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The Right Fit

Shelley Nadler, Legal Director at Bird & Bird looks at structures available to independent schools looking to expand overseas

Posted by Rianna Newman | July 09, 2017 | International

Schools seeking to expand overseas and establish ‘sister’ schools outside of the UK can structure their relationship with their overseas sister school in a variety of different ways, each offering a differing degree of involvement and control. Increased control involves increased responsibility and it is essential that the school takes a long hard look at how much it is able and willing to invest in its sister school as regards time and resources. There are three basic structural options, although technical nuances, local regulatory requirements and differing commercial ambitions mean that within each structure, particularly the franchise and ‘manchise’ models, there is a wide range of possible options which allows schools to tailor things to best suit their individual circumstances. 

A licence: This involves the school committing to a minimal level of involvement in the sister school, which is fully funded by the local partner. Typically it involves the local school, (sometimes an existing establishment) adopting the school’s name, being given a basic curriculum and having access to the school’s head and certain other staff for a fixed number of days a year. In return the school receives an initial fee and a fairly modest ongoing royalty based on the sister school’s tuition fees. The advantage of this structure is that it requires minimal investment of time and resource by the school and generates an ongoing income stream for it. On the downside, it potentially exposes the school to the risk that its reputation will be damaged or diluted by the way in which the sister school is operated. This structure is best used if the local partner is an experienced and successful school operator in the target market in whom the school has significant confidence. 

A franchise: This involves the local partner fully funding the sister school and the school investing far more time and effort into producing a clear and periodically updated statement of the school’s ethos, teaching methods, curriculum and business model (the school guidelines), ensuring that sister school staff are fully trained and apply them. The school will invest time in designing the curriculum for the sister school and recruiting the sister school’s head, deputy head, bursar and academic staff, training them and supporting and policing them on an ongoing basis. There are often staff and student exchanges. In return the school will receive an upfront fee and an ongoing percentage of the sister school’s income. The upside of this approach is that it gives the school far greater control over how the sister school is operated, thereby better protecting its reputation and the quality of its teaching. The downside is that the school is still not totally in control of the way in which the sister school is operated and has to build considerable resources in order to monitor and support the sister school on an ongoing basis. 

A ‘manchise’: This involves the local partner fully funding the sister school and the school granting it a franchise, as above. However, in addition, the school enters into a management agreement with the sister school under which the school’s operating company undertakes to run the sister school on a day-to-day basis in return for an additional management fee. The advantages of this approach is that it gives the school full control of the sister school and another substantial income stream. The downside is that it requires the school to invest a great deal of time and resources in the sister school. 

By adopting one of the structure types detailed in this article, UK independent schools are able to establish sister schools in international markets in a manner which is consonant with their resources and avoids the risk of the school’s reputation being adversely impacted by low standards in the sister school. It is important that schools seek advice from appropriate expert advisors to help them decide which structure is suitable for them. 

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