now reading Children’s Franchises: Which Sector Should I Pick?

Children’s Franchises: Which Sector Should I Pick?

report by

estimated read time
in 5 minutes

Thinking of investing in child-centered franchises?
Ned Levitt looks at what’s succeeding right now

For children in 2018, gone are the days of playing board games and trading collectible cards — now, the 21st-century child matures in a whole new world of innovative play, learning and discovery. Driven by a growing awareness of the real needs of children for them to achieve their fullest potential and budget cuts for school programs, parents are constantly looking for ways to keep kids enriched, entertained and active.

In response, child-centered businesses have begun to sprout all over North America. Fortunately, for interested business people, the industries of recreation, fitness and education are not just child’s play; they also make for sound financial investments.

Here is our roundup of the franchise industries that have enjoyed success in this new era of the child.

SPORTS AND FITNESS CENTER FRANCHISES

In the U.S., over 1,200 enterprises offer children everything from indoor playgrounds and gymnastic centers, to swimming instructions and spa services. According to a recent IBISWorld Report, this franchise sector is forecast to grow at an annualized rate of 1.4%, with franchises expected to benefit $443.9 million in industry revenue by 2023.

In this moderately saturated industry, gaining market share for interested operators will mean overcoming hurdles such as high levels of brand loyalty and the low-cost advantage enjoyed by more affordable external competitors (e.g., afterschool athletic programs).

For investors, entrance into this franchise sector requires an initial franchise fee ranging from $25,000-$55,000 and ongoing royalty fees of about 6%-8%.

New entrants should review the appropriate laws and regulations relating to the sale, financing and collection of memberships and any laws relating to the advertising of nutritional products and beverages.

As well, do not forget about the cardinal rule for real estate: location, location, location! For sports and fitness centers, the geographic location of your facility is not only correlated with children’s willingness to engage in a particular type of play but will also set the stage for the provision of activities relating to climate and other physical attributes. As you search for the
appropriate site, check for any zoning by-law restrictions or restrictive covenants in shopping center leases.

Finally, ensure that company-wide policies comply with any occupational health and safety requirements.

The industries of recreation, fitness and education are not just child’s play; they also make for sound financial investments

PRESCHOOL AND DEVELOPMENTAL CENTER FRANCHISES

Composed of 1,800+ enterprises, this franchise sector offers education and recreational programs for infants, preschoolers, and kindergarteners.

With industry revenues forecast to rise by 4.5% annually over the next five years, this franchise sector is the fastest-growing one on our list.

In 2018, U.S. child education and development franchises experienced
revenues of roughly $2.7 billion, with center-based daycare services accounting for nearly three-quarters
of this revenue. As start-up costs vary depending on the scale of operations, franchise investors can expect an initial fee ranging from $29,000 to $135,000.

With the top four companies holding 60% of the market, new entrants must have a differentiated approach to early childhood development, if they are to succeed during this outlook period.

To avoid the run-of-the-mill classroom experience, successful franchises have focused on play based learning programs for children or developmental services that integrate technology, health and nutrition experts. Beyond the curricula, consider the franchise’s ability to cope with seasonality. For example, an afterschool center will naturally experience quieter periods during the summer. To offset losses due to cyclical dips in demand, ensure your franchise agreement permits arrangements such as offering ancillary recreational services or renting the facility to a third party.

article extract from report:

meet the author

article extract from report

View Children’s Franchises: Which Sector Should I Pick? report
Close