Last updated: May 3, 2026

How to Start a Daycare in Minnesota (2026)

Minnesota’s child care landscape went through two structural changes in 2024-2026 that fundamentally reshape how new providers should plan to enter the market. First, the Department of Children, Youth, and Families (DCYF) took over child care licensing from DHS on June 18, 2025, and as part of that transition, the licensing statutes were renumbered: Minn. Stat. ch. 245A is now Minn. Stat. ch. 142B. Second, Parent Aware – Minnesota’s Quality Rating and Improvement System – is undergoing a major redesign, with new Standards and Indicators announced February 13, 2026 and an automatic 1-Star Rating for all licensed programs in good standing beginning July 1, 2026. The combination means anyone planning to open a daycare in 2026 needs to understand both the new agency structure and the Parent Aware reset.

The single most important business-model decision a Minnesota daycare operator makes is whether to participate in the Child Care Assistance Program (CCAP). CCAP reimburses providers at the 75th percentile of the most recent market rate survey – a major rate increase from the previous 35th percentile, enacted by the 2023 Legislature. Combined with state-funded Great Start Compensation Support Payments (which paid out $316 million in FY 2024-25 and $260 million in FY 2026-27 to participating providers based on staff counts), participation has become substantially more financially viable than it was pre-2023. Operating cash-only without CCAP simplifies compliance but eliminates a major demand source.

This guide covers Minnesota’s two primary license types, the Class A/B/C/D Family Child Care capacity tiers, the 9503 Center ratios (including the distinctive 1:7 toddler ratio for ages 16-33 months), Parent Aware redesign mechanics, CCAP rates and Great Start Compensation Support, NETStudy 2.0 background studies, and the actual costs to launch a daycare in the Twin Cities, Rochester, Duluth, and outstate Minnesota in 2026.

Minnesota Daycare Licensing at a Glance

Requirement	Source	Cost	Notes
Family Child Care License (in residence)	DCYF / County Licensing Agency under Minn. Rules ch. 9502	No state application fee; county admin variable	Class A through Class D capacity tiers
Child Care Center License (non-residential)	DCYF directly under Minn. Rules ch. 9503	Capacity-based licensing fee	Annual renewal; capacity-based
Pre-licensing orientation and training	DCYF / Develop Minnesota	Free orientation; CPR/First Aid ~$60-$120	Online and in-person Develop Toolkit modules
NETStudy 2.0 background study	DCYF under Minn. Stat. ch. 245C	$0 (state-funded with state appropriations)	All staff, contractors, household members 13+
Facility space (Center)	Minn. Rules 9503.0150	Property cost-driven	35 sq ft indoor / 75 sq ft outdoor per child
State Fire Marshal inspection (Center)	State Fire Marshal Division	Inspection fee varies	Fire suppression, egress, exit lighting
Building code compliance	Minnesota State Building Code via local building official	Permit fees vary	2020 IBC and IRC editions with state amendments
Parent Aware QRIS	DCYF	Free	Auto 1-Star July 1, 2026; 3-4 Star earn through points
Child Care Assistance Program (CCAP)	DCYF	Free; reimbursement-based	75th-percentile reimbursement rate; 85% SMI exit; 67% SMI redetermination
Great Start Compensation Support	DCYF (state appropriation)	Free; payment-to-provider	Based on number of regular caregivers; staff comp/benefits earmark
Earned Sick and Safe Time + Paid Leave (employees)	DLI / pl.mn.gov	1 hr/30 worked + 0.88% PFML premium	Both apply to daycare employees from day one
Workers’ comp	Minn. Stat. § 176.041	NCCI 9059 Day Nurseries typical	Required from first hire (no minimum threshold)

The Two Minnesota License Categories: Choose Your Lane

Family Child Care under Minn. Rules ch. 9502

Family Child Care is care provided in the operator’s residence. Minnesota uses a distinctive Class A through Class D capacity tier system that determines how many children one or two adults can care for, with separate tiers for specialized infant/toddler programs:

