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The Savvy Companies Catering to a Boom Market: Kids

The Savvy Companies Catering to a Boom Market: Kids
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This story appears in the September 2016 issue of Entrepreneur. Subscribe »

Amy Donnell came home from her first day teaching first grade, and she was $500 poorer. She had to spend that cash on school supplies for her classroom. Her husband, Scott, was flabbergasted, but he did some research and learned that it was totally normal: The average teacher dishes out $500 per year on school supplies, with no hope of being reimbursed. And although kids are constantly asked to participate in school fund-raisers, none of the resulting money goes back to the teachers. Spending had just become part of the job.

Related: From Powering Businesses to Empowering Kids

This was six years ago, and Scott felt called to action. He wanted a fund-raising system that benefited kids, schools and teachers. And that’s how he developed the APEX Fun Run. For two weeks, students take leadership lessons while competing to bring in the most pledges. It all leads up to a daylong “fun run,” where kids run or walk laps around a track based on how many donations they brought in. The program was so successful in Donnell’s local Phoenix area that, three years ago, he partnered with Jeremy Barnhart, APEX’s current vice president of franchise development, to take it national. APEX now has 77 units in 20 states, all running the program. The average school raises $23,000 through the fun runs, with 10 percent of that amount going to the teachers. The company keeps a percentage based on their level of involvement in the program.

APEX’s success represents a new truism in business: Where parents and children are involved, a franchise concept will evolve. Over the past decade, dozens of new kid-focused franchises have sprung up, from traditional tutoring businesses and STEM enrichment programs to youth exercise and yoga programs. There are children’s food franchises and brands focused on expectant mothers. There are resale shops for baby clothes, salons for tykes and trucks full of jungle-gym equipment and video games that roll out for birthday parties, as well as trampoline parks and dozens of yogurt shop brands that primarily cater to grade-school sugar addicts.

Related: How to Raise Entrepreneurial Kids

“Most of these brands are very high-­quality with not a lot of turnover,” says Ed Teixeira, who has been in the franchising industry for 35 years and is COO of the research firm FranchiseGrade.com. The kids segment is one of the fastest-growing in franchising, increasing by 12.1 percent each year between 2010 and 2014, according to his most recent data. “There’s an old saying that people spend more money on pets and children than anything else, and I think that’s true with franchising,” he says.

Several factors have created this boom. Changes in education and school demographics created new opportunities for businesses, and cultural shifts in parenting are providing a steady stream of customers. And with the latest generation of bambinos poised to be the largest in U.S. history, the demand for children’s services will remain strong.

School Ties

This will surprise zero people with school-age kids: Budget cuts are everywhere. Many districts have lost physical education, arts and music programs, as well as pre-K and after-school programs. “The number one factor in the rise of children’s franchising is that a lot of school systems have scaled back services since the Great Recession and even before that,” Teixeira says. “These franchises try to fill those gaps.”

That opening allowed Erika Lupo, an English teacher with a theater background, to go into business. Disappointed that her school district had no theater program, she’d regularly incorporate acting into her classes -- say, by having kids re-create the stories they read. She even started a theater program in her school. But in 2003, she wanted to do more. She quit teaching and opened a studio in Sparta, N.J., called Acting-A-Part, offering semester-long after-school programs in musicals, plays, commercial and film production and script writing. She soon grew to two locations, is now beginning to select her first franchisees and hopes to open five to 10 units in each of the next five years.

“Schools are cutting the arts, but they’re still popular,” Lupo says. “And this is a place kids can come to feel safe and positive about themselves. Parents tell me how it’s changed lives, how their kids feel accomplished.”

Kinderdance is another enrichment program that fills a gap; this one is for children who may no longer have PE at school. “Our students learn the basics of dance and gymnastics, but we blend it with learning colors, numbers, shapes, words and songs,” says Karen Maltese, vice president of franchise development. “We stress development of physical and language skills while building self-confidence and self-esteem.”

