How Mathnasium Learning Centers Is Primed for Major Growth in the AI Era

The rise of artificial intelligence has disrupted many industries and sent shockwaves through many segments of the broader educational landscape. Many are wondering if traditional learning models are on their way out, but for Mathnasium* Learning Centers, the math-only supplemental education franchise, the technological shift is only further highlighting the irreplaceable nature of human-led learning. As parents seek specialized educational support to address pandemic-related learning loss and other learning gaps, Mathnasium continues to prove that its relationship-driven model is insulated from many macroeconomic and technology-related disruptions.

"We firmly believe that humans are still the best teaching technology, as they have been for a very long time," said Kevin Shen, chief financial officer of Mathnasium. "You need somebody in the room to read the emotional intelligence of an eight-year-old or even a 15-year-old to know that they might be off their usual game and to ask, 'Hey, is everything all right? Did something happen at school? You look a little more down than usual, is there anything you want to talk about?'"

Mathnasium is an international math-only tutoring franchise with over 1,300 locations. It provides specialized support through individualized learning plans, addressing a very real need in the market it enters. With a strong model and the backing of private equity resources, Mathnasium is a low-cost, highly scalable franchise opportunity.

With enrollments and system-wide revenue continuing to climb, it’s clear Mathnasium is a compelling investment opportunity for those seeking not only a financially strong investment but also one rooted in relationships and purpose.

"In reality, Mathnasium is more of a relationship-based business," Shen says. "It's about establishing rapport with the families, parents, and kids, and making sure they understand the value we're delivering."

Shen joined 1851 Franchise Publisher Nick Powills to discuss Mathnasium’s personalized model, current market influences and the impact of AI on early childhood education. A transcript of Shen’s interview with Powills has been provided below. It has been edited for brevity, clarity and style.

Nick Powills: All right, Kevin. Lots to unpack today, but I want to start with a general state of the union. How are things going at Mathnasium? What are things looking like right now?

Kevin Shen: Things are great, thank you for having me again. Things are going really well. First half of the year, lots of awards, lots of center openings, franchisees are doing really well. From our perspective, everything's trending in the right direction.

Powills: If you look at the industry, obviously one of the perceived threats would be what AI is going to do to things. My gut opinion is that tutoring is still untouchable, because the human component is actually essential to learning information from where I stand. Is that something that you're thinking about, and are franchise candidates starting to ask about as they're exploring the business opportunity?

Shen: We've talked about it with candidates. It's a question that often comes up, and it's the right question to be asking against the backdrop that we're in. But from where we sit, it's not really a threat to our business model. I have young kids of my own, and it's hard to imagine that they would have the emotional maturity and the ability to sit in front of a computer and do self-paced learning guided by an AI tool. For the vast majority of kids out there, you need a human there for lots of different reasons, primarily because we firmly believe that humans are still the best teaching technology, as they have been for a very long time. You need somebody in the room to read the emotional intelligence of an eight-year-old or even a 15-year-old to know that they might be off their usual game and to ask, "Hey, is everything all right? Did something happen at school? You look a little more down than usual, is there anything you want to talk about?" You also need them to keep them on task. 

I read an interesting study that the most used prompt when kids are chatting with an education AI is "IDK bro," meaning they're just trying to get the AI to give the answer to them. They're not going through the thought process that the AI is hoping for, which is a Socratic questioning process where it tries to tease out how to think about it and the ways to get to the answer. Eventually, the AI just breaks down and gives them the answer. Our thesis is that it's just not the right kind of answer for the vast majority of kids out there. It's something that we're keeping an eye on, and it's something that we use internally to help make the business easier to run and make it easier for franchisees to do what they need to do, but we don't see it as some kind of existential threat to the business model.

Powills: My general thesis for anybody that has a different way of learning is that when you're put into general population education, you're actually set up to fail more than you are to succeed, which is where a business like Mathnasium pops into the environment to offset a lack of something that a child's getting in education. Now, when we're talking about AI or things that change, it's not necessarily just that you have to understand the fundamentals of math or science or STEAM, but it's more so learning how to interact as a human and learning those problem-solving skills that can carry into other things that we go through in life. I look at the business and say you're actually in your infancy, because AI is probably going to cause more challenges in learning behaviors. The ceiling on this business could be light years away based on students today needing less of a one-size-fits-all approach. Any comments, rebuttals, or opinions on that?

Shen: Absolutely. It's an interesting intersection that we're at. The almost ironic thing from our perspective is that what AI promises in terms of customization and access is the way that we've approached learning from day one. It's the individualized instruction, high-dosage tutoring, Socratic questioning, and really teaching kids how to learn specific to math. I would agree with you that we're very much still in the infancy of the business. The COVID learning loss, or just the gap in education that exists out there across the entire K-12 age range in math education, continues to get worse instead of better over time. Things have gotten very competitive for kids whose aspirations are to go to a private school that requires a test, get into the college they want, do SAT prep, or whatever the case may be. We're well-positioned to provide the individualized learning plans and the group instruction that it takes to get there, so we firmly believe that the best is still ahead.

