The Year-Over-Year Drop: What Kiddie Academy’s 2026 FDD Reveals That Last Year’s Filing Didn’t
Every aggregator publishes the latest snapshot. Nobody compares it to last year’s. The 2026 FDD tells a materially different story than the 2025 filing: the investment floor rose 46%, mature gross profit fell $25,584, and ramping gross profit collapsed 46%.
Two Filings, Two Stories
Kiddie Academy Domestic Franchising, LLC files an updated Franchise Disclosure Document each year, as required by the FTC Franchise Rule. Each filing contains Item 7 (estimated initial investment) and Item 19 (financial performance representations) based on the most recently completed fiscal year.
The 2025 FDD reported FY2024 data. The 2026 FDD reports FY2025 data. If you read only the latest filing, you see a snapshot. If you read both, you see a trend — and it is not the trend the system’s 19-unit growth would suggest.
Here is what changed.
| Metric | 2025 FDD (FY2024) | 2026 FDD (FY2025) | Change |
|---|---|---|---|
| Investment range (leased) | $405,000–$915,000 | $590,000–$1,010,000 | +$185K low end |
| Mature avg gross profit | $559,914 (25.5%) | $534,330 (24.4%) | −$25,584 (−1.1pp) |
| Mature median gross profit | $495,797 | $479,211 | −$16,586 |
| Ramping avg gross profit | $308,447 | $167,069 (10.8%) | −$141,378 (−46%) |
| Ramping avg gross revenue | $1,618,629 | $1,540,666 | −$77,963 |
| Mature avg gross revenue | $2,193,070 | $2,193,815 | +$745 (flat) |
| Mature academies (n) | 280 | 293 | +13 |
| Total franchised units | 344 | 363 | +19 |
Every one of those directional shifts matters. But three of them change the investment calculus in ways a prospective buyer needs to model before signing.
The Investment Floor Rose 46%
The low end of Kiddie Academy’s estimated initial investment for a leased facility moved from $405,000 to $590,000 — a $185,000 increase. The ceiling rose from $915,000 to $1,010,000, a $95,000 increase.
The floor is where most first-time buyers anchor their capital planning. A 46% increase at the low end is not inflation noise. It reflects a combination of factors that Item 7 bundles together without decomposing:
- Construction and build-out costs. Purpose-built childcare facilities require acoustic treatment, commercial kitchens, age-specific classroom configurations, and outdoor playground installations. Construction input costs rose nationally through 2025.
- Equipment and technology. Updated classroom technology, security systems, and curriculum materials contribute to the increase.
- Pre-opening expenses. Marketing, training travel, initial staffing, and licensing compliance — all of which must be funded before the first child enrols.
The practical consequence is straightforward. A buyer who read the 2025 FDD and began planning around a $405,000 entry point now faces a $590,000 minimum. That is not a refinement. It is a different capital requirement that changes equity injection calculations, SBA loan sizing, and the personal liquidity needed to qualify.
For context on the full investment range and what it includes, see the FDD financial breakdown.
Mature Revenue Is Flat — but Mature Gross Profit Declined
This is the number that should concern you most if you are modelling steady-state economics.
Mature average gross revenue moved from $2,193,070 to $2,193,815. That is $745 — effectively zero growth across 293 mature academies. The system held revenue flat year over year.
But mature average gross profit fell from $559,914 to $534,330 — a decline of $25,584, with the gross margin compressing from 25.5% to 24.4%.
Flat revenue plus declining gross profit means one thing: costs are rising faster than revenue. The cost of revenue — primarily instructional staff wages, curriculum materials, and direct programme costs — grew while tuition-driven revenue did not keep pace.
This is consistent with the broader childcare labour market. The Bureau of Labor Statistics reports median childcare worker wages rising 4–6% annually, while tuition increases in most markets are constrained by family affordability and competitive pressure from subsidised providers.
The median tells the same story. Mature median gross profit fell from $495,797 to $479,211 — a $16,586 decline. The median is the more conservative reference because it is less distorted by a few high-performing outliers at the top of the distribution.
What this means for your model: if you are using the 2025 FDD’s $559,914 gross profit figure, you are overstating by roughly 5%. Use $534,330 — and consider that the trend may continue into FY2026 if wage inflation persists and tuition adjustments lag. For a full explanation of why gross profit is not owner take-home, see the gross profit vs. net income analysis.
