Effective Date30 April 2019
Programs CoveredSingle Unit
Exhibits IncludedList of Franchisees as of 12/31/2018 | Financial Statements
PSFC was incorporated in Georgia on September 1, 1988. Our principal business address is 3200 Windy Hill Road SE, Suite 1200E, Atlanta, GA 30339. We do business under the names Primrose School Franchising Company, PRIMROSE® , and PRIMROSE Schools®. We have offered Franchises since 1988. Exhibit E to this Disclosure Document includes the names and addresses of our registered agents for service of process in the various states.
We have not engaged in any other business activities besides offering and selling Franchises and providing related development and operational services to our franchisees. We are a subsidiary of Primrose Holding Corporation (“PHC”). PHC and its subsidiary, PIH Corporation (“PIH”), own PHC Acquisition, Inc. (“PHCAI”). PHCAI, in turn, owns Primrose Holdings, Inc. (“PHI”), the holding company for us. PHC, PIH, PHCAI, and PHI, all share a principal place of business at 3200 Windy Hill Road SE, Suite 1200E Atlanta, GA 30339. These affiliates have never offered franchises in any line of business and do not provide any products or services to our franchisees, except PHCAI guarantees our performance under our franchise agreements.
We are one of the leading educational child care companies in the United States. We offer a franchise under which you can establish a facility (a “Facility”) at a single location, which will operate under the “PRIMROSE SCHOOLS and design®” and “PRIMROSE®” marks, and certain other trademarks, trade names, service marks, logotypes, and commercial symbols that we may adopt from time to time (collectively, the “Marks”). Each Facility is identified by the Mark “PRIMROSE SCHOOL” and school location, e.g. “PRIMROSE SCHOOL OF/AT [town or other location].” Facilities operate under a proprietary System (the “System”) for the establishment, development and operation of educational child care services. The System is characterized by the distinctive interior and exterior design, décor, layout and color scheme; the Marks; exclusively designed decorations, signage, furnishings and materials; the PRIMROSE Confidential Manuals (the “Confidential Manuals”); uniform operating methods, procedures and techniques; and other confidential procedures, methods and techniques for inventory and cost controls, record keeping and reporting, personnel management, purchasing, marketing, sales promotions, advertising and public relations. The latest early learning research is incorporated into our exclusive, STEAM integrated Balanced Learning® approach. Our proprietary Balanced Learning® curriculum aligns with leading early childhood education philosophies and best practices and meets all state standards. The Balanced Learning® curriculum provides an environment with an emphasis on literacy instruction, hands-on learning activities, building a foundation for scientific and mathematical thinking, the integration of technology to support learning, and most importantly, on character development, essential life skills, and the development of confident, happy children.
Initial Franchise Fee The initial franchise fee for a Primrose franchise (the “Initial Fee”) for a new franchisee for a new Facility is $80,000. If you are an existing franchisee that meets our qualifications, the Initial Fee for a new Facility will be $70,000. If you are purchasing an existing Facility from an existing franchisee and are approved by us to operate the Facility, the Initial Fee will be 60% of the then-current Initial Fee for existing franchisees purchasing a new Facility. We participate in the International Franchise Association’s VetFran program. If you are a qualifying veteran or member of the U.S. Armed Forces, the Initial Franchise Fee for your first Facility only will be $50,000. We reserve the right to offer to reduce the Initial Franchise Fee under certain circumstances, including as an economic incentive for a franchisee to (i) open a certain location, open a location in a certain market, or take over an existing Facility; (ii) pursue a location under the permanent lease program; or (iii) develop and open several Facilities. The amount of any waiver or reduction will be made on an individual basis based on the circumstances and relevant considerations. The Initial Fee is payable when you sign your Franchise Agreement and, except as otherwise provided in this Item 5, is not refundable. In our last fiscal year, we charged Initial Fees ranging from $42,000 to $80,000. Real Estate Fees Real Estate Affiliate Development Program. Under the Real Estate Development Agreement, your Real Estate Affiliate must pay us a real estate fee (the “Real Estate Fee”) equal to $70,000. The Real Estate Fee is payable in two installments, with a deposit (the “Real Estate Fee Deposit”) equal to $20,000 payable at the time of signing the Real Estate Development Agreement and the remaining $50,000 payable at the Closing. If your Real Estate Affiliate (i) executes a construction contract that we approve with a general contractor within eight weeks after we begin soliciting construction bids and (ii) secures acquisition, construction and permanent equity and debt financing on terms acceptable to us within 45 days after we give written notice requesting that the Real Estate Affiliate begin the process of securing such financing, the remaining Real Estate Fee due at Closing will be reduced to $35,000. Build-to-Suit Program. You will be responsible for paying us a Real Estate Fee of $25,000 upon signing the Franchise Agreement. Permanent Lease Program. Under the Franchise Agreement, you must pay us a Real Estate Fee of $70,000. The Real Estate Fee is payable in two installments, with a Real Estate Fee Deposit equal to $20,000 payable at the time of the signing the Franchise Agreement and the remaining $50,000 payable at the Closing. If you (i) execute a construction contract with a general contractor within eight weeks after we begin soliciting construction bids and (ii) secure acquisition, construction and permanent equity and debt financing on terms acceptable to us within 45 days after we give written notice requesting that you begin the process of securing such financing, the remaining Real Estate Fee due at Closing will be reduced to $35,000. Independent Development Program. If we authorize you to develop the site for your Facility, you will pay us a Real Estate Fee of $25,000. The Real Estate Fee is payable at the time of signing the Franchise Agreement. Variations to Real Estate Fee. We reserve the right to offer to reduce the Real Estate Fee under certain circumstances, including as an economic incentive for a franchisee to (i) open a location in a certain market; (ii) accelerate development of a location; (iii) pursue a location under the permanent lease program; or (iv) develop and open several Facilities. The amount of any waiver or reduction will be made on an individual