Introduction
Every year, millions of children spend at least some time in paid child care. Paid care is often used when a child's parent or parents are at work. Recognizing that child care plays a key role in supporting working families and in child development, the federal government invests in this industry through a range of grants (e.g., Child Care and Development Block Grant) and tax provisions (e.g., Child and Dependent Care Tax Credit). These federal investments flow to a combination of families, employers, child care providers, states, and other key stakeholders in support of diverse missions that include subsidizing costs of care, increasing supply, and improving quality. Recent reports of supply gaps and workforce shortages have prompted renewed congressional interest in child care as an industry.
The child care industry is highly fragmented, consisting of a range of center-based and home-based, for-profit and nonprofit service providers of vastly different sizes and administrative capacities. While many child care organizations face funding and profitability constraints, some of the industry's largest for-profit organizations appear to have greater access to resources and capital, including funding from private equity (PE) firms. PE is a type of pooled investment that, depending on the investment amount, can lead to investors having a controlling interest in business operations. Child care organizations with a history of PE investments often operate through large-capacity chains and franchise models with individual centers spread across multiple states. Despite evidence that PE has been present in the child care industry for decades, little is known about the direct or indirect effects, positive or negative, of these investments on the child care industry or the families who rely on it. This report provides a brief overview of the paid child care industry, with a focus on the presence of PE investments among larger for-profit child care organizations.