Ramping Gross Profit Collapsed 46%
This is the figure that should stop you mid-spreadsheet.
Ramping average gross profit fell from $308,447 to $167,069 — a decline of $141,378, or 46%. The ramping gross margin dropped from approximately 19.1% to 10.8%.
Ramping average gross revenue also declined, from $1,618,629 to $1,540,666 — a $77,963 drop. But the gross profit decline is disproportionately larger than the revenue decline, which means the cost structure during the ramp period worsened significantly. New academies in the FY2025 cohort faced higher labour costs, higher supply costs, or slower enrolment conversion — likely all three.
At $167,069 in gross profit on $1,540,666 in revenue, a ramping academy is operating at a 10.8% gross margin. That is before rent, before royalties and the brand building fund (9% of gross revenue), before insurance, before administrative staff, before debt service, before owner compensation.
For a buyer entering the system today, the ramp gap between ramping and mature revenue is wider than it was a year ago — and it was already the single largest risk factor in the investment.
The bottom quartile is where this gets severe. The 2025 FDD already showed that bottom-quarter ramping academies lost an average of −$318,000 in gross profit. That figure persists in the 2026 data. A new academy that lands in the bottom quarter of the ramping cohort is not just failing to profit — it is consuming capital at a rate that can exhaust a buyer’s reserves within 18 months. For a detailed breakdown of that distribution risk, see the bottom-quarter warning.
The Spread Is Widening
One pattern visible across both filings: the gap between top-performing and bottom-performing academies is growing.
The top quartile of mature academies still shows approximately $1.08 million in gross profit. That is a strong number — roughly double the system average and more than six times the ramping average. A mature academy in the top quartile generates unit economics that most franchise systems would feature prominently.
But the bottom quartile tells a different story, and the distance between the two is widening. The system is simultaneously producing $1M+ performers and sub-$300K operators, with the middle compressing.
This is not unusual for a franchise system at this scale (363 units). It typically signals that location quality, operator capability, and local market dynamics are becoming more important — and that the system average is becoming less predictive of any individual academy’s outcome. A buyer modelling off the average is modelling off a number that describes fewer and fewer actual academies.
Return on Invested Capital Is Compressing from Both Sides
This is where the two trends converge.
Side one: the numerator is shrinking. Mature gross profit fell $25,584. Ramping gross profit fell $141,378. Whatever proxy you use for return — gross profit, estimated NOI, estimated owner cash flow — it moved down.
Side two: the denominator is growing. The investment floor rose $185,000. A buyer entering today puts more capital in and gets less gross profit out, at both the ramping and the mature stage.
A rough illustration, using the leased-facility midpoint:
| 2025 FDD | 2026 FDD | |
|---|---|---|
| Midpoint investment | $660,000 | $800,000 |
| Mature avg gross profit | $559,914 | $534,330 |
| Gross profit / investment | 84.8% | 66.8% |
| Ramping avg gross profit | $308,447 | $167,069 |
| Gross profit / investment | 46.7% | 20.9% |
These are gross profit ratios, not returns. Actual returns after occupancy, overhead, fees, and debt service will be substantially lower. But the direction is clear: a dollar invested in a Kiddie Academy franchise in 2026 buys less gross profit than it did in 2025, by a meaningful margin.
The System Is Still Growing
Amid the margin compression, Kiddie Academy added 19 franchised units in FY2025 (344 to 363). The mature cohort grew from 280 to 293. The system’s 96% five-year survival rate — one of the stronger figures in franchising — held.
This is worth noting because it means the margin compression is not triggering closures. Operators are staying in the system. New operators are joining. The brand’s recruiting and retention machinery is functioning even as unit economics tighten.
But growth and profitability are not the same thing. A system can grow while individual unit economics deteriorate, because the factors that drive new signings (brand strength, franchisor sales effort, available territories) are different from the factors that drive unit-level gross profit (enrolment velocity, wage inflation, tuition pricing power). The Entrepreneur Franchise 500 ranking reflects system-level metrics. It does not reflect the year-over-year gross profit decline at the unit level.
What This Means for Your SBA Loan Application
If you are financing a Kiddie Academy franchise through an SBA 7(a) loan, the year-over-year changes in the FDD affect your application in three concrete ways.
1. Higher loan amount, same collateral challenge. The investment floor increase means you are likely requesting a larger loan. SBA 7(a) loans for franchise acquisitions are typically underwritten against projected cash flow, not collateral. A larger loan with lower projected gross profit compresses the debt-service coverage ratio (DSCR).
