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HUNTINGTON TRIES TO REBOUND

The Record (Bergen County, NJ) The Record (Bergen County, NJ) 01-29-2012 HUNTINGTON TRIES TO REBOUND Section: BUSINESS Type: News

For 35 years Huntington Learning Center has taken pride in its ability to help academically struggling students get back on course, asking, “Why do smart kids fail?” go to website huntington learning center

Now, after the recession shut about 30 percent of its tutoring centers, the Oradell-based company is vigorously trying to turn itself around.

The effort includes a revamped, lower-price franchise package, new tutoring options for students, a $20 million advertising campaign and an aggressive drive to sell franchises in the New York metro area for the first time in years.

“The changes that we are making are monumental,” said Chairman Ray Huntington, 63, who co-founded the company with his wife, Eileen, the company’s CEO. “We are changing the nature of the company.”

“Today’s buyer can get a premium brand at a discount,” said Huntington, adding that the company added four new franchisees in the last year, bringing the total to about 250, and expects to add 20 this year. “We are expanding.”

Yet the chain may never return to its peak of more than 400 centers before the recession forced parents to cut back on tutoring for their children, and questionable lending practices by an Illinois bank that allegedly inflated revenue projections for Huntington franchises led to more closings.

Whatever the outcome, Huntington is confident that his company is on the rebound, driven by the most radical rebranding in its history.

He started the company in 1977 when he was a statistician in the business-research division of AT&T and his wife, Eileen, was a high school teacher, in a bid to “take charge of our destiny,” he said.

With savings as start-up capital and themselves as the only full- time employees, the couple opened their first center in Oradell.

Their idea was a business to help struggling youngsters develop skills that would allow them to succeed at school, rather than emulate the then-traditional tutor’s role of helping prepare for a test or upcoming paper, Ray Huntington said.

408 locations

In 1985, shortly after a federal report concluded that the nation’s education system was at “risk,” the Huntingtons had 15 centers and started to sell franchises.

By 2007, court papers show, the company had revenue of $20.2 million, with profits of about $5 million, and it was growing fast. In September 2008, the company said it had about 408 centers, and planned to open another 60. But the recession wiped out those plans and more. website huntington learning center

Ray Huntington said consumers pulled back on education spending, forcing franchisees to cut expenditures, especially advertising.

“The centers that closed were, by and large, very weak centers,” he said, adding that they “did not contribute to our top or bottom line.”

There was also the failure — at a cost to the SBA of $2.1 million — of 10 loans made by Banco Popular of Rosemont, Ill., in 2007 to people seeking to buy Huntington Learning Center franchises.

The loans were among a dozen issued that year by Banco Popular to prospective Huntington franchisees that were scrutinized by the inspector general of the U.S. Small Business Administration, which guaranteed the loans.

The inspector general, in a report on the bank’s role issued in July, concluded that the loan applications contained unrealistically high first-year revenue forecasts for the centers.

Ranging from $483,000 to $650,000, they were far higher than the actual average first-year revenue for Huntington franchises of $262,000 in 2007, according to the report, which said the bank failed to properly assess the loan applications.

If the revenue figures had been realistic, the loans would have been rejected, the report said. Instead, it said, 10 of the 12 loans failed, and the SBA had to pay $2.1 million in guarantees.

The report made no mention of Huntington’s role, if any, in the loan applications.

Franchisee sues

Ray Huntington said his company had nothing to do with the providing the revenue figures to Banco Popular, and suggested that brokers helping prospective franchisees get a loan had “misrepresented” the revenue to ensure their clients got funding.

He added that his company’s franchise disclosure document, which is given to prospective franchisees, reported accurate 2006 figures for the average sales per center, $470,510, that were below the lowest of the inflated figures.

“We properly followed all procedures and we did not provide any false or misleading information,” Huntington said.

The report’s allegations, however, are cited in a lawsuit filed in U.S. District Court in Newark by Christopher M. Tozzo, a former New York investment banker, who claims Huntington Learning Center deceived him into buying a franchise in Glendale, Ariz., in 2009.