FDD Talk: The Goddard School Franchise Costs, Fees, Average Revenues and/or Profits (2022 Review)

In this FDD Talk post, you’ll learn the following:

• Section I – Estimated initial investment (franchise costs) for The Goddard School franchise, based on Item 7 of the company’s 2022 FDD

• Section II – Initial franchise fee, royalty fee, and marketing fee for The Goddard School franchise, based on Items 5 and 6 of the company’s 2022 FDD

• Section III – Number of franchised and company-owned The Goddard School outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD

• Section IV – Background information on The Goddard School franchise opportunity, including relevant news updates

• Section V – Presentation and analysis of The Goddard School’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:

• 2016, 2017, 2018, 2019, 2020, and 2021 average gross sales, payroll, occupancy costs, miscellaneous expenses, total expenses, and EBITDA for the Goddard Schools that had been open and operating for over 18 months as of December 31, 2016, December 31, 2017, December 31, 2018, December 31, 2019, December 31, 2020, and December 31, 2021, respectively

• Section VI – Key ratios, comparables, computations, and analyses for The Goddard School franchise opportunity (exclusive content for Platinum subscribers)

Section I – The Goddard School Franchise Costs

• The Goddard School franchise costs (if you lease the school and landlord constructs the improvements), based on Item 7 of the company’s 2022 FDD:

• Initial License Fee:  $135,000
• Initial Training and Assistance Fee; Satellite Location Assistance Fee:  $35,000
• Initial Marketing Fee:  $50,000 to $71,500
• Site Development Assistance Fee:  $35,000
• Background Check (estimate is for up to four individuals):  $3,000 to $5,500
• Convention Deposit:  $1,000
• Lease Deposit:  $19,000 to $100,000
• Three Months’ Rent:  $55,000 to $85,000
• Furniture, Fixtures, and Equipment:  $282,000 to $340,000
• Marketing Materials, Stationery, Forms, and Curricular Resources:  $19,000 to $31,500
• Signs:  $12,000
• Computer System, IT Security, Network Equipment/Wireless Access Point Devices, Telephone System, Interactive Flat Panel, and Digital Signage Package:  $26,000 to $35,000
• Security System:  $12,000
• Miscellaneous Opening Costs:  $85,000 to $100,000
• Accreditation:  $1,000
• Additional Funds – 3 Months:  $48,300 to $90,600
• Total Estimated The Goddard School Franchise Costs:  $818,300 to $1,090,100

Section II – The Goddard School’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• The Goddard School’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:

• Initial License Fee:  $135,000
• Royalty Fee:  7% Gross Receipts
• Marketing Fund/Marketing Fee:  4% of Gross Receipts, including the Gross Receipts derived from any Satellite Location or Annex, per month
• Local Advertising, Marketing, and Promotion:  your cost

Section III – Number of Franchised and Company-Owned The Goddard School Outlets

Franchised

2019

• Outlets at the Start of the Year:  489
• Outlets at the End of the Year:  519
• Net Change:  +30

2020

• Outlets at the Start of the Year:  519
• Outlets at the End of the Year:  553
• Net Change:  +34

2021

• Outlets at the Start of the Year:  553
• Outlets at the End of the Year:  579
• Net Change:  +26

Company-Owned

2019

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2020

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2021

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section IV – Background Information on The Goddard School Franchise

19 Things You Need to Know About The Goddard School Franchise

Builds Targeted Curriculum Around Great Works of Children’s Literature Focusing on Social-Emotional Development

1.  In late July 2021, The Goddard School introduced a targeted curriculum built around great works of children’s literature focusing on social-emotional development. Life Lesson Library includes award-winning best sellers, beloved classics, and some new favorites. The list of books was carefully curated by early childhood education experts and Goddard teachers, featuring relatable characters and stories used to authentically teach and connect with children.

