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How to Read the Mathnasium Learning Centers 2024 Franchise Disclosure Document

From initial investment to financial performance representations, here are some of the key takeaways that can be found within the math tutoring franchise's 2024 FDD.

By Luca Piacentini1851 Franchise Managing Editor
SPONSOREDUpdated 9:09AM 04/30/24

Embarking on the journey of becoming a Mathnasium Learning Centers franchise owner is a significant decision that requires careful consideration and understanding of the franchise's intricacies. The Franchise Disclosure Document (FDD) for 2024 serves as a pivotal resource, offering prospective franchisees a comprehensive insight into what to expect. 

But, with hundreds of pages, diving into the FDD can be a bit daunting. 1851 Franchise spoke with Kevin Shen, Chief Development Officer for Mathnasium, to outline some of the FDD's key components, shedding light on the operational, financial and legal aspects of owning a Mathnasium franchise.

Understanding the FDD: A Section-by-Section Exploration

Item 1: The Franchisor, Its Predecessors, and Affiliates

This section provides an overview of the franchisor's business and the industry within which it operates. It's essential for candidates to gauge the franchisor's track record and experience in the industry before signing on with the brand.

  • Mathnasium, a pioneering force in math education, offers franchises throughout the United States for learning centers focusing on math instruction. Established in 2003, Mathnasium has grown into a network committed to enhancing children's mathematical understanding. This section underscores Mathnasium's enduring commitment to fostering educational growth, highlighting its substantial presence in both the U.S. and internationally, through affiliates in Canada and beyond??.

Item 2: Business Experience

This item details the business experience of the franchisor's key executives and management team. The expertise and stability of the franchise leadership will be crucial for the long-term success of franchise owners.

Item 3: Litigation 

This section discloses any relevant litigation history of the franchisor or its management. Frequent litigation might be a red flag for potential issues. 

  • Mathnasium’s FDD reveals a clean slate in terms of litigation. “We’ve been around for a while, so the fact that we don’t have any history of litigation is a pretty important feather in our cap,” said Shen. “It means we are good stewards to our franchisees and all the people in our ecosystem. Anytime you can find a company with a clean FDD, it's a sign of the strength of the management team and a commitment to doing right by everybody.”
     

Item 4: Bankruptcy 

This item discloses any bankruptcy history of the franchisor or its management. A history of bankruptcy could indicate financial instability.

  • Mathnasium’s FDD reveals a clean slate in terms of bankruptcy.

Item 5: Initial Fees

This section outlines the initial fees that a franchise owner must pay to the franchisor. It will help prospective franchise owners understand the upfront financial commitment and determine whether or not it fits within their budget.

  • Mathnasium franchisees are required to pay an initial franchise fee of $49,000 upon signing the franchise agreement, along with additional fees such as technology and digital/local advertising fees. These fees cover essential services and support provided by Mathnasium, laying the groundwork for a successful launch??.

Item 6: Other Fees

Ongoing fees, including royalty payments and marketing fees, are detailed within this item, offering clarity on the recurring financial commitments franchisees must meet. Understanding these fees is crucial for prospective franchisees to ensure they align with their budget and business objectives??.

Item 7: Estimated Initial Investment

This item outlines the various costs associated with starting a Mathnasium franchise, including fees, compliance with standards and policies, insurance, advertising and more. This section is perhaps the most crucial for prospective franchise owners to gather an in-depth understanding of the financial requirements.

  • The total investment necessary to begin operation of a first Mathnasium franchise ranges from $112,936 to $149,616. This includes fees of $49,186 to $52,116 that must be paid to the franchisor or its affiliate. 
  • The total investment necessary to begin operation of each additional franchise ranges from $90,436 to $127,116. This includes fees of $26,686 to $29,616 for each additional franchise that must be paid to the franchisor or its affiliate. 
  • If franchisees enter into a Development Agreement, the total investment necessary to begin operation of one new center and to have rights to develop between a total of two and six centers ranges from $188,436 to $248,616. This includes fees of $75,686 to $102,116 that must be paid to the franchisor or its affiliate.

“At a high-level, there are a few things you should pay specifically close attention to, and Item 7 is definitely one of them,” said Shen. “With a concept like Mathnasium, you aren’t going to spend over $150,000 for your first center. That is very low compared to other concepts. We suggest you compare this section to the Item 19 so you can see the return on investment.”

Item 8: Restrictions on Sources of Products and Services 

This section outlines any restrictions on where franchise owners can source products or services for their business. Some franchises may require owners to purchase from specific suppliers, for example, which could affect their costs and should therefore be taken into consideration.

Item 9: Franchise Owner's Obligations

This item details the obligations of the franchise owner under the franchise agreement. Understanding this will ensure prospective franchise owners are prepared to meet all expectations before signing on the dotted line.

Item 10: Financing 

This section discloses any financing arrangements offered by the franchisor. For those in need of assistance with start-up costs, this can be a crucial factor in the decision-making process.

  • If franchisees meet the Center Director eligibility requirements for financing or if they qualify to purchase an additional Mathnasium center, Mathnasium may finance $15,000 of the $26,500 franchise fee. 

“Always make sure to see if there are any discounts or incentives that apply to you as a franchisee,” said Shen. “We have a 25% discount on franchise fees for educators, for example, as well as discounts for veterans. We also have support in place to help finance your franchise if you qualify.”

Item 11: Franchisor's Assistance, Advertising, Computer Systems and Training 

This item outlines the support and training provided by the franchisor. Candidates should be looking for robust training and support infrastructure, including assistance with marketing, staffing, operations and more. 

Item 12: Territory 

This section details the territory rights granted to the franchise owner. Candidates will need to ensure the regulations align with their target market location.

