In a childcare market increasingly dominated by private equity, the question of brand ownership has become a crucial differentiator for potential franchisees. For Children's Lighthouse, remaining a family-owned operation provides a fundamentally different experience for its partners. 

“We’re able to maintain the culture and the foundation that were established by my dad and my uncle all those years ago,” said Children’s Lighthouse President Michael Brown. “Our focus is squarely on the brand and on operations, not on hitting short-term numbers for an outside owner.”

Children’s Lighthouse operates in the higher-end early education and childcare category, a segment that has attracted significant private equity investment in recent years. While that capital can bring resources, it can also put a microscope on P&Ls and drive decisions around quarterly returns or five-to-seven-year “flip” timelines — dynamics many first-time franchise buyers don’t fully evaluate. Brown contrasts that with Children’s Lighthouse’s path: the same family ownership for nearly three decades and a management team that has largely been in place for more than 10 years, building the brand methodically and operationally first.

“Our horizon isn’t for the next quarter,” Brown said. “It’s to build up the business for the next generation — hopefully my children or the next generation after that. That’s what guides our decision-making.”

That long-term view shows up in how the brand allocates resources. Vice President of Franchise Development Matt Kelton points to lower system fees and an unusually robust support structure as intentional choices. Children’s Lighthouse’s national ad fund, for example, sits at about half of 1%, compared with competitors at 4%, yet it still covers websites, marketing tools, and PR. Operationally, each franchise business coach supports only about 15 schools; some competitors’ coaches carry 40 to 50.

“Could we make more money if we had more schools per coach? Sure,” Kelton said. “But it’s the right thing to do to frankly overinvest in operational support so we can offer best-in-class support. That’s one reason that in our history, we’ve never had an SBA failure, which in franchising is almost unheard of.”

Culture is another area where family ownership becomes tangible for candidates and franchisees. Discovery Day often includes dinner with Brown and his wife, where prospects hear the founding story and where the brand is headed. Franchisees know they can reach the leadership team directly — even on a Sunday night if something urgent happens at a school.

“I feel a duty to maintain the culture and the mission we stand for,” Brown said. “Our team has 100% bought into that culture, and it attracts franchisees who share a passion for childcare and education. You can feel it in the schools — parents talk about the distinct culture at our locations.”

All of this is playing out against a backdrop of strong demand and measured national expansion. Kelton says Children’s Lighthouse is coming off a record year, growing beyond its Texas roots into markets like Tennessee, Missouri, Florida, and Indiana. Many of those deals are second and third locations from existing owners, a signal that expectations set in the sales process are being matched in real-world performance.

“We’re not a brand that investors want to flip,” Kelton said. “We’re a long-term play with a unique model and a unique family culture, and we’re building a brand franchisees want to grow with over time.”

For entrepreneurs evaluating higher-end childcare investments in 2026, the takeaway from the conversation is clear. In a category increasingly shaped by private equity, Children’s Lighthouse is betting that continuity of leadership, people-over-profits decisions, and a family-first culture will remain a powerful differentiator — for franchisees, families, and the children they serve.

In a recent 1851 Franchise webinar, “Why Children’s Lighthouse is Different: The Benefits of Being a Family-Owned Brand,” Publisher Nick Powills sat down with Brown and Kelton to unpack how staying family-owned in a private equity-heavy childcare market gives franchisees a fundamentally different experience — and why that matters now more than ever. 

A transcript of the interview with Powills appears below. It has been edited for brevity, clarity and style.

Nick Powills: All right. The title basically says it all, but Michael, I'm going to go to you first, and then Matt, I want your perspective as someone who has been in franchising with as much experience as you have, on how you look at this.

Michael, my perspective is, in the space of higher-end children's education, private equity has definitely stepped in in as big a way as it possibly can. From my perspective, there are two routes here. You could either look at private equity as a resource — there are resources behind it — or you could look at it as there's a microscope on P&Ls. And when there's a microscope on P&Ls, sacrifices can potentially be made by the franchisor, or decisions can have some hurdles that come alongside it.

So now we're not necessarily always playing for the benefit of the franchise owner. We might be playing for the benefit of a P&L, or the idea that a business is going to flip every three to five years.

With that being said, you guys have remained privately owned, family-owned. What do you see as the reasoning? I would love for anybody who is watching this to hear that point of differentiation, as well as what your vision is on that category, period.

Michael Brown: We are extremely grateful to be in the industry that we are. We're able to have such a positive impact, and we're also very proud to be family-owned. We're able to maintain the culture and the foundation that were established by my dad and my uncle all those many years ago.

