Hot Real Estate Market Favors Kumon Centers Kumon Centers fill commercial real estate niche in challenging market.

High rent and low inventory within the commercial real estate market is a common complaint among small business owners seeking retail space in 2023.

Many of the same brands are pursuing the same space, and development – delayed by the pandemic – has yet to catch up to the growing demand in a post-pandemic world. Less space means more competition among retailers. More competition translates to higher rents in key markets. And increased construction costs due to inflation, combined with higher interest rates, makes for a perfect commercial real estate storm, of sorts.

"The retail sector remained more robust post than pre-pandemic," according to the National Association of Realtors' August report on commercial real estate. "The vacancy rate has been unchanged for the last four quarters at 4.2%, the lowest among all CRE (commercial real estate) sectors. With inflation easing further and interest rates to stabilize later this year, the demand for retail space is expected to remain robust."

In a normal market, new construction would keep up with increased demand. That changed during the pandemic amid shutdowns, supply chain issues and labor shortages. Now, those disruptors are continuing to challenge the market.

While that shortage is particularly frustrating for those in the franchise industry who are competing for the same space, franchises like Kumon offer franchisees advantages.

Competing in the market.

Kumon centers follow a similar design – a minimum of 1,000 square feet of retail space on the first floor of a center that has signage capability.

While it might not sound like much for a requirement, that profile mirrors that of other small businesses looking for the same space. And in today's market, it's competitive whether you're seeking space in the U.S. or Canada.

A benefit to Kumon Instructors is that they are competing on a level playing field when it comes to paying market rates on a lease. To help its potential franchisees, Kumon recommends working with a commercial broker and provides them with the contact information of those in their area. The company's field consultants are also available to ride with the potential franchisees to find potential center sites, depending on the market. Ultimately, a center's site must be approved by Kumon's area development specialists.

Kumon also offers its franchisees a number of incentives to help reduce overall costs for new business owners.

"We know starting a business can be costly," said John Collins, Kumon's vice president for network center development. "I think if you're going into it, you already know that. It's an investment in your success. The incentives we offer reflect our acknowledgement of the importance of that investment. We want to see our Instructors succeed."

Collins added: "We work with our Instructors to find alternative solutions if all of the criteria can't initially be met, given the challenges in the current commercial real estate market. We know this is a challenging market. We want and need to be flexible."

For the last four years, Kumon has ranked No. 1 on Entrepreneur's Top Low-Cost Franchises ranking for franchises that cost less than $100,000. Typical investments start at less than $65,000. Instructors opening new centers are eligible to receive up to $37,100 in incentives in the U.S. and $31,600 in Canada to help cover the costs of a new Center, like tables, chairs, paint, carpet and signage.

The Kumon advantage.

Developers aren't looking for just anyone to take up available space in their shopping centers. They have an investment in the property and want their tenants to be successful. That means they are also cognizant of what it takes to balance the retail environment for a given market.

Education franchises like Kumon, which have gained in popularity since 2020, are an attractive prospect for commercial real estate management companies seeking to lease space in suburban shopping centers that cater to families in the surrounding areas.

Gary Rappaport, who is the founder and CEO of Rappaport, a Virginia-based commercial real estate management company, recently cited Kumon as an attractive tenant, noting the traffic and business they drive to retailers within the same center, in an industry article on ShoppingCenters.com.

Kumon centers bring parents to the shopping center, who often cross-shop at other stores while waiting to pick up their kids from the educational tenant in the center, he noted in the story.

Rappaport's company currently has leases with Kumon centers in Davis Ford Crossing, Potomac Festival I, Potomac Promenade, Bristow Center, Brockbridge and Clock Tower Center in Virginia.

"Generally, affluent parents drive their kids to special activities after school," he added. "On top of trips to sports practices and games or music lessons, they are also headed to their local after-school tutoring center. In many cases, these children come from excellent schools, where they are typically doing well, but their parents want them to excel."

To learn if the Kumon Franchise opportunity is right for you, visit kumonfranchise.com.