National Heritage Academies, Inc.

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National Heritage Academies, Inc.

989 Spaulding Avenue SE
Grand Rapids, Michigan 49546
U.S.A.
Telephone: (616) 222-1700
Toll Free: (800) 699-9235
Fax: (616) 222-1701
Web site: http://www.heritageacademies.com

Private Company
Incorporated: 1995 as Educational Development Corporation
Employees: 2,100
Sales: $125 million (2002)
NAIC: 611110 Elementary and Secondary Schools

National Heritage Academies, Inc. (NHA) operates a chain of nearly 40 charter schools—state-regulated, for-profit institutions that serve as a tuition-free alternative to public schools. The company erects the buildings and provides personnel and management services, receiving what local school districts spend per student as compensation. NHA students get a back-to-basics education featuring phonics, math skills, and moral teaching, and follow strict disciplinary and dress codes. To reduce overhead, NHA centralizes many operations, pays its non-union teachers lower salaries, and eschews the use of buses or cafeterias. The Michigan-based company is owned by J.C. Huizenga, a cousin of Blockbuster/Waste Management billionaire Wayne Huizenga.

Beginnings

National Heritage Academies was founded in 1995 by John Charles Huizenga, a wealthy Grand Rapids, Michigan, businessman. Huizenga, whose father had founded the companies that would later become Waste Management, Inc., had grown up attending Christian schools and later earned a master's degree in finance. In his early thirties, he decided to go into business and bought his first company, printing plate manufacturer American Litho. He later became involved with a second firm called JR Automation Technologies, a high-tech machine manufacturer.

When the state of Michigan instituted a law in 1994 allowing the creation of for-profit "charter" schools, which would receive taxpayer funding equivalent to what public schools spent, it created an opportunity for entrepreneurs. Huizenga, who had married a Christian school teacher and had donated to religious schools over the years, was approached by David Koetje, the superintendent of an 11-school Christian system in Grand Rapids. Koetje was now seeking funds for new charter facilities.

Michigan's charter law required that the curriculum adhere to state standards and that the schools, which would be certified by local school districts or state universities, not promote a particular religion. Koetje had second thoughts about the project because of this rule, but Huizenga decided to go forward and found a school of his own. Rather than being explicitly Christian, it would instead have a "moral focus."

Excel Charter Academy Opens in Fall of 1995

Huizenga's new company, Educational Development Corporation (EDC), opened its first school in the fall of 1995. Named Excel Charter Academy, it was located on the southeast side of Grand Rapids in a renovated office suite. It was intended to accommodate more than 150 students from kindergarten through grade five, with another level to be added each year until the eighth grade was reached. A high school, which was more expensive to operate, was not planned. To run his new operation, Huizenga chose Mark DeHaan.

Excel, which received approximately $5,000 per child from the state of Michigan, used Dr. E.D. Hirsch's Core Knowledge Sequence for its curriculum. Classes emphasized the basics of reading, writing and math, and used phonics rather than the newer "whole language" teaching. Each day began with a 20-minute assembly in which students recited the Pledge of Allegiance, sang patriotic songs, and heard a lesson about morals or character. Though religion was kept out of the classroom, Excel teachers gave Bible-based "creationism" equal consideration to Darwin's theory of evolution. The instruction day was seven hours, longer than that of the public schools.

Excel proved a hit with parents in the conservative, highly religious community of Grand Rapids, and initial demand was so high that a second first-grade classroom had to be added, which boosted total enrollment to 174 students. Many more parents wanted their children to attend the second year, forcing Excel to hold a lottery for available spaces.

Three New Schools Open in Mid-1990s

With a total of only 150 charter schools allowed state-wide, Huizenga soon began laying plans for expansion. In the fall of 1996, EDC, which was now using such recruitment methods as billboards and videos, opened three new schools. These were Vanguard Charter Academy and Vista Charter Academy in the Grand Rapids area, and Vanderbilt Charter Academy in nearby Holland.

Though there had been much praise for Excel, the newer academies' first year was not so smooth. In its first months of operation, Vista saw 10 percent of its 279 students leave, with some parents citing problems with discipline. To improve matters, EDC hired additional staff to assist in the classrooms. Ten of the school's original 13 teachers were recent college graduates.

In May 1997, the firm hired Peter Ruppert to serve as president. The 33-year old Harvard MBA had founded Landmark Consulting Group of Chicago, which assisted corporations with strategic and marketing decisions. During 1997 and 1998, more schools were opened near Grand Rapids and around Michigan, which brought the firm to a total of 13 at the start of the 1998–99 school year. Excel Academy had by now outgrown its original location, and it moved into a new building. A K-4th grade school called Ridge Park Academy was opened in its former space.

Huizenga spent his own money to build the company's schools, which were then leased back to each academy's board. The boards in turn gave all but 2 percent of their public funding back to EDC for rent and management services. Company officials openly compared their approach to Wal-Mart, and EDC employed such methods as using the same floor plan for all of its schools. Everything down to the playground equipment and number of books in the library was standardized as well. Teachers received an average of 91 percent of the salary of their public-school counterparts, which worked out to 95 percent given their lack of union dues. The company expected to turn a profit when a school's full K-8 enrollment of about 650 was achieved.

