Fallout from Sylvan Learning Center Closures: Benefit for Palm Coast, Word War Elsewhere

Parents taking their children to three Sylvan Learning Center locations in Volusia County–in Orange City, Port Orange and Ormond Beach–got a rude surprise last week: a note tacked on the tutoring service’s door telling them the places had shut down. Rich and Heidi Koepsel, the franchise operators of the three centers, forwarded inquiries to the Sylvan corporate office in Baltimore.

Some 60 students were enrolled and 40 employees worked at the three centers, according to Rich Koepsel. Parents would pay on average between $2,000 and $4,000 for a typical year’s tutoring. Centers are small businesses with revenue ranging from $300,000 to $1 million, depending on the location and size of the center. Franchise owners get 8.5 percent of revenue in royalties. The abrupt closure of the learning centers in Volusia County (with some parents now looking to the Sylvan center in Palm Coast as an alternative) provides a rare look into the pressures and frailties of franchise operations as the poor economy unravels those operations’ fault lines–and customers, in this case students heading into their final exams, pay the price.

Sylvan Learning Center is a 32-year-old for-profit tutoring company with some 819 locations in the United States (not counting recent closures), one of the dominant companies in a market that includes Learning RX, Huntington Learning Center, and Kumon Learning Centers (one of whose 1,300 locations is located at City Market Place).

Sylvan’s location in Palm Coast is headed by Jo Baker–at 520 Palm Coast Parkway, across from Roma Court.

That center has been there almost seven years. It’s welcoming students from the shuttered Volusia centers and, for those who’ve pre-paid, allowing them to continue their tutoring at the Palm Coast center “to the degree that I can,” Baker said. “Where I have tables that are not filled–I do three students to a teacher, and where I have an open spot at a particular hour I will allow a student in.” But Baker is not able to offer a blanket guarantee. “It’s economically difficult for me also so I can’t incur additional costs as a result. I can’t bring in more teachers and pay more teachers. But usually each hour I have some space.” Sylvan is also offering free online tutoring to the families affected.

In their note to parents in Volusia County, Rich and Heidi Koepsel noted “unforeseen economic conditions” as a reason for the closures. That’s only partly the case, Rich Koepsel said in an interview Wednesday evening. “Actually what drove us to do this was corporate Sylvan,” he said. “The economy played a small role too, but really who put us out of business is corporate Sylvan. It’s that simple. I’m upset about it, I feel terrible for the kids and families and our employees.”

Some time back the Koepsels, who at one point owned eight Sylvan franchises, sold one in Gainesville. They were under the assumption that they would generate some profit that would help underwrite their Volusia locations, which have had half the enrollment they had when the economy was stronger. “Instead,” Koepsel said, “they did a reverse, they let us net little or nothing out of the proceeds. We even offered to set up another payment plan with them and so forth, and they weren’t interested. This has become a pattern with corporate Sylvan.”

That’s not how the company sees it. Responding to questions that were forwarded to the company’s attorneys, Sylvan spokeswoman Rabab Pettitt put the blame squarely and sharply on the Koepsels in what by then looked clearly–from both sides–like jockeying for the better light in a fierce break-up.

“When franchisees, such as the Koepsels, close a center, they are obligated by contract to Sylvan to complete certain closing requirements,” Pettitt said. “Included in the requirements are contacting and informing the students and their families, paying refunds to families who have prepaid, and providing customer information to Sylvan so that we can arrange for the students to continue to be served, if possible. The closing is supposed to be smooth and without incident. The Koepsels did not follow any of the required procedures. They contacted Sylvan by telephone the day before the closing and informed Sylvan that they intended to close their centers the next day. Good franchisees will provide Sylvan with at least 30 to 60 days advance notice of a center closing. We understand that they did not inform their instructors or customers. Good franchisees provide advance notice to customers so that educational programs can be completed and customers transitioned to other tutors.”

Pettitt added: “The abruptness was totally due to the Koepsels. They decided when to close and how they would close. They decided their notice to Sylvan would be by telephone the day before the center closings. They decided they would not even inform the customers or their instructors. What they did was not acceptable to Sylvan. Unfortunately, Sylvan cannot control franchisees who act abruptly, as the Koepsels did.”

Sylvan has no plans to reopen centers in Volusia County run by other franchisees.

All I could say is that, again,” Rich Koepsel said, “Sylvan ‘s assertion that we did not keep them in the loop on this and that we didn’t reach out to them is totally false. The parents were surprised, but again, I would blame that on corporate Sylvan, not on my wife and I because we reached out to corporate Sylvan for months before this was going on, and they knew we were going to close the center that day and they did nothing” to potentially mitigate the consequences.

The language Pettitt used, or transmitted from the company’s lawyers, is almost identical to language used today by Sylvan regarding an identical center closure in Littleton, Colo. The owners of that center–Gene and Jackie Hess–were behind in their payments, according to the company, and gave no advance notice of the closure, though the couple had been franchisees for 25 years and had been ranked in the top 10 performing centers in 2010.

Another irony: Earlier today, Sylvan sent out a PR news release announcing that Forbes magazine ranked Sylvan Learning Center one of the “Top 20 Franchises to Start,” out of 100 it examined. What the release didn’t say is that the ranking is almost six months old: Forbes published it in January. Or that Sylvan ranked 19th (sandwiched between Dunkin Donuts and Meineke Car Care. Nor did it mention who came it at Number 3: Kumon.

Sylvan’s home office in Baltimore provided the following information regarding the closures in Volusia County:

The neighboring Sylvan Learning Centers through which customers can receive Sylvan services are the following:

Palm Coast, FL
520 Palm Coast Parkway Suite 101
Palm Coast, FL 34684
386-246-4150
Franchisee: Jo Baker

Lake Mary, FL
136 N. Fourth Street Suite 1270
Lake Mary, FL 32746
407-688-2017
Franchisee: Kerry Collins

Melbourne, FL
3712 N. Wickham Road Suite A
Melbourne, FL 32934
321-253-3463
Franchisee: Jane Leitch

If families want to speak to the franchisees to obtain refunds or get files, they should contact Rich and Heidi Koepsel:

Rich and Heidi Koepsel
H&R Enterprises, LLC
1318 Coconut Palm circle
Port Orange, FL 32128

Rich and Heidi Koepsel
8650 NE 16th Terrace
Ocala, FL 34479
(321) 217-0485
richheidi@msn.com