Head of the Class
Start-up company franchises early childhood education centers, targeting affluent parents.
Will parents pay more for day care if the centers are positioned as schools?
Nothing in business is quite so powerful as a demographic wave read correctly. The wave Joseph Scandone wants to ride -- the entrance of mothers into the labor force -- is still far from cresting. About 56% of all women with children under age six were working in 1988, up from 25% in 1965. Liz Claiborne read it right. So did Kinder-Care. Reebok, too.
And now, so has Joe Scandone -- or so he thinks.
Almost two years ago Scandone started Carousel Systems Inc., a day-care company based in the Philadelphia suburb of King of Prussia, Pa. He plans to build a network to compete with industry leaders Kinder-Care Learning Centers Inc. and La Petite Academy Inc., which run 1,253 and 700 child-care centers, respectively. An old idea, perhaps, but Scandone feels he has a new twist, a second play on the demographic wave that the established companies have ignored.
When Kinder-Care started in 1969, says Scandone, it "developed a product for the emerging working woman who, until then, left her kids with somebody she knew. The mother was a low-level service worker who just needed a place to drop her kids off. Kinder-Care and the other companies that followed delivered safe, secure, sometimes loving care with a hot lunch."
But a good number of today's working mothers, says Scandone, are different, and the existing chains don't serve their needs. They hold high-paying managerial or professional jobs, want less baby-sitting and more emphasis on education, and are willing to pay a premium for it. Though the established chains have responded with educational curricula, Scandone calls these changes little more than window dressing. "We found that parents are looking for nursery-school quality," he says.
Scandone saw that there was plenty of room to maneuver within the industry. Day care remains essentially a mom-and-pop business ringing up annual sales of about $15 billion. Although the national chains grew 200% during the 1980s, they still accounted for only 5% of all child-care centers operating nationwide. Last year only nine chains had as many as 24 centers. The rest were much smaller operations, many of them nonprofit, or run in a provider's home.
Scandone's response is a second-generation child-care company. "We're taking a nursery-school program and fitting it between day-care hours," he says. For Carousel, whose units will operate under the name Goddard School for Early Childhood Education, the major departure from traditional child care will be the hiring of teachers certified in elementary education or early childhood development. Goddard Centers will be licensed by the state not only as child-care centers but also as educational facilities, an unusual status in the industry.
Scandone will charge 10% to 15% more than the national chains, or up to $1,000 more per year in big-city markets. He is targeting affluent parents who might otherwise choose independent centers or a Kinder-Care. "We'll take the cream from the national chains," he predicts.
The other big departure from the norm is that the Goddard Centers will be owned not by a faraway corporate parent, but by franchisees. Parents will be greeted at the door by an owner whose livelihood depends on their satisfaction, not by a manager dispatched from company headquarters. "Parents will feel, touch, and see that Goddard schools are different," promises Scandone.
* * *A long driveway leads to the front door of a stone Cape Cod-style house in Malvern, Pa. It is, like many houses in this affluent Philadelphia suburb, set on a wooded lot blanketed now by snow. A discreet sign outside carries the Goddard name.
Inside the front door is a brown horse that once rode on a carnival carousel. Nearby are the children's cubbyhole mailboxes, filled with handwritten notes from teachers to parents explaining that day's lessons. Kids in one room are singing Christmas carols as their parents listen; in another, a teacher named Jennifer is preparing a midmorning snack. "Whoever is quiet will get their snack first," she announces, and a hush falls over the assembled.
This is the first of Joe Scandone's two child-care centers, and the model on which the franchised centers will be based. Each week, every class in the center focuses on the same subject -- in March, for instance, they'll learn about weather one week, pets another, dinosaurs a third. Each teacher formulates his or her own lesson plan appropriate for the age group, designed to advance four important developmental skills: cognitive, physical, social, and emotional.
Scandone's purchase of the center in 1986 was no attempt to pursue a lifelong passion for child care. He was simply looking for a business to run. He had spent 12 years at the General Accounting Office reviewing a variety of federal initiatives such as Head Start, the early-education program. Then he served for 6 years at General Electric Co.
In 1986 Scandone quit G.E. and began analyzing various business opportunities. The demographic changes that gave rise to the child-care business intrigued him, as did the fragmented nature of the industry. Might there be room for another national chain? By the time he had opened two centers two years later, he had become excited about building a national company. But he didn't know how to do it.
For advice, Scandone sought out Tony Martino, for whom he had worked more than 20 years earlier, when he was a high-school student. Martino had distinguished himself by building three major franchise businesses. In the 1960s he had grown AAMCO into a network of more than 500 transmission-repair shops, with sales of some $100 million. Martino had sold AAMCO and founded MAACO Enterprises, now a chain of 450 shops that specialize in painting and collision work. And he did it a third time in the 1980s, growing SPARKS into a string of auto tune-up centers before selling it.
