This article is based on a video originally recorded on Vetted Biz Youtube Channel
The franchisee will operate an after-school center that provides math and reading programs using the Kumon Method of learning (“Kumon Center”). Children are given the opportunity to attend Kumon Centers twice each week throughout the year for approximately 20–30 minutes per subject and complete daily assignments at home on non-Center days.
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In 1954, Toru Kumon developed the Kumon Method in Japan. Mr. Kumon was a Japanese high school math teacher and created a supplemental math program for his son, who was struggling with second grade math. Mr. Kumon’s method was so successful that his son reached calculus by the sixth grade. This then turned into an international business and currently Mr. Tanabe was appointed President and has been a member of Kumon’s Board of Directors in October 2013.
As of December 31, 2019, approximately 4,200,000 students were studying the Kumon Method in approximately 25,000 after-school Centers in 58 countries. In North America, there were approximately 405,000 students studying it. We operated 21 company-owned Kumon Centers, and there were 1,547 franchised Kumon Centers.
Initial Franchise Fee for Kumon Centers
$1,000
Franchise Cost:
The total investment ranges from $74,428 – $156,590
Additional Cost Breakdown:
- Training Agreement Deposit Fee: $500
- Expenses while training: $5,150 – $8,880
- Initial Franchise Fee: $1,000
- Initial Purchase of Materials: $1,000
- Architect Design: $0 – $10,000
- Leasehold Improvements: $31,500 – $60,000
- Security Deposit: $0 – $15,000
- Rent: $2,500 – $5,000
- Furniture, Equipment, Primary Sign & Supplies: $3,400 – $12,000
- Notebook Computer: $400 – $2,000
- Professional Fees: $1,000 – $3,000
- Liability Insurance: $480
- Business License, Name Registration: $100 – $200
- Lead Management Telephone System: $480 – $600
- Recommended Reading List: $2,550
- Payroll Cost for Assistants (3 months): $7,350 – $8,820
- New Center Marketing: $4,000 – $8,000
- Additional Funds: $13,500 – $18,000
Ongoing Franchise Costs and Fees:
Royalty Structures:
$15 x the # of new students
$34 x the # of full paying students
$19.13 x the # of partially paying students
Sales Figures:
There were 1,547 franchised Kumon Centers across North America. While it does not disclose actual revenues made by new centers, they offer statistics for new Kumon Centers.
| Year Franchised Center Opened | Total Counts of Centers as of December 31, 2019 | Average/Median Number of Enrollments After 12 Reporting Months For Centers Openend in Year Indicated | Count (%) of Centers with Enrollments Equal To or Above the Average After 12 Reporting Months For Centers Opened in Year Indicated | Average/Median Number of Enrollments Afeter 12 Reporting Months For Bottom 25% of Performing Centers by Year Opened (Count of Centers in thi Category) | Average/Median Number of Enrollments After 12 Reporing Months For Top 25% of Performing Centers by Year Opened (Count of Centers in this Category) |
|---|---|---|---|---|---|
| 2018 | 35 | 81/77 | 14 (40%) | 47 (8) / 49 (8) | 124 (9) / 122 (9) |
| 2017 | 39 | 87/86 | 19 (49%) | 43 (10) / 45 (10) | 135 (9) / 125 (9) |
| 2016 | 31 | 97/92 | 14 (45%) | 53 (7) / 52 (7) | 151 (7) / 133 (7) |
Key Highlights from Sales Figures:
As seen in the third column, there is an average of 81 students enrolling after 12 months. We are unable to deduce the revenue from just the number of students enrolled because the pricing varies depending on a couple of factors such as the amount of subjects a student takes and whether they are enrolled with a partial payment or full payment plan.
Kumon North America, INC Income Statement:
Kumon North America, INC. And Subsidiaries (A Wholly-Owned Subsidiary of Kumon Institute of Education Co. Ltd.) Consolidated Statements of Income For the Years Ended December 31, 2019, 2018 and 2017
| Revenues | 2019 | 2018 | 2017 |
|---|---|---|---|
| Franchise fees and royalties | $143,051,079 | $137,880,384 | $130,436,664 |
| Sales of publications and supplies | $2,633,814 | $2,583,860 | $2,499,964 |
| Tuition and related fees – company-owned centers | $6,472,750 | $8,180,090 | $9,058,418 |
| Other revenue | $2,230,799 | $1,782,175 | $2,125,940 |
| Totaal revenues | $154,388,442 | $150,426,509 | $144,120,986 |
| Cost and operating expenses: | |||
| Cost of revenues | $30,382,808 | $31,792,069 | $31,526,700 |
| Selling, general and administrative expenses | $87,289,278 | $83,683,484 | $79,599,177 |
| Income from operations: | $117,672,086 | $115,475,553 | $111,125,877 |
| Other income (loss) | $36,716,356 | $34,950,956 | $32,995,109 |
| Interest income net of interes expense of $269, $9,547 and $13,209, respectively | $940,606 | $749,152 | $369,978 |
| Other income (loss), net | $1,011,934 | $(84,635) | $614,993 |
| Other income, net | $1,952,540 | $664,517 | $984,971 |
| come before provision for income taxes | $38,668,896 | $35,615,473 | $33,980,080 |
| Provision for income taxes | $11,112,200 | $8,661,852 | $19,623,829 |
| NET INCOME | $27,556,696 | $26,953,621 | $14,356,251 |
Income Statement Key Insights:
The franchisor Kumon North America Inc has very solid financials and is seen in their net income of over $27.5 million for the year ending in 2019. This is small increase from 2018, but from 2017 to 2018 they saw almost 100% growth in net income.
Competitions for Kumon Centers:
There will be competition from educational services offered on the Internet, tutoring institutes, tutoring centers, learning centers, test-prep centers, cram schools, individual tutors, self-tutoring programs, and other Centers. Some franchises that Kumon competes with are Club Z!, Mathnasium, and Tutoring Club.
Conclusion
The Kumon Franchise offers a great opportunity to start a fulfilling business and join a well-respected company that has proven results year after year.
While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the education industry.
Analysis Provided by: Brooks Gammill Vetted Biz Intern
