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READING, WRITING, REVENUE
White Hat continues its rapid expansion in the for-profit education industry

By Doug Oplinger and Denis J. Willard — Beacon Journal staff writers

The charter-school company Akron entrepreneur David Brennan founded in 1998 has become a major national player in for-profit education.

In the next few weeks, White Hat will unveil the first of what the company hopes will become a national chain of upscale tutoring outlets to compete with established companies such as Sylvan Learning Centers, company officials said.

White Hat's first Brilliant Learning Center is on North Hawkins Avenue, a few blocks from Akron's Firestone High School. The next two area facilities are slated for Hudson and Medina.

Building on Brennan's theory from the 1980s that education could be made more effective and efficient, Brilliant is one of White Hat's 11 education ventures that all focus on low labor costs and heavy investment in technology.

The company is branching into sophisticated video production, Internet streaming, federally funded tutoring and education services for small and medium-sized colleges.

Like all of the company's ventures, much of the Brilliant learning process will be on computers -- either at the centers or via the Internet -- wherever the child chooses to log on.

Brilliant is targeted at preschoolers; children wanting help with science, advanced placement classes or remedial reading or math; and those who need to improve study skills or to prepare for college entrance tests.

Another new area of growth is the company's remedial tutoring business, which is signing contracts with school districts around the country.

The federal No Child Left Behind Act -- known as NCLB -- forces districts that repeatedly have failed to meet achievement standards to turn over federal grant money to independent contractors for tutoring. District teachers cannot participate.

White Hat trademarked the name NCLB Tutors for its business, which Mark Thimmig, White Hat's president and chief executive, says should be approved for operation in all 50 states by the end of the year.

Like Brilliant, NCLB Tutors is not required to hire certified teachers -- a significant cost saver.

Meanwhile, one of the largest pieces of the White Hat Ventures pie is the Life Skills high school operation, which puts dropouts and at-risk students at computers in three-hour shifts.

The company opened eight Life Skills facilities in Florida this month, Thimmig said. There now are 35 Life Skills centers nationwide enrolling about 9,200 students, according to the company.

White Hat is negotiating with Apple Computer to purchase 10,000 iPod music players for Life Skills students as rewards for performance. Life Skills will install lessons and music on the iPods so students can learn anywhere.

With 51 schools and 22,000 students in six states, White Hat is the nation's third-largest charter-school management company, Thimmig said.

It has nearly 2,000 part- and full-time employees -- about 350 in Akron.

But Thimmig said White Hat is in transition.

``We're really not a charter-school company,'' he said. ``We're a lifelong learning company.''

And, he said, the focus is on making the experience fun so customers want to return.

Charter schools diversify

The expansion of charter-school operators into other areas is a necessity, said Henry Levin, a researcher at the Teachers College at Columbia University in New York.

Levin said education management organizations (EMOs) initially opened standard kindergarten through eighth grade and high school charter schools, believing that economies of scale would produce healthy profits. They learned quickly the imagined margins didn't materialize, he said.

So the EMOs diversified, and stopped opening standard charter schools, Levin said.

For example, Edison Schools, which served more than 250,000 students in nearly two dozen states last year, has in recent years focused on offering after-school and summer-school programs, and selling software.

The EMOs continue to operate their original charter schools mainly for brand identification purposes, Levin said.

Likewise, White Hat -- another EMO -- has undergone little expansion of its trademarked Hope Academies, which are traditional schools for grades K-10.

Instead, White Hat is expanding its Life Skills Centers and its online-school enrollment -- which have the potential for higher profits because of lower labor costs -- and is expanding into tutoring and production.

Brennan's beginnings

Brennan's involvement in education began out of what he said was necessity.

He accumulated a great deal of his wealth in the 1970s and 1980s by turning old manufacturing businesses into profitable ventures, but was troubled that many employees lacked the necessary reading and math skills.

He set up learning centers for workers and their families, and parlayed that into an educational services business, which contracted with Summit County to teach basic skills to welfare recipients and opened a private elementary school in Akron.

Brennan publicly criticized public education as unwilling to innovate. He said ``government schools'' were a monopoly focused on protecting itself.

The ``current system is resistant to change,'' he said in 1989.

Through the 1990s, Brennan -- one of the state's most significant Republican Party contributors and fund-raisers -- lobbied then-Gov. George Voinovich and the legislature to move public education money into private schools.

The result was the Cleveland voucher program, where he played an active role in the operations and opened his own voucher schools in 1996.

Voucher schools, however, received roughly half the funding of a basic public education.

Charter schools -- created by the legislature and Voinovich in 1997 -- were given full basic aid from the state. They don't have to go to local voters for funding.

Brennan quickly moved into the charter-school management business.

White Hat has become the largest operator of charter schools in Ohio, receiving about $109 million in state tax money last year -- about one dollar in every four going to charters. According to a report from the Center for Education Reform, White Hat is the largest operator of charter high schools in the nation -- and that report was issued before the company opened eight schools in Florida this month.

White Hat also operates online charter schools in Ohio and Pennsylvania, along with Hope Academies -- regular charter schools -- in Ohio.

Total revenue for the company wasn't available, but Thimmig said the charter-school business accounts for about 80 percent of White Hat's revenue.

White Hat Ventures is an independent company -- not a part of Brennan Industries -- Thimmig said. Brennan is chairman and a shareholder.

Technology spurs growth

Once White Hat established its technology base a little more than a year ago, expansion was rapid.

Brilliant Learning Centers, which use some of the same software as the online schools, went from concept to reality in 10 months, Thimmig said.

NCLB Tutors will use some of the same technology.

But White Hat has become more than a marketer of education.

IQ Digital, in downtown Akron, is a video production company capable of large-scale projects. The company's video and audio facilities can take a client from conception of a project to streaming on the Internet.

IQ produced portions of an Arnold Palmer presentation to his employees.

Through IQ, White Hat also has changed its role in the education software industry from buyer to producer. Some software manufacturers have come to Akron for digital enhancement.

IQ also has its own news facility, where it produces education news for the White Hat properties across the country. One news show was an interview with former U.S. Secretary of Education Rod Paige after he spent two hours visiting White Hat facilities.

Mike Morache, president and chief executive of education software manufacturer Plato Learning Inc., said White Hat is a big customer but not his company's largest.

White Hat is licensing the Plato Web learning network, which provides course ware for high school students in math, science, literature, history and world studies. Unlike many other clients, however, White Hat is sophisticated enough to license the network and operate it itself, he said.

Morache, who has been with the 40-year-old Minnesota company for five months, visited White Hat in late spring and said he was impressed with the operation.

``What struck me is the amount of innovation they are doing compared to even advanced school districts,'' he said.

Originally published in the Akron Beacon Journal

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