FDD Talk 2021: Sylvan Learning Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

• Section I – Background information on the Sylvan Learning franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Sylvan Learning franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Sylvan Learning franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Sylvan Learning outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Sylvan Learning’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average, median, high, and low gross revenue for the top 25%, mid-upper 25%, mid-lower 25%, and bottom 25% of the 332 licensed territories (including a total of 365 Centers) that operated continuously during the 24 calendar months of 2019 and 2020 under the same or similar form of joint Sylvan and SylvanSync License Agreement which is referenced by and included in the 2021 Disclosure Document

• 2020 average, median, high, and low gross revenue for the 332 licensed territories (including a total of 365 Centers) that operated continuously during the 24 calendar months of 2019 and 2020 under the same or similar form of joint Sylvan and SylvanSync License Agreement which is referenced by and included in the 2021 Disclosure Document, broken down into categories by the number of Centers in operation in each territory

Section I – Background Information

22 Things You Need to About the Sylvan Learning Franchise

Supports Franchisees Amid the COVID-19 Pandemic

1.  In late November 2020, Sylvan Learning said that in spite of a difficult economy, the brand was experiencing high demand amid the COVID-19 pandemic. With schools across the country shifting classes to e-learning at home, parents were looking for some relief from working double-time. Sylvan Learning provides services where students can gain additional help with difficult concepts they’re learning from professional tutors. The Sylvan development team is seeing record numbers of interested franchising candidates as this trend continues.

2.  John McAuliffe, CEO of Sylvan Learning, said, “I’m really proud of the work we’ve been able to do this year as a franchise. Our services are proving invaluable to parents across the country as they try to navigate the COVID-19 landscape at home. We are doing everything we can to ensure students are receiving the best education through our services, and I think franchisee prospects are recognizing that effort.”

3.  As the leading provider of personal learning for students in grades K-12, the Sylvan Learning leadership team has continued to innovate new ways to enhance student learning and assist parents throughout the pandemic. The education brand launched School Support, a program that provides a variety of services to help children stay on track and assist parents in managing the complexities of the school year. The program provides socially distanced, in-person support as teachers ensure that students are logged into their classes and completing their assignments in a healthy, safe environment.

4.  Sylvan Learning’s leadership team has also made conscious efforts to support franchisees in these uncertain times, one such effort being the announcement of a $2.5 million royalty and fee deferral program in conjunction with the brand’s majority owners. Amid the COVID-19 pandemic, Sylvan Learning franchisees nationwide have pivoted their business delivery to be online in addition to daytime support, both new to the brand. The royalty and fee deferral program ensures that franchise owners have the support they need to continue providing solutions to families in need of educational help.

5.  McAuliffe added, “Supporting our franchisees is, and has always been, a priority. We can’t do what we do best if our franchisees lack the tools they need to be successful. It’s our job to ensure that students can learn and grow in any environment, and what we’ve been able to accomplish in the past few months against the odds is incredible.”

6.  With the COVID-19 pandemic still ongoing, Sylvan’s leadership is doing everything they can to provide students the best chance at excelling in their studies, and prospective franchisees will play a key role in driving that effort. Entrepreneurs who wish to open their own Sylvan are encouraged to consider how they see themselves growing with the brand, now and beyond the pandemic.

7.  “We’re obviously in a critical time as a country, and there are so many people out there looking to help in any way they can,” said McAulliffe. “Anyone who truly wants to have an impact on their community should consider joining the brand. Education will continue to matter beyond the pandemic, and we’re trying our best to assist in fostering a fruitful learning environment.”

SylvanSync Technology Surpasses 20 Million Sessions

8.  In mid-March 2021, Sylvan Learning passed a major milestone: 20 million sessions on SylvanSync, the company’s proprietary education delivery technology. Those 20 million sessions underscore how Sylvan Learning invested first in a tech delivery platform for learning, which has always been a competitive advantage for the brand. Since the pandemic hit, SylvanSync has become more relevant than ever and a demonstration of how Sylvan’s forward-thinking leaders can succeed under almost any circumstance.

