Do you love working with children? Are you pursuing a career in childcare?
You wouldn’t be alone. Experts estimate that there will be a 6.9 percent increase in childcare jobs between 2016 and 2026. As the childcare industry expands, more and more people are turning to this rewarding field.
But what if you’ve already been in the childcare industry for a while? You might be an established childcare expert looking for your next step. If this sounds like you, you should start investigating daycare franchising.
What if you’re just a savvy business person who wants to support your community while making a meaningful investment? Then daycare franchising might be for you, too.
This unique investment opportunity makes sense for people from many different walks of life. Interested in learning more? Read on for our complete investor’s guide to daycare franchising.
Why Invest in Daycare?
When you hear the word “investment,” daycare probably isn’t the first thing that springs to mind.
But daycare is a better investment than you might think. These are just a few reasons to get involved in this expanding industry.
Shape a Child’s Life
When you play the stock market, you usually don’t care much about the companies you buy and sell. You may not even know what they do. Your main takeaway from a good day of trading is profits.
Your main takeaway from investing in a daycare center is much different. While daycare centers can be and often are profitable when well-run, they offer investors something just as important.
Daycare investors can help shape a child’s life. Research has repeatedly shown that early education gives children a better start.
One influential study gathered longitudinal information on children from birth through age eight. Children in high-quality early education programs reaped remarkable long-term benefits.
Those benefits included better health outcomes and higher adult incomes. Their working parents experienced better quality of life, too. Similar high-quality programs often include health checkups and tested curricula.
Quality childcare isn’t just a good financial investment. It’s an opportunity to get involved in a community-oriented business. It’s an opportunity to shape and improve children’s lives.
In short, it’s an investment in a better society.
Work With Children
For some investors, knowing they’re helping to shape the next generation is enough. These investors operate the business but leave day-to-day care to qualified staff.
For other investors, the joy of interacting with children every day is a big incentive. These investors may already have childcare experience from jobs or their own children. They may even look forward to putting their own children in the daycare, keeping them close.
For these investors, childcare is a true passion. Investing in a daycare center grows their careers and financial futures.
Join a Booming Industry
Investing in your passion, investing in a better society—these are worthy goals. But they won’t amount to much if your investment isn’t sustainable. And to be sustainable, it must turn a profit.
Is there room for profit in the world of childcare? Absolutely.
Experts valued the US daycare industry at $54.3 billion in 2019. That market is only set to grow. The same study gave the industry a 3.9 percent compounded annual growth rate between 2020 and 2027.
Daycares aren’t automatic cash cows. Like all businesses, they require savvy financial planning and management. Owners must avoid unnecessary costs without sacrificing care quality.
But in this rapidly growing industry, a well-managed daycare can profit. One study estimated that daycares’ annual net profit margins varied from 2.6 percent to 8.1 percent between 2008 and 2013.
Benefit From Social and Government Support
COVID impacted many industries, including daycare. Yet experts still predict plenty of expansion in the daycare industry.
Why is that? One reason is demographics.
Households with working parents aren’t going anywhere. Even in 2020, almost 60 percent of households with married parents and children featured two working adults. As the economy rebounds, this percentage will go up.
The other reason? Increasing recognition of the fact that early childcare investment pays off for society. As more people understand this fact, support for childcare support programs has also increased.
Childcare tax credits have played an important role in recently passed legislation such as the American Rescue Plan Act. Several proposed pieces of legislation also reflect increased support for affordable childcare.
For childcare investors, this social shift could mean more demand for daycare services. New tax breaks and grants could also be on the horizon.
Why Buy a Daycare Franchise?
Plenty of people interested in childcare investment open a daycare in their own homes. Others may buy ownership shares in a local daycare center.
But more and more investors are looking past these paths to a unique investment opportunity: daycare franchising.
How does franchising work? It starts with a successful business that’s developed a sound business model and a trustworthy brand.
Franchisees pay a fee to develop a business using that model and that brand. Both parties sign a contract that governs their working relationship. The franchisee operates their own business, but they benefit from their association with the franchisor.
What, exactly, are those benefits? Let’s take a closer look.
Parents understandably get a little nervous when it’s time to leave their children with a new daycare provider. No matter how thoroughly they’ve vetted the provider, it will always be nerve-wracking to leave children with someone you don’t know.
When you’re starting your own daycare from scratch, that nervousness can be a big obstacle to business growth.
Many owners start out with only the children of friends and family as clients. Growth tends to be slow and based on word-of-mouth. Building trust in the community takes a long time.
There’s nothing inherently wrong with slow business growth. But low growth can be a problem if you’re looking at your daycare as an investment. It can take a very long time to convince those nervous parents that you’re the best choice.
Franchisees have a secret weapon when it comes to reaching these nervous parents. That secret weapon? Brand recognition.
Parents approaching a franchise have opportunities to vet the entire brand, in addition to the specific location. They may have friends or family who has sent children to other franchise locations. They can google the franchise for information on its curriculum, philosophy, and safety record.
Franchisors vet and guide their franchisees. This two-way partnership keeps in-facility care and safety standards high.
