Nagoya-based G. communication Co. last week sold Nova Corp. and Geos Corp., two major foreign language school chains, to an investment fund.
The fund, Inayoshi Capital Partners, run by recently retired G. communication founder Masaki Inayoshi, acquired the stakes Friday by purchasing shares of G. education Co., a G. communication spokeswoman said.
Seven Geos language schools overseas, in Singapore, Hong Kong, Taiwan and Thailand, will remain G. communication subsidiaries.
“Both Nova and Geos will continue their operations, and we believe this will not affect the students,” the spokeswoman said, adding both brands will be maintained.
G. communications took over the operations of Geos just six months ago after the chain filed for bankruptcy with net debts of ¥7.5 billion.
The corporation purchased Nova in 2007 after the school chain went bankrupt.
The spokeswoman said the decision to sell off the two school chains was made because Kobe-based food and beverage distributor Hanshin Shuhan Inc. is poised to become the parent company of G. communications and wants to focus on its mainstay business.
Tokyo-based Foody’s Co. now owns a majority in G. communications but has agreed to sell its entire stake to Hanshin Shuhan.
According to the Asahi Shimbun, Foody’s is planning to sell its stake partly because of expected financial difficulties due to the recent bankruptcy of its main creditor, Incubator Bank of Japan.
Foreign-language schools have seen a decline in sales and enrollment recently.
According to the trade ministry, average monthly sales at language schools fell to ¥5.1 billion this year from ¥8.1 billion in 2007. The corresponding monthly enrollment figure decreased to 335,827 from 619,642 students.
The shares in G. education Co. were sold on Friday to an investment company headed by G. communication founder Masaki Inayoshi for an undisclosed sum.
The boss of a multi-national English language school in Auckland has been awarded $190,000 after an employment tribunal dismissed claims he was used to being treated “the Japanese way”.
David Page was stripped of his job as regional director of GEOS New Zealand at a conference in 2008 and demoted to head of the company’s Auckland language centre.
In April last year, he was fired by email after being given “one last chance” to make the school profitable.
Page launched an unfair dismissal claim against GEOS, which comes under the umbrella of the GEOS Corporation founded by Japanese businessman Tsuneo Kusunoki.
But the company responded by claiming that Page “accepted understanding of the ‘Japanese way’ of doing business”. They went on to say he was used to Kusunoki “ranting”, “berating” and “humiliating” people “so this was nothing new”.
But the Employment Relations Authority said the company’s failings were “fundamental and profound”.
Member Denis Asher said the final warning was “an unscrupulous exploitation of the earlier, unlawful demotion”. He said: “A conclusion that the ‘Japanese way’ already experienced by Mr Page was continuing to be applied is difficult to avoid.”
Page, an Australian, started with the company as general manager for GEOS Gold Coast, Australia, in July 1999.
He moved to Auckland in March 2006, to take on the role of regional director. He was informed of his demotion at a regional conference in Thailand in November 2008.
Four months later he received a final warning that if the Auckland language centre was not in profit by the end of May his employment would be terminated.
Asher also said “an entirely unfair, unilateral process was applied” by the company in the decision to dismiss Page.
Page was awarded $55,000 for loss of income, $21,000 for hurt and humiliation, and $31,849.99 for long service leave. The total amount, including superannuation, under-payment of salary, holiday pay and bonuses came to more than $190,000.
The parent company, GEOS Corporation, went bankrupt in April owing $121 million. The New Zealand branch has been taken over by New Zealand Language Centres Limited. They refused to comment last night.
Thank you very much for printing the story regarding the Geos bankruptcy. As a former Geos teacher, I was glad to see that you told the other side of the story, as other media had made it appear that there weren’t any problems because G.communication had taken over the company in advance. This is not true.
I chose not to sign the vague contract with the new company, for the same reasons as the teacher mentioned in the article, and because I was due to leave the company in a matter of weeks.
I had been employed with Geos for more than 10 years when they declared bankruptcy in April. I had given the required four months’ notice and was due to leave the company in May, but had offered to extend my employment to help the school as they were having trouble finding teachers.
As I was on a very old-style contract, I was due a leaving allowance of ¥1 million — which I lost — in addition to April’s salary. I have also had to fight to be allowed to stay in my apartment until the end of the month, despite the fact I had paid May’s rent directly to the landlord.
Many teachers signed the new contract as they were worried about being left homeless and visa-less with no money in a foreign country. A letter in Japanese was sent to staff who chose not to sign the contract saying that the documents required to claim the unpaid salary would be sent by May 15, and that teachers should be out of their apartments by that date. As many ex-teachers are already having to leave the country, there is no way that they will be able to make a claim.
In the school where I used to teach, the instructor who replaced me left after only a few days’ teaching, and the other teacher is due to work until only the end of May. However, the students are not being told about this when they sign and agree to continue their lessons, losing the right to a refund if they cancel their contracts. Students who do not want to continue under these conditions are being told that they will not be able to obtain a refund.
I agree with the article that the large eikaiwa school models are on their way out. In the area where I live, smaller schools that allow students to pay monthly are seeing an increase in students.
I hope that you will continue to print articles showing the other side of the story.
G.communication Co., which has taken over collapsed English conversation school operator Geos Corp., plans to resume lessons at all Geos schools by the end of May, the company president said.
This means lessons will resume soon at 18 of the 230 Geos schools that were closed for falling behind in their rent payments and for other reasons as of Wednesday.
In an interview with The Yomiuri Shimbun, G.communication President Hideo Sugimoto said he hopes to return Geos to the black within a year.
“I want to record a profit in a year from now, although there still are costs that may materialize later,” he said.
G.communication also took over the Nova English conversation school when it went belly-up in 2007, but Sugimoto plans to maintain both brands.
“Geos schools have Japanese teachers and beginners may find it easier to take lessons there, whereas all Nova teachers are native speakers. Each has its own advantages and devotees,” he said.
The firm plans to maintain, for the time being, the 230 Geos schools it took over.
If some schools have difficulty resuming lessons, G.communication will help them out by renting rooms in neighboring buildings and taking other measures, Sugimoto said.
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.