November 24, 2015
Tutoring franchise systems are suffering from high franchisee turnover rates, with many franchise owners reportedly closing their doors or selling their tutoring businesses at fire sale prices. We are asking franchisors and franchise owners: What are the major challenges facing tutoring franchisees? What are franchise companies doing to help them?
(UnhappyFranchisee.Com) Franchises that offer tutoring and test preparation have been hard-hit in recent years, with many well-publicized closings that left parents irate, children tutor-less, and franchise owners in or near bankruptcy.
UnhappyFranchisee.Com analyzed the 11 top tutoring and test preparation franchises, and found an average of 25% franchisee turnover within the last three years.
That means that 1 in 4 tutoring franchise agreements ended prematurely with the franchises being terminated, closing their doors, or transferring to the franchisor or other owners.
For many franchise owners, this means losing their initial investment of $74,754 – $137,009 plus a lot more.
Above Grade Level was the franchise with the highest franchisee turnover rate, just over 54%. Above Grade Level opened its first franchise in 2010, and has suffered 60% turnover since then.
Sylvan Learning (31.17%), Tutor Doctor (31.8%), and Club Z (30.71%) home tutoring were the next three worst, with nearly 1 in 3 franchisees exiting prematurely.
Tutoring franchises with greater than 20% franchisee turnover include Huntington (28.9%), brain trainingfranchise LearningRx (26.95%), The Tutoring Center (25.33%), Eye Level Learning Centers (22.6%), JEI Learning Centers (20.23%) and Kumon with $20.52%.
Mathnasium had the lowest franchise turnover rate with 17% – which is no cause for celebration and would be considered relatively high in other segments of the franchise industry.
Tutoring Franchise Turnover Rates 2012 – 2014
|
Franchise
|
Invest.
|
# units¹ 2012
|
# units¹ 2013
|
# units¹ 2014
|
Total Agrments²
|
Closed/ Transfer³
|
Turnover Rate
|
 KUMON
|
$64,073 to $134,100
|
1481
|
1466
|
1452
|
1827
|
375
|
20.52%
|
 Sylvan
|
$89,368 –
$191,874
|
599
|
585
|
552
|
802
|
250
|
31.17%
|
 Club Z Home
Tutoring
|
$32,600 to $56,550
|
375
|
379
|
379
|
547
|
168
|
30.71%
|
 Mathnasium
|
$90,750 – $137,610
|
337
|
409
|
511
|
616
|
105
|
17%
|
 Huntington
|
$99,195 – $204,320
|
231
|
225
|
218
|
307
|
89
|
28.9%
|
 Eye Level
|
$75,588 –
$139,050
|
176
|
216
|
226
|
292
|
66
|
22.6%
|
 Tutor Doctor
|
$66,000 – $133,900
|
229
|
227
|
238
|
349
|
111
|
31.8%
|
 LearningRx
|
$102,300 to $200,750
|
79
|
88
|
84
|
115
|
31
|
26.95%
|
 JEI Learning Centers
|
$60,750 to $99,750
|
52
|
53
|
67
|
84
|
17
|
20.23%
|
 The Tutoring Center
|
$90,000 to $132,200
|
53
|
58
|
56
|
75
|
19
|
25.33%
|
 Above Grade Level
|
$51,665 to $76,995
|
18
|
20
|
17
|
38
|
23
|
54.04%
|
|
ALL Tutoring Center Franchises
|
$74,754 – $137,009 (avg)
|
3,630
|
3,726
|
3,800
|
5,052
|
1,254
|
24.82%
|
¹ U.S. franchise locations reported open at end of year
² Includes both new franchise agreements and franchise resales (transfers)
³ Includes all franchises reported as terminated, non-renewed, reacquired by franchisor, ceased operations – other reasons, and transferred to new owners. While a transfer could reflect a franchise sold for a profit, it often means sold at a loss.
Turnover rate is calculated by total franchise agreements including transfers divided by franchise agreements ended x 100.
Data sources: 2015 Franchise Disclosure Documents (FDDs) of each respective company. Please report any errors to UnhappyFranchisee[at]gmail.com.
Why Are Tutoring Franchises Failing? What Are Franchisors Doing to Help?
According to a report released by IBISWorld, annual revenue for tutoring and test preparation franchises declined as the economic downturn reduced the discretionary income parents had to spend on private tutors for their children.
At the same time, profits were squeezed due to an increase in wages for the highly qualified employees franchisees need to compete with online services.
Tutoring franchises are also having to compete with a surge in Internet-based live tutoring and online supplementary education materials and programs.
