G.communication Co. will hire some teachers from schools that it isn’t taking over from defunct Geos Corp. because it is currently experiencing a manpower shortage, G.communication President Hideo Sugimoto told The Japan Times on Wednesday.
“Some teachers left (the Geos schools) we took over because they weren’t getting paid,” Sugimoto said in an interview in G.communication’s Tokyo office.
Sugimoto said he doesn’t know how many teachers his company will hire from the Geos schools that will be shut down. G.communication has already said it will keep all of the employees at Geos schools it is taking over.
Nagoya-based G.communication runs language conversation schools, cram schools and restaurants.
Geos will close 99 English-language schools that employ 483 teachers and staff, while G.communication will take over 230 schools that employ 1,059. The company reopened 201 Geos schools last Friday, just three days after Geos filed for bankruptcy with the Tokyo District Court.
It will reopen the remaining 29 as soon as landlords of the branches sign rent contracts, Sugimoto said.
Former Geos employees will first enter work contracts with G.education, an education arm of G.communication, for three months, as had been the style with Geos, and then will sign a contract based on G.education’s style of employment, in which popular teachers get to teach more hours and are paid more, Sugimoto said.
Sugimoto also stressed that the chaos at the time of the failure of Nova Corp., another major language school chain, will not be repeated because of his company’s speedy rescue of Geos. G.communication took over operations of some Nova schools in November 2007.
“People may be worried because of the experience with Nova. In Nova’s case, we took over some of their schools awhile after the company went bankrupt and we had to start in a situation where more than 1,000 teachers didn’t have places to work,” Sugimoto said.
“This time, we raised our hand (to rescue Geos) at an early time,” he said. “If it was a week later, it would have been more chaotic.”
He also said he hadn’t been intending to expand in the language education business, and this move was just the result of salvaging a failed company.
He is also confident of making the former Geos schools profitable in a year, saying G.education will offer better services, such as convenient lesson-booking methods, than rival firms.
“The (English conversation school) market may be shrinking, but there are needs and we will meet customers’ needs,” he said.
At Nova schools, the teacher-to-student ratio is 1-to-3.5, which is “just right,” he said. He will aim to achieve that for Geos schools, whose current ratio is 1-to-2.6, he said.
Geos’ bankruptcy is believed to be tied to its persistent’s attempts at expansion, flying in the face of industry figures that showed the English-teaching market was shrinking amid the economic slump.
According to the Ministry of Economy, Trade and Industry, the monthly number of students enrolled at foreign-language conversation schools plunged from 826,858 in February 2006 to 335,604 in February this year. The corresponding monthly sales figures for the industry over the same period fell from ¥17.2 billion to ¥5.7 billion.
G.communication Co., which has taken over 230 of 329 schools run by collapsed English conversation school operator Geos Corp., resumed classes at 201 Geos schools nationwide Friday.
Classes at the remaining schools will restart soon, according to G.communication.
The phone was ringing off the hook at one Geos school in Tokyo, where classes resumed at 10 a.m., as students sought information about class schedules and made other inquiries. A female staffer manning the phone was still coming to grips with the events of recent days.
“I’d heard some schools would close, but I never expected the company would go under,” she said. “I also heard that we’ll keep our jobs, so I really don’t know what’s going on.”
Meanwhile, Mizuho Fukushima, state minister in charge of consumer affairs, said after a Cabinet meeting Friday, “We’ll keep an eye on developments so students can take classes without concern.”
Nagoya-based G.communication said students at 99 Geos schools that will be shut down can take classes at other schools taken over by the company if they waive the right to receive a repayment of their tuition fees.
However, Fukushima said she hoped G.communication would provide more details about its plans.
“Some students might regret waiving the right to receive a refund because they live some distance from other schools, or for other reasons,” Fukushima said.
Geos filed for bankruptcy at the Tokyo District Court on Wednesday.
The failure of major language-school operator Geos Corp. occurred because the company didn’t trim unprofitable branches fast enough at a time when the industry was facing a drastic drop in students, people in the industry said.
Although the bankruptcy of industry leader Nova Corp. in October 2007 damaged the image of the commercial language school industry, the impact this time is likely to be contained somewhat by the swift response of G.communication Co., another language chain that has offered to take over about two-thirds of Geos’ branches.
“I think the biggest factor was the decline in students,” said Masami Sakurabayashi, director of the Japan Association for the Promotion of Foreign Language Education, a Tokyo-based organization that promotes sound management of foreign-language schools. Geos, the second major language school to fail in the past three years, is not a member of the group.
The Ministry of Economy, Trade and Industry said enrollment at foreign-language schools has plunged from 826,858 students in February 2006 to 335,604 this year.
