THE PRE-SCHOOL PROPOSAL

Prepared for
Acumen Venture Capitalist Fund
New Delhi, 110025

Prepared by
Neera Nair

October 23, 2018

 Table of Contents

Executive Summary
Table of Contents
1. Introduction
2. Findings
2.1 Mega Environment
2.2 Task Environment
2.2.1 Initial Capital Requirement
2.2.2 Feasibility Factors
2.2.3 Standard Operating Procedures
2.2.4 Competition
2.2.5 Labor Supply
3. Conclusions and Recommendations
References
Appendix
Executive Summary

This study investigates whether the opening of a pre-school in the Ghaziabad area by being a
franchise of a reputed pre-school brand is a viable option for the client. The study conducts an
analysis of both the Mega and Task environments, and is based on information collected from a
variety of sources: industry research reports, local government reports, and census data. The
conclusion drawn from the analysis is that in the present environment it would benefit our client
to start a franchise unit of a reputed pre-school brand. A number of recommendations are made
concerning the establishing of the proposed operation including, the need to focus on branding,
high quality, and to target the young and aspiring customer base focused on quality education for
their children. In addition it is also emphasized in the recommendations that setting up this project
will require a number of dedicated services.

The purpose of this report is to provide preliminary information to the client about: i) the overall
viability of establishing a pre-school unit in the Ghaziabad area; and ii) key management and
marketing issues that need to be considered in ensuring the success and profitability of any
proposed new outlet.
1. Introduction
This report considers the viability of the business in broad management and marketing terms only;
it does not provide a comprehensive financial analysis of the proposed expansion.
In the investigation of these issues, two analytical concepts have been used, namely Mega
Environment and Task Environment. The Mega Environment is concerned with the external
environment in which a business operates; the Task Environment considers conditions that a
business faces in its immediate environment. Data for the study came from a range of sources
related to both these environments including: industry research reports, local government reports,
and census data.
The report is divided into two main sections: a Findings section, which presents information about
both environments as they relate to a pre-school unit; and a Recommendations section which
provides specific suggestions for the running of the proposed business.

2. Findings
The viability of establishing a play school unit under a reputed brand name was considered in
relation to two broad areas the mega environment and the task environment. Each of these areas is
discussed below.

2.1 Mega Environment

Technopak Report (2012, pp. 1-3) states that: as India moves ahead on the path of globalization,
it needs to overhaul its education system to meet the future demands. Educational infrastructure.
The size of our educational infrastructure can be assessed by the private and public spends on
education. The Indian private spend on education in 2011 was estimated to be over USD 60 billion
across all segments (Schooling, Higher Education, Vocational and Ancillary) or approximately
equal to 3% of our GDP. During the financial year 2011-12, the Central Government allocated
USD 8 billion to the Department of School Education and Literacy itself, which is the main
department dealing with primary education in India. Yet, there exists a huge demand and supply
gap, which requires a sizable and sustainable public and private investment. Exhibit 2 below
provides an overview of the current Indian educational infrastructure and the need gap. The Indian
Education sector can be segmented under four broad heads, namely, Schooling, Higher Education,
Vocational Education & Skill Development and Ancillary. The Exhibit 3 below provides an
overview of the various education segments and their respective sub-segments. The schooling
segment covers the largest population of our society as compared to any other form of education.
This segment is also the largest education segment valued at USD 44 billion in 2011 and is
expected to reach USD 144 bn. by the year 2020. The market size of its various sub-segments with
growth rates and projections for the year 2020 is mentioned in Exhibit 4.
The pre-school business in India is in a very high growth path, around 36% Y-O-Y at the moment,
and the organized segment accounts for only 17% of this market. The market size in India as per
available data is more than Rs. 10,000/- crores already, spread across approx. 25000 schools.

