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Childcare expansion: 5 things to consider when expanding your child care center

Childcare expansion takes specific considerations for success. We recently sat down with Grafton Milne, Co-Founder and Designated Broker of Menlo Group Commercial Real Estate, and dove into these considerations, as well as strategic insights to help child care providers expand while maintaining quality child care.

The American federal government delivered an unprecedented $52 billion in COVID-19 relief funding and subsidies for states to prop up the child care industry during the pandemic, including both childcare expansion grant dollars and stabilization grant dollars, the latter of which grants states flexibility in how they use the funding to address the needs of the child care industry. In particular, the government gave states an opportunity to implement innovative policies and programs to assist families and child care providers. With the end of this relief funding, it’s essential to employ best practices at every stage of child care management, particularly at the expansion stage. Let’s dive into key considerations.

1. Market Research and Demand

Market research is essential when expanding a child care facility or child care services. As Grafton shared, “I always tell people we’ve got to start with market research, whether it’s due diligence, demographic studies, or competitive analysis: you’ve got to do it on the front end. Even things like understanding the traffic patterns and the traffic counts, whether you’re going eastbound or northbound; little things like that can help support demographic studies and competitive market analysis to understand where current competitors are and their current enrollment and child care capacity.”

Market research will vary depending on your location, so if you’re expanding into another market, it’s essential to do your due diligence: child care programs in California may have different rules and regulations around number of children and ratios for caregivers per age groups than a center in New York, for example.

2. Space Requirements

Space requirements are essential to consider for both logistics and legal requirements. As Grafton advises, “You really need to be very intentional with what you’re trying to do from a profitability standpoint.” For example, ensure you’re hiring a professional that knows how to maximize the square footage of the center to eliminate wasted space; you wouldn’t want too much hallway space when you consider that space doesn’t generate revenue. Also, it’s important to consider accessibility, particularly for children and parents with disabilities, and availability of things like water and electricity–critical to having a successful early childhood education center.

Grafton further shares, “We had a client with an absolutely beautiful center, but they had this tiny little playground space, which dramatically affected their licensability of the space and dramatically impacted their revenue and their profit profitability of their center.” It’s essential to fully understand and consider child care needs and think about how a given space reflects that.

A few key considerations to evaluate include the day care space itself (i.e.: classrooms, admin offices, outdoor areas), the availability of utilities, the accessibility of the space, the parking, and the safety.

3. Financial Planning

Without appropriate financial planning, your early learning center may not succeed. Is your center feasible? Have you considered everything? It’s essential to secure the necessary funding to support the center expansion, considering options such as loans, grants, or investors. You must also assess the financial viability of the expansion, including the projected costs, potential revenue, and ROI. Is there a grant program to consider? What are the timelines for grant applications? Do you have funding for the human services you need to run a high-quality child care business?

Another big thing to consider is your option to renew a commercial lease. Some businesses in the child care sector will sign a 5-year lease or a 10-year lease, but then overlook their ability to control their destiny when they do not have options to renew the lease.

4. The Real Estate Landscape

The real estate landscape can be a very interesting piece to the puzzle. One challenge in the industry is that many childcare operators don’t do enough homework on the front end. As Grafton mentioned, “Whether it’s the demographic study, driving the community, getting a sense of the traffic and the community, who’s at the park, etc. Traffic patterns are big for understanding, for example, do you want to be on the east side of the street, because that’s better for pickup drop off, or the northwest side of the street where the turn-in access is located?”

It’s important to avoid common mistakes in this area. Don’t wait too long to begin the negotiating process once you find the right spot. Don’t focus too much on the economics or price when there are more factors to consider. Don’t allow your real estate decisions to dictate your business needs. And finally, don’t try to do it all yourself! Hire the right people with the right expertise to provide the advice and guidance you need.

5. Childcare Success: Maximizing Profits

It’s important to think of the full picture when it comes to expanding your childcare center. Childcare expansion requires simple plans to improve your business, marketing, and operations, with an initial focus on research, research, research!

For more insights into how to find the right location for your childcare center, what top-performing childcare centers do to make their business success, and other best practices to help maximize profits and minimize, mistakes, check out both the webinar, as well as Grafton Milne’s book: Childcare Center Success: How to Maximize Profits and Minimize Mistakes.

Grafton has worked with many different childcare owners and directors throughout the childcare industry. In writing his book, he had the pleasure of working with childcare experts across the country to learn Childcare Center Success. As a result, he provides a unique perspective from a 30,000-foot view of what it takes to run a successful childcare center.