“The U.S. child care market size was estimated at USD 61.70 billion in 2023 and is expected to grow at a CAGR of 5.86% from 2024 to 2030” (Grand View Research).
The child care industry has proven to be resilient even in economic downturns. While some industries experience volatile demand, the need for child care is steadily growing due to its essential nature. There are several factors that play into this increasing demand for child care services:
- Workforce Trends – There has been a significant rise in the number of working parents, particularly working mothers. According to the U.S. Department of Labor Blog, “maternal employment has largely recovered from the steep declines experienced at the onset of the COVID-19 pandemic. In fact, the share of employed mothers is 1.9% higher now than in February 2020…”
- Economic Impact – Not only does quality child care enable parents to maintain steady employment, the industry also creates jobs and generates significant revenue.
- Early Childhood Development & Education – A solid daycare program will also double as early education centers, providing a structured learning environment that prepares children for school.
- Government Support – There are various subsidies, tax benefits, and other incentives that make child care services more affordable, which expands the market for providers.
- Specialized Services – From infant care to after-school and summer programs, many daycares have adapted their services to cater to different age groups, learning needs, and schedules.
Anyone looking to own a daycare could either start the business from scratch or join an already established franchise. While there are pros and cons to both methods, choosing a franchise in the daycare industry is uniquely beneficial for a few reasons:
- A franchise offers brand recognition and trust, and a child care business requires the maximum trust of parents.
- Franchise systems make regulatory compliance and licensing more streamlined in the highly regulated daycare industry.
- Daycare franchises often offer curriculum and educational programs, which is a significant selling point for parents.
What is a Daycare Franchise?
In short, a daycare franchise is a business arrangement where an individual (the franchisee) pays a franchisor for the right to operate a child care center under the franchisor’s brand and business model. As with most franchises, this generally includes:
- Use of a Recognized Brand Name
- Access to Proven Business Systems
- Ongoing Support & Training
How the Franchise Model Typically Works
A daycare franchise system is much like any other franchise. It includes:
- Initial Franchise Agreement & Fees – The agreement outlines the terms, including the duration of the franchise relationship, territory rights, and operational standards.
- Royalty Payments & Ongoing Fees – These payments cover continued access to the franchisor’s resources, brand use, and support. Additional fees could relate to marketing and advertising expenses.
- Training & Support – Most franchisees receive extensive initial training on all aspects of running the business as well as ongoing support from the franchisor.
- Operational Standards & Brand Consistency – Franchisees must adhere to the franchisor’s strict operational guidelines that ensure consistency across all locations.
- Marketing & Customer Acquisition – Franchisees will focus on local marketing efforts while benefiting from the franchisor’s large-scale marketing initiatives.
- Territory Rights – In most cases, franchisees are granted exclusive territory rights to protect their market share and prevent internal competition.
- Ongoing Relationship with the Franchisor – This includes regular communication, updates, and performance evaluations as well as other resources to help franchisees succeed.
Is Buying a Daycare Franchise a Profitable Investment?
No one is guaranteed success or a particular ROI in any business. However, there are several financial considerations that might help you decide if buying a daycare franchise is a profitable investment.
Initial Franchise Fees & Startup Costs
- Franchise Fees – While the fee can range widely depending on the brand’s reputation, market presence, and support services, a daycare franchise fee typically falls between $30,000 and $50,000. Of course, certain high-profile franchises will exceed this range.
- Initial Start-Up Costs – The majority of this expense is building out and equipping the daycare facility. These costs can range from $150,000 to $500,000 or more, depending on the size and location of the daycare. They cover tasks such as renovating the space, purchasing equipment, setting up playgrounds, and ensuring the facility meets safety and licensing standards.
- Licensing & Regulatory Compliance – It’s not surprising that the daycare industry is heavily regulated, which means daycare franchise owners will need to obtain proper licenses and certifications. Costs will vary, but they can range from a few thousand to tens of thousands of dollars.
- Initial Marketing & Launch – This includes contributing to the grand opening marketing campaign, which is designed to attract clients quickly. These costs could also be included in the initial franchise fee.
Recurring Costs: Royalties, Marketing Fees, Equipment, & Maintenance
Other ongoing expenses that will impact the bottom line include:
- Royalty Fees – These usually range between 5% and 10% of monthly revenue for daycare franchises.
- Marketing & Advertising Fees – These are either a fixed monthly rate or a percentage of revenue (often 1% to 3%).
- Equipment, Supplies, & Curriculum Materials – Franchisors often require specific vendors or brands to ensure consistency, which can be more expensive than sourcing supplies independently.
- Staff Salaries & Benefits – Hiring and retaining qualified teachers, assistants, and administrative personnel is a significant recurring expense.
- Facility Maintenance & Upkeep – Daycare owners should budget for regular safety audits and equipment replacements, especially in outdoor play areas.
The Potential Profitability of Daycare Franchises
Despite the significant costs, daycare franchises can also be highly profitable for a few reasons:
- Consistent Demand – Child care is an essential service for many families, leading to consistent, year-round demand.
- Premium Pricing Models – Daycare franchises are often positioned as premium providers with high-quality early childhood education programs and state-of-the-art facilities. This allows franchisees to charge higher tuition rates leading to better profit margins.
- Revenue Diversification – Many franchises offer additional revenue streams, such as after-school programs, summer camps, and extracurricular activities that maximize facility usage and increase overall profitability.
Factors That Impact Return on Investment (ROI) & Profitability
Each daycare franchise location will financially succeed at different levels for various reasons including:
- Location & Market Demand – Location is a huge factor for success. Opening a daycare franchise in a densely populated area with a high concentration of working families will lead to higher enrollment rates and long waiting lists.
- Operating Efficiency – Efficient management is key to profitability. This includes optimizing staff-to-child ratios, minimizing unnecessary expenses, and maximizing enrollment capacity.
- Local Competition – The presence of other child care options can affect enrollment. Offering specialized curriculums or extended hours are ways a daycare franchise can stand out in a crowded market.
- Franchise Support & Performance – Franchisor support can significantly impact success. Strong marketing campaigns, regular training, and access to the latest industry tools can give franchisees the advantage as a daycare owner.
Is Buying a Daycare Franchise Right for You?
Are you passionate about childcare and have solid skills in the areas of management, customer service, and operations? If yes, a daycare franchise might be the perfect opportunity for you to become a business owner. Either way, an expert franchise consultant from FranNet can help match you with the right franchise and walk you through the process from start to finish. Schedule your free consultation today to get started!