There are pros and advantages, and there are disadvantages to being part of a private equity-run company. We feel like what's best for us at this time is to be where we are.

Right now, we're operations-driven and focused on the brand. With private equity, we don't have the restrictions that some others in our industry do. Our management team is built exclusively with operations experience, and we're able to make decisions without a large board that either doesn't care or maybe doesn't understand the consequences of some of their requirements.

We don't have the private equity-required quotas on a quarterly basis or some of the roadblocks that could restrict what we feel is important for us to do.

During COVID, one of the things we're extremely proud of is we had a zero-closure rate. We had a 100 percent PPP and grant funding rate with our franchise owners, and that's because of the dedication of our team.

We have several franchisees who were in other brands or part of other brands — not in this industry, but other franchise brands — and they each made a point to come up to us afterward and tell us how much they appreciated the support and some of the interim processes that we put in place to keep everybody afloat.

Every single person on our team was able to pivot in what they were doing to the needs of what the franchisees were at that time, and we all gave 110 percent to make sure we could do everything possible to keep everybody successful during that time.

Powills: One thing that I'm hearing out of your voice is the ability to pivot fast and that the autonomy is owned by you.

You can say, “I don't need to make another buck today. Let's go ahead and give that back to the franchise owner.”

Matt, you've been in various situations and have seen both sides. How do you see this as a benefit when you're talking to a candidate about why Children's Lighthouse?

Matt Kelton: A couple pieces.

One, our franchisees don't have to worry that there's going to be a sudden change in fee strategy or culture based on a new investor, because that's how that model works. They want to flip these every five to seven years.

We recently had a prospect who had attended another Discovery Day from a big company — I won't name their name — but the entire C-suite was totally new and had just started. Some of them weren't even from the industry, and this is a very specialized business.

I think there are a lot of benefits to having a business where, rarely do you see a franchise where the same basic people who built the franchise are still running it. I think that's really rare.

A big thing is our fees aren't as high. We're not trying to nickel and dime you with a lot of the franchise fees that we have. As an example, we have a national ad fund that pays for our websites and marketing tools, PR, etc. Ours is half of 1 percent. We've got competitors where it's 4 percent. You start doing the math — that's $80,000, $90,000 a year in additional fees that should be going in their pocket.

We think our marketing is just as good, if not better.

When we're looking at this, we ask: How can we create a really successful business for our franchisees, but also provide top-level support? We have only 15 schools per franchise business coach. Our competitors have 40, 50, even more.

Is that the most profitable thing for us? Could we make more money if we had more schools per coach? Yeah. But it's the right thing to do, to overinvest in operational support, to have best-in-class support.

I think that's one reason we, in our history, have never had an SBA failure, which is mind-boggling to me, being in franchising as many years as I have, because that number is normally 20 percent or higher.

You look at all that together — it's a different kind of business. We're looking for long-term growth. We're not looking at 10 quarters in the future; we're looking at 10 years in the future. We have a long-term focus for sure.

Powills: Matt, that's a huge statement.

Maybe it's how novice the majority of franchise owners are, whether it's a $10 million investment or it's a $1 investment. Most are novice, especially when you're getting into franchising.

If I'm thinking through, “I'm going to invest” — and we'll keep this category specific — “I'm going to invest in children's education and a higher-end investment.”

If you're buying into a brand that's backed by private equity, that five- to seven-year flip is most likely going to happen. Also, the candidate is not trained or conditioned on how to do due diligence on the private equity fund that owns the brand.

Typically, as part of their due diligence, they're not reaching out to that PE firm and saying, “Can we talk to you about the process?” The PE firm removes themselves from that equation.

The reality is, what they're going to do — you said a new leadership team comes into Brand X — what they're going to do can have direct influence and impact back to that franchisee.

I would imagine if you get a candidate on the phone, you have the ability to talk about this stuff, but to the outside world, a candidate might not even understand that there is a clear advantage — unless there’s a great private equity group or family office that owns the business — there’s a clear advantage for you guys to not be owned by outside money, right?

Kelton: Yeah, absolutely. We don't have quotas. We want to sell quite a few franchises, but we're going to be pretty picky about who joins us.

We're not trying to flip it. We're not trying to sell 50 or 60 locations and hit a number. Sometimes you can lower the bar if you're trying to hit a number.

For us, it's making sure it's the right fit — not only financially, but culturally — and that they're going to be a long-term play.

We've always had, from day one, a very measured approach to growth. It wasn’t to expand rapidly unless we were able to support it. Our first goal was to establish that foundation, build the infrastructure, and then after that we would grow at a rate we feel like we can support.

The focus is on the franchisee’s success and the success of the brand, not the success of how quickly we can grow.