Item 13: Trademarks 

This item, which provides information on the franchisor's trademarks, is crucial to understanding the brand and the assets that come along with it. The use of Mathnasium's trademarks offers franchisees the advantage of operating under a reputable and recognized brand name, contributing to the franchise's marketing and brand identity efforts?

Item 14: Patents, Copyrights, and Proprietary Information 

This section discloses any patents, copyrights or proprietary information owned by the franchisor. This can be another indicator of the unique value and competitive advantage of the franchise.

  • Mathnasium's FDD emphasizes the importance of its proprietary information, including the Mathnasium Method™, which is central to its teaching techniques. The franchisor has developed proprietary educational materials and methods, which franchisees are authorized to use. This proprietary content is a key aspect of Mathnasium's competitive advantage, offering a unique value proposition within the educational sector.

Item 15: Obligation To Participate in the Actual Operation of the Franchise Business  

This item outlines the obligations of the franchise owners regarding their participation in the day-to-day operation of the business. Candidates should make sure these requirements align with their desired goals and ideal work-life balance.

  • The FDD specifies that franchise owners, especially if they are legal entities like corporations or LLCs, are required to actively participate in the day-to-day operations of their Mathnasium center. This involvement is crucial to ensuring the quality and consistency of the Mathnasium educational experience.

Item 16: Restrictions on What the Franchise Owner May Sell 

This section details any restrictions on the goods or services the franchise owner can offer. Franchise owners should ensure these restrictions align with their business goals.

  • Mathnasium franchisees are limited to offering only those services and products that have been approved by Mathnasium. This includes the specific educational programs and materials associated with the Mathnasium Method™. Such restrictions are in place to maintain the brand's integrity and ensure a uniform educational experience across all locations.

Item 17: Renewal, Termination, Transfer, and Dispute Resolution

This item outlines the terms for renewal or termination of the franchise agreement, transfer of the franchise and dispute resolution procedures. It's vital to understand these terms upfront as a franchise agreement is a long-term commitment and one that should be taken very seriously. 

  • Mathnasium's franchise agreement term is typically five years, with the possibility for renewal under certain conditions. Franchisees are required to apply for renewal between six to twelve months prior to the expiration of their current term. The FDD outlines specific terms under which the franchise agreement may be terminated or transferred, as well as the procedures for dispute resolution.

Item 18: Public Figures 

This section discloses any public figures used in promoting the franchise. Knowing this can help franchise owners understand the marketing strategies of the franchisor.

Item 19: Financial Performance Representations 

This item provides a glimpse into the financial performance of existing Mathnasium franchises. This is particularly important as it gives candidates a realistic expectation of the potential earnings and financial performance of the franchise. 

  • The Average Gross Receipts for the top-quarter percentile of Mathnasium centers open 12 months or longer was $611,684 for the calendar year of 2023.
  • The Average Gross Receipts for the mid-top-quarter percentile of Mathnasium centers open 12 months or longer was $357,440 for the calendar year of 2023.
  • The Average Gross Receipts for the mid-lower-quarter percentile of Mathnasium centers open 12 months or longer was $252,541 for the calendar year of 2023.
  • The Average Gross Receipts for the bottom-quarter percentile of Mathnasium centers open 12 months or longer was $157,599 for the calendar year of 2023.
  • The Average Gross Receipts for all Mathnasium centers open 12 months or longer was $344,816 for the calendar year of 2023.

     

“Our Item 19 is very robust, which we are proud of,” said Shen. “There are some competitors in our space who don’t even have one, but ours goes very in-depth regarding revenue, operating profit, medians, averages, quartiles, etc. Prospects can get a pretty accurate reading on what to expect from a financial perspective.”

Item 20: Outlets and Franchise Owner Information

This item provides information on the number of franchised and company-owned outlets, as well as contact information for current franchise owners. This can give candidates valuable insight into the stability and growth potential of the franchise; for example, if the brand has closed more locations than it has opened, that could be a cause for concern.

  • The number of Mathnasium units increased by 17 in 2021, three in 2022, and 18 in 2023. 

“The Item 20 is a great indication of the health of the system,” said Shen. “We’ve increased our units every year, so that is a sign that people are buying in and that franchisees aren’t aggressively exiting the system. It also means we are serving more children than ever.”

Item 21: Financial Statements 

This section provides the franchisor's financial statements. Review these with a financial advisor to assess the financial health of the franchisor.

Item 22: Contracts 

The FDD includes copies of all contracts that a franchise owner will be required to sign, including the franchise agreement. Reviewing these documents carefully with a franchise attorney is recommended to fully understand the terms and obligations before entering into a franchise agreement.

Item 23: Receipt 

This section provides a formal acknowledgment that the prospective franchisee has received the FDD. The franchisor must allow a minimum of 14 days for the candidate to review the document before any agreements are signed, ensuring that potential franchisees have adequate time to consider their decision carefully.

Review the FDD Carefully

Overall, the FDD is a treasure trove of information. As a prospective franchise owner, it's important to read the document in its entirety, understand the obligations and expectations, and seek legal advice if needed. Remember, becoming a franchise owner is a significant decision, and the more informed you are, the better equipped you'll be to make the right choice.

“It is very important to read the FDD thoroughly,” said Shen. “We also recommend you go back and read previous years’ FDDs. This is very important information — there is a reason franchisors are required by law to release it. It is to protect buyers. Go through it with a fine-toothed comb, ask all the questions and make sure you are informed on this major decision.”

The initial investment required to begin the operation of a Mathnasium franchise is  $112,936 - $149,616 . To find out more information on costs to buy this franchise, please visit 1851franchise.com/mathnasium/info.

*This brand is a paid partner of 1851 Franchise. For more information on paid partnerships please click here.

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