2.2 Task Environment

A preschool is an educational establishment offering early childhood education to children

between the ages of two to five years, prior to the commencement of compulsory education at
primary school. To give a brief idea, the concept of pre-school business is developing a curriculum
of one’s own and promoting the same through a brand by a franchise system of operations which
is a proven model adopted by renowned houses like Kidzee, Eurokids, Kangaroo Kids, Tree House
etc. The areas of development that preschool education covers vary. However, the following main
themes are typically offered:

 Communication, (including sign language), talking and listening

 Understanding of environment
 Creative and aesthetic development
 Numerical awareness
 Motor controls
 Teamwork
 Self-help skills
 Social skills
 Scientific thinking
 Literacy
2.2.1 Initial Capital Requirement

The initial Capital requirement for this venture is estimated to be around Rs. 90 Lacs spread across
a year approximately in the beginning phase.
2.2.2 Feasibility Factors
Entry barriers to this business do not seem to be high, and the franchising model allows one to
share expenses, knowledge, experience, brand image, technical expertise commonly. This is
essentially a long-term business format driven by a business philosophy with a mission and vision
to evolve as a reputed company operating profitably with a nationally recognized Brand.
Expertise in content development and research, financial planning, effective training, superior
support infrastructure, operations control along with smart marketing will be the key factors to
success.
The business operates in cash terms only with a unique feature of perpetual royalty income coming
from franchise revenues. Therefore it makes it a time-bound number game. Even if the client
concentrates initially on a small area like Ghaziabad, it can easily expand into tier 2 and tier 3
cities where demand is increasing. A regional expansion plan can be taken up after the first year
of operation. The business viability model for the franchise will be made with an ROI achievable
in 2 years. However, franchisee fees and student fees vary depending on the premium of the center
location.
2.2.3 Standard operating Procedures

For this business, the parent company develops an education program, develops exclusive designs
for learning aids, furniture and fixtures, theme, effective promotional material, advertising inputs,
color schemes, identity and finally training to franchise partners, which collectively constitute the
support system which the parent company offers to the franchisee. The parent company aims to
develop its own exclusive designs for exterior and interior development of franchise centers to
ensure similar ambiance, supplies and infrastructure in all.

A franchisee is appointed on the basis of the following:

1. Franchising fees, which is a brand-sharing and hand-holding fees, to be paid on a

Lump-sum basis (initially say Rs. 1 to 2 lacs) for 3 years.
2. Equipment cost for material supplies and hardware. (say about Rs. 4 lacs)
3. Exterior and interior development (say around Rs. 2 lacs)

Once the above formalities are over, the franchisee is trained and the student enrolment process
starts. The parent company will be entitled to claim a royalty of 15% to 20 % initially on student
fees. A standard franchise center will operate on the basis of 60-80 students with annual fees of
25000-30000 for each student.
2.2.4 Competition
At the moment, there are around 12 national players operating nationally and around 20 regional
players in this segment across the country, making the scope immense. Some big corporate houses
have entered the segment with a view to grow nationally, and eventually leveraging their brands
into secondary and high school business.
Although the market is still not cluttered, new players are seen to be entering in a rapid scale. One
of the main reasons for this is the high propensity of parents to spend on quality pre-primary
education these days across the line.

2.2.5 Labor Supply

To take advantage of these opportunities, any prospective new outlet would need to achieve a good
match between the cultural and educational background of prospective staff and the ethnic profile
of the area. The growing young and aspiring middle-class composition of Ghaziabad area is likely
to be a suitable pool for necessary talent required in this venture. Support for this move can also
come from facilitating the process of enabling the hired staff to undertake Certificate/ Diploma
training in this specialized area.
3. Conclusions and Recommendations
The main question considered in this study was whether the establishing of a pre-school franchise
unit of a reputed brand in the Ghaziabad area is a viable option for the client. Based on the
preceding analysis, both of the mega and task environments, the conclusion drawn is that such an
expansion of the business is likely to be a sound investment. The study also considered a range of
marketing and management issues that would need to be considered to ensure the success of the
business. Accordingly, the following recommendations are made:
 The target customer base should aspirational middle and also upper-middle class
population with small children in the family, with emphasis on the value and brand the
unit brings to the area.
 The unit should take account of the multicultural composition of the area especially the
growing number of residents from Asian backgrounds
 This model also requires the following dedicated services:

1. A tie-up with a legal firm for agreements, ensuring royalties and protection of copy-
rights.
2. A tie-up with a design house for development and execution all collaterals.
3. A tie-up with an Accounting firm for ERP back-up and Accounts.
4. A tie-up with an ITES firm for website development and maintenance, database
management, CRM and networking.
5. This being a 'reputation' business, it would require an exclusive office space for client
handling as well as for training.
6. Hiring of Key manpower resources such as
a. Program/Content developer.
b. Trainer/Counsellors
c. Sales Executives
d. General office staff.

References

Appendix