Published on 15 Nov 2021 Time 13 min read Last update by 23 May 2024

Kumon Franchise in 2024: Cost Not Worth the Franchise Profit

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This article is based on its 2024 FDD

The Kumon Franchise opportunity allows you to run an after-school center that provides math and reading programs using the Kumon Method of learning (“Kumon Center”). Children are allowed to attend Kumon Centers twice each week throughout the year for approximately 20 to 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 who created a supplemental math program for his son, who was getting marks at or near 100% in second-grade math. As a result of Mr. Kumon’s method, his son reached calculus by the sixth grade. Over the ensuing decades, this became an international business. Mr. Tanabe was appointed President and CEO of Kumon North America on its Board of Directors in October 2013. In 2022, he also became CEO of Kumon South America.

The Japan regional headquarters has initiated businesses in various countries similar to the type being offered in the U.S. since 1958. Kumon in the United States has offered franchises since 1994. There are over 4 million students studying the Kumon Method in approximately 25,000 after-school Centers in 58 countries. In North America, approximately 405,000 students were studying it.

How Is Kumon Franchise Positioned in the Children’s Programs Industry?

Children’s Programs are typically activities and programs children can participate in after school or during the summer. These programs are popular for parents who both work full-time and want their children to develop hobbies or extracurricular activities. Furthermore, schools are now looking for well-rounded students who not only excel in school but also are involved in other activities.

On the one hand, Kumon North America appears to be a very successful franchisor. It has been ranked in the top ten of the overall Entrepreneur Magazine Franchise 500 List. 2021 was also the 20th year in a row that Kumon was named the No. 1 tutoring franchise in the Franchise 500 List’s tutoring category. Kumon ranks as the No. 1 tutoring franchise for its performance in areas including unit growth, financial strength and stability, and brand power. However, as we will see, the perspective from the franchisee side is not equivalent.

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How Much Is a Kumon Franchise?

The initial Kumon Franchise Fee is $2,000 less the $1,000 Deposit Fee. You have to pay this upfront fee when opening a Kumon franchise.

Kumon Franchise Cost

The estimated total investment necessary to begin the operation of a Kumon Franchise ranges from $73,783 – $165,920. The following costs are part of the upfront costs included in the initial investment for a Kumon. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Kumon franchise in 2024.

Additional Cost Breakdown

Type of Expenditure Amount Method of Payment When Due To Whom Payment is Made
Training Agreement Deposit Fee $1,000 Lump Sum At signing of Training Agreement Kumon
Initial Franchise Fee $2,000 less the $1,000 Deposit Fee if you are obtaining your first Kumon Center franchise Lump Sum At signing of Franchise Agreement Kumon
Initial Purchase of Materials $2,000 Lump Sum At signing of Franchise Agreement Kumon
Architect Design $0 – $10,000 As arranged Before Opening Architect
Leasehold Improvements $30,000 – $60,000 As arranged Before Opening Contractor
Security Deposit, If Required $0 – $26,500 As required by Landlord As required by Landlord Landlord
Rent $3,000 – $7,000 As required by Landlord As required by Landlord Landlord
Furniture, Equipment, Primary Sign & Supplies $5,000 – $15,000 As arranged Before opening Vendors
Notebook Computer at Kumon Center $500 – $2,000 As arranged Before Opening Vendors
Professional Fees $1,000 – $3,000 As arranged Before Opening Accountant, Lawyer
Liability Insurance $480 ($4.80 multiplied by the number of students enrolled in the Math Subject) Semi-annually, if purchased through Kumon’s insurance carrier; otherwise, as arranged with insurer Semi-annually after opening Kumon or Insurance Agent
Business License, Name Registration $100 – $200 As required by law Before opening Local Municipality, State
Kumon Lead Management System Suite $200 – $550 Lump Sum Before opening Kumon’s Vendor
Recommended Reading List $2,600 As Arranged Before Opening Vendors
Fingerprinting, Criminal Background Check $18 – $60 Certified check or money order Before opening Treasury of the United States
Payroll Cost for Assistants (3 Months) $10,725 – $12,870 Check or payroll service As arranged Assistants
Additional Funds – 3 Months $16,160 – $21,660 As arranged As arranged Kumon, Vendors, and Utilities
Total $73,783 – $165,920

However, based on conversations with Kumon franchisees, we estimate that additional funds are almost double that listed at $27,000 – $36,000. This drives the initial cost estimate to $100,000 – $202,000, which is a higher cost.

Actual startup costs can even be in the $250,000 – $350,000 range depending on the build-out and when you finally break even.

CTA FDD 2

Kumon Franchise Requirements

The franchisor is particularly looking for candidates who have a passion for education and working with children. Also needed are a four-year college degree and the ability to create and manage a Kumon center that will motivate and help children in your community. That said, the minimum net worth required to own a Kumon franchise is $150,000 and the applicant must have liquid assets of at least $70,000.

Owning a Kumon Franchise Requires Ongoing Fees

Kumon has a complicated system, which we detail below.

