Starting a daycare or preschool: in-home vs. center vs. franchise

So, you did it. You’ve decided to turn your passion for children into a career plan. You’re going to open a child care center!

Starting a child care business can be complicated, and there will be many questions to ask and decisions to make as you set up a daycare or preschool. One of the most important choices, and one you should make relatively early, is "what type of child care you want to own?" Franchise vs In-home vs Center. We'll walk you though the pros and cons of each.

There are two basic types of child care facilities: franchised and self-owned.

Within the self-owned category you’ll have to choose between in-home and center-based. The differences between all these options can be drastic. Here are some things to consider when picking the child care business model that’s right for you.

Franchise Preschool / Daycare

Franchise child care centers are like the other types of franchises you may know and love. No, you’re not going to be a McDonald’s®or a Subway®, but the model is similar. With a child care franchise, you’re buying a brand. This can be helpful for a number of reasons:

• Many franchise child care centers have a strong brand identity. People from around the nation may be familiar with your child care center before you even open. Maybe they’ve seen your franchise name in another city. Maybe a set of first-time parents have a niece who attends the same child care center the next state over. This immediate boost in brand recognition can give you the upper-hand.
• Along with a familiar name, a franchise also allows you to tap into one of the most important things for parents: consistency. Franchises typically have a set of rules and standards that all franchisees must follow. These guidelines let parents know what to expect when they enter your facility.
• Opening a franchise can come with significant support initially. The parent company may provide you with invaluable resources, especially when you first start. Franchisors may offer you operational and marketing guidance. They may also provide you with policies and basic disaster plans and procedures. The parent company may even offer sales support during the beginning of your time as an owner. This can make the process easier and less stressful for you.

Being a franchise owner has its advantages, but it’s still your own business. While support may be offered, it’s ultimately up to you to make the business work. Here are some things to keep in mind when considering a franchise:

• Many franchise child care centers require you to teach a specific curriculum. Identifying the type of curriculum you’d like to use is very important when selecting a franchise to join. If you don’t agree with a franchise’s curriculum philosophy, that’s probably not the right one for you.
• Be prepared to put your ego aside. Many franchisors expect you to follow any rules they set. If you prefer to run things your own way, you may be better off going the self-owned route. Remember to consider the amount of restrictions you have when running a franchise.
• Child care franchises also come with a big price tag when it comes to startup costs. Don’t forget about the franchise fees and/or monthly royalties you’ll have to pay as an owner.

Self-Owned Child Care Center

Now, let’s take a look at the pros and cons of opening a self-owned child care center. The major deciding factor for choosing to setup a private preschool or daycare center is where you want to open your business: in your home or in a building you rent or buy? Let’s break down the differences between the two options.

In-Home Child Care

In-home child care centers are exactly what they sound like, a child care you run within your own home. In-home centers can offer a plethora of advantages for an owner and the families that enroll their children there:

• Smaller class sizes can mean more one-on-one interaction between children and their teacher or care provider. Many parents value seeing low teacher-to-student ratios, and may appreciate a nurturing homelike atmosphere.
• As a child care worker or administrator you may be able to spend more time with your own children while also caring for children within your community, which makes an in-home daycare a natural fit.
• An in-home child care business gives you the flexibility to set your own hours, rates, curriculum, and vacation times. Your clients should be made aware of any breaks in availability, but overall, you decide how you want to operate your child care center.
• There can be lower setup costs associated with opening a child care center within your home, compared to a franchise. Franchises often require an investment of thousands of dollars just to open your doors. With a in-home care facility, you can open once your inspections have passed.
• As an in-home child care service, you select your own curriculum philosophy and policies. If you’re passionate about a certain style of teaching or curriculum, you can build your business around that.

Educational Requirements

In most states, in-home child care providers have less stringent licensing requirements. For example, under the state law of Indiana an in-home child care operator is required to have a high school diploma or equivalent while center-based operators must have a college degree plus education in early childhood development. Requirements vary by state, so make sure to check with your state’s child care licensing agency to learn which education requirements apply in your situation.A child care center with staff who participate in regular continuing education courses and training, or have four-year degrees can be more attractive to families in the market for child care. If you choose to run your business in your home, keep this in mind as you consider how you will stay up-to-date on the latest in the early childhood education industry. Many parents actively look for continued education from their child care provider.