Partnering with a franchise alone isn’t enough to gain community trust and build a business. Franchisees still have to maintain high standards of care. But franchisees can lean on their franchisors to gain parents’ trust faster.
Marketing can be one of the most difficult elements of starting a new business.
It’s crucial to make every penny in a new business’s budget count. Yet measuring a return on investment (ROI) for different marketing strategies is notoriously difficult. Even savvy small business founders struggle to use their small marketing budget effectively.
Franchisees, on the other hand, can rely on professional marketing strategies. Broad regional or even nationwide marketing campaigns for the franchisor boost the profiles of each franchisee.
Some franchisees pay into an advertising fund that supports nationwide advertising strategies. Marketing professionals working for the franchisor can handle that advertising budget efficiently and maximize ROI. Even if franchisees handle some or all of their marketing on their own, their franchisor may still provide them with resources and guidance.
As in any other franchising situation, a daycare franchisee faces some marketing restrictions. Franchise brands are carefully created and protected. That means if you’re joining a franchise brand, your advertising can’t deviate from brand standards.
But you’re probably not interested in daycare investing because you love advertising. Instead, you care about childcare and business investing. Franchisees in this category are happy to leave advertising to the franchisor.
What was your first small business? Maybe you ran a lemonade stand or sold candy door-to-door. Many investors catch the small business bug early in life.
But owning and operating a daycare center is far more complicated than selling lemonade.
A childcare facility has to meet several health and safety standards. Staff must meet education requirements. Zoning laws and licensing requirements can be obstacles to opening the business.
Your potential daycare facility may need remodeling to meet legal standards. Are there enough toilets per the number of children you serve? Is there enough room to keep cribs the legally required distance apart?
The rules and regulations surrounding childcare facilities are in place for good reason. But they can still be intimidating, even to someone with plenty of childcare experience. Experience nannying or raising your own kids can only take you so far when it comes to establishing a small business.
Franchising can provide crucial set-up support to first-time daycare owners. Franchisors can help franchisees understand and meet crucial legal requirements. They can help them vet and upgrade facilities.
Starting a business of any sort requires some upfront investment. That’s still true if you’re a franchisee. But franchisees can use their franchisor relationship to lessen this financial burden.
Franchisors have plenty of experience launching daycare centers. They can guide franchisees through the financial hurdles of opening a daycare center. Realistic, experience-informed budgeting and financial planning can help franchisees stay in the black.
Franchisor support can extend to help find unique grants and loans for childcare center operators.
Your franchisor may also help you secure financing from a bank. Banks may be more inclined to grant loans to franchisees than totally independent founders.
Franchisees undergo vetting from their franchisors. They use proven business plans and well-established brands. These factors can help your bank loan become a reality.
Make no mistake: franchisees still need to bring financial acumen and upfront investment to the table. What they get in return, however, is helping to navigate the tricky finances of a new small business.
Is your new daycare encountering some unexpected problems? Do you have questions about the best way to run the business?
Classes, internet research, and talking to successful daycare operators are all good resources. Franchisees, however, get another resource: their community of fellow franchise operators.
Franchisors gravitate away from opening a new franchise in an existing franchisee’s turf. That means your fellow franchisees aren’t your competitors. Instead, they’re a supportive community of informed daycare owners.
This community can be an invaluable source of information when your daycare is encountering issues. Furthermore, fellow franchisees have experience navigating the same franchisor relationship as you do.
Daycare Franchising: Your Next Steps
Do you see daycare franchising in your future? Then you need to follow these steps:
Find a Franchisor
A good daycare franchisor has a well-established brand and a track record of success. They take the time to provide structured care and guidance that helps franchisees, children, and parents. Vet your franchisor by meeting with them and touring a facility.
Franchisees must pay a franchising fee and cover the upfront costs of starting a daycare center. Savings, bank loans, and grants can all help cover these costs.
Sign an Agreement
You and your franchisor will sign an official franchise agreement. This agreement delineates the policies you’ll follow and how they’ll support you.
Check Legal Requirements
Childcare is a regulated industry, and those regulations vary by state. You may need to take classwork, get special licensing, or pass background checks to open your facility.
Find a Location
Some locations are better for daycares than others.
Look for a location with an unfilled daycare need. A growing suburban community, for example, might have high daycare demand. A sparsely populated county, on the other hand, might struggle to attract parents.
Find and Train Staff
Your state regulations will help determine what you look for in staff. They’ll need to meet all safety training and background requirements. They should also have the training and/or experience in early childhood education.
Depending on your role in the franchise, you may also need to take coursework and gain certifications.
Why Go With Kid City USA?
Not all daycare franchise opportunities are created equal. A good franchisor helps you with every step of your daycare franchising journey. Meeting legal requirements, finding a suitable location, training staff, providing curricula—a good franchisor does it all.
At Kid City USA, we strive to be that kind of franchisor.
We support our franchisees on every step of their journey. From signing your location lease to repainting your walls, from caring for newborns to afterschool care, we’ll be there. The result is a daycare facility that creates a profit while providing optimal care.
Interested in learning more about franchising opportunities with Kid City USA? Contact us today to learn more.