Powills: Michael, it's an easy concept, what you just said, but so many franchises focus on selling deals versus making their current franchisees fatter and happier.

When you have a great foundation and you give fatter, happier franchisees the opportunity to continue to grow their businesses, what they end up doing is scaling with your business.

An insight that you just said on the COVID side is you have franchisees who have ownership in other brands. If they're looking apples to apples on what is the definition of support, which comes out of the royalty that you pay, they’re like, “Here's Brand X, here's how I felt there. And here's you guys, and here's how I felt.”

The feeling — the emotional side, the support structure, the scale, etc. — felt more in tune or more of a cultural match to those franchisees.

The only way you could do that is if you could say, “I’ve got to make a decision today that's going to impact my franchisees positively for the future.” Right?

Brown: Right. It was very beneficial to the brand because they were able to maintain successful operations.

We were referred other franchisees from our existing franchisees who had a group of people, or possibly other people from the other brands they were involved in, and they referred them over to us directly because of that situation during COVID.

We truly feel that if you're doing the right things for the right reasons, you'll be successful.

Powills: Matt, another thing I heard out of what Michael just said is the depth of the support structure, the operational background of the people who are on the leadership team.

From your experience in franchising, how does this level of support compare to other brands? Not necessarily in a negative way, but how is this different for a franchisee who is coming in, based on what you've seen — the size of the business and how much infrastructure is around the franchisee?

Kelton: I have never seen as much total experience, the total number of years of experience.

We joke that we have, I don't know, 200 years of combined experience. We have a Vice President of Operations who has been doing this for 30 years. Our Director of Curriculum has been doing this for 35 years.

Our Director of Operations has worked for Children's Lighthouse from being a school teacher all the way up to Director of Operations for 20 years, as long as Michael has been here.

We know every specific thing that is going to happen, right and wrong, in these schools. We often say there's nothing you're going to experience that we haven't dealt with.

There's a lot of fear with opening any franchise. We'll often say, “If you're not scared in the process, there's something wrong with you,” because it is scary, especially when you're dealing with children, people's most precious asset, and we want to make sure we're taking care of them.

Having that support, and the reality that we have a proven model that has been successful for literally decades, matters. Just like any franchise, we have made all the mistakes you would make trying to figure out this model.

If you look at our system in general, most of our people here have been here more than 10 years. I've been here two, and I'm the rookie on the team, even though I've been in franchising a long time.

This is a specialized industry. This is not like a home services franchise. There's a lot of knowledge that you need, and having this level of experience is important.

Beyond Children's Lighthouse, we have had people who worked at Goddard, and we have had people from Children's Courtyard, so we've gotten some perspective from those long-term players.

We have a seasoned group of solid people and incredible training systems.

Powills: Michael, when you're having discussions with a candidate or a current franchisee, does the discussion or the question come to you of, “Are you going to sell? Will you sell?” Is that in the discussion?

Brown: People do ask us. What I tell them every time is, at this time we're focused solely on operations. We're focused on the brand.

That's one of the things that goes into our decision-making. Our horizon isn't for the next quarter or building up numbers for that next quarter. It's to build up for the next generation, for, hopefully, my children or the next generation.

That's what our focus is on. It's not on any type of short-term goals.

Powills: Do you think people understand that?

From my standpoint, and I'm going to say this bluntly, if I'm looking at a giant investment comparative, it's at the top of the list. I would over-index on how I'm evaluating what you just said.

You said, “I'm hopefully building a business that my children can be involved with.” That would give me more comfort in knowing that the team and infrastructure that are around me are going to be there in some capacity — whether it's this generation or the next — to support the investment, the big risk I'm taking for my family to try to build wealth for my family.

What you're saying is powerful. Do they get what you're saying? It is valuable if you're going apples to apples and looking at similar investments or other types of franchises.

Brown: Absolutely. A lot of our current franchisees who have gone through the Discovery process have told us during that process that they're able to feel the culture that we have.

My dad and my uncle founded the company and created that foundation and the culture so they were able to turn it over to my generation. My goal is to turn it over to the next generation.

Those foundations and that culture are still here. From what franchisees are telling us, it's noticeable when they do their Discovery.

Powills: Matt, Michael says this with conviction. There are other brands out there, and it's not wrong, it's business. Most franchisors are building to exit.

This is rare, to have a brand with this much legacy, this much support, this much depth on the leadership team that has been around for a long time. This is rare.

I think there's a bigger message here for buyers out there. If you're looking at an investment in this category, at this type, from a business-structure standpoint, keeping it family-owned seems powerful.

