With Algonquin facing a $6.7 million shortfall, the college is doing everything it can to mitigate the financial shortfall.
One of the strategic investments by the college that has received the most scrutiny is the satellite campuses in Kuwait, and Jazan, Saudi Arabia.
The two campuses do not have similar business models. According to Algonquin, both are well-positioned to bring in extra revenue for the college.
Algonquin’s Kuwait campus has a very low level of financial risk according to Doug Wotherspoon, vice president international, communications and strategic priorities.
A group of business partners in Kuwait supplied the start-up costs associated with the campus.
These partners were described by Wotherspoon as “a local group of investors who can make a difference in their community and recoup a small amount of money. Nobody runs a college or university to get rich.”
The day-to-day operations of the campus are run by Orient Education Services, a Kuwait-based education and training company.
“None of the money comes out of Algonquin College,” Wotherspoon said about the campus in Kuwait.
Algonquin’s responsibility in the partnership is to provide the educational framework that will be taught on campus. In exchange, Algonquin gets a percentage of each student’s tuition.
Wotherspoon compared the Kuwaiti campus to a typical franchise opportunity you would see with McDonald’s or Tim Horton’s.
“The whole concept of a franchise is finding passionate people. Whether it’s education or food service, they don’t need to know anything about running a business. We give you the system for that. You just bring the passion, and the capital,” Wotherspoon said.
“The financial risk is not very high, it’s in the tens-of-thousands of dollars,” Wotherspoon said.
Additionally, Wotherspoon says the campus in Kuwait – despite being located in a volatile part of the world – is extremely safe.
“Kuwait is quite safe; it’s probably one of the most stable economies in the region. I’m not terribly worried about that campus,” said Wotherspoon.
Algonquin’s Jazan campus is a different matter. It does not run under the same framework as the Kuwait campus.
Algonquin has a more hands-on role in Jazan. The college set up a limited liability corporation in Saudi Arabia— Algonquin College Coporation Saudi Arabia— to run the day-today operations of the campus.
The staffing and administration costs in Jazan are funded by Algonquin.
“We have a higher risk in (Jazan) because instead of just receiving revenue, it’s an expense and revenue situation,” Wotherspoon said.
But, much like the Kuwait campus, Algonquin was not on the hook for much in terms of start-up costs.
“We invested about $1.5 million to start-up the campus but that has been paid back,” said Duane McNair, vice president, finance and administration.
“We operate the campus, that’s how we make our money. We haven’t built the buildings, they’ve been provided to us. The buildings have equipment in them—things like desks and chairs and the essentials,” Wotherspoon said.
The campus had an enrolment goal of 200 students. But because it opened a month late, the college only attracted 79 students.
“The fact that we opened when we did, and have 79 students, I’m thrilled,” Wotherspoon said. “We came as close to our target as could be expected given the delay.”
Although the Jazan campus has struggled, McNair says it is still in decent financial shape. “(The campus) made money its first year, but this year the audit is still under way,” said McNair.
“We’ll take some short-tern losses to get to long-term gain,” Wotherspoon said.
Ultimately, Wotherspoon is confident Algonquin’s investment in the Middle East will benefit the college in the long-run. “This is an institution that will be here for the next hundred years, not hundred days,” he said.
“Ultimately, we’re not in it to lose money, let me put it that way,” Wotherspoon said.