9.  According to John McAuliffe, CEO of Sylvan Learning, “We adopted SylvanSync after a year of development in 2012. It’s our proprietary delivery technology that doesn’t try to replace the teacher but improves the teaching experience. Generally, a child will come in and take an assessment and, based on the goals of the parent, we set targets for learning. The SylvanSync software adapts to the child. If they’re grasping the curriculum and mastering skills quickly, it will adapt and continue to adjust the level of complexity and vice versa, and it will slow down and repeat if needed.”

10.  With almost a decade of usage, 20 million sessions, and constant updates and improvement, the SylvanSync program is backed by extensive academic research that proves it gets results. Monica Nicolau, Sylvan’s chief technology officer who was also the development lead, calls SylvanSync the most advanced system in the supplemental education space.

11.  Nicolau said, “Not only does SylvanSync streamline tutoring delivery by enabling teachers to focus on working with students rather than create and maintain lesson plans, but it’s also a competitive advantage because it gives us detailed data to demonstrate its effectiveness. We can prove that students who attend Sylvan make progress faster based on scores in their pre- and post-assessments. Our competitors don’t have that proof that comes from 20 million sessions worth of data, so it’s a massive advantage.”

12.  When the pandemic started closing down businesses, Sylvan began delivering its tutoring services online nearly overnight thanks to the SylvanSync technology program. Students already loved the system, but Sylvan empowered teachers to keep encouraging the children while franchisees could keep their business running thanks to the franchise’s big investment in technology.

13.  McAuliffe said, “SylvanSync allows the teacher to really focus on what they do best, which is teach. In the old days, paper-based franchisees had to have pullers, part-time workers that would have to take the materials and create the paper-based programs for the child to be delivered. All of that is done in an automated fashion now. Before a child comes in, you pull up the program, and it already has the curriculum and updates it after the completion of each session based on the things accomplished. Our system really takes all the admin tasks away from a franchisee and takes away the requirement of hiring pullers.”

14.  When franchisees benefit, they can better serve teachers. When teachers benefit, the students will learn better. SylvanSync brings together the best of what tech can do with the unbeatable asset of old school personal instruction. “It’s a very personalized program, but it still includes the teacher who really is the person who motivates and builds confidence in the child. The combination of tech and teacher makes it unique and special,” said McAuliffe.

15.  SylvanSync has seen 20 million sessions in less than a decade for two reasons: because it works and because technology and remote learning is here to stay. Now, amid the most difficult school year on record and with summer break looming around the corner, McAuliffe says demand for the service is sky-high. McAuliffe added, “We’re seeing an increase in demand as the school year is coming to an end and people are preparing for the summer. That’s a huge period for us.”

16.  Also, SylvanSync has proven adaptable in the year 2020, not only in terms of facilitating Sylvan’s COVID-19 pivot, but also by growing to fit all types of subject matter and delivery modalities. Nicolau added, “When 2020 hit and COVID became our awful reality, we were able to immediately use SylvanSync online to keep tutoring and build a brand new learning environment that was web-based. The reason we can do what we do is not happenstance, but because we were very thoughtful in how we built SylvanSync so it’s very extensible should we need it.”

17.  But for Nicolau, the real meaning of SylvanSync’s 20 million milestone isn’t just the data they pull that they use to improve future sessions – it’s the lives changed. “The reason why 20 million sessions are important is not the number in itself, but because we’ve helped so many students be successful. People always ask themselves, ‘What’s in a number?’ Well, in this number, it’s services we delivered to help children and families.”

Company History

18.  Sylvan Learning was founded in 1979 by former school teacher W. Berry Fowler, who had also worked with the educational company The Reading Game. Fowler wanted to set up a tutoring service that provided help to children of all ages and skill levels.

19.  Initially, Sylvan Learning was part of the the Sylvan Hill Medical Center Building. Following the success of the first location, Fowler began franchising the Sylvan Learning concept in 1980. By 1986, there were over 500 franchise locations. The following year, Fowler sold a majority of the company’s stock to KinderCare.