License Class	Adults	Maximum Children	Notes
Class A – Regular Family Child Care	1	10	Most common entry-level license; typical first-year tier
Class B1 – Specialized Infant/Toddler	1	5	Children under 33 months only
Class B2 – Specialized Infant/Toddler	1	6	Higher-experience tier; children under 33 months
Class C1 – Group Family Child Care	1	10	Larger Family Child Care permitted
Class C2 – Group Family Child Care	1	12	Higher capacity with larger residence
Class C3 – Group Family Child Care	2	14	Two-adult tier
Class D – Specialized Infant/Toddler Group	2	9	Specialized two-adult infant/toddler care

Under Minn. Rules 9502, no Family Child Care residence may have more than 2 children under 12 months at any time, and no more than 4 children under 24 months total. These caps apply across class tiers and reflect the increased supervision needs of infants and toddlers.

Family Child Care licensing is administered through the County Licensing Agency in your county – a delegated structure where DCYF sets the rules and counties handle inspections, application processing, and ongoing oversight. Each county sets its own administrative procedures for application turnaround, inspection scheduling, and continuing requirements, though all follow Minn. Rules ch. 9502 and Minn. Stat. ch. 142B. Hennepin and Ramsey counties (Twin Cities) have larger licensing staffs and faster turnaround than rural counties; rural counties often have a single licensor handling several functions.

Family Child Care has been the most accessible entry path historically – operating from your home means lower overhead, no separate commercial rent, and a smaller staff requirement. Minnesota’s Family Child Care provider count has been declining for years, however, with the state losing roughly 30% of in-home providers between 2014 and 2023 due to compensation, regulatory burden, and demographic shifts. The Great Start Compensation Support payments and CCAP rate increase are explicitly aimed at reversing that decline.

Child Care Center under Minn. Rules ch. 9503

Child Care Centers serve children in a non-residential setting, typically a dedicated commercial building, faith-based facility, employer-sponsored space, or school-affiliated program. Most “daycare centers” operate under Minn. Rules ch. 9503 with capacity set by space, staff ratios, and the building’s safe occupancy.

Minn. Rules 9503.0040 staff-to-child ratios (and the corresponding maximum group sizes – Minnesota uses both metrics, applying whichever is more restrictive in any given classroom):

Age Group	Staff:Child Ratio	Maximum Group Size
Infant (6 weeks – 16 months)	1:4	8
Toddler (16 months – 33 months)	1:7	14
Preschooler (33 months – kindergarten entry)	1:10	20
School-age (kindergarten and older)	1:15	30

Minnesota’s 1:7 toddler ratio is more permissive than most peer states (Wisconsin’s 1:6 base / 1:7 pilot, Iowa’s 1:6, North Dakota’s 1:5) and reflects a deliberate balance between staffing cost and child supervision quality. Two related rules matter:

• Flexible age boundaries: Under Minn. Rules 9503.0040 subp. 8, a child may be designated as an “infant” up to 18 months, a “toddler” up to 35 months, or a “preschooler” from 31 months if the parent, teacher, and director agree it is in the child’s best interest. This flexibility is unusual nationally and helps centers manage transitions and individual development variability.
• Youngest-child rule for mixed-age classrooms: When a classroom contains children of multiple age groups, the ratio for the youngest child applies to the entire group. A classroom with one toddler and several preschoolers operates at 1:7, not 1:10.

Child Care Centers must meet space requirements under Minn. Rules 9503.0150: at least 35 square feet of usable indoor floor space per licensed child, plus 75 square feet of outdoor play space per licensed child. The outdoor space must be safely accessible to the children and may not include parking lots or driveways. Minnesota’s space standards are aligned with NAEYC accreditation expectations and similar to most peer states.

Certified License-Exempt Child Care

Beyond licensed Family Child Care and Child Care Centers, Minnesota offers a third pathway: Certified License-Exempt Child Care under Minn. Stat. § 142B.501. This certification covers center-based programs that meet Federal Child Care and Development Block Grant (CCDBG) requirements without full state licensure – typically faith-based programs, school-based programs, and some employer-sponsored programs. Certified license-exempt programs cannot accept CCAP without additional steps and typically serve a narrower demographic than fully licensed programs.

