Late for the bell. (Education Alternatives Inc.).

Byline: Julie Forster

Education Alternatives Inc. (EAI) President and Chief Operating Officer Philip Geiger spouted plans for opening schools in September 1997, in a February Corporate Report story. The company, he said, planned to nearly double the facilities and enrollment at its two Tesseract Schools in Eagan, Minnesota, and Paradise Valley, Arizona. It also expected to develop three charter schools in Arizona, a charter school in New Jersey, a private high school in Indiana and another in New Jersey, and a French international charter school in Massachusetts. And it was all supposed to happen by September.

This grand strategy would supposedly boost revenue for the Bloomington-based company by more than $15 million, and its gross profit by $1.3 million at the end of its 1998 fiscal year. For the year ended June 30, 1997, the company reported net earnings of $566,000 on revenue of $4.8 million. This includes settlement income on canceled contracts of $650,000.

So far in the current fiscal year, EAI isn’t making the grade, and its much-needed boost in revenue won’t be realized anytime soon, if ever.

Charter schools are run by community groups, parents, or companies such as EAI. They are funded with tax dollars. In Arizona, for example, EAI would receive about $4,000 in state aid for each pupil, In New Jersey, state support for charter schools is $6,300 per pupil. Because of this aid, New Jersey and Arizona are two markets EAI is pursuing aggressively. EAI has applied for four charters in New Jersey and has secured 12 in Arizona, a state in which one of every 10 students attends a charter school.

Despite obtaining the charters, EAI did not open any of the three schools that were scheduled to open in Arizona by September 1997. “The developers aren’t ready to work with them this year,” says EAI spokeswoman Angela Crawford.

Give EAI an “F” in Planning 101.

Securing a charter and actually starting a charter school are two different matters. Industry sources say companies like EAI see a lucrative market in Arizona, but the lack of available school buildings is delaying charter school development.

John McLaughlin, president of Education Industry Group in Sioux Falls, South Dakota, calls the Arizona market pretty challenging right now. “It is the best environment in the country for charter schools, but they are really hindered by the fact that there are no adequate facilities,’ he says.

EAI, he adds, is looking for a change in state legislation that would authorize funds for capital needs for charter schools in addition to perpupil money. Currently, 30 states have passed charter school legislation. All provide only operational funds for the start-up schools.

“If charter developments in Arizona are slower than initially hoped, it’s due to a lack of facilities and pending legislative battles,’ McLaughlin says. “But also, the company sees other directions in which to grow and develop its products.”

Geiger refused to be interviewed for this follow-up and called the February story about EAI “a hatchet job.”

He doesn’t have much to brag about. Of EAI’s two planned Tesseract School expansions scheduled for the fall of 1997, only the Minnesota project has been completed.

A French charter school slated to open in Boston this fall didn’t. That’s probably because Massachusetts only recently approved its new charter school legislation, not in time for EAI to open anything by September. EAI hopes to hear by January 1998 whether it will receive a charter from the state, Crawford says.

In New Jersey, it’s the same story told a different way. Geiger said in the February issue of CRM that EAI had plans to enroll about 150 students in a charter school in Galloway, New Jersey, in September 1997, and to enroll as many as 500 by the third year. The reason that didn’t happen, Crawford says, is that the company wasn’t listed on a charter application that a community group filed with the state. The original bid was denied, she says, because the group filed the application before deciding it wanted EAI to manage the school.

Even if EAI launches its planned charter schools in 1998, it will be some time before they are profitable. First, McLaughlin says, charter schools must prove their worth. “This is an extremely young industry, and those looking for an immediate return are in the wrong business,” he says.

What, then, has EAI accomplished? The company opened two private schools this fall on schedule: one in South Bend, Indiana, and the other in Atlantic City, New Jersey.