Hildebrandt Learning Centers has found success in the on-site employer daycare niche.
Bill Grant, CEO of Wilkes-Barre, Pa.-based Hildebrandt Learning Centers, thought he had part of the answer to the nursing shortage of the 1980s: If health institutions provided daycare centers for their workers, they could retain more of their female employees.
At the time, Grant was employed by a food company that served roughly 200 health-care facilities. He thought these relationships could help his employer dovetail its business into providing childcare. Though Grant's boss liked the idea, the company declined. Grant stayed on in his job for a few more months until he could no longer resist the opportunity he saw.
In 1983, Grant started Magic Years Child Care and Learning Centers with money he raised through friends and family. When he first started knocking on CEOs' doors, he didn't get the response he was expecting.
"I figured with the nursing shortage that people were going to jump right on this and say, 'Boy, you've got a great idea," the 51-year-old recalled. "But for the first year or two, I was getting laughed out of CEOs' offices. They were saying that moms should be staying at home."
That kind of old fashioned thinking eventually faded and things started rolling for Magic Years. Grant was even able to take the company public in 1984 and, by 1989, Magic Years was ranked the 50th fastest growing small public company by Inc. But Grant, weary from being beholden to stockholders, sold the company to Children's Discovery Centers in 1989.
Grant didn't stay out of the game for long and opened Hildebrandt Learning Centers in 1991, where he is "CEO, founder and chief bottle washer." The company operates 29 employer-related childcare centers and two adult daycare centers throughout the state of Pennsylvania, enrolling 3,000 children and generating roughly $13 million in revenue annually. Grant boasts that his company has always been profitable and the future looks even more promising with another 20 facilities somewhere in the development pipeline.
The idea of on-site daycare has grown in appeal to employers primarily for two reasons, according to Grant.
"Childcare is an employee-retention tool and it can be used to attract people," he said. "It's a little extra that helps get quality employees. Some people come because of the childcare center."
Other factors have contributed to Hildebrandt's success, including the rise of the two-income family and the fact that more emphasis is being placed on the importance of early childhood learning. The 2001 tax cuts also provided employers with tax incentives to provide childcare.
Hildebrandt's clients include colleges, hospitals, and government agencies, as well as a few publicly-held companies, including XL Insurance and Aventis Pasteur. Grant maintains that his company has very little competition in the employer-related market because of his focus on smaller companies.
"Childcare is basically a mom-and-pop industry. There aren't that many big companies, but those that do exist, in my opinion, tend to focus on the Fortune 500-types of businesses," Grant said. "I like to say that my focus is on the Unfortunate 50,000 -- the middle group of companies with 500 to 1,000 employees."
A company the size that Grant targets usually yields around 100 to 150 children, which translates into the high enrollment rate that makes Hildebrandt profitable. While the industry on average operates in the 70% capacity range, Hildebrandt operates at over 90% of licensed capacity.
Since finding business hasn't been a problem, Hildebrandt is able to focus on improving the quality of its facilities. Currently, 21 of Hildebrandt's centers are accredited by the National Association for the Education of Young Children, a distinction held by less than 10% of all licensed centers because of its stringent review process and annual fees.
"I've been saying that we should strive for high-quality centers in our industry, because parents will be willing to pay for them," said Grant.
Last updated: Apr 18, 2005
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.