The terms of this deal are interesting. For a single dollar, Purdue assumes control. Kaplan absorbs all the expenses for the first five years. Why?
Kaplan's enrollments had held mostly steady over the past few years but the national picture was clear: the traditional institutions were increasingly stealing market share in on-line education. Rather than face the same, Kaplan has guaranteed a royalty stream into the future and wrapped itself inside Purdue's more reputable brand. If Purdue can realize the kind of growth seen at SNHU, then both sides will come out better for the deal.
The state university will pay $1 upfront and enter into an agreement with an affiliate of Graham Holdings Company, the parent of Kaplan Inc. and Kaplan University, that could yield the company 12.5 percent of the new university’s revenue. The deal calls for Kaplan to provide operational support, including marketing, human resources and financial aid administration, to the new institution for an initial term of 30 years with a buyout option after six years. Kaplan is not entitled to any expense reimbursement, until the new university has covered all of its operating costs and set aside $10 million in each of the first five years. Once those conditions are met, Graham Holdings will be reimbursed for its costs and receive a percentage of the school’s revenue, according to a company filing.
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