NETStudy 2.0 Background Studies Under Minn. Stat. ch. 245C

Every Minnesota child care provider, owner, employee, contractor, volunteer, and household member age 13 or older must complete a background study through NETStudy 2.0, the state’s online background-study system administered by DCYF under Minn. Stat. ch. 245C. The system aggregates checks across multiple registries and databases:

• Minnesota Bureau of Criminal Apprehension (BCA) records – state criminal history
• FBI fingerprint check – national criminal history (live-scan fingerprints submitted through approved providers)
• Minnesota Predatory Offender Registry – sex offender and similar registry checks
• Minnesota child and adult maltreatment registries under Minn. Stat. ch. 260E (Maltreatment of Minors Act) and ch. 626 (Vulnerable Adults Act)
• Out-of-state child abuse and neglect registry checks for any state of residence in the past five years
• National Sex Offender Public Website (NSOPW) check for any past out-of-state residence

NETStudy 2.0 background studies are free to providers – the state pays the BCA, FBI, and registry fees from state appropriations, an unusual arrangement nationally. Providers initiate studies through the NETStudy 2.0 portal, the subject completes online consent and submits fingerprints at an approved IdentoGO location, and DCYF returns a determination within 1-2 weeks for most subjects (longer for complex out-of-state histories). Disqualifying offenses include felonies involving children, vulnerable adults, controlled substances, financial fraud, and various misdemeanors and gross misdemeanors with set-aside windows depending on offense severity.

Parent Aware QRIS – The 2026 Redesign Reshapes the System

Parent Aware is Minnesota’s voluntary Quality Rating and Improvement System (QRIS), administered by DCYF. The system has been in continuous operation since the early 2010s but is undergoing its most significant redesign in over a decade:

• February 13, 2026: DCYF announced the redesigned Standards and Indicators. The new framework aligns Parent Aware ratings with the licensing standards already in place and emphasizes ongoing program quality improvement over one-time rating events.
• July 1, 2026: The new Standards and Indicators take effect. All child care programs that are licensed and in good standing will automatically receive a One-Star Parent Aware Rating – no application or additional documentation required. The change aligns Parent Aware participation with licensing and dramatically increases the number of providers eligible to accept Early Learning Scholarships.
• Higher ratings (3-Star and 4-Star) are achieved by earning points across the redesigned indicators – workforce development through Develop Minnesota credentials, family engagement, curriculum and assessment, and program management. Detailed point thresholds are specified in the published Standards and Indicators document.
• 2-Star rating remains a transitional tier under the new system, awarded to programs taking specific quality-improvement actions short of the full 3-Star or 4-Star threshold.

The Early Learning Scholarship Program, which provides up to $14,000 per year per eligible child for families up to 185% of FPL, is restricted to Parent Aware-rated programs, so the July 1, 2026 automatic 1-Star rating dramatically expands the network of providers eligible for scholarship-funded enrollments.

Child Care Assistance Program (CCAP) – the 75th-Percentile Rate Increase

CCAP is Minnesota’s child care subsidy program for low- and moderate-income working families. CCAP reimburses participating licensed and certified providers directly for child care services provided to eligible families. Two CCAP subprograms operate:

• Basic Sliding Fee (BSF): Open to working families and students; eligibility starts at 47% State Median Income (SMI) at initial application and continues until family income exceeds 85% SMI.
• Minnesota Family Investment Program (MFIP) and Diversionary Work Program (DWP) Child Care Assistance: Combined with cash assistance for families participating in Minnesota’s TANF program; entitlement-funded.

The single most important provider-side fact about CCAP in 2026: Minnesota increased the CCAP reimbursement rate from the 35th percentile to the 75th percentile of the most recent market rate survey, enacted in 2023 and operationalized 2024-2026. The shift more than doubles per-child reimbursement for many providers and brings Minnesota into compliance with federal recommendations under the 2014 Child Care and Development Block Grant reauthorization.