Powills: If a buyer is looking at this business, out of curiosity, has it swung in either direction of more people who have an affinity or background in the segment, or who have had a relationship with Mathnasium and therefore want to become a franchisee? Is there any trend that you're seeing in the buyer coming in?

Shen: Interestingly, the trend has been more corporate background folks — people working for big companies, small companies, or even mid-to-late career folks who probably have some kind of affinity to education or math education. It could just be that they've always enjoyed math or they used to tutor when they were growing up, rather than having a formal educator background. Those folks have gotten to an inflection point in their career where they've perhaps accomplished what they needed to accomplish, got laid off, or are just at a crossroads. They realize there are lots of different opportunities out there, but because they want to do something that not just has a good ROI but also benefits the community and is more mission-driven, they naturally gravitate towards the Mathnasium opportunity.

Powills: How are they finding their way into your funnel? Clearly, there's some sort of turbulence in their career causing them to want to go that route, and turbulence could also mean recognizing the delicacy of life and wanting to put time and money into something different than working for someone else.

Shen: Lots of different ways. Certainly, there are channels like this that build brand awareness, and lots of folks find us through our website. There are also plenty of folks who were in some ways affiliated with the brand, meaning perhaps they were parents of students who already attend Mathnasium. With 1,300 units around the world, it's not uncommon these days for people to start exploring Mathnasium and then realize that their niece or nephew attended, or they've seen a couple in their town and now want to bring it to their own community. We've gotten to a critical mass where most people are aware of the brand at this point, even if they haven't explored it formally as a franchising opportunity. Once they do start looking, they come in through the website, socials or even print media and magazines. 

Powills: It's easy to understand the passion and impact on the community. If there was a blank slate listing of every franchise opportunity that exists and you filter by investment range and something that is truly impactful, the list gets thinned out pretty fast. You almost get misclassified as standard tutoring and education versus a passion-based community impact opportunity, which almost has to be extracted by the individual before they fill out that form, right?

Shen: Exactly. It oftentimes requires some thinking about the right type of opportunity for you. It's a service-based franchise, which is very different from how many people think about franchising. When most people think “franchise,” they think of a food concept that is commoditized, and they have a preconceived notion of what that means. In reality, Mathnasium is more of a relationship-based business. It's about establishing rapport with the families, parents, and kids, and making sure they understand the value we're delivering. It's more about building upon that than trying to get repeat customers in and upselling them on a bigger package.

Powills: Okay, so buyers are inquiring. With 1,300 locations across the globe, what percentage of people are getting rejected because they were too slow to inquire in a market that was already occupied?

Shen: I would say anecdotally somewhere around 70% of folks are looking for territories that aren't available. We also have a fairly rigorous qualification process, so you need a certain level of assets and the ability to invest into the business to get to a point where both we and they feel comfortable going on this journey. There's some vetting at the top, but it's somewhere around 70%.

Powills: That's the insight. There was a quote from the founder of Panda Express years ago when he bought into a franchise: "I got to buy this because I don't want to miss out on the next McDonald's." What happens is people think about buying a business, sit on the sidelines too long, and then their territory gets swallowed up. You're in the business of protecting your territory, especially if you want to scale and build a business that has the potential of building a different generational wealth profile for your family. I'm always fascinated by that number because it's not necessarily an exercise of whether this is a viable business; it's a timing thing where if you don't have a sense of urgency, you risk the potential of being left out, right?

Shen: Absolutely, I definitely agree with that sentiment. I tend to think about opportunities on a spectrum. You have brands out there that are under 100 units, so there's tons of opportunity from a geographical perspective, but perhaps they haven't been around that long. You're not sure if the concept can withstand different economic cycles, or there are question marks about the support they offer. On the other end of the spectrum, you have brands at 10,000 or more units, in which case you just take what's available to you. I feel like we're still in that sweet spot where we have over 1,000 units, but there's still plenty of opportunity left. We're proven, we have the support, and we have a demonstrated capacity to go through economic cycles. We're actually counter-cyclical to a lot of trends and more recession-resistant, which we proved through the financial crises and COVID. I like that middle ground where we sit today, where there's availability of territories for people to go on the journey with us if they want to.

Powills: I'm going to go back to the title of our discussion: growth and rising ROI. This means there's got to be some sort of indicator of either more students, more parents, more volumes, or more demand. How are you seeing sales system-wide? What is the impact that you're seeing right now?

Shen: Fortunately for us, while there are lots of headwinds out there for other kinds of franchise concepts like lower same-store sales growth in food, we're still growing steadily. You can see that with our year-over-year FDD Item 19 updates where we break down the P&L for the franchisees currently in the system. Enrollments are going up, and revenue is growing for franchisees. Franchisees can even take price because we have such good staying power and stickiness with our customers. All of that is going up and to the right. Because of the way the business model works, you also get increased margins over time as your business grows, so that ROI continues to trend up.

