Here’s What you Need to Know Before Opening a Primrose School Franchise (2023)
Written by: Maria Victoria Silveira e Silva
Last Updated by
Rocio Somoza: January 18, 2023
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Buying a franchise in the United States can certainly be a daunting experience. Especially for those who have not had significant exposure to its domestic market and entrepreneurial endeavors in the past. With that said, our team has often found that a strong way to ensure a potential success of one’s business endeavors, entails investing into a franchise that not only is placed into one’s industry of interest, but that also provides a strong match to the investor and their business profile. The article below, details the investment criteria and overall profile required for an investment into Primrose Schools. It provides an in-depth analysis of the franchisor’s financials and franchise structure and hopes to shed some light on whether or not Primrose Schools is the franchise for you.
How is Primrose Schools Franchise Positioned in the Education Industry?
The Education industry in the USA currently has a market size of $2 trillion. There are around 1.4 million open businesses within the industry that support over 13 million jobs. Education is one of the fastest growing sectors of the franchise industry and composes over 7.3% of the U.S. GDP. The annual growth rate in the industry is at 4.2% and its market size is expected to reach around $3.1 trillion by 2030.
Primrose Schools is a national system of accredited private preschools that provide supreme, exemplary education to children in the early stages of their education. At Primrose Schools, the focus is in delivering the best and most trusted early education and care for children who are six weeks to 12 years old and their families.
Founded in 1982, Primrose Schools is considered a national leader in providing premier early education to children across all of the US. As of 2021, Primrose Schools had over 400 franchise units across 34 US states and many more currently under development!
How Much is a Primrose Schools Franchise Fee?
The initial Primrose Schools Franchise Fee is $80,000. Franchisees are required to pay this fee upfront when opening a Primrose Schools franchise. Additionally, there are other pre-opening costs which are detailed in the table below:
Pre-Opening Costs – Franchised Schools
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Fee | $50,000 – $80,000 | Us |
| Real Estate Fee | $25,000 | Us |
| Security Deposit for Lease and Limited Rent Guarantee Fee | $15,000 – $250,000 | Landlord or PSFC |
| Utility Security Deposit | $10,000 – $30,000 | Utility companies |
| School Equipment and Supplies | $222,000 – $340,000 | Approved supplier or lender |
| Insurance | $5,000 – $10,000 | Insurance company |
| Initial Training and Opening Support Fee | $35,000 | Us |
| Marketing, Advertising and Grand Opening | $40,000 – $105,000 | Us or Vendors |
| Transportation Vehicle | $900 – $42,000 | Approved supplier or lender |
| Licenses | $4,000 – $7,000 | Governmental authorities |
| Miscellaneous | $10,000 – $45,000 | Vendors, professionals |
| Financing Cost | $55,000 – $75,000 | Lender(s) |
| Additional Funds – 3 months | $180,000 – $420,000 | Employees, suppliers and utilities |
| TOTAL | $651,900 – $1,464,000 |
Sub-Total Pre-Opening Costs for Franchised Restaurants: – Low: $651,900/ High” $1,464,000
Primrose Schools Franchise Cost
The estimated total investment necessary to begin the operation of a Primrose Schools Franchise ranges from $651,900 to $8,454,000. This range is significant and is determined highly by the real estate development program the franchisor decides you qualify for. The following costs are part of the upfront costs included in the initial investment for a Primrose Schools franchise. Many of these are one-time fees that are needed to launch the franchise. Review the charts below to see how much it costs to buy a Primrose Schools franchise in 2022.