Kelton: That's what drew me to it. I have been a Brand President for 20-plus years, and when this opportunity came up — after another company I was with sold to another private equity group, another story — it resonated.

It's a different feel. It's a family culture. Long term, it feels like somewhere where, for me, it could be home.

That's what we talk to prospects about, that it can be home for you. We want that for parents when they walk in the doors and tour our schools.

You get access to a leadership team that listens and acts quickly. We're not a boardroom full of investors. We can make things happen and move quickly.

During our Discovery Day process, we're going to have a dinner the night before they tour a school and our home office. Most of the time, it's Michael and his wife getting to know them on a personal level and then sharing the stories of how they started and his vision of the future.

We often say, if you want to call Michael on Sunday night and you have a problem, he'll pick up the phone. I don't know any other private equity-owned or most franchise systems where that's going to happen.

It is a definite culture and something that resonates with a lot of people.

Powills: Michael, I'm going to make a statement because I assume this to be the case, and correct me if I'm wrong.

Because of the backstory of how this grew up in your family and has continued on, it feels like you have a responsibility to keep it like this because of the backstory behind the business.

That gives you the governor to say no when private equity starts waving fancy check numbers in your face. You're not going to entertain it because you feel you have a responsibility back to the story of the business. Is that accurate?

Brown: That's true, not just with myself but with the entire team.

Because of the culture that was created and that we have here, I feel like I have a duty to maintain that. It’s very successful, and it's something I'm passionate about and feel is important, not just to this business, but in general, to maintain that culture and the mission that we stand for.

I do everything that I can to keep that, and our team shares that same philosophy. They have 100 percent bought into our culture, and it trickles down from there.

Our franchisees — we have franchisees who come to us because they're attracted to the industry due to the strong demand and the profitability. But they also have a passion for childcare and for education. They want to be in an industry that makes an impact, as we do.

By the culture that we have and the team that shares that passion, it also attracts franchisees who feel that same way. From there, it trickles down to the schools, and you can feel it in the schools.

There's a distinct culture at our schools, at a school level, that parents talk about.

Powills: I want to make a few statements, and then Matt, if you want to close by giving a state of where the business is at today, in case someone's watching this and is engaged in it.

One: In franchising, I haven't seen due diligence hit private equity. I think that's a takeaway from this discussion, that if you are a buyer and you're looking in this industry, and if there's another owner of the business, you need to also do your due diligence with that owner to make sure that they align culturally with you.

As Matt said, if they make a change in the entire leadership team, you're starting over from scratch. Different opinions can make different impacts back to the investment that you made. I think that's an important mark.

Two: Every franchisee I have spoken with has looked at two things — the business model and the culture. This business model is significant. It's been around for a long time.

If you look at any trend reports into the next year around the New Year’s turn, children's education is always on that list of something that is sustainable and continues to be a great category. There's demand for this, on both the real estate side, because you have to, in some situations, go find the land, and on the customer side, because they need this in their marketplaces, which is why brands can continue to grow in this category.

On the culture side, we heard it from Michael and Matt: there's tremendous care. There's something intangible here that can't be seen on a website. It can't be seen unless you feel it.

You can feel some of it, some of the energy, on this call. But for a candidate who's thinking about a brand, make sure you align back to a culture that feels like they're going to have your back throughout this process.

Matt, in closing, can you give any of the audience a sense of what's going on with the business, how it stands, how this year went?

Kelton: We're going to end up having a record year.

We are going aggressively outside of Texas for the first time. We've had measured growth for many years, but this year we're expanding into Tennessee, Missouri, Florida, and Indiana. We're expanding well, in a smart way.

We want to provide the same service to families around the country, and the demand is unlike anything we've seen. We have waiting lists in schools all over the country.

We're building a brand that franchisees want to grow with long term. We're selling a lot of additional second and third locations to existing owners, which to me is probably the greatest testament to a franchise: They feel good enough about it that they're going to continue to invest.

We're not a brand that investors want to flip. We're a long-term play. It's a unique model, a unique family culture, and we're excited about 2026.

Powills: I want to put this statement on here: What Matt said — franchisees expanding — means the expectations were also met. That's a cultural thing.

If you're honest in the sales process, and it is what you said it would be, then people continue to scale.

Michael, any closing thoughts?

Brown: I appreciate it. We're excited for how 2025 turned out. We can't wait for 2026 and how the industry goes.

Nick Powills: Lots of new insights, especially as it comes around doing diligence into the culture side, private equity or privately owned.

For Michael and Matt, I'm Nick. Thanks for joining us. Go to the Children's Lighthouse franchise site if you'd like to learn more about the franchise opportunity.

Watch the full webinar here.