CCAP eligibility (family side) is set by State Median Income:

• Initial application: Income at or below 47% SMI (approximately $51,500 for a family of 4 in 2025-2026)
• Continuing eligibility: Family remains eligible during a 12-month eligibility period as long as income does not exceed 85% SMI (approximately $93,200 for a family of 4 in 2025-2026)
• At redetermination: Income must be at or below 67% SMI to continue (approximately $73,500 for a family of 4 in 2025-2026)
• Income guidelines update annually on the Minnesota DCYF schedule (next update October 12, 2026)

The Great Start Compensation Support Payments are a separate state-funded payment direct to participating providers, calibrated to the number of staff who regularly care for children. The 2023 Legislature appropriated $316 million for FY 2024-25 and $260 million for FY 2026-27 specifically for compensation and benefits for child care workers in eligible programs. This program is administered through DCYF and is one of the most significant state-funded child care workforce investments in the country.

Cost to Open a Daycare in Minnesota

Minnesota daycare startup costs vary substantially based on license type, location, and capacity. Sample budgets:

Cost Category	Family Child Care Class A (in-home, capacity 10)	Child Care Center (commercial, capacity 50)
LLC formation (MN SOS, online)	$155	$155
Pre-licensing training	$200-$500 (online + in-person)	$500-$1,500 (director + lead teacher)
NETStudy 2.0 background studies	$0 (state-funded; multiple subjects)	$0 (state-funded; many subjects)
CPR/First Aid certification	$60-$120	$60-$120 per certified staff
Facility modifications (residence vs. commercial buildout)	$0-$5,000 (gates, fencing, fire safety)	$50,000-$300,000+ (commercial buildout, sprinklers, finishes)
Outdoor play space (county compliance)	$0-$3,000 (existing yard typically OK)	$5,000-$30,000 (fencing, surfacing, equipment)
Equipment (cribs, cots, tables, supplies)	$2,000-$5,000	$15,000-$60,000
General liability + property insurance (year 1)	$1,200-$2,500	$3,500-$8,000+
Workers’ comp (NCCI 9059, payroll-based)	n/a (solo)	$2,500-$8,000+ depending on payroll
UI tax (year 1, several employees on $44K wage base)	n/a	$1,500-$5,000+ depending on rate
Minnesota Paid Leave premium (year 1)	n/a	$1,000-$3,000+ depending on payroll/size
Estimated Year 1 startup total	$3,615 – $16,275	$78,720 – $384,500+

Twin Cities commercial real estate, particularly in Minneapolis, Edina, Eden Prairie, Plymouth, and Maple Grove, pushes Center buildout costs to the high end of the range. Outstate Minnesota commercial space (St. Cloud, Mankato, Rochester, Duluth) typically runs 30-50% lower per square foot than Twin Cities core. Many new Family Child Care providers operate from existing residences without significant facility modification, keeping their start-up well under $10,000.

Minnesota Daycare Market Context: Where the Demand Is

Minnesota’s daycare demand concentrates in three settings, each with distinct dynamics:

• Twin Cities Metro (Hennepin, Ramsey, Dakota, Anoka, Washington counties): The region accounts for 60%+ of Minnesota’s licensed child care slots and demand is acute. Infant care availability runs particularly tight – many Twin Cities families wait 12-18 months for an infant slot in a quality center. Average infant Center rates in Hennepin County run $1,800-$2,400 per month; toddler $1,500-$1,900; preschool $1,300-$1,700. Suburban Edina, Eden Prairie, Wayzata, Minnetonka, and Bloomington centers can charge above these averages. Minneapolis and St. Paul both maintain their own city-specific licensing add-ons through their health departments for certain in-school and Head Start partnerships.
• Rochester (Olmsted County): Mayo Clinic’s enormous workforce drives demand for family-friendly child care, including non-standard hours, weekend coverage for clinical staff, and bilingual care for international clinical fellows. Mayo operates several employer-sponsored child care centers and contracts with community providers. Rochester’s child care market is one of the most consistently undersupplied in the state relative to demand.
• Iron Range and Greater Minnesota: Demand patterns follow rural employment cycles. Mining communities (Hibbing, Virginia, Eveleth) have seen multi-decade provider shortages exacerbated by aging out of in-home Family Child Care providers. The Northern Minnesota Initiative Foundation and other rural philanthropy partners have funded creative solutions including pop-up Family Child Care recruitment, employer co-investment, and county-level shared-service alliances.

