As Education Partners, Strategum Team is often asked the unavoidable question:
“Is it better to take a franchise of a school or start your own school?”
Well, there is no simple answer to this all-important question from the perspective of the Investor. The success of DPS Society’s Schools in the recent past seems to have convinced many that having a good brand name assures the success of the school and hence helps to achieve the desired return on investment. This is true to a large extent in the case of DPS. DPS Schools have build enormous trust amongst parents, and people at large believe that the education system adopted under these schools offer good quality education. However, We haven’t seen any other School command similar respect under the franchise model across India. There are franchise schools that are doing well but none have the national presence and recall value of DPS (under the DPS Society).
Our understanding from the numerous interactions with diverse group of investors is that they generally prefer “branded schools” for one of the following reasons:
- To give them a head-start in admissions right from year 1
- To assist the investor in planning the school (physical infrastructure, systems & practices, financial model, ownership patterns, feasibility study, school location, key differential factors and competitor analysis)
- To provide know-how and knowledge in running the school
- To facilitate in affiliation of School and other legal formalities
- To recruit, select, train and develop Principal and Teachers
- To bring ‘best practices’ in school management
- To provide support in design and delivery of curriculum
- To ensure that the School achieves its social and financial objectives
- To give immediate visibility and recognition to the project in the city
Though all of the above factors are essential for smooth functioning of School, they are not critical success factors. At Strategum, we believe that the success of a school is dependent on the following critical factors (in no particular order):
- The learning environment
- Student performance, attitudes and values
- School Management & Leadership (vision, structure, decision-making and policies)
- Contextualization of academics to local needs
- Customization of teaching methods to suit the learning styles of students
- The School culture
We think none of the “Franchise Model” Schools offer all the above 15 benefits to its franchisee. Any Franchise School that offers “one-size-fits-all” model of starting a School would find it difficult to deliver on the Investor’s expectation over medium term. Schools are part of community and unless the academic programs and teaching-learning process is not localized and offered in the context of the parents and students where the school is located, the results will always be discouraging.
India is a diverse country, rich in traditions and culture. The social and cultural context makes it very difficult to operate schools based on a set of manuals and SOPs (Standard Operating Procedures). The need and challenges of teaching a child in Bangalore is vastly different from that of a child in Raipur. The expectations and profile of parent in Coimbatore is very different from that of a parent in Sambalpur. Teaching in school is a very creative process and standardization or digitization of this will only adversely impact the quality of students coming out of such schools.
Taking the franchise route
Franchising of schools has become the name of the game. To assist the decision in taking the franchise of a School, we suggest that the investor considers the following:
- Credentials of the Franchise in school education sector within the State where the School is proposed. If possible, randomly select any existing Franchisee across India and speak to that investor on his experience. A visit to that School would be wonderful idea.
- Brand Name. Have complete clarity on what brand name of the School is offered to you. Some Franchisors have multiple brand names based on type and location of the School. Others may connote association with some other reputed / well-established school. For instance, Doon Public School and Doon School are different schools. If in doubt, seek clarification or review the Trademark Registration Certificates.
- Presence of a dedicated Franchise Office / Team for technical and academic support in the State where the School is proposed.
- Consider a partnership model rather than a franchise model. It will be good if the Franchise commits financial investment in the project. This would ensure greater commitment and support.
- Do a quick “Brand Re-call” test. Circulate the logo of the Franchise (without the name in it) to your Target / Potential Parents and ask them to name the School. You have a good brand to work with if atleast 50% of prospective parents can recognize the brand and recall the name.
- Do not get sold to oral promises and assurances made by Sales Executives or Agents. Ensure that everything is incorporated in the franchise agreement and do not hesitate to take a legal opinion before signing the Agreement. Make special note of the termination clause and exit route offered. The Term of the Agreement and Lock-in Period are other important clauses. Ensure to include a performance clause.
- Understand in great detail the academic support and inputs that will be provided. Most investors are good at administration and management of school but they would require lot of academic handholding. Please remember that only the quality of academics will take the school to greater heights.