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Fee | $50,000 – $80,000 | Us |
| Real Estate Fee Deposit | $25,000 | Us |
| Balance of Real Estate Fee | $30,000 – $45,000 | Us or Real Estate Affiliate |
| Other Real Estate and Development Costs | $3,611,500 – $6,960,000 | Real Estate Affiliate, lender and/or us |
| Utility Security Deposits | $10,000 – $30,000 | Utility companies |
| School Equipment and Supplies | $222,000 – $340,000 | Approved supplier or lender |
| Insurance | $5,000 – $10,000 | Insurance company |
| Initial Training and Opening Support Fee | $35,000 | Us |
| Marketing, Advertising and Grand Opening | $40,000 – $105,000 | Us or Vendors |
| Transportation Vehicle | $900 – $42,000 | Approved supplier or lender |
| Licenses | $4,000 – $7,000 | Governmental authorities |
| Miscellaneous | $10,000 – $45,000 | Vendors, professionals |
| Financing Cost | $258,000 – $310,000 | Lender(s) |
| Additional Funds – 3 months | $180,000 – $420,000 | Employees, suppliers and utilities |
| TOTAL | $4,481,400 – $8,454,000 |
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Fee | $50,000 – $80,000 | Us |
| Real Estate Fee | $25,000 | Us |
| Security Deposit for Lease and Limited Rent Guarantee Fee | $15,000 – $250,000 | Landlord or PSFC |
| Utility Security Deposit | $10,000 – $30,000 | Utility companies |
| School Equipment and Supplies | $222,000 – $340,000 | Approved supplier or lender |
| Insurance | $5,000 – $10,000 | Insurance company |
| Initial Training and Opening Support Fee | $35,000 | Us |
| Marketing, Advertising and Grand Opening | $40,000 – $105,000 | Us or Vendors |
| Transportation Vehicle | $900 – $42,000 | Approved supplier or lender |
| Licenses | $4,000 – $7,000 | Governmental authorities |
| Miscellaneous | $10,000 – $45,000 | Vendors, professionals |
| Financing Cost | $55,000 – $75,000 | Lender(s) |
| Additional Funds – 3 months | $180,000 – $420,000 | Employees, suppliers and utilities |
| TOTAL | $651,900 – $1,464,000 |
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Fee | $50,000 – $80,000 | Us |
| Real Estate Fee Deposit | $25,000 | Us |
| Balance of Real Estate Fee | $30,000 – $45,000 | Us or Property Owner |
| Security Deposit for Lease and Limited Rent Guarantee Fee | $15,000 – $125,000 | Landlord or PSFC |
| Other Real Estate and Development Costs | $2,288,000 – $4,275,000 | Contractor, construction manager, architects, consultants, lender and/or us |
| Utility Security Deposit | $10,000 – $30,000 | Utility companies |
| School Equipment and Supplies | $222,000 – $340,000 | Approved supplier or lender |
| Insurance | $5,000 – $10,000 | Insurance company |
| Initial Training and Opening Support Fee | $35,000 | Us |
| Marketing, Advertising and Grand Opening | $40,000 – $105,000 | Us or Vendors |
| Transportation Vehicle | $900 – $42,000 | Approved supplier or lender |
| Licenses | $4,000 – $7,000 | Governmental authorities |
| Miscellaneous | $10,000 – $45,000 | Vendors, professionals |
| Financing Cost | $232,000 – $233,000 | Lender(s) |
| Additional Funds – 3 months | $180,000 – $420,000 | Employees, suppliers and utilities |
| TOTAL | $3,146,900 – $5,817,000 |
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Fee | $50,000 – $80,000 | Us |
| Real Estate Fee | $25,000 | Us |
| Other Real Estate and Development Costs | $3,611,500 – $6,960,000 | Landowner/Developer |
| Utility Security Deposits | $10,000 – $30,000 | Utility companies |
| School Equipment and Supplies | $222,000 – $340,000 | Approved supplier or lender |
| Insurance | $5,000 – $10,000 | Insurance company |
| Initial Training and Opening Support Fee | $35,000 | Us |
| Marketing, Advertising and Grand Opening | $40,000 – $105,000 | Us or Vendors |
| Transportation Vehicle | $900 – $42,000 | Approved supplier or lender |
| Licenses | $4,000 – $7,000 | Governmental authorities |
| Miscellaneous | $10,000 – $45,000 | Vendors, professionals |
| Financing Cost | $258,000 – $310,000 | Lender(s) |
| Additional Funds – 3 months | $180,000 – $420,000 | Employees, suppliers and utilities |
| TOTAL | $4,451,400 – $8,409,000 |
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Fee | $50,000 – $80,000 | Us |
| Real Estate Fee | $25,000 | Us |
| Security Deposit for Lease and Limited Rent Guarantee Fee | $125,000 – $150,000 | Landlord or PSFC |
| Other Real Estate and Development Costs | $10,000 – $25,000 | Us |
| Utility Security Deposit | $10,000 – $30,000 | Utility companies |
| School Equipment and Supplies | $222,000 – $340,000 | Approved supplier or lender |
| Insurance | $5,000 – $10,000 | Insurance company |
| Initial Training and Opening Support Fee | $35,000 | Us |
| Marketing, Advertising and Grand Opening | $40,000 – $105,000 | Us or Vendors |
| Transportation Vehicle | $900 – $42,000 | Approved supplier or lender |
| Licenses | $4,000 – $7,000 | Governmental authorities |
| Miscellaneous | $10,000 – $45,000 | Vendors, professionals |
| Financing Cost | $19,000 – $30,000 | Lender(s) |
| Additional Funds – 3 months | $180,000 – $420,000 | Employees, suppliers and utilities |
| TOTAL | $735,900 – $1,284,000 |
Ongoing Costs and Fees
The royalty fee for Primrose Schools is 7% of gross revenues. There is also a brand fund contribution of 2% under the franchise agreement.