basis based on the circumstances and relevant considerations. Refundability of Initial Fees and Real Estate Fees The Initial Fee and Real Estate Fee are not refundable, except if (i) we determine that it is unlikely that you will locate a site for your Facility that is suitable and/or economically feasible for the development of a Facility, (ii) after locating a site and entering into a purchase agreement for the site, we determine that you are unable to proceed with the development of the site for any reason, or (iii) we identify one or more sites within the Development Area which meet our criteria for acceptable Facilities and you reject these site(s), we may elect to terminate the Franchise Agreement (and any related Real Estate Development Agreement) and refund (a) the Initial Fee less $20,000 and (b) the Real Estate Fee Deposit less (i) $10,000 due to us for work expended by us and (ii) all out-of-pocket expenses and fees incurred by us in regard to the site or a replacement site. If our out-of-pocket expenses exceed the Initial Fee and Real Estate Fee Deposit, then you must reimburse us for any additional amount. If you request termination, we are not obligated to refund any fees to you and you may be obligated to pay any outstanding costs associated with the development of the site. Training Fees and Opening Support Fees You must also pay us an initial training and opening support services fee (the “Initial Training and Opening Support Fee”) of $35,000, which covers Initial Training and Opening Support (“ITOS”) services that we will provide. ITOS services include our initial training program and new franchise owner orientation (“Initial Training”) for up to two Owners and additional support services during the opening of your Facility. We may charge existing franchisees who meet certain criteria a reduced Initial Training and Opening Support Fee of $18,000. New and existing Franchisees must pay an Initial Training and Opening Support Fee deposit of $5,000 upon signing the Franchise Agreement, with the balance of the Initial Training and Opening Support Fee due at the Closing. We may require or permit additional Owners to attend Initial Training for an additional fee of $3,500 per attendee. The Initial Training and Opening Support Fee and any other training fees paid by you for additional representatives who attend Initial Training are not refundable. These fees are uniform for all new franchisees. If we determine, in our sole discretion, that you have not satisfactorily completed any part of the required training, we have the right to terminate your Franchise Agreement and the Initial Training and Opening Support Fee deposit will be retained by us. Development Expenses For the Real Estate Affiliate Development Program and Permanent Lease Program, you and your Real Estate Affiliate will also be responsible under the Franchise Agreement or Real Estate Development Agreement for reimbursing us for the expenses that we incur related to the identification, development, and construction of the Site and the Facility (the “Development Expenses”), including, without limitation, expenses and fees incurred for engineering, environmental studies, soil samples, architectural fees, legal fees, or any and all other fees that we incur in regard to the identification, investigation, review, and acceptance process and for services rendered on the site. The Development Expenses will be due to us regardless of whether or not the Facility is built or leased on a particular site or whether or not we approve any submitted proposal or plan. In addition, you and your Real Estate Affiliate must pay interest on any amount paid or advanced by us from the date of such payment by us until we are repaid, with such interest to be calculated at the Prime Rate (as published and established by the Wall Street Journal) as the same may change from day to day, plus 2.75 percentage points, with such interest being considered part of the Development Expenses. The Development Expenses are due to us at the Closing. However, any time the Development Expenses exceed $50,000, we may require you or the Real Estate Affiliate to pay immediately to us the accrued Development Expenses within 10 days after the date we send an invoice for such amount. If the Closing does not occur or if we incur additional Development Expenses after Closing, you and your Real Estate Affiliate must pay us the Development Expenses within 10 days after the date we send an invoice for such amount. You and your Real Estate Affiliate or Approved Developer are responsible for all other costs and expenses associated with the development of the Site and the construction of the Facility, which are further described in Item 7. Rent Guarantee In limited and unique circumstances under the Build-to-Suit Program or Permanent Lease Program, we may provide a limited rent guarantee in favor of your independent third-party landlord specifically for the purposes of renting the real property, building, and improvements for the Facility from such party. If we elect to provide the guarantee, you will be required to pay us a non-refundable limited rent guarantee fee equal to 5% of the guarantee amount. You will also be required to sign a Rent Guarantee Addendum to your Franchise Agreement which we will prepare based upon the lease, the landlord, local laws, and the unique circumstances. The terms of your lease between you and your landlord will be negotiated by you and your landlord, but must be approved by us. Option Fees under Option Addendum The total amount of the option fee varies based on the number of Facilities you obtain the option to develop. If you sign an Option Addendum, you must pay an option fee equal to $30,000 for each Facility you obtain the option to develop under the Option Addendum. Each time you exercise an option for a Facility, you must pay us our then-current initial franchise fee minus the portion of the option fee paid for the option on the Facility. If (i) we modify the Option Area as permitted in the Option Addendum and (ii) you reject the modified Option Area or you fail to respond to our notice to you asking if you would accept the modified Option Area, the Option Addendum will terminate and we will refund the portion of the option fee that you have already paid for any additional Facilities for which you have not yet exercised your option as of the date of termination. The option fee is otherwise not refundable. The fee is uniform for all franchisees purchasing franchises under this Disclosure Document. Grand Opening Marketing You must spend a minimum of $40,000 for grand opening advertising, including advertising and promotional activities that you will conduct prior to operating your Facility. We may require you to deposit up to the full $40,000 for grand opening advertising with us at a specified time prior to the date the Facility opens (the “Opening Date”), and we will spend such money on pre-opening marketing on your behalf.