2.  Life Lesson Library books help young children learn five educational themes including 1) self- awareness, 2) self-management, 3) social awareness, 4) relationship skills, and 5) responsible decision-making. Each theme features 12 age-appropriate books for infant listeners to preschool readers. Every book has a unique lesson plan with multiple in-school activities focused on the core social-emotional skill that it touches upon. Additionally, there is an accompanying at-home activity for each book to help parents reinforce what their children are learning and reading at The Goddard School, the leading premium childcare provider in the U.S.

3.  Dennis R. Maple, chairman and CEO of Goddard Systems, said, “As we emerge from the pandemic as a society, there is a need to support the social and emotional needs of children seeking a return to normalcy. We designed a Summer Learning program to reengage children’s natural curiosity, and our fall curriculum seamlessly carries this important path forward through structured learning, and now Life Lesson Library. We know that when children hear stories they can relate to and are engaged in activities, they learn. It’s our mission to teach children to be kind, caring, and eventually grow to have a positive impact on their communities.”

4.  Timed for parents who were ready to have their little ones back in school in the fall of 2021, Life Lesson Library is available in more than 560 Goddard Schools across 38 states. The 60-book library will continuously be built out, with new infant-book additions expected later in the fall. The plan is to build to 36 books per age group (infant, toddler, preschool/pre-k, and kindergarten/school-age) for a total of 144 diverse books and authors.

5.  On a final note, Maple added, “We are here to partner with parents in providing children the opportunity to grow and learn while having fun. We believe the best way to do this is through the power of interactive reading. Teachers read meaningful books, children participate in play-based activities adapted from those stories, and parents help these life lessons blossom at home.”

Appoints New Senior Vice President and Chief Academic Officer

6.  In mid-April 2022, The Goddard School appointed Dr. Lauren Starnes as senior vice president and chief academic officer, effective immediately. In this newly established role, Starnes will be responsible for leading the development of The Goddard School’s proprietary education program, driving research-based innovation and implementing new accreditation standards across the franchise system.

7.  Starnes joined GSI with more than 20 years of experience in education, including curriculum development, evaluation, and implementation, as well as teaching and consulting in the fields of preschool, special needs, and elementary education. As senior vice president and chief academic officer, she will lead The Goddard School’s nationally acclaimed F.L.EX. philosophy, which is used to educate over 70,000 students across the country. This curriculum uses the most current, academically endorsed methods in early childhood education so children can explore, learn, and discover through many different subjects and enrichment classes.

8.  Starnes will guide The Goddard School’s curriculum on social-emotional development, which educates children on how to be kind to themselves and others, further helping students become school, career, and life ready. One way in which students experience this is through The Goddard School’s Life Lesson Library, a targeted curriculum built around great works of children’s literature focusing on social and emotional learning.

9.  Dennis R. Maple, chairman and CEO of GSI, said, “I’m thrilled to welcome Lauren to the Goddard family! The breadth of expertise she brings to support Goddard’s focus on play-based learning will be paramount as we foster both academic and social-emotional growth in the little learners cared for and educated in Goddard Schools each day. I look forward to Lauren’s leadership, passion for students and expertise in early childhood education to drive innovative, flexible programming and standards as we continue our mission to make the world a better place through early childhood development.”

10.  Most recently, Starnes served as vice president of early childhood education at Primrose Schools Franchising Company, where she oversaw the continued evaluation, development, and implementation of Primrose’s proprietary early childhood curriculum and research models, as well as served as subject matter expert and advisor to the executive team.

11.  Starnes said, “I have always believed the role of a curriculum is to empower teachers to make the right decisions for the children in their classrooms. I’m proud to align myself with the leader in premier early childhood education as they accelerate their flexible, supportive educational programming to elevate their academic offering for Goddard families. Goddard’s reputation for high-quality, academic programming is truly what sets them apart in the early childcare market, and I’m excited to help them continue to provide a warm, safe and caring educational environment where students can thrive.”

