$31m 'Soho House for kids' collapses after mounting debt and traumatized babies

Once valued at $31m, Maggie and Rose started in 2006 as a new concept offering the exclusivity of a private members club for young families with a taste for the finer things in life.

‘Soho House for kids’

Rose Astor founded the exclusive club in 2006 with former CEO Maggie Bolger.

The pair dreamed of creating a space where high-flying parents could go to mingle, work, or watch as children enjoyed imaginative playtime and other educational activities. 

The group located themselves in high-income areas of London to attract a specific upmarket clientele. 

It didn’t take long for those wealthy members to sign up, paying around £120 ($151) for the privilege of attending a space where their kids could play in style. The group expanded to three clubs in the affluent London neighborhoods of Islington, Kensington, and Chiswick.

Similar to the business model found at Soho House, other costs including activities and drinks in the clubs’ bars carried additional steep charges. There were also charges for specific classes, like “Messy Masters Art” and “Let’s Get Cooking.”

The group spared no expense decorating the site in a move that seemed to be aimed more at impressing the parents, rather than its children. Intricate wood paneling adorned playhouses and slides in the daycare, for example.

Still, the company’s formative years were lucrative. According to Bolger’s website, the daycare group grew to a reported valuation of £25 million.

Its founders sold the company in 2019 to China New City Commercial Development, leading to international expansion with sites in Hong Kong and Shanghai.

The onset of COVID-19 and a widespread shift to remote working might have promised to be a boon as busy parents looked for a space where they could offload their youngsters while trying to handle remote work commitments. 

Babies crying themselves to sleep

But the company has been plagued by problems since its takeover, not least a scathing report from state watchdog Ofsted in Islington in 2021.

The body panned  Maggie and Rose with the lowest possible score of “inadequate” following an inspection, arguing that children’s safety was being compromised at the site’s daycare.

Concerns included babies crying themselves to sleep because they weren’t comforted by carers, and being served large chunks of fruit, an obvious choking hazard. Worse still, the inspectors found babies were placed to sleep on their front (which is against official advice) and staff were found to not be aware of safe-sleep practices.

The company later improved to the second highest grade of “good” following another inspection five months later. 

There were struggles with money problems for several years.  Company accounts showed the group had £3.2 million in total equity in 2018. Its latest annual financial report from 2021 shows negative equity of £1.6 million ($2 million).

Maggie and Rose sold its in-house daycare to operator private equity-backed Grandir UK in 2022. The daycare confirmed to several publications that it is still operating its facilities at the members’ club.

A parent whose child attends Grandir told Fortune that the daycare was keen to distance itself from Maggie and Rose’s operations, though it still used the company’s title until it closed last week.

The Islington branch is now called “Islington Square Day daycare,” and continues to operate on Maggie and Rose’s shuttered site. 

The parent said he and other members were under the impression that membership would provide access to these activities as part of the up-front fee.

“It seemed like they were not particularly invested in either the daycare or the club. They sort of seemed like afterthoughts,” the parent said.

The parent said the cafe beside the daycare was often full, but it was the only part of the club that made financial sense to him.

“The rest of the clubhouse? I don’t know, it’s a lot of money to pay for soft play.”

Maggie and Rose was also up against stiff competition as businesses rushed into big cities to take advantage of wealthy metropolitan parents who had money to burn. 

The daycare’s £120 per month base fee looks like a bargain compared with rival London offering Purple Dragon, where parents pay around £4,000 ($5,000) to leave their kids with reportedly Chanel-coated nannies in the group’s affluent Chelsea center. 

Maggie and Rose shuts shop

Signs of distress first emerged in January, with local publication Chiswick W4 reporting that parents had been left in the dark when its doors suddenly closed.

An email sent out by the company and seen by London’s Evening Standard said the club was closing temporarily owing to “staffing and operational challenges.”

Parents took to messaging sites to say they had been left out of pocket, paying up-front monthly and in some cases annual membership fees they’re unsure they’ll ever get back.

“Our members’ safety and experience is our top most priority. We are very sorry for any inconvenience caused,” the email reportedly read.

A picture seen by Fortune shows a closure order for the group’s branch in the London neighborhood of Islington.

But warning lights may have been flashing even earlier. 

In November, the group announced director Caihe Lin would be stepping down director, just two months after he was appointed to the post, Companies House filings show. 

For the club’s co-founders, it marks a sad end to a profitable operation they left behind five years ago. 

“It is a sad moment, quite a few of the old team have been reaching out—it is the end of an era for sure and such a shame as it was an excellent business,” founder Bolger told local publication The Chiswick Calendar.

Fellow founder Astor told the Evening Standard: “Maggie and I are very sad to hear of its closure.”

A representative for Maggie and Bolger didn’t immediately respond to Fortune’s request for comment.

A spokesperson for daycare operator Grandir confirmed to Fortune that the company was still fully operational within the clubs, and was an entirely separate entity to Maggie and Rose.

“The closure of the Club is completely unrelated to the ongoing operation of our nurseries. The nurseries remain dedicated to providing childcare and education services across the area.”