(Un)Intelligent Investor Article, page-70

Hi Islay:
Agreed that regs have changed and now under a different govt department. Not sure -- no, I doubt -- these changes have transformed govt policy since August 2013, though. The ratio changes ARE a major challenge, but I explained that independents may hurt more than corporates for various reasons. If anything, the ratio changes might speed up corporatization.

CORPORATIZATION OF CHILD CARE
The shift to corporates is not unique to the child care industry and is not inherently a bad thing (nor inherently good either). Hotels and restaurants went through this decades ago. Law firms have been corporatizing in more recent times. Research suggests that corporatization tend to introduce better systems (including training, career devel, operations), better back office cost efficiencies, lower capital costs, etc. Negative risks of corporatizing, too, but corporatization has flourished for decades because there are usually more positive than negative (for customers as well as shareholders)

BRAND VALUE IN CHILD CARE
Then there is the brand issue. Parents want to trust the provider, which is more difficult with stand-alone centers. For example, Bright Horizons Family Solutions is one of the largest child care corporates in the US. In a recent 10-K filing, it emphasized that “our success depends substantially on the value of our brands and reputation as a provider of choice”. It explained that 50% of each executive's bonus is based partly on maintaining the company's brand/culture (they are closely related). Brand is critical in big child care firms, and they maintain that brand through initiatives that maintain quality and sometimes a particular approach to the child experience (e.g. Montessori).

Finally, employees are more motivated and have lower turnover with a strong employer brand. For example, Brotheridge et al (Career Devel. Intl, 2013) reported significant employer brand effects on employee commitment/motivation and turnover in child care centers.