Acquired by Sycamore Partners

12.  At the end of June 2022, Sycamore Partners, a private equity firm specializing in retail, consumer, and distribution-related investments, announced that it has acquired Goddard Systems, franchisor of The Goddard School, from an affiliate of Wind River Holdings, LP, a privately-owned investment company.

13.  Stefan Kaluzny, managing director of Sycamore Partners, said, “Goddard Systems is the leading brand in the large and growing market for premium early childcare and education, We look forward to partnering with management to support Goddard Systems’ thriving franchisee network in furthering the company’s important mission of caring for and educating children.”

14.  Dennis R. Maple, chairman and CEO of Goddard Systems, added, “We are excited to partner with Sycamore as we continue to strengthen our business and build on our track record of success. Given our well-established foundation and clear strategic roadmap, we expect this to be a smooth transition for the franchisees and families we serve and support. Our team remains focused on providing families with the highest quality educational environment for which we are known.”

15.  Barclays served as financial advisor to Sycamore Partners, and Kirkland & Ellis and Ropes & Gray acted as legal counsel. Baird served as financial advisor to Wind River, and Hogan Lovells acted as legal counsel.

Company History

16.  The Goddard School was founded in 1983 by Lois Goddard Haines in Malvern, Pennsylvania. Haines opened an early childhood education center to enrich the lives of children and their families who required childcare. She developed a program that incorporated a variety of teaching methods and progressive ideologies from all areas of child psychology and neurology to create a warm yet individualized experience to meet each child’s needs. The core curriculum was supplemented with art, theatre, music, garden to table, and made use of the traveling programs of The Philadelphia Museum of Art, The Please Touch Museum, and The Franklin Institute.

17.  Over the next few years, Haines successfully ran The Goddard School. In 1988, she sold the company to Anthony A. Martino, founder of the AAMCO Transmissions and MAACO Auto Painting and Bodyworks franchises. Martino established a franchising system under the name Carousel Systems, Inc. This name, as well as Goddard School’s logo, is based on the carousel horse that Haines had installed at the entrance of the original school.

18.  The Goddard School continued to expand around the United States and by the end of the 1990s, the company had grown to 100 locations. In 2002, the Goddard School was sold to Wind River Holdings, LP. In 2022, The Goddard School was sold to Sycamore Partners, a private equity firm. Today, there are Goddard School locations across more than 37 states.

Entrepreneur’s Franchise 500

19.  The Goddard School ranked No. 96 on Entrepreneur’s 2022 Franchise 500 list.

Section V – Financial Performance Representations (Average Revenues and/or Profits) for The Goddard School Franchise (Item 19, 2022 FDD)

• The following is a report of mature The Goddard Schools (open over 18 months as of December 31, 2021) (“Mature Schools”), identifying the actual gross revenue, payroll, occupancy (representing rent plus property tax expense), and miscellaneous operating expenses prepared on a cash basis for the year ended December 31, 2021 for all The Goddard School businesses operating as of December 31, 2021.

• The net result of these items is “EBITDA” which is defined as gross revenue less all expenses directly related to operating the School excluding interest, taxes, depreciation, and amortization. EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization.

• The items included in the expense category identified as miscellaneous items include bank charges, office supplies, utilities, telephone, transportation, payroll taxes, employee costs, marketing, royalties, repairs and maintenance, school supplies, snacks, technology, and professional fees. The expenses reported may also include miscellaneous items that are subject to the discretionary spending of the individual franchisee.

• “Gross Revenue” is determined on an accrual basis and represents the amount billed by a School for all services or products of any nature rendered or sold at or from or as a result of the School, and without deduction of any kind. (School services are not currently subject to sales taxes or similar taxes.)

• As of December 31, 2021, there were 575 The Goddard School businesses in operation, all of which 575 Schools were owned by franchisees. Of these 575 Schools, 532 Schools had been open and operating for over 18 months as of December 31, 2021.

• Three Mature Schools closed during 2021; they had not been open for less than 12 months. Information from these three closed Mature Schools are not included in the report.