Initial Enrollment Royalty Fee: For each reporting month, $30 times the number of newly enrolled students.

Monthly Royalty During Temporary License Period (“TLP”): $40.50 times the number of full-payment students enrolled, and $20.25 times the number of partially exempt and/or prorated tuition students for each SubjectFranchise.

Monthly Royalty after completing the TLP: $36 times the number of full-paying students enrolled, and $18 times the number of partially exempt and/or prorated tuition students for each SubjectFranchise.

The royalty fee ends up being at least around $34 – $38 with nearly all subjects having a fee of $38 or more. This, at the end of the day, amounts to a royalty fee of 30% of gross revenues if the current average tuition of about $130-140 per subject per month is being charged. This fee is prohibitively high and one of the highest we have seen in franchising.

Note: Some franchisees charge over $200 per month and thus bring their effective royalty down to a somewhat more reasonable figure. However, franchisees’ effective royalties are rarely under 25% of gross.

Kumon Franchise

More Fees

Marketing Fee: Kumon says in its FDD that there’s no marketing or advertising fee. However, rules are rapidly changing, and the franchisee we interviewed said that new franchisees are now required to pay for digital advertising. They are expected to pay at least $300 per month either through an outside marketing agency or through their own initiatives.

Local Marketing: Kumon franchisees are required by the FDD to aggressively promote their franchises in every way possible, including locally. During the first two years of COVID-19, opportunities were limited but now there is more pressure to find many different local marketing approaches in addition to digital marketing, though there is no specific dollar amount attached.

 

Kumon Franchise Sales Figures

2023 Sales Figures and Break-Even Point:

Based on 1,659 franchise units

Royalty Fee: As we have stated above, the royalty tends to be around 30%.

In 2023 Kumon franchise revenues were $144,000,000.

Estimated Average Franchise Revenue: $289,366

As you can see, with an average profit margin of 7.5%, it takes a long time, 12.75 years, to break even on your initial investment. This is much longer than other franchises in the industry and shows up in other ways that we will discuss below.

Kumon Centers during 2020 saw a revenue decrease of 27% and we can assume that this sharp decrease was due to the spread of COVID-19 and the fact that many indoor facilities such as education centers were unable to open and operate as normal. The move to online education will be a trend that will need to be analyzed further as to how it will affect Kumon Centers.

This is just estimated sales based on the franchisor’s income statement and can vary greatly depending on the length that the particular franchise location has been open and how well the business is run.

What Is the Kumon Franchise Owner Salary?

New Kumon owners put in anywhere from 40 to 80 hours per week on average into working on their franchises. Most of this work would be priced at a very low hourly wage. However, many franchisees stay in the system motivated by the unique benefit of Kumon to the students they support.

Additionally, Kumon operates centers that cannibalize existing centers. For example, Kumon opened a corporately owned location a short distance away from a franchisee who is among the most successful Kumon owners in the USA. Immediately students began to transfer to the new center.

Is the Kumon Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Kumon franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.

Under $1 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.46

When you go to sell a Kumon Center franchise based on the median multiple of .46 and net sales in 2023 of $290,000 it would sell for $133,400. This represents a significant loss when allotting for your time to build up the business and break even (sweat equity).

It is difficult to make the money back from owning a Kumon franchise, which means your initial investment, which could be as high as $300,000, could become a sunk investment. We recommend looking at a Kumon resale instead of a new location.

Kumon Math & Reading Center

Hartford County, CT

Kumon Franchise

Asking Price: $150,000 Cash Flow $0
Gross Revenue: $0 Inventory: N/A
EBITDA: N/A Rent: $3,100 per Month
FF&E: N/A Established: N/A

Kumon franchise available in a busy area

Massachusetts

Asking Price: $80,000 Cash Flow: $38,215
Gross Revenue: $108,588 Inventory: N/A
EBITDA: N/A Rent: $1,650 per Month
FF&E: $1,000 Established: N/A

poop 911

 

Profitable and Growing Kingwood Area Kumon Enrichment

Harris County, TX

Asking Price: $185,000 Cash Flow: $57,274
Gross Revenue: $287,110 Inventory: $2,000+
EBITDA: N/A Rent: $4,100 per Month
FF&E: $25,000 Established: 2004

Kumon (Franchisor) Income Statement Key Insights:

Consolidated Statements of Income

For The Years Ended December 31,
2023 2022 2021
Revenues
Franchise fees and royalties $144,017,675 $133,910,302 $122,600,511
Sales of publications and supplies $1,574,732 $2,352,955 $2,017,877
Tuition and related fees – company-owned centers $4,561,501 $4,563,271 $4,516,634
Other revenue $2,878,508 $3,711,055 $1,896,574
Total Revenues $153,032,416 $144,537,583 $131,031,596
Costs and Operating Expenses
Cost of revenues $32,236,959 $33,141,435 $28,962,035
Selling, general and administrative expenses $86,618,988 $76,063,937 $75,970,463
Total costs and operating expenses $118,855,947 $109,205,372 $104,932,498
Income from operations $34,176,469 $35,332,211 $26,099,098
Other Income (Loss)
Interest income, net of interest expense of $73,000, $212,028 and $105, respectively $865,590 $161,087 $180,078
Other income (expense), net $352,524 ($1,879,697) $595,240
Total other income (expense), net $1,218,114 ($1,718,610) $775,318
Income before provision for income taxes $35,394,583 $33,613,601 $26,874,416
Provision for income taxes $10,479,315 $9,618,506 $7,219,470
NET INCOME $24,915,268 $23,995,095 $19,654,946