The brand isn’t part of the new franchising boom -- it’s been franchising since 1985 and has 132 units -- but it’s definitely being helped by it: In the past few years it has doubled its international units to 25, starting programs in India, Qatar and Mexico, among others.

Child’s Play

Here’s another thing that will come as no surprise to parents: Some parents (hey, we’re not blaming you!) can be obsessed with coddling their kids. Gone are the days of just letting kids roam around to find their own adventures and trouble. “I think it’s a cultural shift,” says Wade Brannon, CEO of Pigtails & Crewcuts, a children’s hair salon with 50 units in 20 states and another 30 in development. “I believe parents now are more focused on their children and their day-in-and-day-out activities than when I was growing up. We’re trying to build a business that appeals to children and parents by taking a somewhat uncomfortable experience for kids and making it as comfortable as we can.”

Brannon believes that’s one reason his children-only salon has succeeded. At Pigtails, there are TVs playing kids’ shows. On one side of each shop, barber chairs are shaped like airplanes and police cars. The other side looks more traditional, for preteens who have outgrown the kiddie stuff. Stylists are trained to keep customers calm during what can be a stressful situation.

“I believe parents are more focused on their children and their day-in-and-day-out activities than when
I was growing up.”
--Wade Brannon, CEO of Pigtails & Crewcuts

As children get older, the involved parents shift their priorities -- from making kids comfortable to wanting them to be as academically advanced as possible. “It’s getting more and more difficult for children to get into competitive colleges and find employment,” says Jackie Sanin, founder of Jump! Immersion School. “Parents feel like they have to give their children whatever opportunity they can to excel in a competitive world.”

Her brand, which has three locations in New Jersey and recently began franchising, teaches children bilingual classes in either Spanish or Mandarin. They serve preschool through second grade, the period when children are best able to absorb a new language. While a large portion of Sanin’s students are from immigrant families that want their children to learn their cultural heritage, a larger portion are from families trying to give their children a leg up in a multicultural world.

Parental Guidance

New franchises are also discovering the power of playing to the parent. Sure, most businesses are focused on the kid -- but some are succeeding by explicitly making parents’ lives easier, too.

WT Cafe discovered this strategy after it launched. The brand operates lunch service primarily inside schools’ cafeterias. Debbie Blacher initially conceived it as a way to help kids get a healthier school lunch, and so that’s how she marketed the company. But then she developed a more emotional pitch: WT Cafe can take one more thing off a parent’s to-do list. With her company’s platform, parents can go online and choose their children’s meals, which are then made from scratch and served to them at school.

“Working parents are looking for ways to spend more quality time with their kids,” she says. “If they don’t have to spend time shopping and prepping their lunches, but can instead order something online and still feed them something they feel good about, then they have more time for conversation and hanging out.” That message is resonating, with 17 franchise units having served more than two million meals to 100,000 diners -- and all that food is free of artificial flavors, colors, MSG, trans fats and nitrates.

Tot Squad also talks about saving parents time. The brand, which just opened to franchising, is like a full-service transportation helper: It installs car seats, plus repairs and cleans the seats and strollers. Typically, the brand sets up shop inside a retailer like Babies R Us for a day and offers to do its work while parents go shopping. This has proved popular with retailers and parents alike, and founder and CEO Jennifer Beall Saxton says she sees a lot of room for growth: She is now planning expansion in Dallas, Chicago, Miami and San Francisco. She also intends to add services, training drivers with ride-share companies on car-seat safety and cleaning their seats regularly.

But no matter how a franchise interacts with kids, the people who work in the industry say there’s a benefit you can’t always find elsewhere: The work is fun. “I meet people who want to join our franchise because they want to do something that makes a difference and makes them feel good at the end of the day,” says APEX Fun Run’s Barnhart. “And kids’ businesses make you feel good.”

Edition: December 2016

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