each franchise, accounts for about $1.8 million. The Franchise fee of 6.5% is only slightly bigger than the industry average of 6%.
Their expenses are also relatively equal compared to their revenue with net income from operations of just over $ 400,000. The biggest expense item is salaries and wages which is just above $3 million indicating the management team is distributing earnings back to themselves and taking profits instead of leaving it in the business.
Code Ninja Franchisor Cash Flow Statement (December 31, 2020)
| Cash Flows from Operating Activities | |
| Net Income | $ 83,096 |
| Adjustments to reconcile net income net cash used by operating activities: | |
| Payment-in-kind interest expense | $ 167,496 |
| Bad debt | $ 178,826 |
| Depreciation | $ 32,675 |
| Amortization | $ 4,399 |
| Changes in operating assets and liabilities: | |
| Accounts receivable | $ (52,848) |
| Inventory | $ (82,682) |
| Prepaid expenses | $ (38,210) |
| Security deposit | $ (3,625) |
| Accounts payable | $ 370 |
| Credit car payable | $ 20,225 |
| Accrued payroll | $ 97,792 |
| Deferred franchise revenue | $ (1,663,220) |
| Net Cash Used By Operating Activities | $ (1,255,706) |
| Cash Flows from Investing Activities | |
| Repayment on related-party payables | $ (471,293) |
| Collection on related party receivables | $ 3,725,002 |
| Purchase of property and equipment | $ (57,512) |
| Net Cash Provided by Investing Activities | $ 3,196,197 |
| Cash Flows from Financing Activities | |
| Borrowing on paycheck protection program loan | 512,518 |
| Borrowing on notes payable | 2,992,778 |
| Member contributions | $ 13,005 |
| Member distributions | $ (4,764,529) |
| Net Cash Used by Financing Activites | $ (1,246,228) |
| Net Increase in Cash | $ 694,263 |
| Cash, beginning of year | $ 1,195,004 |
| Cash, end of year | $ 1,889,267 |
| Supplemental cash flow information | |
| Cash paid for interest | $ 3,089 |
| Cash paid for state margin tax | $ 20,947 |
Cash Flow Statement Key Insights
In 2020, Code Ninjas net income was a little over $80,000, but their cash and cash equivalents were almost $ 1.9 million an increase of almost 60% from the beginning of the year. This indicates the company’s cash flows from investing activities is producing a good return.
How many Code Ninja units have opened/closed?
The number of Code Ninja centers has been growing over the past three years. In 2018 the company started with just 3 outlets, 2 franchised and 1 company or affiliated owned and ended the year with 73 outlets. In 2019 the company ended the year with 196 outlets, a 168% growth rate for new locations. For 2020 the company ended the year with 247 units, a 26% increase in locations. Due to how new Code Ninja franchise system is, it explains the high growth in locations opening and should continue to increase as the company matures.
Conclusion
Code Ninja is a relatively new concept in the Education industry but has seen exponential growth in franchise openings over the last three years. As technology becomes a prominent focus in our society, skills like coding, logic, and math are being demanded more.
While we are unable to provide exact figures on the potential earnings of franchisees, through analyzing the Income Statement and Cash Flow Statement of Code Ninja Holdings LLC it is apparent that they currently are in good financial health and profitable just a couple years after inception in 2017. Since the company or their affiliates only operates 4 locations and have 243 franchise locations, this is a clear indicator that the Franchisor is committed to building out and expanding their franchise locations. We strongly recommend you speak to atleast 5 Code Ninja franchisees to better understand the financials.
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