The Greater Minnesota Partnership and Child Care Aware MN both publish annual reports tracking provider supply by county. Demand is universally exceeding supply – Minnesota lost an estimated 5,000+ licensed child care slots between 2018 and 2024 – and that imbalance is driving the 2023-2026 Legislature investments described above.

Minneapolis and St. Paul Daycare Considerations

Twin Cities providers face several city-specific layers on top of state licensing:

• Minneapolis ESST and St. Paul ESST apply to daycare employees in addition to the statewide ESST law (which began January 1, 2024). Both cities have higher accrual minimums or earlier-eligibility provisions than the state law in some scenarios. Both ordinances were amended December 31, 2025 to harmonize with state law, but employers must follow the rule most favorable to the employee.
• Minneapolis minimum wage of $16.37 (2026) applies to all daycare employees regardless of size. St. Paul tiered minimum wage means a small Center (6-100 employees) currently pays $15.00 climbing to $16.37 in July 2026, while a Macro employer (10,001+) is already at $16.37. Most Twin Cities daycares fall into the Small or Mid-tier categories.
• Minneapolis Health Department handles food service licensing for daycares serving meals on-site – separate from the DCYF Center license. St. Paul-Ramsey County Public Health does the same for centers in Ramsey County.
• Hennepin County and Ramsey County operate the County Licensing Agencies for Family Child Care in their respective jurisdictions – both with significant licensor staff and faster typical turnaround than rural counties.

Minnesota Daycare Resources

Resource	What It Covers
Minnesota DCYF	Child care licensing, Parent Aware, CCAP, Great Start Compensation Support, NETStudy 2.0
Minn. Rules ch. 9502	Family Child Care licensing rules – Class A/B/C/D capacity tiers
Minn. Rules ch. 9503	Child Care Center licensing rules – 1:4/1:7/1:10/1:15 ratios, 35/75 sq ft space
Parent Aware	4-Star QRIS family-facing site, redesigned standards effective July 1, 2026
Develop Minnesota	Workforce development, training registry, credentials, professional development
Child Care Aware MN	Statewide referrals, provider consultation, supply reports, training
MN Licensing Lookup	Public license verification – search by provider name, location, license type

Related Minnesota Business Guides

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Frequently Asked Questions

What agency licenses daycare in Minnesota in 2026?

The Minnesota Department of Children, Youth, and Families (DCYF) licenses daycare in 2026. DCYF is a new state agency, operational July 1, 2024, that combined child-focused programs from DHS, DOE, and MDH. Child care licensing transferred from DHS to DCYF on June 18, 2025, and as part of the transition, the licensing statutes were renumbered: Minn. Stat. ch. 245A is now Minn. Stat. ch. 142B. Existing licenses remain valid – licensees did not need to reapply or take any action. Family Child Care licensing is administered by County Licensing Agencies under DCYF’s rules; Child Care Centers are licensed directly by DCYF.

What are the staff-to-child ratios for Minnesota Child Care Centers?

Under Minn. Rules 9503.0040: Infant (6 weeks – 16 months) is 1:4 with maximum group size 8. Toddler (16 – 33 months) is 1:7 with maximum group size 14. Preschooler (33 months – kindergarten entry) is 1:10 with maximum group size 20. School-age is 1:15 with maximum group size 30. Minnesota uses the youngest-child rule for mixed-age classrooms – the ratio for the youngest child applies to the entire group. The 1:7 toddler ratio is more permissive than most peer states. Children may be classified as infant up to 18 months, toddler up to 35 months, or preschooler from 31 months by parent/teacher/director agreement.

