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 are still able to receive relatively steady and stable revenue streams even during the Circuit Breaker period. This is because preschools are allowed to remain open to service parents who are working in “essential services”. For other parents, they also continue to pay monthly school fees even as school attendance is restricted and preschools launch 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.

A Fuss-Free Ownership Model with Strong Support from the Franchisor

The onset of Covid-19 and the Circuit Breaker measures have necessitated the introduction of many new initiatives and operational standards within the preschools, in order to keep children and staff safe. One key benefit of our unique Franchise Management Model is that the owners of our preschool franchises do not need to do any heavy-lifting during this busy transition period, as these tasks are managed by the Franchisor on their behalf. This minimizes the worry that a particular preschool may not be implementing the revised guidelines correctly, and provides assurance of strict compliance to the government regulations.

In addition, apart from the various government support schemes announced via the Resilience, Solidarity and Fortitude Budgets, our Franchisees have also been able to receive special goodwill discounts from the Franchisor during the Circuit Breaker period. These discounts, offered voluntarily by the Franchisor, 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.