Fourteen years ago, an Alabama real estate developer looked at the divorce rate, the number of working mothers and the shortage of day-care centers and decided there was money in those statistics.
Today, his brainchild, Kinder Care Inc., is the nation's largest day-care center chain, with annual revenues of $116 million and 750 day-care centers, including 25 in Virginia and seven in Maryland. Nicknamed the McDonald's of day care, Kinder Care serves more children daily than the average American public school system.
Its growth is not unusual. In little more than a decade, the nation's for-profit day-care chains have grown from financial toddlers to multimillion dollar businesses big enough to have a trade association representing about 270 operators.
To these companies, the Washington suburbs are a plum.
"This is such a terrific market. This is the fastest-growing region in our company," says Doug Carneal, regional director for Children's World, the nation's third-largest chain, which has opened eight centers in Northern Virginia in the past two years.
Carneal oversees his corner of Children's World from a McLean office, where tiny T-shirts and shoelaces imprinted with Children's World logos clutter his desk.
"This is different than selling shoes or cars," he says. "That's parents' pride and joy and you'd better recognize it. Our motto is, 'We help families work.' "
About half the nation's licensed day-care centers are organized to make a profit. Most are still individual operations, but the chains have steadily increased their share of the for-profit pie to more than a fifth of the total. They have expanded selectively, studying census figures carefully. Not just any children will do.
They look for middle-income households, above-average levels of education and a high proportion of working mothers with children younger than 5. "We'll drive through neighborhoods and look for swing sets, empty two-care garages, Big Wheels," says Carneal. They investigate rush-hour traffic flow, too. "You want to be on the morning side of traffic," he says. "People will rarely backtrack to drop a kid off."
The chains are not likely to open in communities with large-blue collar or ethnic communities, says Children's World President Robert S. Benson, because those neighborhoods are likely to have lower levels of education, income and more extended family around to care for children. Almost 95 percent of Children's World business comes from one- or two-children families, he says, because the economic advantages of both spouses working begin to evaporate with more children.
The for-profit chains' trade association lobbied against now-defunct federal regulations for day-care centers. "Those regulations were designed for the inner-city, deprived child," explains Ann Muscari of Kinder Care. "Kinder Care doesn't serve that group of people. We are not the United Way." In contrast, the chains lobbied hard and successfully to have themselves included in the Agriculture Department's child-care food subsidy program.
The big chains sell themselves as more reliable than the neighborhood babysitter, and more experienced than the local nonprofit. They have brought sophisticated management techniques and the economies of scale to what is a labor-intensive, costly business. "We do it 750 times a day, we can't help but do it better," says Muscari. "Holiday Inn became successful for providing reliable service at reasonable cost . . . We're not so different."
Kinder Care and Children's World reported profits of about 5 percent last year. The amount of money the national chains spend per child varies greatly from state to state, depending on local staff-child ratio requirements. According to a 1979 government study, for-profit centers spent at least $200 a year less per child than nonprofits. "That sounds right," says Kinder Care comptroller Eddie Nabors. "The not-for-profits have no reason to try to be more efficient."
The chains have been criticized for avoiding states with stringent licensing requirements, for cookie-cutter standardization, for making profits at expense of staff salaries and quality care. Some critics say they would not enroll their children at a for-profit day-care chain.
"Old prejudices die hard," says Benson of Children's World. "Objective people have found that there are some very good for-profits, and some terrible ones, just as is true of the nonprofits."
"I don't think the chains are as guilty as they once were," says Joe Perreault of the Save the Children Federation, a national children's advocacy group. "The children aren't suffering," though workers' salaries are still at minimum wage. What the chains have done better than anyone else, though, says Perreault, is listen to parents as consumers. "They got into after-school care very early, they saw the need for that before any one else."
In the meantime, the chains are expanding rapidly. Kinder Care is shooting for 2,000 centers by the end of the decade; Children's World is adding 25 centers a year.
"It's humbling, let me tell you," says Carneal. "One minute you're on the phone trying to put together a $1 million acquisition, and the next minute Bobo the Clown is calling to say he wants to entertain the kids."