Powills: Is there some sort of hesitation coming up consistently with candidates where, if you had the ability to talk to them beforehand, you could show them they are looking at it the wrong way? Is there anything causing hesitation where you're like, "Well, let me explain why you're looking at it the wrong way"?

Shen: It's a great question. Oftentimes, when there's noise in the macroeconomy, candidates get more hesitant. They want to see how things play out, whether the market's down because AI is having a pullback or whatever the case may be. It could just be cyclical noise in the broader economy, and candidates prefer to take a wait-and-see approach. From where we sit, we're very insulated from that macroeconomic noise. Whether it's tariffs, supply chain shocks, or the broader economy, if your son or daughter is struggling with math and they don't have confidence when they get to school every day, that represents a highly inelastic demand. You're going to stick with Mathnasium and figure that out so they can catch up or maintain their positioning. Parents will continue to invest in education for their child long before they cut back on that cost. It's always a good time to be in our industry, as evidenced through all the economic cycles we've been through. If you look at the Item 19 or the FDD in general, we're always up and to the right. From where we sit, it's very much a Warren Buffett idea: if the market's down, you should be investing, not pulling your money out.

Powills: When I'm looking at a business model like this, the last thing I would look at is the depth of what I get for a royalty. There are some businesses where you pay a royalty and don't get much, but with Mathnasium, you get the infrastructure and business intelligence that comes from holding companies backed by private equity. That's another asset a franchisee gets for the same percentage they would pay to another business. I see a clear vision, a point of differentiation in the product, and availability in territories despite a tremendous footprint. We've had other franchisees on these webinars rave about expectations being met and surpassed. Given that 70 percent are rejected purely based on territory availability, there is a clear supply and demand element here. I don't see many reasons why not to do this if you have an affinity for impacting your community and you're ready to get into franchising.

Shen: Absolutely, I think you summed it up incredibly well. To piggyback on that, it's definitely a low-cost opportunity to get started. Our numbers are in the FDD, but the initial investment cost is somewhere in the range of $130,000 to $165,000. It is definitely on the low end, especially compared to an early childhood education concept where you might have to buy the dirt, which can take years to eventually open and generate revenue. For us, it's a very simple build-out. You can open in a matter of months. If you compare that $130,000 to $165,000 investment range to our average EBITDA and margins last year, system-wide EBITDA on average was in excess of $110,000 to $120,000, translating to 30 percent-plus margins. 

For anybody who is finance-oriented and cares about vetting the financial opportunity, that definitely checks the boxes. It also checks the other boxes you talked about earlier regarding territory availability and the ability to scale from one unit to ten units to supplement your income. On the support end, support only means something if it shows up in owner behavior. The fact that a meaningful share of our growth comes from existing franchisees opening additional units tells you how that support actually lands. Franchisees validate this by talking about how much they enjoy the support, our responsiveness, and our ability to continue adding things that make running the business easier for them every day. All of that creates a virtuous cycle that makes the Mathnasium opportunity more compelling every day.

Powills: I'm going to add one more component that we probably have to have a longer discussion about too: the protection of the asset at exit. When you have a brand growing at this level with the financials you just disclosed, you have an asset at the end that provides another turn on the business. When you look at businesses that have a protected turn, especially when existing franchises are continuing to build, there are internal and external buyers who will knock on the door when you're ready to do your next thing. Sometimes, with investments south of half a million dollars, buyers only look at what they are going to make on an annual basis rather than looking at the protected asset. Here, given how long the business has been around and the ongoing innovation, there's clearly an asset at the end that you can flip.

Shen: You're right. We sit at a unique inflection point where the business has grown remarkably over the past 15 to 20 years. Although we have a great margin profile, our costs remain low, and our AUVs are still under $400,000. Somewhere down the line, we're going to get to an AUV and profit range where bigger players can get a bite at the apple. I have conversations with private equity groups and search funds every day, and they're all very excited about the Mathnasium opportunity. However, there's an interesting supply-demand issue where there's far more external demand to acquire Mathnasium groups than there are owners willing to sell or who have the AUVs to sell. That equilibrium will come somewhere down the line, probably a couple of years from now when we cross $500,000 in AUV. At the rate we're going, that's going to happen, and it will open up a bigger buyer pool and lead to multiple expansion for people buying and selling. That will create a second wind for the secondary market of transacting on Mathnasium as well.

Powills: I love every bit of this. To simplify it for someone watching: passion, community impact, a tremendous support infrastructure with private equity backing, opportunity, and a clear supply and demand issue. There's a sense of urgency with existing franchisees buying this up. If this was on your list, then it's time to reach out. It costs nothing to fill out the inquiry form and have a conversation with the franchise development team.

Watch the full interview above or on YouTube.