Tutoring is a booming business. In the U.S., it is reportedly a $4.9 billion industry. It is considered to be relatively recession-resistant in that parents are reluctant to cut education services to help their children. While in-person tutoring is likely to continue to experience strong growth, online learning may be even stronger. The size of the online tutoring market in the U.S. has been estimated at $608 million with an average growth of 6.9% between 2014–2019. However, because of COVID-19, e-learning may grow even faster. For those who have an existing tutoring business, this may present an opportunity to consider franchising. Before moving forward, there are costs and benefits to be weighed as with any franchise. These issues should be considered in relation to how they specifically apply to a tutoring franchise. For example:
Market size and location.
If you will be offering in-person tutoring, then you will want to target franchisees in optimal markets with a high percentage of parents who can afford tutoring services. With online tutoring, you may have more flexibility in terms of the location of your franchisee. However, either way, you must comply with both federal and state franchise rules. Many states have their own requirements for filing and registration and they may vary depending on where the franchisor is domiciled, where the franchisee is domiciled, or where the business will be located. You will need to consult an experienced franchise lawyer about compliance with these rules.
Staffing.
Typically, tutors have an educational background. For added credibility, you may want to require that franchisees hire tutors with tutoring certifications from the National Tutoring Association, American Tutoring Association, and other certifying bodies. If the franchise will have a physical location, franchisees will need to access a good pool of candidates in the area at an affordable price. Note that tutors may be considered “employees” rather than “independent contractors,” which means they are subject to wage, hour, and other employment laws.
Reserving rights to online sales.
If you are franchising an online learning business or your in-person tutoring business also offers online tutoring as a separate service, you will need to decide if you want to reserve the right to sell online services yourself. This information will need to be included in the Franchise Disclosure Document (FDD). Item 12 of the FDD sets forth the geographical areas within which your franchises will/may operate. You must consider whether you want the ability to sell products and/or services within a franchisee’s territory through Internet activities or other channels of distribution.
Start-up costs.
As the franchisor, you will have significant upfront costs related to business plans, legal documents, operations manuals, marketing materials, and other expenses. However, you also must consider the start-up costs for franchisees. An online learning franchise will have significantly lower costs for the franchisee than developing and maintaining a physical location. However, there may be added expenses related to training, software, tech support, and marketing for an online-only business.
Franchising your tutoring business has great potential for growth, but it is important to discuss the specifics of your situation with a knowledgeable franchise attorney and business advisor.
If you have questions about franchising your business, contact Lusthaus Law.
