Desire to lift kids gives tutoring market an 'A'

Susan Lim Editor • Profile • E-mail

SEATTLE - Jeannie Ianelli’s son was failing fourth-grade math and she was desperate to find a solution.

Alex was the math whiz in her son’s class and when she found herself sitting next to his mom at a baseball game, she asked for help. The answer turned out to be Kumon, an after-school learning center that helps students master math and reading skills.

More than 10 years later Ianelli, now a mother of four, is the owner of two Kumon centers in Seattle with a combined enrollment of nearly 400 students, who each pay tuition of about $100 a month.

The program is just one of the many players in the $3.5 billion tutoring industry, which is growing rapidly as more parents spend money to help their kids catch up -- or give them an  edge in the classroom.

"Parents want to do all that they can to help their children be the best that they can," said Mary Foster, president of Sylvan Learning Centers, a leader in the field and rival to Kumon. "I think that has really motivated parents to buy, in our case, services to help their children."

Growth factors
The tough competition for college admissions is just one reason parents are digging deeper into their pockets. College enrollment rates for 18- to 24-year-olds have increased from 26 percent in 1980 to 38 percent in 2003, according to federal statistics. That makes it tougher than ever to grab freshman spots even at many public universities.

Just applying for colleges requires essays, recommendations, SAT scores and extracurricular activities, but high-school grades are the primary factor in admissions, according to the Princeton Review, a company that focuses on helping students get into college. Being class president or the school’s newspaper editor is not enough for colleges without solid grades.

And although the federal law has created a new opportunity for private tutoring companies to offer their services to lower-income children, paid for by federal tax dollars, parents still pay for about two-thirds of such tutoring services, according to Mark Jackson, senior analyst at Eduventures, a research firm for the education market.

Last week Educate Inc., the parent company of Sylvan Learning Centers, reported its revenues for the first half of 2005 increased 19 percent to $201.3 million, driven mainly by the growth in its consumer segment. Revenues for its Learning Centers totaled $123.5 million, up 32 percent from the same period last year.

Kumon, the other leading provider, is privately held and does not release financial figures.

To keep up with rising consumer demand, companies like Kumon and Sylvan are opening new centers at a rapid clip and launching new services, including online tutoring.

Location, location, location
In an interview last year, Educate’s chief executive officer R. Christopher Hoehn-Saric said he wanted the company to expand as Starbucks did in the coffee business.

"This is a real estate play right now — it’s location, location, location," said Jackson, the analyst. "These tutoring programs are face-to-face, out-of-the-home ventures for these companies. It's about easy access."

So far this year Sylvan has opened 41 new locations, bringing its total to 1,103 centers, and it plans to add 15 to 20 more in the second half of 2005.

And as long as they see demand, Sylvan will keep opening more centers.

"We’ve gotten smarter about listening to consumers," said Foster, Sylvan's president. "Convenience is a major trend for consumers. They want not just education or tutoring services to be convenient, but they want more convenience in life. So if things are easier to use, more conveniently located, they like that."

Kumon added 162 U.S. locations in the past year and currently has 1,352 franchises nationwide.

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