In its attempt to catch Nova, Geos expanded rapidly only to be caught high and dry by the plunge in student enrollment after Nova imploded, and was probably unable to trim unprofitable branches fast enough, Sakurabayashi said.
G.communication Co., which took over some Nova branches, will take over 230 Geos schools and close 99. Geos boasted about 500 branches during its heyday, while Nova had about 900.
“Rapid expansion is very risky with this business because it is hard to maintain quality service,” Sakurabayashi said, referring to the distrust created by Nova, which collapsed after being penalized by the government for misleading advertising.
The language industry has been in decline for the past several years due to Japan’s economic malaise, the global financial crisis and the fallout from Nova’s bankruptcy.
According to Tokyo-based Yano Research Institute Ltd., sales in the industry fell from ¥826 billion in fiscal 2005 to ¥767 billion in fiscal 2008.
But the failure of yet another major chain doesn’t mean the industry is hopeless, some said.
Running a language school chain is manageable if you don’t make the mistake of expanding too rapidly, Sakurabayashi said.
“This is my personal opinion, but running foreign language schools is a profitable business, although you may not make such a huge profit,” he said, adding that the key is to have a realistic goal.
Atsushi Hamai, a spokesman for the major school chain Aeon Corp., said that while it’s true that new enrollment has been in decline for the past several years, the industry is recovering and the company has not seen much fluctuation in its sales and operating profit.
“When Nova was expanding its presence about 10 years ago, we did put a focus on establishing new branches,” Hamai said. “But we think that increasing the number of branches is not the way our company should go, so we hardly create new schools now. Our strategy is not expansion, but to strengthen the inside.”
Some fear that Geos’ collapse and subsequent bad press will give the entire industry a black eye.
“I’m concerned that this issue might bring negative influence to the industry,” said Kunio Hatanaka, head of the All Japan Linguistics Association, another organization of foreign language school operators that included Geos.
“There are many schools that run healthy businesses and try hard to serve customers,” he said.
But the impact is likely to be smaller compared with Nova, Sakurabayashi said, thanks to the aggressive moves of G.communication.
The decision to file for bankruptcy was not his, the president of language-school chain Geos Corp., Tsuneo Kusunoki, implied in an unusual statement released Thursday.
“The company’s board of directors did not reach a consensus on filing for bankruptcy, and the action was taken by one director and some employees,” Kusunoki said in the statement. “Although it has given the impression that the company filed for bankruptcy, it is actually not the company’s will.”
A Geos lawyer explained that because “three directors could not reach agreement” on the bankruptcy filing, the action was not taken by the board of directors but rather by some executives.
The lawyer stressed that the process is legal.
Kusunoki and another director who did not agree to the bankruptcy filing “insisted on keeping the company alive, disagreed on filing for bankruptcy and refused to put their personal seal” on the bankruptcy document, according to sources who work at Geos.
The filing, dated Tuesday, says the company’s debts total ¥7.5 billion. Hitomi Suhara, a Geos director, told a news conference Wednesday that part of the English conversation business will be taken over by Nagoya-based G.communication.
Behind the bankruptcy of Geos Corp., a major operator of English-language schools, are two words whose value can be recognized in any language: time and money.
Japanese studying English are increasingly using free Internet-based programs and steering clear of the high fees and rigid scheduling of traditional language schools.
“With an abundance of choices today, things are different from the days when learning English meant attending an English-language school,” said Masato Honma, who penned the book “Eigo wa Netto Doga de Minitsukero!” (Pick up English through video on the Net).
The shift in attitude among Japanese consumers was prompted by the October 2007 collapse of Nova Corp., once the largest language school operator in Japan.
The number of students attending foreign-language schools dropped from about 827,000 in February 2006 to around 336,000 this February, according to industry ministry statistics.
The decline was particularly sharp after Nova’s failure, which exposed problems concerning unpaid wages to teachers, suspected fraud and the difficulties getting refunds for canceled contracts.
Geos’ customers could feel the same sting after the company filed for bankruptcy protection Wednesday.
“I am shocked to the point where I cannot find the words,” said a 47-year-old woman from Hasuda, Saitama Prefecture, who had just paid one year’s worth of fees for her twins.
While Geos tries to deal with its nearly 37,000 students and 335 schools, Smart.fm, a website offering English-language lessons for free, continues to gain in popularity.
More than 1 million users are registered with Smart.fm, which was set up in October 2007 and offers more than 100 programs ranging from basic skills to advanced courses.
The majority of students today at language schools are workers who need English skills for their jobs and people planning to take the Test of English for International Communication (TOEIC) to improve their job prospects amid the economic downturn.
