She Spent $3 Million on 6 Tutoring Franchises, Then Lost Them All

Danielle Scott had spent years working in franchise development when she got an opportunity that appeared too good to be true and almost impossible to pass up: buying six tutoring centers in Central Florida.

She was successful, ambitious and, by her own description, “pretty arrogant.” The chance to become a franchise operator felt like the next logical move. So Scott assembled funding, drawing from her own savings and money from her family and friends, and bought the portfolio for more than $3 million in the early 2000s.

“Everybody could get money back then,” Scott says in a new interview with Entrepreneur. “Money was very easy and very cheap, and that was the problem.”

In hindsight, Scott saw warning signs she didn’t fully investigate. She says she should have asked why the tutoring company was selling off corporate-owned locations. At the time, however, she interpreted it as an extraordinary opportunity rather than a possible indication of risk.

“I got very excited,” she says. “I was very young, and I was very successful, and I pretty much had the world in the palm of my hand at that moment.”

Then the Great Recession happened

The 2008 Great Recession hit Scott’s businesses hard. When the economy worsened, many households began cutting discretionary spending. Tutoring, music lessons and extracurricular activities were often among the first expenses to go.

The business suffered an immediate exodus of customers. Scott says one child’s program could cost nearly $5,000 per year, and as parents withdrew their children, the revenue loss piled up rapidly.

“Everybody was pulling out their kids,” Scott says. “We lost $180,000 in one week. We didn’t have enough money to keep things afloat; we had to start closing the centers.” 

The centers were in Central Florida, a market Scott says was hit especially hard by the downturn. Her recollection of the period is defined by incomplete housing developments, closed businesses, empty malls and a swift increase in crime.

“There were roads that were being built into neighborhoods that would just stop,” she says. “You would see a road going up a hill with street lamps, no houses, just a road, and it just stopped.”

The conditions were devastating not only because of the macroeconomic collapse, but also because Scott had built a business model that depended on customer spending that could be postponed or eliminated. In a downturn, many families didn’t view tutoring as a necessity, even if Scott believed in the service and the company’s mission.

Closing the centers

As the centers’ finances deteriorated, Scott began closing them. She ultimately lost all six businesses.

The loss was financial, professional and personal. Scott employed more than 100 people, some of whom had spent a decade or more with the tutoring centers. Some blamed Scott for their lost jobs. She received death threats. And for a time, she believed the collapse had ended her career in franchising.

Eventually, she realized that “this situation would have happened whether I was standing there or not,” she says. “There was nothing that anybody could do.”

Before the collapse, Scott believed that she had reached the top of her professional game. She had corporate experience, operational knowledge, a growing portfolio and the confidence that comes with early success. Losing the businesses forced her to reassess her identity as a leader. 

“It humbled me completely,” Scott says. “I mean, beyond humbled me.”

Reflecting on that time, Scott now believes she should have paid closer attention to the broader business environment and demanded answers about why the franchisor was divesting corporate-owned units. She had been senior enough to recognize that the decision warranted scrutiny, but she did not pause long enough to conduct the level of due diligence she now considers necessary.

“If I had, I probably wouldn’t have bought them at all,” she says. 

The emotional toll was equally severe. Scott feared that the loss had permanently damaged her standing in franchising.

“It made me feel like I had ruined my career,” she says. “It made me feel as though I would never work in franchising again because who does something like this at the top of their career and then fails so massively?”

Returning to the franchise industry

Her return was not immediate. Scott says it took about three years after the collapse for her to feel that she had truly come back to the franchise industry. 

“It took a lot of people telling me that it wasn’t my fault and that they still wanted to work with me and that I was still amazing and that I still had a lot to offer to the industry,” she says.

Scott dipped her toe back into the franchise industry by helping a franchise owner pursue growth and secure an equity partner. She was initially hesitant, but the relationship became a successful experience.

Today, as chief development officer of Alliance Franchise Brands, Scott helps guide franchise growth, legacy ownership transitions, business sales and acquisitions across brands including graphics and signage franchises Allegra and Image360.

Her advice to entrepreneurs is not to minimize hardship or pretend that failure is painless. Her story makes it clear that when a business collapses, it can carry economic consequences, damaged relationships, public embarrassment and grief. But she believes that leaders cannot afford to remain trapped. 

“Don’t sit in it too long,” Scott says. “Let it be what it is, because the failures and the hits, they’re just going to keep coming — and all it does is make you better.”

For Scott, that perspective was hard-won. The crisis had made her feel exposed and ashamed, especially when employees blamed her for the closures. But over time, she came to see the difference between a flawed decision and a permanent personal failure.

“Just because you failed at something doesn’t mean you fail at everything,” she says. “And just because this happened doesn’t mean that it’s a reflection upon you.”