In recent years, we have seen an increase in all childcare franchise brands seeking to convert independent childcare businesses to their brand. For instance, Primrose, Goddard, The Learning Experience, and Kiddie Academy land others looking to convert large centers in metropolitan areas with high demographics – median household income, high population, high number of children, with large employers to their brand.
For childcare owners with their business for sale, how viable is converting your childcare business to a franchise? At Solutions4ChildCare, we have seen a substantial increase in the franchisors seeking to work with business brokers that sell childcare businesses to gain access to their childcare listings and contact childcare owners directly.
Why? Here are the advantages from the franchisors’ standpoint:
- Skip the two-three-year process to find land and construct a new facility.
- Business in operation with enrollments and revenue
- Easier and faster to bring in new franchisees into their franchise system.
- Quicker creation of new royalties for the franchise system.
Advantages for childcare business sellers
- Sell your childcare business and either sell or lease the building and RE
- The business continues in operation.
- Staff may receive more benefits – depending on the franchise system.
Disadvantages for childcare business sellers
- More people involved in the transaction – greater chances for breaches of confidentiality.
- Added costs associated with the franchise (royalties, franchisor-required marketing expenses, initial franchise fees, franchise training fees, costs associated with converting to the franchise brand) often result in the owner not getting the total price/value for their childcare business.
- The money to cover franchise costs is often taken from the business profits – your business profits – making what the buyer (or lender) is willing to give you for your independent childcare business less than what you would expect if sold to a buyer that will continue to operate your business as an independent center and not paying all the fees associated with a franchise.