Legal Advice

Special Considerations for Educational Franchisees

Educational franchises are hot right now. Day-care centers, sports leagues, music, art, and tech concepts are taking over. You can walk through a strip mall in any suburban area and count the children-focused franchises. And there’s something else you’ll notice—they’re packed! Our firm has worked with many franchisees who bought into educational franchises, and I recently franchised a long-standing children’s art studio. But if you are looking into an educational or child-focused franchise, then there’s a few unique points to keep in mind.

STATE DAYCARE LAWS

I had never known about state day-care laws until I was drafting a franchise disclosure document for a new educational concept. In every state, there are laws that regulate daycares. Each of these laws defines “daycare” differently, too. Some states base the definition of daycare on the number of hours a child is present at the business. For instance, if a child spends at least three hours at the business, then that business is considered a daycare. Initially, this doesn’t sound too important, but the ramifications of being classified as a daycare are huge. In every state, daycares are subject to heavy regulation. Typically, the Department of Social Services (“DSS”) or the Department of Human Services (“DHS”) regulate daycares. Immediately upon being classified as a daycare, the business will have to obtain a daycare license, which can be an expensive and grueling process. If anything at the business fails an examination, the business will be subject to heavy fines and, potentially, closure.

SAFETY

Safety is an obvious concern any time children are involved. You will use common sense to figure out if a particular franchise model is safe for children. However, there are some additional concerns you should keep in mind. For instance, is this business a drop-off model where children are dropped off for a class or session and then picked up by their parents or guardians afterward? Are the parents or guardians present while the children are there? You will want to make sure the franchise has solid systems and procedures for ensuring the children are safely dropped off and picked up. For example, if a mother brings her child to a class, you will want to know who, if not the mother, is authorized to take that child home. If the family is going through a domestic issue and an unauthorized person like an estranged parent picks up the child, you could face serious liability for letting the child go with someone unauthorized.

COMPETITION

On a less scary note, consider the competition in the educational and children-focused franchise space. Are you going to drop a children’s art studio right between a children’s dance studio and a children’s swimming franchise? Essentially, your competition encompasses all extracurricular activities, not just art. Talk with the franchisor about which other children-focused franchises might compliment your own. In the adult-space, it makes sense to drop a juice bar next to a fitness franchise. Children’s concepts will have their own synergies, but you have to take the time to find them.

Jonathan Barber exclusively practices franchise law as a partner at Barber Power Law Group, in Charlotte, North Carolina. He has assisted hundreds of clients world-wide with their FDDs and franchise purchases. Barber also represents emerging and established franchisors. Contact Barber at 980-202-5679 or JBarber@barberpowerlaw.com.