Although the Great Schools Franchisee Owners Association (GSFOA) can only speculate about what Sycamore Partners and Goddard Systems, LLC (GSL) intend to do with The Goddard School® franchise – because they have not shared their plans with franchisees, based on the actions they have taken since Sycamore’s acquisition of GSL in 2022, and the actions other private equity (PE) firms have taken when they acquire businesses, we can reasonably assume that GSL may:

  1. Transition most or all services currently provided with the royalties paid by franchisees to fee-based services, until all that royalties buy is the right to use the Goddard brand and benefit from the goodwill associated with it, and the right to buy required products, branded materials, and services from GSL and GSL approved vendors.
  2. Execute all legally allowable options – and perhaps a few that are open to debate — to maximize GSL’s topline revenue and bottom line. These options could include but may not be limited to:
    1. Focusing on “performance improvement” initiatives that drive increased revenues from existing locations by:
      • Pursuing a >90% system occupancy objective;
      • Requiring all schools with <85% TTM occupancy to have tours automatically scheduled so that, without regard to what may work best for a school, no interested prosect – whether the openings they need are available or not and whether they can afford the tuition or not – goes untoured;
      • Providing simplistic pricing for success research and guidance – which is more about increasing topline revenues to fuel GSL’s success and enabling them to extract more fees from franchisees without reducing their current EBITDA dollars.
      • Requiring completion of annual, mandatory online sales training programs for franchisees – and designated tourers – with the expectation that training will help deliver the Lead > Tour and Tour > Registration conversion rates needed to support the >90% system occupancy objective.
    2. Focusing on goodwill (perception) improvement initiatives (e.g., brand building, generating more and better Medallia and Google reviews, maintaining an active social media presence, and providing WoL performance “proofs”) – which may benefit newer schools but may not drive more leads and higher enrollment for mature schools. The hyper focus on these activities is based on the knowledge that increased brand presence and favorable reviews build brand equity (goodwill) that will appeal to prospective franchisees and the valuations future investors assign to the franchise when Sycamore disposes of GSL.
    3. Opening as many new locations as possible – even at the expense of performance at existing locations because two schools at 75% occupancy while not good for either franchisee, are better for GSL’s revenue model than one school at 100% occupancy.
    4. Requiring that franchisees comply with GSL’s ever evolving “standards”, which include purchasing certain supplies, materials, furnishings, equipment, and services only from GSL approved vendors with whom GSL may have negotiated a discount or from whom GSL may receive compensation.
    5. Gradually reducing support provided to franchisees (e.g., fewer FC and QA visits, fewer initiatives, reduced internal marketing and promotion of GSL initiatives, etc.) after the >90% occupancy objective has been achieved.
    6. Increasing the Marketing Fee to 4% and suggesting or requiring that franchisees undertake or pay for additional activities and services not included in the fee (e.g., Google Review solicitation).
    7. Increasing fees for Kaymbu/Wonder of Learning® (WoL) and charging additional fees for add-ons to the center management software and curriculum.
    8. Imposing a Technology Fee, providing Help videos, and reducing live support.
    9. Increasing Franchise Renewal Fees and shortening the period between renewals.
  3. Undertake more difficult or risky (i.e., capital intensive) options to achieve earnings objectives if the actions in A and B do not deliver expected results. These options could include:
    1. Establishing “major account” relationships with public or private entities (e.g., hospital systems) to drive occupancy and charging franchisees an administrative fee when they are engaged to deliver the services.
    2. Acquiring and operating schools that GSL believes could become better performers through better management — and selling them to franchisees after they become more successful.
    3. Developing and selling or renting fully furnished new school buildings to franchisees.
    4. Acquiring regional franchises and converting them to the Goddard brand.
  4. Once Sycamore and GSL have a recurring revenue model that meets their objectives

they could:

  1. Undertake an initial public offering (IPO) — if markets will pay a 20:1 price/earnings ratio for the stock.
  2. Sell the franchise at a premium to another PE firm or buyer group.
  3. Load the franchise with debt and spin it off to generate a return for Sycamore.
  1. If the GSL franchise does not meet Sycamore’s objectives within a reasonable period (e.g., seven years from the date it acquired GSL) it may:
    1. Continue to hold the franchise and pursue achievement of its objectives while waiting for market conditions that will support an IPO with a 20:1 price/earnings ratio.
    2. Modify their objectives and restructure the franchise (e.g., downsize corporate staff and services).
    3. Sell the franchise at a discount to an investor group or PE firm that has different objectives for the franchise or other ideas about how to squeeze more value from the franchise.
    4. Merge with one or more similarly challenged PE-owned premium providers, rebrand the combined operating entity (e.g., Goddard-Primrose) and after a time, pursue an IPO.