20.  After struggling for a few years under KinderCare’s leadership, Sylvan Learning was acquired by Douglas Becker and Christopher Hoehn-Saric in 1991. Sylvan Learning recovered and during the 1990s, the brand expanded to offer teacher training, computerized testing, distance learning, and other services. In 2003, Sylvan Learning was sold to Apollo Global Management.

21.  Following the economic crash of 2008, Sylvan Learning closed several underperforming locations, which is something that continues today. However, there are still Sylvan Learning centers all across the United States. There are also international locations.

Entrepreneur’s Franchise 500

22.  Sylvan Learning did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Sylvan Learning franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Sylvan Learning’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  486
• Outlets at the End of the Year:  484
• Net Change:  -2

2019

• Outlets at the Start of the Year:  484
• Outlets at the End of the Year:  485
• Net Change:  +1

2020

• Outlets at the Start of the Year:  485
• Outlets at the End of the Year:  466
• Net Change:  -19

Company-Owned

2018

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  9
• Net Change:  -4

2019

• Outlets at the Start of the Year:  9
• Outlets at the End of the Year:  7
• Net Change:  -2

2020

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  6
• Net Change:  -1

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• With respect to the Sylvan System, as of December 31, 2020, Sylvan had 430 licensed territories in the United States, including a total of 474 Centers, which provided revenue reports to Sylvan.

• Of these, 332 licensed territories (including a total of 365 Centers) operated continuously during the 24 calendar months of 2019 and 2020 under the same or similar form of joint Sylvan and SylvanSync License Agreement which is referenced by and included in the 2021 Disclosure Document.

• For a consistent comparison, this Item 19 reflects only those 332 reporting territories and 365 Centers.

• This Item 19 does not include revenue from any licensed territory which operated during 2019 or 2020 pursuant to an earlier form of License Agreement which did not include the SylvanSync System offering; all 332 territories that are the subject of this Item 19 used SylvanSync in 2020.

• This Item 19 also does not include revenue from any territories that closed or opened during 2019 or 2020, and therefore were not open for the full 24 months of 2019 and 2020.

• In addition, for the purposes of this Item 19, “operated continuously” means that the Center did not close permanently during 2019 or 2020. During 2020, 33 Centers closed permanently, and none of these Centers had been open for less than 12 months.

• Due to the government-mandated sanctions that were put into place starting in March of 2020 due to the COVID-19 outbreak, many Centers were forced to close temporarily or limit in-person operations at their brick-and-mortar Center locations during 2020.

• However, commencing in March of 2020, Sylvan granted franchisees the temporary right to deliver Sylvan and SylvanSync System programs to students virtually pursuant to a Temporary Virtual License. This Temporary Virtual License enabled Centers to remain operational during periods when their brick-and-mortar Center locations were forced to close or limit in-person operations.

• This Temporary Virtual License is also a part of Sylvan’s 2021 franchise offering that is described in the 2021 Disclosure Document. This Temporary Virtual License shall continue until the earliest to occur of the following events: (a) the effective end of the COVID-19 pandemic (in Sylvan’s reasonable judgment); or (b) the availability of a more permanent virtual learning offering by Sylvan to franchisees, and may continue beyond such point at Sylvan’s discretion.

• The following chart sets forth certain historic performance information by category for United States licensed territories that operated continuously throughout the 24 calendar months of 2019 and 2020 pursuant to a joint Sylvan and SylvanSync License Agreement. All such licensed territories are included in the following calculations.

• The term “licensee” as used in this Item 19 refers to a person or entity that entered into a joint Sylvan and SylvanSync License Agreement.

• The financial performance of company-owned territories is not included.

• The figures included in this Item 19 have not been audited.

Part 1 – 2020 Sylvan Territory Gross Revenue by Quartile

• This table reflects the total gross revenues from the Sylvan businesses in the 332 reporting territories for 2020.

• The table divides the group into quartiles, based upon gross revenue by territory.

Top 25% of Territories by Gross Revenue (83 Territories)

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