• The figures in the report have been compiled from operating reports supplied to The Goddard School by franchisees. All of the Schools report financial information to The Goddard School based upon a uniform reporting system. The Goddard School has not audited these figures.

• The Goddard School offered substantially the same services to all of the Schools described in the report. The Schools offer substantially the same services to the public.

• Some Schools have sold and/or earned this amount. Your individual results may differ. There is no assurance that you’ll sell and/or earn as much.

Average Gross Revenue, Payroll, Occupancy, Miscellaneous Operating Expenses, Total Expenses, and EBITDA for Mature Goddard School Businesses

2021 Average – 532 Mature Franchise Schools

• Gross Revenue:  $1,798,771 (100.0%)
• Payroll:  $680,493 (37.8%)
• Occupancy:  $267,854 (14.9%)
• Miscellaneous Items:  $476,582 (26.5%)
• Total Expenses:  $1,424,929 (79.2%)
• EBITDA:  $373,842 (20.8%)

• 2021 Median Gross Revenue:  $1,669,054
• 2021 Highest Gross Revenue:  $6,257,269
• 2021 Lowest Gross Revenue:  $213,171

2020 Average – 504 Mature Franchise Schools

• Gross Revenue:  $1,336,520 (100.0%)
• Payroll:  $579,551 (43.4%)
• Occupancy:  $236,803 (17.7%)
• Miscellaneous Items:  $389,825 (29.2%)
• Total Expenses:  $1,206,179 (90.2%)
• EBITDA:  $130,341 (9.8%)

• 2020 Median Gross Revenue:  $1,291,314
• 2020 Highest Gross Revenue:  $5,052,878
• 2020 Lowest Gross Revenue:  $207,178

2019 Average – 478 Mature Franchise Schools

• Gross Revenue:  $1,812,739 (100.0%)
• Payroll:  $671,104 (37.0%)
• Occupancy:  $255,686 (14.1%)
• Miscellaneous Items:  $472,324 (26.1%)
• Total Expenses:  $1,399,114 (77.2%)
• EBITDA:  $413,625 (22.8%)

• 2019 Median Gross Revenue:  $1,700,221
• 2019 Highest Gross Revenue:  $6,028,893
• 2019 Lowest Gross Revenue:  $226,260

2018 Average – 458 Mature Franchise Schools

• Gross Revenue:  $1,725,514 (100.0%)
• Payroll:  $645,696 (37.4%)
• Occupancy:  $248,470 (14.4%)
• Miscellaneous Items:  $458,027 (26.5%)
• Total Expenses:  $1,352,193 (78.4%)
• EBITDA:  $373,321 (21.6%)

• 2018 Median Gross Revenue:  $1,631,631
• 2018 Highest Gross Revenue:  $5,229,396
• 2018 Lowest Gross Revenue:  $449,582

2017 Average – 443 Mature Franchise Schools

• Gross Revenue:  $1,632,855 (100.0%)
• Payroll:  $613,225 (37.6%)
• Occupancy:  $240,655 (14.7%)
• Miscellaneous Items:  $437,013 (26.8%)
• Total Expenses:  $1,290,893 (79.1%)
• EBITDA:  $341,962 (20.9%)

• 2017 Median Gross Revenue:  $1,563,551
• 2017 Highest Gross Revenue:  $5,042,110
• 2017 Lowest Gross Revenue:  $513,461

2016 Average – 423 Mature Franchise Schools

• Gross Revenue:  $1,568,657 (100.0%)
• Payroll:  $591,736 (37.7%)
• Occupancy:  $233,051 (14.9%)
• Miscellaneous Items:  $421,051 (26.8%)
• Total Expenses:  $1,245,838 (79.4%)
• EBITDA:  $322,819 (20.6%)

• 2016 Median Gross Revenue:  $1,488,532
• 2016 Highest Gross Revenue:  $4,795,011
• 2016 Lowest Gross Revenue:  $551,210

Section VI – The Goddard School Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers)

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