Mathnasium Franchisee Looks To Grow from 39 to 80 Locations, Part 2

This is part 2 of a Q&A profile of 39-unit service franchisee Mo Khalil. Find part 1 here. The full profile will appear in the Q4 issue of Multi-Unit Franchisee magazine in November.

Name: Mo Khalil

Title: Executive director and multi-unit owner

Company: Khalil Ventures

Units: 39

Age: 44

Family: Married to Julie and raising two boys, Alexander and Aidan

Years in franchising: 20

Years in current position: 12

COVID-19

How did Covid-19 affect your business? It was a complete shock to our system, as we’re a mostly in-person concept that is built on our relationships with our students. When that was taken away, my first thought was that our entire business would be gone. Fortunately, at the time, Mathnasium was in a trial process of releasing an online platform for virtual learning sessions. We quickly converted our entire student base to online in less than a week. It was a huge accomplishment that couldn’t have been done without our team. However, we did lose a significant amount of business because of the pandemic’s economic impact on many families who were faced with hardships.

How have you responded? We were nimble and reacted very quickly. We still maintain 25% of our student base online. Today, we’re well above our 2019 sales.

What changes do you think will be permanent? The reliance of our online capabilities will remain as part of our value offering. It is convenient for a subset of students. It’s not for everyone, but a lot of families rely on our online learning to support their ever-changing schedules.

BOTTOM LINE

Annual revenue: $19 million.

2022 goals: In 2021, we did $15 million. Our forecasted goal for this year will be to reach $19 million.

Growth meter: How do you measure your growth? We compare it to the year before, the month before, and our rolling 12-month.

Vision meter: Where do you want to be in 5 years? 10 years? We’re looking to own 65 centers in 5 years. In 10, we could reach 80. Another goal is to own 25% of the real estate our locations are in.

Do you have brands in different segments? Why/why not? No, we do not. I’m in a great industry whose future is very stable with steady growth. We’ve only scratched the surface in our industry. Learning centers as a whole are a total of 10% of industry spend, so the growth opportunity is incredible.

How is the economy in your regions affecting you, your employees, your customers? Overall, it’s the rising costs of wages, rent, and supplies. In Florida, the majority of our centers will face the challenge of the minimum wage getting to $15 over the next couple of years. We’re trying to stay ahead of that. For our customers, it’s the rising cost of our service. It does price out or exclude some price-sensitive families, which is never what we want. We want to serve as many people as possible, so we do offer financial assistance for some of our families. We’re doing all that we can to serve as many students as we can.

Are you experiencing economic growth in your market? Yes, we’re concentrated in two of the fastest growing states: Florida and Texas.

How do changes in the economy affect the way you do business? It has not, as we insist on creating as much value for our families as possible. Our service is the best, and the value we provide families will always remain our top priority. We’ve rebounded completely from our 2019–2020 losses. That could be because we’re in two of the fastest-growing states, so we’re not having the same financial challenges as other states and areas.

How do you forecast for your business? It is a huge challenge to forecast for our business. We know and look at our business cycles and historical trends with back-to-school, holidays, end of the year, and summertime. We use our historical data and measure based on where we are in the year to understand the seasonality of the business.

What are the best sources for capital expansion? We rely on our banking relationships.

Experience with private equity, local banks, national banks, other institutions? Why/why not? We have great relationships with local banks and use them for real estate expansion and acquisitions for larger franchisees.

What are you doing to take care of your employees? We offer an extensive benefit package that includes unlimited PTO, salary bonuses, health benefits, and a 401(k) plan. We are currently creating an equity program where employees can invest in the company and the future.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We’ve had to raise our prices, but we also continue to invest in our people to attract and retain the great ones with benefits, bonuses, and even future investment opportunities.

What laws and regulations are affecting your business and how are you dealing with them? The main challenge is the rising minimum wage.

How do you reward/recognize top-performing employees? With annual awards that we use to recognize our top performers, and with financial bonuses, constant praise, and feedback.

What kind of exit strategy do you have in place? Right now, there is no exit strategy in sight, but, should the time arise, my only real option with the size of our business would be private equity.