How much do Primrose Schools franchise owners make?
| All Included Facilities | Top Third | Middle Third | Bottom Third | |||||
|---|---|---|---|---|---|---|---|---|
| (141 Facilities) | (48 Facilities) | (46 Facilities) | (47 Facilities) | |||||
| During 1/1/21 to 12/31/21 | Average | % of Total Gross Revenues | Average | % of Total Gross Revenues | Average | % of Total Gross Revenues | Average | % of Total Gross Revenues |
| Total Gross Revenues | $2,187,800 | $2,837,310 | $2,142,047 | $1,569,250 | ||||
| Payroll (excluding taxes) | $833,316 | $1,042,193 | $805,939 | $646,790 | ||||
| Payroll Taxes | $97,032 | $139,921 | $86,533 | $63,505 | ||||
| Total Payroll and Taxes | $930,348 | 42.5% | $1,182,114 | 41.7% | $892,472 | 41.7% | $710,295 | 45.3% |
| Brand Fund Fee – 2% of Gross Rev. | $42,173 | $54,932 | $39,996 | $31,273 | ||||
| Royalty Fee – 7% of Gross Rev. | $148,303 | $191,587 | $145,382 | $106,956 | ||||
| Total Brand Fund Fee and Royalty | $190,475 | 8.7% | $246,519 | 8.7% | $185,377 | 8.7% | $138,229 | 8.8% |
| Food | $85,290 | $105,279 | $88,090 | $62,137 | ||||
| Educational Supplies | $27,545 | $34,304 | $27,394 | $20,791 | ||||
| Advertising – Local | $17,410 | $20,156 | $18,651 | $13,391 | ||||
| Bank Charges and Credit Card Fees | $8,715 | $10,232 | $9,649 | $6,252 | ||||
| Bus Operating Expenses | $3,897 | $3,944 | $4,861 | $2,906 | ||||
| Bus Leases | $3,864 | $5,222 | $2,584 | $3,731 | ||||
| Employee Benefits | $44,014 | $69,302 | $39,832 | $22,280 | ||||
| Accounting Costs | $6,841 | $8,215 | $7,048 | $5,234 | ||||
| Field Trips | $3,317 | $2,943 | $3,896 | $3,132 | ||||
| Cleaning Charges | $27,674 | $32,193 | $27,167 | $23,553 | ||||
| Misc. Taxes & Licenses | $10,355 | $15,451 | $7,588 | $7,858 | ||||
| Office Supplies & Postage Expense | $11,382 | $16,167 | $9,266 | $8,567 | ||||
| Printing & Promotional Clothing | $1,933 | $2,120 | $2,335 | $1,348 | ||||
| Staff Training | $4,762 | $7,292 | $3,619 | $3,299 | ||||
| Supplies (General) | $7,685 | $11,048 | $5,516 | $6,372 | ||||
| Telephone Expense | $6,450 | $6,834 | $7,397 | $5,132 | ||||
| Uniforms | $3,479 | $4,899 | $3,276 | $2,227 | ||||
| Miscellaneous Expenses | $24,334 | $48,436 | -$664 | $24,184 | ||||
| Total Other Expenses | $298,947 | 13.7% | $404,036 | 14.2% | $267,507 | 12.5% | $222,394 | 14.2% |
| Insurance – General Liability | $22,554 | $27,856 | $19,374 | $20,251 | ||||
| Maintenance – (Building, Grounds, Equip) | $46,052 | $52,302 | $42,035 | $43,600 | ||||
| Utilities | $32,288 | $35,679 | $32,666 | $28,457 | ||||
| Total Occupancy Expenses | $100,894 | 4.6% | $115,837 | 4.1% | $94,075 | 4.4% | $92,307 | 5.9% |
| Total Expenses | $1,520,665 | $1,948,507 | $1,439,431 | $1,163,225 | ||||
| Adjusted Operating Income/Earnings Before Interest, Taxes, Depreciation, Amortization and Rent (“EBITDAR”) | $667,136 | 30.5% | $888,804 | 31.3% | $702,616 | 32.8% | $406,026 | 25.9% |
| 2021 | ||||
|---|---|---|---|---|
| All Included Facilities | Top Third | Middle Third | Bottom Third | |
| # of Facilities | 141 | 48 | 46 | 47 |
| Gross Revenues | ||||
| Average | $2,187,800 | $2,837,310 | $2,142,047 | $1,569,250 |
| # and % Above Avg | 66/47% | 18/38% | 24/52% | 25/53% |
| Median | $2,151,730 | $2,698,363 | $2,149,793 | $1,580,014 |
| Highest | $4,421,348 | $4,421,348 | $2,406,126 | $1,919,283 |
| Lowest | $1,102,750 | $2,420,805 | $1,924,106 | $1,102,750 |
| Total Expenses | ||||
| Average | $1,520,665 | $1,948,507 | $1,439,431 | $1,163,225 |
| # and % Above Avg | 59/42% | 19/40% | 23/50% | 25/53% |
| Median | $1,465,961 | $1,901,096 | $1,439,309 | $1,191,172 |
| Highest | $3,196,633 | $3,196,633 | $1,877,969 | $1,643,621 |
| Lowest | $353,977 | $1,457,553 | $911,474 | $353,977 |
| EBITDAR | ||||
| Average | $667,136 | $888,804 | $702,616 | $406,026 |
| # and % Above Avg | 75/53% | 23/48% | 26/57% | 23/49% |
| Median | $687,759 | $838,376 | $717,402 | $386,160 |
| Highest | $1,435,271 | $1,435,271 | $1,186,173 | $1,166,245 |
| Lowest | -$33,255 | $399,624 | $136,975 | -$33,255 |
2021 Primrose Schools Median Franchise Sales
