Ann: Appendix 4E and 30 June 2017 Annual Report, page-16

@mal85

"What I am however curious about from anyone who knows- what are the terms for franchisees/ and how does it compare to Kumon"

Kumon has slightly lower start up costs, but also provides less support. 40-45% of student fees are paid to Kumon as royalties. This compares with 10-20% of revenue for KME. Yet, that 20% comes with full back-office support. Kumon lacks this service, I believe.

“For KME to really take off it has to be attractive to both franchise owners as well as students.”

Given KME's potential owners are (by restriction) certified teachers, I believe the higher professional standards held by Kip McGrath will almost unanimously attract teachers to this business over Kumon. This professional requirement admittedly limits the pool of candidates for owning a franchise, yet almost guarantees that qualified teachers would opt for KME, if indeed wishing to open a franchise. So it's a smaller, yet somewhat captive market of potential franchisees.

In my mind, the biggest competitive threat for KME may not be Kumon or another franchise, but instead a platform business model like Uber. One called Scooter Tutor has already been set up - https://www.scootertutor.com.au/

Likewise, a non-government initiated tutor accreditation system was recently established in Australia and this lends further support to such a system - with parents and students being able to ascertain the credentials of available tutors, as well as working with children checks all online.

In saying this, I really think there is room for each of these franchises and models. Unlike a pizza or hardware franchise, tutoring is a business that caters for multiple unique needs. KME's specialty is in systematically identifying primary and secondary students learning needs and providing remedial support by qualified teachers which is aligned to the given state or national school curriculum. Despite the multitude of tutoring businesses out there, I'm yet to find one which neatly fits this niche on a global scale.