An “Essential Service” in a Recession Resistant Sector

While many other service businesses, e.g. F&B, retail or hospitality, faced a dramatic reduction in revenue during the Circuit Breaker months, the early childhood industry has been fortunate to emerged relatively unscathed. Preschools were still able to receive relatively steady and stable revenue streams even during the Circuit Breaker period. This is because preschools were allowed to remain open to service parents who were working in “essential services”. For other parents, they also continued to pay monthly school fees even as school attendance was restricted and preschools launched remote Home-Based Learning initiatives. This market dynamic, coupled with additional government financial support schemes available only to preschool operators, allows the preschool to be financially sound even when children are not physically attending school, making the preschool sector one of the most recession-resistant service sectors in Singapore.

A Faster Recovery than Global Equities

Many are aware of the V-shaped recovery in the global equities market so far in 2020. On 23 March 2020, the S&P 500 index fell 34% from its February highs just a month earlier, and it was not until 5 months later on 18 August 2020 that the S&P 500 index recovered to its February level. This period was already lauded by many analysts as the shortest bear market in Wall Street history.

What may surprise many observers however, is that there is a similar trend in preschool enrolment numbers, except the recovery is much faster. Compared against March 2020 enrolment numbers, there was a small fall in enrolment by around 5-10% during the Circuit Breaker period as a few parents opted to withdraw their children given new workplace logistics or caretaking arrangements available. By the middle of June 2020 after the Circuit Breaker period ended, preschool enrolment was already back at the levels seen in March 2020, and by July 2020, the numbers have made all-time highs, trending upwards as more parents adapt to the “new normal” and send their children back to preschools under enhanced health and safe distancing measures.

An Attractive Business Model with Strong Support from the Franchisor

The strong demand for childcare offerings among Singaporean parents has enabled a financially rewarding and attractive business model for our Franchisees. Even during the pandemic and the Circuit Breaker period, extensive government grants and support schemes meant that childcare operators were able to benefit and remain viable even when other businesses were suffering.  Our Franchisees have also received special goodwill discounts from the Franchisor during the Circuit Breaker period, which included waivers of franchise royalties and management fees, thereby helping to boost the financial position of preschools. This was done as we value each Franchisee partner and remain committed to working closely as a team to overcome any challenges, and emerge stronger together.

Franchisees will be happy to note that the Franchisor has also recently won the title of “Established Franchisor” under the Franchising & Licensing Awards 2022! The Franchisor, with its strong commitment towards being a quality franchise organization, will be able to support Franchisees in their business growth journey and path towards profitability and purpose.