According to the Kumon franchise website, Kumon is “an after-school math and reading program that employs a unique learning method designed to help each child develop the skills needed to perform to his or her full potential.”
With an international network of independently owned and operated franchises, Kumon claims it the largest and most established program of its kind in the world. States the website: “Kumon has nearly 250,000 students enrolled at more than 1,500 individually owned and operated Math & Reading Centers in U.S. and Canada alone.”
One would think that having brand dominance of the supplemental education market would be a benefit for Kumon franchise owners… unless continued expansion results in cannibalization of sales between competing franchisees. We received an email from “concerned owner” who worries that, among other things, Kumon is overexpanding at the expense of existing owners.
Concerned Owner writes:
Many Kumon franchise owners are concerned about recent expansion of Kumon in seemingly saturated areas. The corporation is using generic criteria to evaluate potential market areas, namely family income and a specific number of children in K-8. The generic criteria is not adjusted based on disposable income, cost of living, and who actually contributes to average family income. The exclusion of important market data has led the corporation to overestimate their market potential and an unjustified expansion plan.
Kumon corporate also does not have a good understanding of their customer. Kumon offer a good value but they do not know the segment of customer that respond to the value. Instead, they are trying a shot gun approach to increase brand awareness. They are trying to sell expansion as an investment in brand awareness but awareness is no substitute to a targeted message to the customer segment that responds to a companies value prop. Again, this lack of market knowledge and poorly thought out increase in brand awareness leads to over expansion.
In more saturated areas, such as the tri-state NY, NJ, CT area, the corporation is just trying to open up centers in close proximity to some of their largest centers. The corporation does not seem to care that an owner can lose 20 to 30% of their revenue because the corporation hopes to net an additional 5 to 10% growth between the 2 centers. Kumon corporate does not put in capital for the center, that responsibility is on the franchisee. Because the franchisee puts up the capital, Kumon does not share in the risk of the current and new owner. For the current owner, its a loss because they are losing on their top line. For the new owner, they will not get an adequate payback on their investment (build out, furniture, advertisement, etc). Kumon corporate does not care because they can get an extra 5 to 10% without risking anything.
The poor market data, cavalier attitude towards existing/potential franchisee owners, and no risk sharing between franchiser and franchisee leads me to believe that a Kumon franchise may no longer be a wise investment.
Most franchisors have an expansion strategy based on market saturation. Their goal is to dominate viable markets with the greatest possible presence in order to create strong brand recognition, to squeeze out competitors and to maximize systemwide revenue. Overexpansion can result in franchise encroachment, perhaps the greatest source of franchise litigation and unhappy franchisees.
What do you think? Is Kumon Math & Reading franchise doing what it needs to do to create a strong system, or is it overexpanding to the detriment of its franchise owners?
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