Franchising THE Future : L.A.-Based Chain of Computer Learning Centers Strikes Right Key With Parents

It took the birth of her son Colin two years ago to show Liz Henry how to realize a lifelong dream of owning her own business.

“Once you have a child, what the education system will do for you becomes a focus,” Henry said. “There are real problems in the public school system. My husband felt as I do that we need to do some supplemental things for our children’s lives that will give them as much of a boost as possible.”

With a knowledge of computers gained while working for a tax processing firm, Henry purchased a Futurekids franchise, joining a group of entrepreneurs and anxious parents who have helped make the Los Angeles-based chain of computer learning centers one of the nation’s fastest-growing franchise concerns.

Futurekids centers provide computer instruction for children ages 3 to 13. The company, founded in a run-down Westwood office building in 1983 with just two Apple-compatible computers and homemade furniture, began franchising in 1989. It has grown to 233 franchises in the United States and abroad.

“There is a universal consensus among parents that children are not getting adequate computer instruction,” said Peter Markovitz, who founded Futurekids with his wife, Leslie, while a film student at USC. “Private enterprise has a role in bridging the gap between what the schools provide and what the children truly need to be prepared for the future.”

What they need, Markovitz contends, is a place where they can learn basic skills such as typing, as well as disk and hardware operation in a structured but fun environment.

By using exciting software, students can also improve their math, reading and thinking skills, he said.

Those needs have been expressed internationally, Markovitz said, even in Japan, where many feel that intense academic pressure is stifling the creativity of young students.

In 1989 Japanese businessman Kyoichi Sakai saw the potential for Futurekids, with its emphasis on self-paced learning and fun, and paid $300,000 for franchise rights there.

The sale allowed Futurekids to embark on an aggressive franchising program that generated 200 U.S. franchises in four years.

The greater Los Angeles area, with 23 centers, remains Futurekids’ largest market, but the firm is expanding to a new country every two months, Markovitz said. In all, the company has a presence in seven countries and has entered into agreements for 49 new foreign locations, and prospective franchisees in four other countries are receiving training, said Markovitz, a native of South Africa.

Markovitz attributes the company’s success to a philosophy that integrates computers with traditional teaching methods.

Futurekids maintains a ratio of one teacher to four children, and students most often work in pairs, either as partners or friendly rivals.

“We learned early that the only way that children are going to absorb the information they need is if we make it palatable for them,” Markovitz said. “So we were obsessive with making it as fun as possible.”

Franchise owners say buying into Futurekids is a good business opportunity because of the growing children’s market. Despite the recession, the market for children’s products and services continues to expand, according to Michael Tierney, public relations manager for the 900-member International Franchise Assn.

The category grew by 3.8% from 1990 to 1991 for franchise-owned establishments and is projected to have grown 14.2% last year, Tierney said. Futurekids and other franchises such as Kansas City, Mo.-based Discovery Zone, which has about 50 indoor playgrounds nationwide, are benefiting from that growth, he said.

Part of the reason for the increased demand comes from the proliferation of two-income families eager to find a worthwhile place to send their children after school, Henry said. “I have a large number of kids in after-school classes or day care and I haven’t even begun to tap this market,” she said.

“The two-income family is the norm now,” said Ernie Delgado, whose family bought a Futurekids in Chino Valley a year and a half ago with the intent of tapping into the “kid country” Chino Hills market. “This was an easy way to make money and give back to the community,” he said.

Yet for many parents, interest in computer education for their children has less to do with convenience than with their assessment of the changing world around them.

“Parents want to have their children introduced to computers as early as possible,” said Georgine Possnack, owner and administrator of Countrywood Elementary School in Chino. Her son Nicholas, 11, has been a student of Delgado’s Futurekids for two years.

Possnack said Delgado’s approach works because he chooses age-appropriate programs for the students and reinforces the material they learn in their academic classes.

But for franchisees such as Larry Tolentino, a former employee of the TRW aerospace firm, finding a niche in less affluent areas such as Carson and San Pedro has proven increasingly difficult during the recession.

The cost of instruction at a Futurekids center averages $50 to $100 a month for four one-hour lessons. Lessons at a school or day care center run $35 to $50. Thus, Futurekids appeals most to parents with extra income to spend on activities such as ballet and horseback riding lessons.

“Although Futurekids has experienced a low level of failure, it is a recessionary-prone concept,” Markovitz said.

To increase their business, franchisees have had to market themselves more creatively. Delgado has begun working with his local parks and recreation department and the YMCA in Chino to increase enrollment.

Tolentino and others complain that Futurekids’ emphasis on international expansion has hurt profitability at home. They say they are desperate for fresh curricula and stronger ties to public school systems.

“Corporate is clearly more interested in starting new franchises than in helping us improve the business,” Tolentino said.

And while the cost to buy a Futurekids franchise--$25,000 for software, hardware and two weeks of training--remains low compared to other franchises, some say the 16% in royalty fees they pay Markovitz is too weighty a chunk of their profits.

Markovitz said he understands the concerns and is trying to address them.

He recently hired Dan Daniel, a former vice president at the software division of Josten’s Corp., to lead a team of national experts in developing new instructional programs.

At Futurekids in Rancho Santa Margarita, Daniel’s arrival is already making a difference, said owner Rich Harrell.

In the next two months, Harrell will use a program devised by Daniel to lead students through a day at the zoo. The students will act as zookeepers, caring for the animals’ every need. Harrell’s staff plans to get into the spirit by dressing in safari clothes and decorating the center like a jungle.

Even with improvements to the curriculum, Markovitz admits that keeping up with changing computer technology has presented an “operational nightmare.” Three years ago the company had to shift to IBM computers after Apple abandoned its IIc line, Futurekids’ mainstay at the time.

Making inroads into public schools has also proven difficult.

The reason may be different philosophies about how computers are best used in educating youngsters. “We believe that if you are teaching students in an academic area using a computer, that learning how to use that computer will come as a byproduct,” said Gracie Jones, an administrator for the information technology division of the Los Angeles Unified School District. In contrast, Futurekids emphasizes learning about how computers operate.

Markovitz said he believes Futurekids may find a niche in public schools teaching teachers how to provide computer instruction.

But Jones said L.A. Unified is already establishing technology centers to do just that for its teachers. A center in Reseda and another in West Lost Angeles are scheduled to open this month, she said.

Even with better-trained teachers, public schools cannot match the attention given at Futurekids, some parents say. At L.A. Unified, schools offer one computer for every 33 students, Jones said, which is the reason, perhaps, why programs such as Futurekids continue to flourish.

Liz Cahn, a magazine publisher who has been bringing her children Briana, 3, and Branden, 5, to Futurekids in Chino Valley every Saturday for more than a year, said she likes the individual attention the children receive.

“I like the fact that they are able to learn at their own pace,” Cahn said. Additionally, she said, because of the varied programs used at the center, “they are not only learning about computers but are learning about the world.”

Growth of Futurekids Los Angeles-based Futurekids has become one of the fastest growing franchise operations. Number of franchises 1989: 6* 1990: 14 1991: 87 1992: 164 1993: 233 * (first year of franchising) Source: Company

Futurekids Goes Global Although most of its franchises are in the United States, the firm has also established a presence abroad.

Country Franchises United States 200 Japan 13 Mexico 10 Canada 4 Indonesia 3 Australia 2 Argentina 1