Children's Educational Franchises
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Beyond the basics of reading, writing, and arithmetic, children's education has become increasingly viewed as big business. Although for-profit educational franchises accounted for less than 10 percent of the $380 billion spent in the United States on K-12 (kindergarten through twelfth grade) education in 2000, proponents claimed that the "education industry" was poised for explosive growth. Fueling those projections were U.S. demographics—enrollments that were expanding and expected to outstrip even the numbers of the baby boomers in their school days. The market grew by six percent in 2000, and optimists foresaw revenues increasing at 15 to 20 percent in the early twenty-first century. However, according to Eduventures Inc., a Boston-based market research firm, revenues in the K-12 segment only achieved one percent growth in 2002, reaching $48.8 billion. Revenues inched ahead slightly in 2003, reaching $50.1 billion.
A report issued by the Commercialization in Education Research Unit (CERU) at Arizona State University's Education Policy Studies Laboratory revealed that during the 2003-2004 school year, 51 education management organizations (EMOs) operated 463 public schools. Collectively, these institutions served 200,400 students in 28 states and the District of Columbia. The majority (81%) of these institutions were charter schools. By the mid-2000s, virtual schools were an emerging trend. According to the CERU report, four EMOs operated 17 virtual schools in 2003-2004, serving a combined student body of 10,500 students in 11 states.
For-profit charter schools were among the most visible—and controversial—components of the children's educational franchise industry. Likened to health maintenance organizations, these so-called EMOs, or education management organizations, were promoted as a panacea for the ills of an;' ineffective and inefficient national public school system. Education is the last large segment of the economy controlled by the government, and penetration by the private sector accelerated at the century's end as companies went after the largely untapped market of 53 million students enrolled in K-12 and a mini baby boom was anticipated to swell the K-;12 population by an additional two million from 2000 to 2005.
Other industry providers specialized in delivering computers, tutoring, Web-based curricula, textbooks, and other instructional aids to both school districts and individual parents. At-risk youth, often expelled from public schools for drug and weapons violations, formed a challenging and emerging target population for specialized educational franchises.
According to Eduventure's overview titled "The Education Industry: Markets and Opportunities," the industry can be divided into three segments: schools, educational products, and educational services.
The most prominent component of the schools sector was for-profit charter schools—schools that, though publicly funded and tuition-free, can be managed by organizations that seek to generate a profit from their operation. Charter schools operate according to a charter drawn up between the school and its sponsoring organization, usually a local school board or the state. In exchange for freedom from the restrictions that govern other public schools, the charter school must live up to the terms of its charter or its administering organization could lose the contract. For-profits receive the same per-pupil allotment as public schools in a district. After operating costs are deducted from that amount, the company keeps the remainder. Though for-profit charters have been enthusiastically backed by Wall Street investors and many parent groups and school boards, profits have been somewhat elusive for industry players and the very arrangement has drawn heavy criticism, especially from teachers' organizations that argue that profit is inimical to the very idea of an equal opportunity, public education for all American schoolchildren.
Some non-educational corporations also sponsor elementary and secondary public schools. For example, the American Bankers Insurance Group (ABIG) operates a "learning center" for kindergarten through second grade in Miami, Florida. Although the building belongs to ABIG and only children of its employees attend the center, the Dade County public school district provides the books, teachers, furniture, and other supplies. Florida law permits property tax exemptions for corporation-owned buildings that house such educational endeavors. Honeywell ran a similar operation in Clearwater. The Walt Disney Co.'s Celebration School in Celebration, Florida operates in tandem with the Osceola County school district.
The products sector encompasses producers of educational supplies and equipment for classroom and home use such as instructional materials developers Harcourt General Inc. and Scholastic Corp. The Family Education Network develops educational Web sites, including one that permits parents to connect with their children's schools. By 2005, more than 50,000 schools, PTAs, school districts, and other organizations were included on the company's MySchoolOnline.com service. Bigchalk.com, acquired by ProQuest Co. in 2003, develops Web tools for educators of K-12 students.
The services sector contained not only more traditional tutoring endeavors but also specialized providers who serve at-risk students. For example, Community Education Partners operated two campuses for approximately 2,000 students who required extra surveillance in the Houston school district. One opened in 1997 and one in 1998. Security and supervision are much greater than at ordinary district schools and much of the learning that occurs is self-paced, often taking place on computers. Furthermore, teachers are more likely to have backgrounds in corrections work, counseling, or communications than in education. Although all possess at least a Bachelor's degree, only about 15 percent are certified instructors.
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