Kumon is a very profitable business for the franchisor, with an income of $24.91 million in 2023, and shows a steady pattern of growth over the last 3 years. This is a good indicator.

How Many Kumon Centers Have Opened and Closed?

Outlet Type Year Outlets at the Start of the Year Outlets at the End of the Year Net Change
Franchised 2021 1568 1606 +38
2022 1606 1618 +12
2023 1618 1637 +19
Company-Owned 2021 27 31 +4
2022 31 28 -3
2023 28 22 -6
Total Outlets 2021 1595 1637 +42
2022 1637 1646 +9
2023 1646 1659 +13

Over the last three years, the company has been in expansion. Both franchising units and company-operated stores have increased. Over the last three years, franchises have opened at a rate of 23 units a year. This is an indicator that these locations are performing well. Clearly, the confidence in the franchisor is still strong even after COVID.

Kumon Management Runs the Business in the Traditional Japanese Way

Kumon’s business model in 2024 is still based on the idea from the 1950s that Japanese housewives in the post-war years were happy just to work and produce value even if they were not getting much in return. However, in the U.S., Kumon centers exclusively run in retail locations with rents at least in the $3,000 – $5,000 range but which in at least one case is as high as $15,000.

Owners normally need to give six months of notice before they leave the system (except in the months before the royalty is increased when the notice is only 60 days).

What Are Alternatives to a Kumon Franchise?

If you want to explore more options in the schooling and daycare space, here are some recommendations you can look at:

Kiddie Academy

  1. Kiddie Academy Educational Child Care is an American franchise system of specially designed early childhood learning and child care facilities offering programs for children between six weeks and 12 years of age with over 320 franchised academies. Kiddie Academy headquarters are in Abingdon, Maryland.

The total investment necessary to begin the operation of a Kiddie Academy Franchise is $4.42M-$7.26M. This includes between $105,000 and $145,000 in Initial Fees that you must pay to the franchisor or an affiliate.

Royalties are 8% of Gross Revenues. Brand Building Fund Contribution is 2% of Gross Revenues among the major ongoing costs of running a Kiddie Academy Franchise.

In 2023, the median gross revenue for Kiddie Academy franchises was $1,983,971.

Over the last three years, the company has been expanding. While they have had only 1 company-operated unit, franchising units have increased. Over the last three years, franchises have opened at a rate of 23 units a year.

The Goddard School

2. The Goddard School is an early childhood education provider with more than 620 franchised Schools in hundreds of markets, including the Atlanta, Boston, Chicago, Houston, New York City, Philadelphia, Portland, and St. Louis markets. Goddard Systems, Inc. (GSI) franchises The Goddard School from its headquarters in King of Prussia, Pennsylvania.

A Goddard School facility costs between $903K-$8.51M. Royalty Fee for a Goddard School Franchise is 8% of Gross Receipts of the School. If you are an existing franchisee purchasing an additional (new) franchise for a reduced initial license fee, the royalty fee is reduced during the first year of operation of the new School to 2% of Gross Receipts for months 1-3, 4% for months 4-6, and 6% for months 7-12. The Marketing Fund Marketing Fee is 4% of Gross Receipts per month.

The Median Revenue for a Goddard School Franchise in 2023 was $2,131,739 while the EBITDA was $-31,436,374.

Over the last three years, the company has been expanding. While they have no company-operated units, franchising units have increased. Over the last three years, franchises have opened at a rate of 27 units a year.

The Learning Experience

3. The Learning Experience is a childcare business that claims to provide a “curriculum that develops the whole child.”

The start-up cost for a Center ranges from $590K-$5.47M. This varies based on whether you’re buying an existing Center, building a new one, or having the franchisor build it. Royalties are 8% of the Center’s Gross Revenue, which includes all revenue related to the Center and the Brand Awareness Fund is, currently, 4% of Gross Revenue.

The median gross sales for a mature Center in 2023 were $2,131,739.

Over the last three years, the company has been expanding. Both company-owned and franchised units have increased. Over the last three years, franchises have opened at a rate of 26 units a year.

Conclusion

The preschooling and school business in the USA is big, and Kumon offers a chunk of it. However, there are a few red flags in the system. We very strongly recommend talking to at least 5 franchise owners before starting a Kumon franchise and recommend resales over starting one from zero.

While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Children’s Programs Industry.

 

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