2. DSCR modelling gets tighter. Under the SBA SOP 50 10 8.1, which took effect October 1, 2026, the DSCR floor for first-time acquisitions is 1.25x. At the 2026 FDD’s ramping gross profit of $167,069 — which is gross profit, not NOI — clearing 1.25x coverage on a $800,000 loan is arithmetically difficult once you subtract occupancy, overhead, and the 9% fee load. Capital advisors like Lendesca can model the updated DSCR at these higher investment levels against the 2026 FDD’s ramping figures to determine whether the math works for your specific market and facility configuration.
3. Lenders will see both filings. Experienced SBA lenders will pull both the current and prior FDD. A lender who sees gross profit declining year over year while the investment requirement rises will ask harder questions. Prepare your answers before the call: what is different about your location, your market, your operator profile that makes the system average less relevant to your outcome?
How to Use the Year-Over-Year Comparison in Your Due Diligence
The fact that two filings tell different stories is not inherently negative. It is information. Here is how to use it.
- Model conservatively. Use the 2026 FDD figures, not the 2025 figures. If the trend continues, even the 2026 numbers may prove optimistic by the time you open.
- Ask why. During your Item 20 validation calls, ask existing franchisees whether they experienced margin compression in FY2025, and if so, what drove it. Labour costs? Enrolment softness? Tuition resistance?
- Stress-test the ramp. The 46% decline in ramping gross profit is a single data point, based on a small cohort. But it is the most recent data point. Build your pro forma around $167,069 in year-one gross profit, not $308,447.
- Size your reserves accordingly. A higher investment floor and lower ramp-period margins mean your operating reserve needs are larger than the 2025 filing suggested. Budget 18–24 months of operating capital beyond the Item 7 investment.
- Compare across brands. FranchiseChatter’s 2026 review and competitor FDDs will show whether this margin compression is specific to Kiddie Academy or industry-wide. If Primrose and Goddard show similar trends, the issue is structural. If Kiddie Academy is an outlier, the issue is brand-specific.
Frequently Asked Questions
Is Kiddie Academy still a good franchise investment in 2026?
The 2026 FDD shows a system that is still growing (344 to 363 units) with a strong survival rate. But unit economics shifted: the investment floor rose 46% at the low end, mature gross profit fell $25,584, and ramping gross profit declined 46%. Whether the investment works depends on your specific market, facility costs, and capitalisation — not on the system average. Use the 2026 figures, stress-test the ramp, and size your reserves to the updated numbers.
Why did ramping gross profit drop so much between the two filings?
The 2026 FDD’s ramping cohort reflects academies that opened between roughly mid-2023 and mid-2024. This cohort faced higher post-pandemic construction costs, elevated childcare worker wages, and in many markets a slower-than-expected enrolment ramp. The ramping cohort is also small (typically 15–25 academies), so a few underperformers can pull the average significantly. The decline is directionally meaningful, but the small sample size means it may not predict your specific outcome.
How does the investment increase affect SBA loan qualification?
The $185,000 increase in the low-end investment means larger loan requests. Under SBA SOP 50 10 8.1 (effective October 2026), the DSCR floor is 1.25x. Higher debt service against lower ramping gross profit makes the DSCR test tighter. Buyers should model the DSCR using the 2026 FDD’s ramping figures — not the mature average — because lenders underwrite early-year performance.
Should I wait for the 2027 FDD before committing?
The 2027 FDD will report FY2026 data and will be available around mid-2027. Waiting gives you one more year of trend data and clarity on whether the margin compression is stabilising or accelerating. The trade-off is opportunity cost and the possibility of further investment-floor increases. If you are early in due diligence, there is no penalty in waiting. If you are far along, use the 2026 figures conservatively and build in downside contingency.
Key Takeaway
The 2026 FDD does not tell the same story as the 2025 FDD. The investment floor rose 46% at the low end. Mature gross profit fell $25,584 while revenue held flat — meaning costs are outrunning revenue. Ramping gross profit collapsed 46%, making the first two years materially harder than the prior cohort experienced. The system is growing, the survival rate is strong, and top-quartile performers still clear $1M in gross profit. But the return on invested capital is compressing from both directions: higher entry cost, lower margins. Use the 2026 figures. Model the ramp at $167,069, not $308,447. Size your reserves to the updated reality, not last year’s filing.