EDC's schools, and those of other charter companies, quickly began having an impact on the education system in Michigan. Because they were free to attend and were similar in many ways to tuition-charging Christian schools, a number of parents switched their children from such institutions to EDC, causing financial problems and layoffs at some of the former. The public schools in cities like Holland were also affected, with enrollments dropping and staff laid off as public funds were diverted to charters. Critics of EDC charged that it largely enrolled "cheap" students who came from middle-class families and required less special services, leaving the more expensive children to the public system.

Seeking New Investors in the Late 1990s

By the fall of 1998, Huizenga's investment in the firm, which was now going under the name National Heritage Academies, Inc. (NHA), stood at $40 million, with $50 million more borrowed from family and friends. Each new startup cost upwards of $3 million, and Huizenga's plans for further growth were hampered by a limited amount of available capital. Consequently, the company began seeking an outside investor to purchase its school buildings and lease them back to the schools' boards. This would give Huizenga more capital and also save each academy money, as the rental rates would likely be less than what NHA charged. In early 1999, a $100 million deal was nearly reached with a California investment firm, but it fell through at the last minute.

The year 1999 also saw the American Civil Liberties Union of Michigan sue NHA for allegedly promoting religion in its academies. At one school in particular, parents met for weekly prayers, a Baptist church held evening meetings rent-free, and a minister had reportedly given a sermon at a staff training session. A judge later dismissed the case.

In the fall of 1999, NHA opened its biggest crop of schools to date, which raised the total to 22. Half of this number were in the Grand Rapids area, while eight others were scattered around the state of Michigan and two were located in Winston-Salem and Greensboro, North Carolina. With Michigan nearing its legal cap of 150 charters, the firm was now actively seeking other states into which to expand. A total of 8,000 students were enrolled, served by a staff of 700. The company was still not turning a profit, having lost $1.5 million in its most recent fiscal year.

At the beginning of 2000, NHA secured $50 million in financing from a consortium of lenders and $35 million in new equity funding from an investor. The firm was now the second-largest charter management company in the United States after the New York-based Edison Project, which had 51 schools. In the fall of 2000, six new academies were opened in North Carolina, Michigan, and Rochester, New York. NHA's revenues totaled $49.1 million for the year, and its staff topped 1,000.

Company Perspectives:

Mission: Challenging children to achieve their greatest potential. Vision: Our shared vision is to build a national organization of over 200 charter schools that become the finest K-8 schools in the country. Using a partnership with parents as our foundation, we will achieve this by combining rigorous, "back-to-basics" academics, strong moral development, and a universal commitment to all children. Throughout this effort, we will continuously strive to increase the economic well-being and quality of life of all employees and stakeholders.

A new school that was opened in Detroit at the start of the 2001–02 school year added 455 children, which helped boost total enrollment to 13,300 students system-wide. Of these, 68.7 percent were white, 23.3 percent were African-American, and 5.8 percent were Hispanic. More than two-thirds had transferred from a public school, with about 18 percent coming from a private school, 9 percent from another charter, and 4.5 percent from a home-schooling environment. The company reported a waiting list of 2,600 for spots in its schools. NHA was now ranked 19th on the Inc. magazine list of the 500 fastest-growing companies in the United States.

In the summer of 2002, the firm secured another $25 million in credit as it prepared to open four new schools in Detroit; Dayton, Ohio; Charlotte, North Carolina; and Syracuse, New York. NHA, as it had done every year, also added grades to existing schools, while two other academies relocated from rented quarters to new buildings. Annual revenues topped $100 million for the fiscal year ended in June, bringing the firm its second profitable year in a row.

In the fall of 2003, NHA opened seven more academies. They were located in Hamtramck and Belleville, Michigan; Dayton and Cincinnati, Ohio; Buffalo and Brooklyn, New York; and Indianapolis, Indiana, the latter of which expanded the company's reach to five states. Enrollment now topped 20,000. NHA officials announced that expansion would continue until there were a total of more than 200 schools in operation.

In less than a decade, National Heritage Academies, Inc. had grown into one of the top private school management companies in the United States. Its combination of back-to-basics academics and moral teaching appealed to many parents as an alternative to public schooling, while its standardization of buildings and other cost-containment measures helped the company make a profit. NHA had staked out a solid claim in the still-evolving field of for-profit K-8 education.

Key Dates:

1995:: J.C. Huizenga opens Excel Charter Academy in Grand Rapids, Michigan.
1996:: Huizenga's firm, Educational Development Corporation, adds three new schools.
1998:: The company changes its name to National Heritage Academies, Inc. (NHA).
1999:: The first two out-of-state schools open in North Carolina, giving the company a total of 22 schools.
2000:: A lawsuit involving religious issues in NHA schools is dismissed; the first New York school opens.
2001:: The company records its first profitable year.
2002:: A new academy in Dayton, Ohio, increases the number of states in which the company has a presence to four.
2003:: Seven new openings, including the first one in Indiana, bring the company's total number of schools to 39.