Neither we nor any of our affiliates offer, either directly or indirectly, any financing arrangements except as expressly stated below. In limited and unique circumstances under the Build-to-Suit Program or Permanent Lease Program, we may provide a limited rent guarantee in favor of your third-party landlord specifically for the purposes of renting the real property, building, and improvements for the Facility from such party, as described in Item 5. We may refer you to a preferred lender who meets certain qualifications and has indicated an interest in providing financing to our franchisees. We do not require you to use a preferred lender and have not made any financing arrangements with them. As of the date of this Disclosure Document, we have not derived any revenue from third parties or lenders that provide real estate development or lending services to our franchisees, but in the future we may receive referral fees or other payments from such third parties.
The data below has been generated using financial reports submitted by franchisees. The franchisees entered all data into their financial reports and the franchisees were responsible for categorizing their expenses according to guidelines we provide. We have not audited or verified these financial reports nor have we asked questions of the submitting franchisees to determine whether they are in fact accurate and complete, although we have no information or other reason to believe that they are unreliable. We did not use any reports that were incomplete or for which the information was presented in a manner that prohibited us from applying the information to one of the categories below. The data also does not include franchisees that failed to submit complete financial reports when we prepared this information. For purposes of this Item 19, the “Summary Period” means the 24-month period from January 1, 2017 to December 31, 2018. We consider franchised Facilities with a capacity of less than 145 children to be “Smaller Facilities” and franchised Facilities with a capacity of between 145 and 296 children to be “Larger Facilities.” There is one franchised Facility with a capacity of 418 children, which has not been included, since it is not representative of a typical Facility (the “Excluded Facility”). At the end of our 2018 fiscal year, there were 334 franchised Facilities (including 13 Smaller Facilities, 320 Larger Facilities, and 1 Excluded Facility) that had been in operation throughout the entire Summary Period. This Item 19 does not include data from two franchised Facilities that closed during the Summary Period (neither of which were open for less than one year), since such Facilities were not open for the entire Summary Period. SUMMARY OF ANNUAL REVENUES OF FRANCHISED SCHOOLS DURING THE PERIOD JANUARY 1, 2018 THROUGH DECEMBER 31, 2018 The three tables directly below set forth the historical average annual revenues during the period between January 1, 2018 and December 31, 2018 achieved only by franchised Facilities that were open and operating throughout the entire Summary Period, excluding the Excluded Facility. A total of 334 franchised Facilities, including 13 Smaller Facilities and 320 Larger Facilities, were open and in operation throughout the Summary Period and are represented in the three tables. The Facilities represented in this Item 19 are located in Alabama, Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Maryland, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and Wisconsin. PROFIT AND LOSS STATEMENT FOR FRANCHISED LARGER FACILITIES DURING THE PERIOD JANUARY 1, 2018 THROUGH DECEMBER 31, 2018 The following tables sets forth the historical average profit and loss statements for certain Larger Facilities that were open and operating during the entire Summary Period. There were 320 franchised Larger Facilities that were in operation continuously during the entire Summary Period. Of these 320 Larger Facilities, we received complete and timely financial information for the full Summary Period from 216 Larger Facilities (the “Included Facilities”) (67.5% of all Larger Facilities). Accordingly, the following tables are based solely on data for the Included Facilities. In the tables, the Included Facilities were divided into three groups based on the Gross Revenues of each Included Facility. The “Top Third” includes the Included Facilities with the highest Gross Revenues. The “Middle Third” includes the Included Facilities with Gross Revenues less than the Top Third but higher than the Bottom Third. The “Bottom Third” includes the Included Facilities with the lowest Gross Revenues. Other than in this Item 19, we do not make any additional representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any additional representations either orally or in writing. If you receive any additional financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting Franchise Administration at 3200 Windy Hill Road SE, Suite 1200E, Atlanta, GA 30339 (Tel. 770-529-4004), the Federal Trade Commission, and the appropriate state regulatory agencies.