> Is the theory here that the previous owners were altruistically pricing below what the market would bear?
As someone who has done research on pricing in a range of sectors, it’s usually some form of ignorance rather than altruism.
In case you think I’m just picking on child care providers, I will provide an additional example — non-VC SaaS services were often wildly mispriced/underpriced until the “charge more” mantra became more widespread (thank you, patio11).
Concerns about reputation, too, as well as general friction. I used to do the menus for my dad's restaurant, which was always a big hassle first of all with the typesetting and going to the printers and everything, and then also it was such a struggle to get him to go up on prices. He'd just rather undercharge a little bit and make less money than be known as the guy in town who sold the "expensive" burgers.