Jun Nakagawa, a spokesman for Berlitz Japan Inc., noted that many companies have reduced their employee training budgets particularly since the collapse of Lehman Brothers triggered the global financial crisis.
Now, businesspeople with no time to attend classes at schools make up a large portion of Smart.fm’s students.
Nakagawa also said free services may have taken away many would-be students looking to study English to enhance their image or kill time.
“The group who learned English because ‘it would be cool if I could speak English’ has disappeared from many schools,” the official said.
The trend will likely affect the hordes of native-English speakers who came to Japan for teaching jobs.
“The age when language schools could boast an abundance of native speaking instructors has ended,” said Yukio Otsu, a professor at the Institute of Cultural and Linguistic Studies at Keio University. “Some added value such as (teaching) ways of thinking, will be required.”
Thousands of students were caught off-guard and could be left out of pocket by the collapse of Geos Corp. on Wednesday, with many unaware the major English conversation school was in financial straits.
“I paid 300,000 yen-plus in February for annual tuition. I was concerned as Nova had collapsed a while ago, but I didn’t expect Geos would also go belly-up,” a company employee in his 20s said at the Jiyugaoka branch in Meguro Ward, Tokyo, referring to the major conversation school that went bankrupt in 2007.
A 22-year-old student who arrived at the Sangenjaya branch in Setagaya Ward said she paid 250,000 yen in annual tuition in mid-March.
“The school insisted that I pay it in a lump sum,” she said wistfully.
Geos started bankruptcy procedures Wednesday at the Tokyo District Court, which ordered its assets protected from creditors. The firm grew rapidly on the English conversation learning boom, but its finances worsened recently.
Flanked by a lawyer, Geos executive Hitomi Suhara announced at a press conference Wednesday that Geos had applied to the court to start bankruptcy procedures.
Geos founder and president Tsuneo Kusunoki did not attend the conference.
Suhara said it would be “rather difficult” to refund students who had paid their tuitions in lump sums because the firm’s financial condition “isn’t very good.”
A 43-year-old woman of Chofu, western Tokyo, arrived at the Geos’ Sengawa branch in Chofu on Wednesday afternoon after hearing of the bankruptcy.
“This is the second time this has happened to me [following Nova],” she said. “All I can do is laugh at my bad luck.”
She began sending her son, a fifth-grader, to the branch last year and paid more than 200,000 yen for annual tuition. However, he has so far attended classes worth less than half of the tuition.
As the woman was left out of pocket after paying more than 600,000 yen in a lump sum to Nova before it collapsed, she paid Geos in a smaller installment.
“I’m anxious as I don’t know if [my son] can go to another branch in the neighborhood,” she said. “He got along well with his instructor. It’s such a shame.”
A 28-year-old American instructor at the Tsu branch said he was informed about two weeks ago by Geos that his school would be shut down and it could not guarantee his salary for this month would be paid.
He was also told it would be difficult to refund students.
“I want to get my salary, but I feel really sorry for my students,” he said.
General Union, an Osaka-based labor union for instructors at English conversation schools, said it had received many complaints from Geos instructors over salary payment delays since last summer.
Katsuji Yamahara, chairman of the union, said: “We don’t know what will happen. We’ll help [Geos instructors] over their unpaid salaries.”
According to Geos, 230 of its 329 branches nationwide will be taken over by Nagoya-based G.communication Co. Geos will ask 7,000 students at the 99 branches that will be closed to transfer to other Geos branches.
Geos has set up a toll-free number for students with inquiries from 10 a.m. until 8 p.m. through Saturday. The number is 0120-134-446.
Geos bankruptcy typifies an industry faced with changing market, bad economy
With stiffer competition for fewer students amid a lingering recession, the nation’s language schools need to develop new and profitable business strategies if they hope to improve their situations, a fact only further highlighted by Geos Corp.’s announcement Wednesday that it had filed for bankruptcy.
“The current economic slump has led to a decline in the number of students, which meant we had to cut our advertising budget. As a result, the number of new students drastically decreased,” Geos executive Hitomi Suhara told reporters Wednesday in Tokyo.
In the 1990s, Geos had increased its number of campuses to more than 400 in an attempt to compete with its largest competitor, Nova Corp.
In 2008, Geos began closing, abolishing or consolidating unprofitable schools. But these measures came “too late,” according to one industry insider.
According to Yano Research Institute Ltd., the nation’s language school market for fiscal 2009 was estimated at 738.6 billion yen, down 10.6 percent from its fiscal 2005 value.
With the persistent economic downturn, language schools have seen a decrease in the number of commuting students and corporate language programs, contracts for which are considered to be steady forms of income, according to the research institute. Further complicating the matter was Nova’s 2007 bankruptcy, which turned many potential students against language school operators.
