Making pre-school a class apart

For Rajesh Bhatia, the founder of pre-school chain Tree House, being a teacher is the world’s noblest profession.

Bhatia believes that without the passion of being a teacher at heart, one cannot run an educational institute. For the 43-year-old software engineer-turned-entrepreneur, Tree House was born out of a personal compulsion — in 2003 he could not find a decent and affordable pre-school for his toddler son.

He, however, soon realised that there was a huge market for affordable pre-school centres and that there was a dearth of good teachers and quality education as many entered the profession not out of passion, but out of need for a job.

Strong biz acumen

These people were unable to sustain in the job due to low incomes and lack of novelty factor.

Coming from a family that believed in entrepreneurship, Bhatia had strong business acumen of how to connect with the consumers. In this case, kids in an age group of 1-5 years.

“I still remember the first day of Tree House in Andheri (in Mumbai) 10 years back, parents were hesitant to hand over their kids to a male teacher (Bhatia himself). Now, I have a bigger responsibility but whenever I visit the schools, the parents want a picture of their kids with me that makes my day,” Bhatia smiles.

Well, so what difference has Bhatia brought to this noble profession? There are many such chains in the country such as Kidzee, Eurokids, Brainworks and Kangaroo kids, so what is so special about Tree House? Of course, he is not the first entrepreneur who has got into the country’s most lucrative business but he is definitely one of the few who has got his fundamentals and strategy right. Bhatia is among the earliest to provide ESOPs (employee stock options) to his teachers. He always felt that teachers in India are not paid enough.

“In a bid to provide good education, we need to have good teachers. That will happen when more people come to this profession by choice and not out of compulsion. The idea of the ESOPs will help revolutionise entire education ecosystem in India,” says Bhatia, who took his company public in 2010 and raised around Rs 120 crore.

“Someone has to bring about a change. Providing ESOPs to teachers will not only help them stay motivated but it will also be a great leap towards evolution of the education industry. There will be less attrition. This happened to the IT industry during the boom period, when Infosys took the lead in providing stock options to their employees,” says Bhatia.

In the last one decade, Bhatia has expanded the chain to 379, of which 300 are company-owned centres. The rest are run by franchisees.

“This is another conscious business decision I took for not going in for the franchise model. It gives you a sense of ownership and you feel like taking care of it as your own child. That is when you succeed.” Bhatia’s Tree House is the largest self-operated preschool education company in the country, while rest all run on franchise model.

His major investments include good quality toys, books, cradles, and last but not the least good teachers. The Tree House spends around Rs 40 lakh per centre in developing specialised day-care furniture, bathroom facilities and mini play areas. Each centre earns between Rs 80 lakh and Rs 1 crore a year.

Affordable pre-schools

“Many preschools these days demand exorbitant fees and donations making it difficult for the middle-class families to afford them. Forget about the lower middle class. In a bid to address this problem, we are launching far more affordable pre-schools for the lower income bracket or urban poor. We are slowly and steadily creating a revolution. Rome was not built in a day,” Bhatia says.

He adds that the company has launched a brand 'Global Champs' in June. While Tree House charges Rs 22,000-50,000 a child depending on the city, Global Champs will be located mostly in the slum areas in Kandivili and Malad, in Mumbai. These schools will have annual fees of Rs 10,000-12,000 per kid. “I have been to the slums and one thing that I have learned about India over the years of doing business here is that lower middle class families are willing to pay for quality education. Nobody wants anything free. People who work as drivers, for instance, are willing to pay for their child's education,” he says. There will be no difference in the functioning of both the brands, he adds.

The focus of the schools, as Bhatia says, will be on high quality content delivery and experience.

Bhatia’s new venture is being backed by some large corporate houses as part of their social responsibility programme. Bhatia, however, declined to share any details on the same. “We will soon be making an announcement on our new venture,” he says. The former investment banker, who is upbeat about bringing a revolution in the Indian education system, has achieved a turnover of Rs 121 crore with a net profit of Rs 33 crore last fiscal and hopes to grow at a healthy 20-25 per cent in both topline and bottomline this fiscal. Bhatia says company-owned schools will be 60 per cent of the target.

“Low dependence on franchisees may strain resources initially, but it also means better margins,” he says. But in going national he enters competitive turf. The Rs 2,000-crore branded playschool market in India is growing 50 per cent year-on-year.

Tree House is the only VC-backed branded playschools chain in India. The only other one to receive external investment is Eurokids, in which Delhi-based education services firm Educomp Solutions invested Rs 39 crore for a 50 per cent stake in 2008.

However, Bhatia’s peers have not needed VCs so far as growth has been well funded by franchising.

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