On The Horizon

Web-based education may be a winner or a worry for technology learning centers.

Magazine Contributor

February 1, 2000 3 min read

This story appears in the February 2000 issue of Entrepreneur. Subscribe »

For those of us who learned to use a typewriter via the "hunt and peck" method, learning to operate a computer through the "crash and restore" method seems a natural evolution. Tedious hours spent exploring software capabilities with no real support--this is how most tech users have learned to harness their tools. But the tech tide is changing, thanks to training systems like New Horizons Computer Learning Centers.

Computer training is big business, and no franchise knows that better than New Horizons, one of the industry leaders, with more than 200 locations worldwide and 1999 systemwide sales of more than$400 million.

Santa Ana, California-based New Horizons has built its franchise on the concept of flexibility--it offers classroom, Web-based and CD-ROM-based training. The intent: to make the service appropriate for practically anyone interested in improving their computer skills.

Typically, students pay franchisees about $225 per day for training and, with "club" specials, can pay as little as $795 for $16,875 worth of training.

While this classroom training is the current mainstay of franchisees' businesses, accounting for about 80 to 90 percent of sales, New Horizons has worked out a system that permits students to view courses in real time and even ask the instructors questions while online.

According to David Cole, New Horizons' product manager for Web-based training, this sector of training could grow to about 50 percent of the franchise's sales by 2003. In my opinion, this opportunity could be a curse on franchisees if it's not properly managed.

Let me explain. While meeting with the Dallas franchisee and his general manager, I learned of New Horizons franchisees' leading challenge: making sure they keep their classrooms full. This is because New Horizons centers have large fixed real estate costs.

Now, suppose you enter into a long-term lease for a large space, and potential students, lured by the convenience of learning in their homes, start making a move toward Internet-based training. Can't you just hear the echo in your office space?

Furthermore, if students order Web-based training through New Horizons' Web portal, the franchisor gets the revenue from the sale even if that customer is located in a franchisee's protected territory. CEO Thomas Bresnan says he'll be working with the franchise advisory council to discuss problems like these.

The franchisor estimates it costs between $250,000 and $450,000 to open a center. Because of this relatively high start-up cost, New Horizons is seeking franchisees with a net worth of $400,000 or more. The initial franchise fee ranges from $25,000 to $75,000, depending on how many computers you'll have; New Horizons will finance 50 percent of this fee. Many of the major markets in the United States are already covered, but the company plans to start franchising in smaller markets: Fort Wayne, Indiana, for example.

One of the benefits of these saturated markets is that franchisees work together to provide business for one another. This helps to facilitate national training for larger corporate customers. The franchisor helps out by calling on some of these national accounts and splitting the income among the franchisees in those territories.

Todd D. Maddocks is a franchise attorney and small-business consultant. You can reach him at TMaddocks@aol.com.