Meanwhile, the advent of new types of learning tools, including online English conversation programs and software for mobile phones, also have made competition fiercer within the industry.
There is an increasing number of price-busting schools, which hire Filipino teachers, who are native English speakers and work for less than other English-speaking peoples. These schools offer lessons for as little as several hundred yen for 30 minutes–without any admission fee.
On the other hand, as English instruction will be mandatory at primary schools starting next academic year, business endeavors geared toward children have grown steadily.
According to one Industry Division official at the Economy, Trade and Industry Ministry, “The industry needs to come up with a business strategy that targets growing fields, such as providing special lectures for children.”
Toll-free telephone numbers provided by Geos Corp. for its students were inundated with inquiries Thursday, a day after the major English conversation school said it had begun bankruptcy procedures.
No employees were seen at Geos schools around the country, and calls to the Geos sales department went unanswered or were connected to a message saying that nobody was available to answer the phone.
The toll-free number the school set up for its students has been flooded with inquiries, but most calls were relayed to an answering machine saying the lines were busy.
The National Consumer Affairs Center received a number of complaints and inquiries from Geos students.
Although a few employees showed up at the head office in Shibuya Ward, Tokyo, on Thursday morning, all said they were in the dark about what was going on.
The Tokyo Metropolitan Consumer Center also has received inquiries by students wondering if their fees would be returned. The center plans to discuss this matter with Geos and the Consumer Affairs Agency.
G.communication Co., the Nagoya-based firm that will take over 230 of Geos’ 329 schools, and Geos jointly held a briefing Thursday for Geos employees. According to a G.communication spokesman, the meeting was for all Geos employees, including those who work at 99 schools that will be closed.
The two firms were reportedly sending letters urging students to transfer to schools taken over by G.communication.
Geos filed for bankruptcy at the Tokyo District Court on Wednesday with total liabilities estimated at 7.5 billion yen.
The founder and president of Geos Corp. said Thursday he will ask the Tokyo District Court to avert bankruptcy proceedings for the major language school operator.
Tsuneo Kusunoki expressed his intention during a telephone interview with Kyodo News a day after Geos filed for such proceedings with the court, which ordered the protection of the company’s assets from creditors.
“A company has come forward to extend financial support to Geos so it does not have to go bankrupt,” Kusunoki, 62, said.
An executive in charge of financial affairs, who is one of the three board members at Geos including Kusunoki, decided to file for bankruptcy protection, according to Kusunoki.
The Geos president said he is considering taking countermeasures as he did not agree with the executive’s decision.
The financial executive and some other Geos officials, who filed for the bankruptcy proceedings, told reporters Wednesday that although there was disagreement in the company’s management over whether it should go bankrupt, the application for court protection was legal.
But a lawyer for Kusunoki said the application may have constituted an abuse of rights.
Stopping the bankruptcy proceedings, however, may be difficult as it has already been decided that of the 329 schools operated by Tokyo-based Geos, 230 will be handed over to G.communication Co., a Nagoya-based company which took over the assets of another bankrupt language school operator, Nova Corp., in 2007 and turned them into a profitable operation.
“I would like to protect as many students and employees as possible,” Kusunoki said, adding that the transfer of so many schools to G.communication would make it difficult to save them.
Kusunoki is expected to voice his opposition when the Tokyo court holds a hearing with parties concerned to decide whether it should order the launch of bankruptcy proceedings.
Meanwhile, G.communication said 201 of the 230 schools it will take over from Geos will resume classes Friday.
Geos was founded in 1973 in the city of Tokushima, Tokushima Prefecture, and the number of its schools peaked at 500 during its heyday.
The company, which says it has 2,100 employees on its payroll, followed an expansionary policy of setting up English language schools in other countries such as Canada, Australia, Singapore and South Korea.
G.communication Co., which has taken over 230 of the 329 schools run by bankrupt major language school operator Geos Corp., resumed classes at Geos schools on Friday.
Classes were reopened at 201 schools and will resume later at 29 other schools, while 99 schools were closed.
On Wednesday, Tokyo-based Geos, mired in debts of 7.5 billion yen, filed for bankruptcy proceedings with the Tokyo District Court, which ordered its assets protected from creditors.
Of Geos’s total of about 36,800 students, 29,000 are registered at the Geos schools taken over by G.communication based in Nagoya.
Students at the Geos schools being closed can continue their studies at nearby Geos schools or at schools of Nova Corp., a language school taken over by G.communicatin in 2007, for tuition already paid.
Refunds will not be granted for classes that students have not yet taken, according to Geos.