Commercial aspects of the Franchise Model
Most Franchise Model of Schools involve a combination of:
(a) A one-time licensing / set-up fee
(b) An annual fee as Royalty or School Management fee
The one-time fee ranges from Rs. 25.00 lakhs to 5.00 crores (or more). It depends on the brand name and its reputation to command that price in ‘market’.
The Annual Fee may be a fixed fee with periodical incremental clause or it may be paid as a percentage of “Total Receipts”. Generally, this ranges from 6% to 20% of fee collected.
There is no fixed fee and the above can be negotiated. A new franchise school having limited presence in terms of number of schools would be willing to offer deep discounts with an objective of expand fast. A well-established chain of franchise schools may not relent on the commercials.
Some of the factors that can influence the above, are:
- Profile of the investor
- Location of the proposed school
- Investment envisaged
- Number of students expected to be enrolled in first year (market potential)
- Bargaining power / References
- Vision for the proposed school (e.g. Board to be affiliated, facilities to be provided, type of school – residential, day-boarding or day school)
Indicative List of Schools that offer Franchise:
(Note: The List is indicative and for information only. It does not mean that Strategum recommends or endorse these schools.)
Delhi Public School (under the aegis of DPS Society)
G D Goenka Public School
Mount Litera Zee School
Open Mind – A Birla School
Shloka – A Birla School
Shemford Futuristic Schools
Educomp Schools (Millennium, Takshila, Universal Academy)
Indus World School
Doon Public School
Billabong High International Schools
Global Indian International School
Alternative to Franchise School
An alternative to Franchise Schools is to start a K-12 School in your own brand name. This is generally preferred for committed education investors who are looking at long-term gains and advantages. This is also suitable for investors who have a strong reputation in the city where the School is proposed. Many times, the investor underestimates his own brand value!
The benefits of starting a school on your own are:
- You own the brand and hence the School ‘in toto’
- It is more successful model financially over a period of ten years as you save crores of rupees that would otherwise be paid as royalty or management fee
- You have a complete distinct control over the management of the school
- As your investment and reputation is at stake, your commitment to make the school successful will be greater.
- It can be a good business diversification plan from the present line of your business and offer good avenue for working of next generation in your family
- It creates more visibility and respect for the family as the School is distinctly identified with the promoters of the School
- It offers great flexibility as you are not bound by policies and guidelines of a franchise school
- It enables you to customize and localize the academic programs and suit the need of the target group
- It offers opportunity to expand further into Degree College, Engineering College, B.Ed. College or University by same name in future
- You can also start another school or a chain of schools in your own brand name, depending on your vision and long term plans
- It offers greater scope for innovation, collaboration and partnerships.
- Starting school in your own name conveys a social purpose unlike franchise schools that are seen as commercial / business oriented.
On the down side, investors are worried of project failure in the absence of a strategic knowledge partner who can guide and support the project right from planning to implementation at a reasonable fee. Indeed, Strategum Eduserve is well established to fill this gap.
Strategum Eduserve offers a complete value chain of services right from planning of the School to successful implementation of the plans and academic management of the School post its establishment. We understand School Education & Academics and appreciate the context of the School. In fact, going away from the established practice of preparing a business plan, we begin our work with a Project Concept Note that details the Academic Plans and Program, supported by ten year financial projections, required for the school in the proposed location after a detailed study of the social and cultural environment. Every single document template, policy guidelines and procedure is created on the basis of a “Zero Based Planning” approach to suit the internal resource constraints and requirements of the context in which the School is planned. It is a qualitative approach rather than adopting a “Check-List” based approach. Each of our School is distinct and different in character, but in sync with the aspirations and need of the community.
From our past experience of working with Clients, we have seen that after three years of School functioning, the School operates smoothly and all the systems are matured and proven. Hence, our engagement at professional level is generally restricted to first three academic years of School. This offers great financial prudence to the Investor as he need not pay any royalty or management fee for 15-30 years as required under most franchise models.
Strategum offers its services to suit the resource constraints of the investor and we would be happy to discuss through the issue with you as you make a decision to take franchise or start school on your own. Please fee free to email us on email@example.com . Alternatively, you may call us on 09981506149.