Different Ways to Own a Childcare Centre

Pros, Cons & Profit Potential

The childcare industry in Australia—especially in high-demand regions like Western Australia—is not only essential but also highly lucrative. With strong government support, a growing population, and consistent demand, owning a childcare centre can be a sound investment. Not all ownership models are the same, there many business opportunities in the childcare sector for different levels of commitment and ownership. 

Did you know you can be involved in childcare business even if you are new to the industry or if you want to invest but not be involved in managing the services?

Below, we explore the main ways you can own a childcare business or property, the advantages and disadvantages of each model, and what kind of profitability you can expect.

1. Own & Operate a Childcare Centre (Freehold + Business)

Description:
You own both the childcare property (freehold) and the childcare business operating on it. You manage or appoint staff to run the day-to-day operations. 

Pros:

• Full control over the property and business
• Dual income streams (business profit + long-term property value growth)
• Easier to refinance or sell later as a complete package

Cons:

• High initial capital required (often $1M–$4M+)
• Full responsibility for compliance, staffing, and operational risk
• Time-intensive unless you appoint a Centre Director

Profit Potential:

• Business profit margins typically range from 15%–30% of revenue
• Potential for $150K–$500K+ annual profit depending on size and occupancy
• Real estate may appreciate significantly in high-growth areas

2. Buy the Business Only (Leasehold Model)

Description:
You purchase an existing childcare business only and lease the premises from a landlord.

Pros:

• Lower upfront cost (typically $300K–$2.0M)
• Faster entry into the market
• Predictable income from day one
• Some property expenses can be passed on to landlord

Cons:

• Lease limitations (renewals, restrictions on use or renovations)
• You do not benefit from property appreciation
• Vulnerable to rent increases or lease termination

Profit Potential:

• Similar business profit margins of 15%–25%
• After rent and staffing, net profit may range between $100K–$300K p.a.
• Lease terms strongly influence overall viability

3. Own the Property Only (Landlord Model)

Description:
You buy a purpose-built childcare property and lease it to a third-party operator (e.g., large childcare provider or private owner).

Pros:

• Long-term lease agreements (often 10–25 years)
• Stable rental income with CPI-linked increases
• Minimal operational involvement

Cons:

• No control over the childcare brand or quality
• Vacancy risk if tenant defaults or exits
• May require specialised property design and zoning

Profit Potential:

• Net rental yield of 5%–7% annually
• e.g., $3M property could yield $150K–$300K p.a. in rental income
• Strong long-term capital growth in growing suburbs

4. Franchise Ownership

Description:
You buy into a childcare franchise system (e.g., Mind Champs, Busy Bees, Only About Children), gaining access to their brand, systems, and support.

Pros:

• Turnkey business model with established systems
• Support with marketing, training, and compliance
• Brand recognition can attract enrolments faster

Cons:

• Franchise fees and ongoing royalties (typically 5%–10%)
• Less autonomy in how you operate
• Bound by franchise agreement conditions

Profit Potential:

• Lower net margins due to franchise fees (typically 10%–20%)
• Average annual profit around $120K–$250K, depending on enrolment

5. Develop a Childcare Centre (Build-to-Lease or Sell)

Description:
You acquire land, obtain development approvals, build a compliant childcare facility, and either lease it to an operator or sell it.

Pros:

• Significant capital gain potential
• High demand for childcare-ready properties
• No long-term operational responsibility

Cons:

• Requires knowledge of DA/zoning and compliance
• Longer time frame (12–24 months)
• Construction and regulatory risks
• Significant capital outlay

Profit Potential:

• Depending on location and sale/lease strategy, can earn $500K–$1M+ in capital profit
• Rental yields of 6%–8% possible if leased

Key Factors Affecting Profitability

Regardless of the model, profitability depends on:

• Occupancy rates (break-even usually around 60%–70%)
• Operating costs, especially staff wages and rent
• Location and demographic demand
• Government subsidies (e.g., Child Care Subsidy)

Final Thoughts

Whether you’re a property investor, business operator, or entrepreneur, the childcare industry offers diverse entry points with strong returns and community value. Your choice depends on your capital, risk appetite, time involvement, and long-term goals.

Need Help Getting Started?

At BEST Childcare Consulting, we help prospective owners evaluate each path—whether you’re looking to buy a business, invest in property, or develop a centre from scratch. We also support you through compliance, licensing, and operational setup to ensure a smooth launch.

Contact BEST Childcare Consulting today for expert guidance on how to start, run, and grow your childcare business with confidence.