Despite growing its outlets by almost one-third last year, L.A. supplementary education company Mathnasium is still calculating its formula for growth.
The mathcentric after-school tutoring business for K-12 students added 100 locations across North America last year, bringing its total to 431.
The demand for its services, said Chief Executive Peter Markovitz, comes as high school test scores continue to decline even as universities raise the bar on math requirements required for acceptance. The United States ranked 31st in the world in math according to the 2012 Program of International Student Assessment, down six spots from 2009.
The 10-year-old Ladera Heights company has taken advantage of that gap.
“If a student wanted to go to UCLA and study fine arts, that student would need excellent math results to go to that institution,” Markovitz said. “There’s a gap between what schools can do and what universities demand for entry. As a result, the supplemental education industry has been a very fast growing segment.”
The company’s centers had revenue last year of more than $65 million; Mathnasium collected $13 million in franchise royalties. Its reported revenue in 2005 was $2.6 million.
Max McConkey, spokesman for San Francisco-based non-profit education research and consultancy WestEd, said parents are turning to learning centers outside of school because of increased testing.
But they must be willing to pay for it. Mathnasium charges between $225 and $300 a month for a six- to 12-month commitment, plus a $199 registration and testing fee.
This is in response to initiatives like the Common Core State Standards, which California adopted in 2012 and is expected to start during the 2014-15 school year. Common Core calls for more standards and testing, McConkey said, leaving parents believing their children need more help to be successful.
“These are high-stakes tests. In some cases, it’s a matter of graduating,” he said.
Still, McConkey added, it’s difficult to determine whether programs like Mathnasium are helpful because there are too many variables in education research to single out a program’s effectiveness.
“The problem is it’s very difficult in educational research to find the cause and effect of a certain program,” he said. “In general, the learning centers have been successful. They have responded to demand from the market.”
Crowded market
Mathnasium’s recent expansion comes as rivals Sylvan Learning Inc. of Baltimore and Huntington Learning Center Inc. of Oradell, N.J., which tutor students in math, reading and writing, have been in decline the past couple of years. Sylvan’s North American franchise count fell to 668 from 831 over the last two years. Huntington’s outlets fell to 234 from 250 in same period, according to Entrepreneur Magazine.
But another competitor, Japanese import Kumon, is much larger and growing; its North American franchise count has risen by 108 over the last two years to 1,429. Kumon also has more than 23,000 locations overseas.
Markovitz said the difference between Mathnasium and Kumon is his firm’s reliance on teachers. Kumon uses independent drilling with worksheets.
“Kumon de-emphasizes the instructors,” he said. “We heavily emphasize teachers who have certain sensibilities and compassion and a desire to see children succeed. It’s what others have difficulty doing or just avoid.”
Mathnasium’s chief instructional officer, Larry Martinek, a former Los Angeles Unified School District consultant, designed the program, which instructs with oral, written, mental and visual concepts.
Markovitz said that he hopes to reach the 1,500-location benchmark in three years, but conceded that his company is only beginning to mature. About 40 percent of Mathnasium units were built in the last two years.
“When you aspire, like we do, to go from 500 to 1,500 units and have that model go to at least 10,000 internationally, we have to get better at what we do,” he said.
Value proposition
The 54-year-old chief executive started the company with business partner David Ullendorff in 2003 after selling FutureKids Inc., a computer tutoring center three years prior. Markovitz said he was tired of having to create an artificial market with FutureKids.
“I wanted to get away of the model of making our own market like with the computer business,” he said. “There’s a natural demand for math.”
Markovitz is confident that he will hit his expansion goal, in part because Mathnasium franchises are less expensive than most of its competitors. Initial franchise investments range from $86,000 to $136,000. Franchisees pay a $500 monthly royalty plus 10 percent of revenue. Sylvan, by comparison, charges an initial investment of between $151,000 and $267,000; Huntington’s ranges from about $121,000 to $254,000.
Sticking to one subject helps keep costs down, Markovitz said.
One calculation he has made is to avoid financing the ongoing expansion by tapping the public markets. He has ruled out going public, for now, saying the company’s best opportunities would come if the company’s principals held control.
