Growing Tutoring Franchise Offers a Lesson in Expansion

Private tutoring has become a multi-billion business as competition to get into good universities grows increasingly fierce and the cost to get into those schools keeps rising.

It helps that the economy keeps chugging along.

“When disposable income rises, parents are better able to afford personal tutoring services for their children, and adult students are able to spend more money on tutoring and test preparation services,” research firm IBISWorld noted in a report.

Franchises drive a good bit of the tutoring business and fill a lot of small spaces in retail centers around the country. Kumon, a Japanese company founded in the 1950s that arrived in the U.S. in 1974, and Hunt Valley, Maryland-based Sylvan Learning dominate the market.

Companies such as Bellevue, Washington-based Best in Class Education Centers founded by Hao Lam, an entrepreneur who left Communist Vietnam in 1988, are among the variety of tutoring options trying to carve a share of the industry for themselves.

Since 2011, Lam, the franchise’s chief executive officer, has led an expansion across the country. The franchise recently signed a development deal for a second location in San Jose, California, which will mark its 10th in the Bay Area when it opens.

Lam plans to open 20 locations across the country this year and another 20 next year to take the brand from 61 locations to more than 100 in 12 states.

He started the business out of his own experience with getting an education. After leaving Vietnam, he worked his way through the University of British Columbia to earn a degree in mathematics. Lam tutored classmates along the way, which he said helped him develop a passion for education that he didn’t have growing up in Vietnam.

“I know how life-changing education can be,” Lam said in a statement. “Earning my education was instrumental in overcoming great adversity in my life and if teaching another through their own great adversity is the only thing I accomplish, then I have accomplished the greatest task.”

Total investment in a location runs $63,000 to $125,000, according to the company. Many of the franchisees have a corporate background but other haves a background in education. The key is finding someone who has a strong interest in education, Peterson said.

Many retail centers like having this type of tenant. Andrew Shaw, vice president with Dallas-area real estate firm NAI Robert Lynn, said Best in Class has been a good addition to McDermott Commons, a retail center in Allen, Texas.

“There’s a lot of household growth in the area,” Shaw said. “You also get the moms that come by.”

A student goes once a week for a 75-minute class. So parents who wait rather than drop off have to do something with their time. In that center, there’s food, a hair salon, a dentist, a chiropractor, an eye doctor, a large home décor and antiques store and an indoor trampoline park.

The location is one of two for the franchisee. The other is in neighboring McKinney. Sharon Peterson, vice president of franchise recruitment and development for Best in Class, said the franchisee is close to opening a location in nearby Frisco.

Those three cities are a hot suburban enclave north of Dallas with strong income. Shaw said the average annual income in a mile radius of the Allen retail center is about $120,000.

She said the company does a “thorough demographic analysis” when looking at areas for expansion.

“We obviously look at the student populations,” she said. “We look at the convenience factor.”

For example, in February, Best in Class opened a location in Milton, Georgia, a wealthy suburb north of Atlanta. It took a so-called end cap space that was formerly a nail salon in a small retail center across from a Publix-anchored center and near two private high schools and a large public high school.

Typically, the franchise leases 1,000 to 1,500 square feet. Most times it seeks out retail centers. But several locations are in single-story office parks. “In certain markets, we get a little creative,” Peterson said.

Peterson said the CEO plays a big role in helping with the hunt for real estate. “We are not afraid to be near our competitors,” with Kumon considered its primary competitor, she said.