| Average Gross Revenues | # at or Above Average Gross Revenues | % at or Above Average Gross Revenues | Median Gross Revenues | Lowest Gross Revenues | Highest Gross Revenues | |
|---|---|---|---|---|---|---|
| Calendar Year 2021 – 438 Facilities | ||||||
| Q1 | $478,607 | 205 | 47% | $467,126 | $104,029 | $1,208,846 |
| Q2 | $535,099 | 201 | 46% | $524,430 | $105,020 | $1,307,378 |
| Q3 | $546,908 | 207 | 47% | $532,466 | $124,790 | $1,332,371 |
| Q4 | $567,495 | 195 | 45% | $549,724 | $175,094 | $1,449,738 |
| Full Year | $2,128,109 | 201 | 46% | $2,084,533 | $508,934 | $5,298,333 |
| Calendar Year 2022 – 438 Facilities | ||||||
| Q1 | $616,629 | 197 | 45% | $598,717 | $180,641 | $1,567,676 |
| # of Facilities | Average Gross Revenues | # at or Above Average Gross Revenues | % at or Above Average Gross Revenues | Median Gross Revenues | Lowest Gross Revenues | Highest Gross Revenues | |
|---|---|---|---|---|---|---|---|
| Calendar Year 2021 – 438 Facilities | |||||||
| Top 25% | 110 | $2,950,017 | 46 | 42% | $2,801,824 | $2,460,655 | $5,298,333 |
| Second 25% | 109 | $2,258,420 | 51 | 47% | $2,246,099 | $2,088,191 | $2,459,279 |
| Third 25% | 109 | $1,907,574 | 59 | 54% | $1,917,390 | $1,718,327 | $2,080,875 |
| Bottom 25% | 110 | $1,395,605 | 60 | 55% | $1,435,125 | $508,934 | $1,716,796 |
| Total | 438 | $2,128,109 | 201 | 46% | $2,084,533 | $508,934 | $5,298,333 |
Based on the average sales provided by Primrose Schools franchise locations, at an average of a 32.5% profit margin, it should take around 6 years for a franchisee to recoup their investment. This is slightly more than the return on investment timeframe offered by other franchises, especially considering a franchisee may not reach such a high profit margin which would elongate the timeframe stipulated above.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, offering, and competition in the marketplace. The presence of other Education franchises; the extent of market penetration and brand awareness that Primrose Schools locations have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Primrose Schools franchise, 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 $5 Million Net Sales
- Estimates Selling Price = Net Sales *0.55
When you go to sell a Primrose Schools franchise based on the median multiple of .55 and median net sales in 2021 of $2,084,533, it would sell for $1,146,493. This is significantly lower than their midpoint investment of $4,552,950.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
How Many Primrose Schools Have Opened and Closed?
| Facility Type | Year | Facilities at the Start of the Year | Facilities at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 391 | 418 | +27 |
| 2020 | 418 | 445 | +27 | |
| 2021 | 445 | 465 | +20 | |
| Company-Owned | 2019 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | |
| 2021 | 0 | 0 | 0 | |
| Total Facilities | 2019 | 391 | 418 | +27 |
| 2020 | 418 | 445 | +27 | |
| 2021 | 445 | 465 | +20 |
Over the last three years, the company has experienced experienced significant growth. Although the franchisor continues to steer away from owning any schools themselves, franchise units have been opening at a rate of around 22 units per year. This is an indicator that despite the significantly high investment amount, the franchisor is likely providing significant support which is consequently generating a positive performance across all franchise units.
Conclusion
Primrose Schools offers people the opportunity to be a part of a business that has strong returns with a reasonable payback period. The franchise system seems to be as strong as ever and is likely to continue its growth process within the coming years. Additionally, there is no doubt whatsoever that the education industry is one that provides significant room for growth and that is showing inspiring promises of an outstanding performance for within the coming years. If you are passionate about children’s educations and looking to dedicate yourself towards building and running a school – Primrose Schools is certainly the franchise for you. With that said, while this may be the business for you, make sure to also check out other companies offered on Vetted Biz and in the Education Industry.
