Kinder-care's Standard Formula For Success

Tweet

The Equitable Life Assurance Society started Kinder-Care off on another venture, Kindustry, which is now a payroll deduction plan for Equitable employees. Parents who participate can take their children to the Kinder-Care center of their choice for 20% off. The attraction of Kindustry to employers and employees is obvious: A child care fringe benefit helps reduce employee turnover, and the parents receive a discount, a convenient payroll deduction, and the standard tax deduction for child care expenses.

Since Equitable, other companies have become interested in the Kindustry plan. Disney World now has a Kinder-Care center in Orlando for both employees' and visitors' children. It will accommodate 165 children and is open seven days a week, 16 hours a day.

Another offshoot is Kinder-Care Merchandising Inc. This company sells a variety of toys -- duplicates of those used in the centers -- plus T-shirts, scrapbooks, and tote bags. The retail outlets are the Kinder-Care centers.

In June 1978, Mendel and Grassgreen formed the Kinder-Care Life Insurance Co. "We'd been sitting around brain-storming about the services we could provide," Grassgreen recalls. "The idea of life insurance came up. We didn't even know if it was legal." It was. Today, Kinder-Care Life Insurance has $60 million in children's insurance in force and is increasing at a rate of about $1 million a week. Because the insurance is sold in the centers themselves, where the customers come to the salespeople, the insurance company has little overhead and is able to offer competitive rates and to pick up the first year's premium. "We expect Kinder Life to be a major contributor to our earnings in the future," says Grassgreen. It added $125,000 to net earnings in fiscal 1980.

Low overhead costs are another major factor in Kinder-Care's continuing success.The centers are staffed mainly by women who are willing to work at the minimum wage. "Child care is pleasant work," says Grassgreen. "The people who work in the centers like to be with children. They receive a strong sense of self-esteem from their work."

"There's no comparison between the caliber of workers in fast food and the people who work for Kinder-Care," adds vice-president Montgomery. "In fast food people are in it just for the money. In child care there are other rewards."

Still, the company suffers high turn-over among employees. While that won't change (pregnancy and spouse transfer are the major causes for resignations), the company's growth has allowed Kinder-Care to reward ambitious employees with advancement in the organization.

As Kinder-Care grew it became impossible to manage all the centers from headquarters in Montgomery, Ala. "We had to start putting supervisors out in the field," says Grassgreen. The regionalization of Kinder-Care has center directors reporting to area directors who report to regional directors. The center directors select their own staffs. Quality control is managed by a welter of weekly reports from each center on everything from tuition checks to maintenance.

The beauty of regionalization is that it allows for employee advancement, says Grassgreen. Some employees have stepped up to positions that pay as much as $40,000. "We don't want to create a bureaucracy," says Gene Montgomery, "but systems help you manage your good people more effectively. We need training programs now, particularly at the management level. We need specific salary guidelines and performance appraisals."

Montgomery has decentralized Kinder-Care still further. "I had 14 regional managers, each responsible for 20 to 50 centers, reporting to me," he says. "That's too many. I couldn't deal effectively with 14 different managers. So we went to zone management." Each zone has managers of operations, marketing, personnel and training, and construction and maintenance. Those managers report to a zone director, who reports to Montgomery.

Perry Mendel thinks Kinder-Care is today where McDonald's stood a decade ago. The trends suggest that by 1990, around 60% of the female population over 16, some 52 million women, will be working outside the home -- an increase of 11.6 million over the number of women in the work force in 1979. Even though the average number of children per family has been declining, the number of women of childbearing age will increase through the '80s.

Kinder-Care's growth has come during a decade when resistance to child care as an industry has been fading fast. Once that resistance disappears, as it seems likely to do, Kinder-Care's growth will probably be even more dramatic. Today, even though it has half the market for national child-care service chains, that market represents only 5% of the 19,000 licensed child-care centers in the country.

"Now we see the opportunity to grow and increase our income simply by letting people know we're here," says Perry Mendel.

KINDER-CARE LEARNING CENTERS:

THE BUSINESS OF CHILD CARE PAYS OFF

Year 1977 1978 1979 1980 1981

(year ending) (6/3) (6/2) (6/1) (5/30) (5/29)

Revenues ($ mil.) 12.8 19.7 28.6 56.6 87.0

Net earnings ($ mil.) .7 1.3 2.2 3.4 4.3

Current assets ($ mil.) 2.0 2.9 9.4 8.5 16.3

Current liabilities ($ mil.) 1.4 1.6 2.3 5.2 7.6

Working capital ($ mil.) .7 1.3 7.1 3.3 8.7

Current ratio 1.5 1.8 4.1 1.6 2.2

Long-term debt ($ mil.) 6.0 10.2 19.6 59.2 68.2

Average return on equity (%) 27.0 35.0 34.0 26.0 16.0

 PREV  1 | 2 | 3