Challenges & Considerations

Does this sound like the right option for you?

Here are some challenges to consider as you think about opening an in-home child care business:

• You would likely be your client’s only source of child care. With that in mind, you may want to consider offering a backup provider in case you get sick or take an extended vacation.
• Licensing from start to finish is your responsibility. Make sure you give yourself enough time and set aside enough money to get your home into compliance and to cover the licensing fees. Check with your state’s local home day care requirements for various inspections, square foot requirements per child, and education and program requirements.
• Insurance to protect your home and your business in case of an accident is a must. You can purchase a plan from your existing home insurance provider, or you can be insured by a private company that will offer you additional coverage that might come at a higher price point. Do your homework to ensure you’re adequately covered.
• Keeping kids safe should be your #1 priority, so you’ll need to invest in safety materials, such as baby gates, cabinet locks, outlet covers, fire extinguishers, and first aid equipment, to name a few.
• And don’t forget the fun stuff! Age- and curriculum-appropriate toys, games, books, and educational materials should be well stocked and stored.

Center-Based Child Care

A center-based child care facility comes with its own sets of advantages and drawbacks. Let’s start with the pros:

• As a center owner, you have the chance to separate work from home. Having a separate location for your child care center can help you relax at the end of the day. While having a center won't stop you from staying late to clean up, it will keep you from potentially sliding down the slide thats attached to the playground in your living room after hours.
• Center-based child cares are typically larger than in-home child cares, which means you’ll have a staff to manage. While that has its own challenges (see below), one benefit is that you might have more flexibility to take a sick day without worrying about potentially losing clients. Another benefit of having a staff is that with more teachers comes more supervision, which can help reduce accidents.
• Child care centers typically have fewer late and missed payments than in-home centers. There’s something about having a physical location that encourages parents to pay for your services on time. Using a child care software like tend.ly can also help to remind parents that their bill is due soon. No matter what type of facility you run, setting up a payment schedule and payment terms is important.
• A center-based daycare will offer you more structure. Not only will you need to have physical policies in place, but you will likely need to have stepping stones in place for the children you nurture. For example, your center may offer Kindergarten preparation. This program not only provides you with a daily schedule to follow, but will also provide the children with the knowledge and skills they need to advance academically.

And here are the challenges of center-based child care:

• As mentioned above, you’ll have to hire staff to help educate the kids in your center. According to Childresearch.net, the average turnover rate within the child care industry is 30%. With these high turnover rates, finding and keeping qualified teachers can be a struggle.
• Thought there was a lot to buy to open an in-home child care center? Take the startup costs from the in-home center section and multiply it. In addition to all that, you’ll need feeding stations, changing stations, and play areas. You’ll also need furniture for the front office and a break room space for employees.
• Make sure you have some money set aside to market your new center. While word-of-mouth is a great way to find new clients, you’ll need to do some proactive marketing in the beginning to establish a solid base of customers.
• Of course you’ll need a location! Think about whether you want to buy or rent a building. If you purchase an older building, you’ll likely need to repaint and update basic fixtures. Fencing may need to be installed, and pavement may need to be refinished. You should expect to make a significant investment in your facility. After all, you get what you pay for.

Picking your space for your center-based child care

When selecting your location for your child care center, you have several options. You could build or purchase an existing building. You could also co-locate with another established business or partner with a church or ministry. Each of these options have unique requirements and regulations. Check with your state’s local child care requirements for various inspections, square foot requirements per child, and education and program requirements.

Now that your head is filled with the some of the basic components of the various child care setup options, what all does it mean? The first step is simply deciding what is important to you. Try making a list of all the things that you’re set in stone on and a list of things you’re willing to compromise. Having a clear outline of your own values and philosophies will help guide your decision.You should also think critically about the amount of finances you have available. Starting a child care center is not cheap. Selecting a model that fits within your budget will help to ensure success.Lastly, and perhaps most importantly, talk to the parents around you. If there is a gap in the market or an unmet need for parents, they will likely be ecstatic to tell you about it. Listening to your potential clients’ biggest struggles with child care can help you pick the structure that is best for your community.

Be sure to do your research. This outline is by no means exhaustive, but it’s a great place to start. If you’ve started to lean toward one form of business, dig deeper into your state’s local requirements.

Need more inspiration on your child care journey? Sign up for our newsletter today!