What are the Class A through Class D Family Child Care tiers in Minnesota?

Minnesota’s Family Child Care licensing under Minn. Rules ch. 9502 uses capacity tiers. Class A: 1 adult cares for up to 10 children (most common new-provider tier). Class B1/B2: Specialized infant/toddler programs – 1 adult cares for up to 5 (B1) or 6 (B2) children under 33 months. Class C1/C2/C3: Group Family Child Care – 1 adult/10 (C1), 1 adult/12 (C2), or 2 adults/14 (C3). Class D: Specialized infant/toddler group – 2 adults care for up to 9 children. Family Child Care residences are limited to 2 children under 12 months and 4 children under 24 months total regardless of class.

What is Parent Aware and how does the 2026 redesign affect new providers?

Parent Aware is Minnesota’s 4-Star Quality Rating and Improvement System (QRIS) administered by DCYF. The major 2026 change: effective July 1, 2026, all licensed child care programs in good standing will automatically receive a 1-Star Parent Aware Rating with no application required. Higher ratings (3-Star and 4-Star) are achieved by earning points across the redesigned Standards and Indicators (announced February 13, 2026). The change dramatically expands the number of programs eligible to accept Early Learning Scholarships, which are restricted to Parent Aware-rated providers.

What is the Child Care Assistance Program (CCAP) reimbursement rate in Minnesota?

The 2023 Legislature increased the CCAP reimbursement rate from the 35th percentile to the 75th percentile of the most recent market rate survey – more than doubling per-child reimbursement for many providers and bringing Minnesota into compliance with federal CCDBG recommendations. Family eligibility starts at 47% SMI initial, continues to 85% SMI exit during a 12-month eligibility period, and requires income at or below 67% SMI at redetermination. The state also pays Great Start Compensation Support payments directly to participating providers, with $260 million appropriated for FY 2026-27 to fund staff compensation and benefits.

What background checks are required for Minnesota daycare staff?

All Minnesota child care directors, owners, employees, contractors, volunteers, and household members 13 and older must complete a NETStudy 2.0 background study through DCYF under Minn. Stat. ch. 245C. The study aggregates Minnesota Bureau of Criminal Apprehension records, FBI fingerprints (live-scan at IdentoGO), the Minnesota Predatory Offender Registry, child and adult maltreatment registries under chs. 260E and 626, out-of-state child abuse and neglect registry checks for any state of past residence in the prior 5 years, and the National Sex Offender Public Website. NETStudy 2.0 background studies are state-funded – free to providers – which is unusual nationally. Determinations typically return within 1-2 weeks.

What are the space requirements for a Minnesota Child Care Center?

Under Minn. Rules 9503.0150, every licensed Minnesota Child Care Center must provide at least 35 square feet of usable indoor floor space per licensed child and at least 75 square feet of outdoor play space per licensed child. Outdoor play space must be safely accessible to children and may not include parking lots, driveways, or unsecured areas. Indoor space must exclude bathrooms, kitchens, hallways, and storage. The standards are similar to most peer states and aligned with NAEYC accreditation expectations. The State Fire Marshal Division and the local building official add fire and building code compliance on top of DCYF licensing.

Do daycare employees in Minnesota qualify for Minnesota Paid Leave and ESST?

Yes, on both. Minnesota Paid Leave (launched January 1, 2026) applies to virtually all Minnesota employers including daycares. The 2026 premium is 0.88% of wages on the first $185,000 per employee, reduced to 0.66% for daycares with 30 or fewer employees. Most Family Child Care providers and small Centers qualify for the 0.66% small-employer rate. Earned Sick and Safe Time (ESST) applies to all Minnesota employers from day one – daycare employees accrue 1 hour of paid sick and safe time per 30 hours worked, capped at 48 hours per year and 80 hours of carryover, regardless of employer size or industry. Both programs apply on top of any voluntary employer-provided PTO and require payroll system updates for new providers.