2012 SPECIAL REPORT

SENIOR CARE

FRANCHISES

www.FranchiseBusinessReview.com

2012 SPECIAL REPORT: Senior Care Franchises

SENIOR CARE

FRANCHISES Top Senior Care Franchises Home Instead Senior Care* Visiting Angels Homewatch CareGivers*

ranchise Business Review released its first report on the senior care franchising sector two years ago. Since then, the industry has only grown in popularity—for both franchise owners and consumers. In the past two years, we’ve seen the number of senior care companies on our annual list of top franchises grow, and we’ve seen franchisee satisfaction in the sector as a whole continue to go up.

Right at Home BrightStar* FirstLight HomeCare* Caring Senior Service Home Care Assistance Nurse Next Door CarePatrol *To view this company’s satisfaction report, visit www.FranchiseBusinessReview.com.

This report is designed to give you a high-level look at the senior care franchising sector. (It is important to note that by “Senior Care,” we mean franchise companies that provide home care services.) We will explore what services the sector provides, what’s involved from an investment standpoint, what the “typical” franchisee looks like, and how franchisee satisfaction in the sector has fared in the past year. We will also forecast where we think the senior care franchising sector is going, and we’ll identify the top senior care franchises based on our franchisee satisfaction research. Who We Are Franchise Business Review is a national market research firm that performs independent research of franchisee satisfaction. Our products include franchisee satisfaction reports, economic impact studies, and sector studies. Methodology To compile the data this report, we surveyed 1,348 franchisees from the senior care sector and researched more than 30 brands. We also talked to CEOs at some of the top senior care franchises for their in-the-trenches take on the industry. To survey franchisees, we email our survey to all active operators within a system. Franchisees answer 33 benchmark questions ranking their franchise system in the areas of financial opportunity, training and support, leadership, operations and product development, core values (e.g., honesty and integrity of franchisor), general satisfaction, and the franchisee community. An additional 19 questions ask franchisees about their market area, demographics, business lifestyle, overall enjoyment running their franchise, and role in the franchisee community. From this data, we identify our list of franchises with above average satisfaction.

Cover photos courtesy of (clockwise from left): Right at Home, Interim Healthcare, Brightstar, FirstLight HomeCare.

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2012 SPECIAL REPORT: Senior Care Franchises

Ted Bernhardt Right at Home Photo courtesy of Right at Home

Models/Concepts In the last two years, the definition of senior care and the core services provided by senior care franchises have broadened. Whereas most of the companies we talked to in 2010 provided primarily non-medical, in-home care (e.g., meal preparation, grooming, bathing, transportation, companionship) for seniors, many of the companies we talked to this year have added new services (e.g., medical care, staffing solutions, child and pet care). While the sector is still widely called “senior care,” we recognize that it encompasses much more than that. (We use the terms “senior care” and “home care” interchangeably throughout this report.) “Maybe 6 to 8 years ago, senior care or home care was defined more narrowly as seniors but now I think we all realize that there’s a more diversified client base out there— it’s not just seniors,” said Jeff Bevis, president and CEO of FirstLight HomeCare.

FirstLight offers non-medical home care and just added dementia care to its services in response to requests from clients and family need. Home Instead Senior Care, Franchise Business Review’s 2012 top senior care company for franchisee satisfaction, recently added an Alzheimer’s program called “CARE” (Changing Aging through Research and Education) to its model, which Global Operations COO Yoshino Nakajima says has become increasingly popular with both clients and franchisees. BrightStar, another leader in the home care space, has offered different services beyond senior care since Shelly and JD Sun launched the business in 2002. BrightStar COO Brian Schnell says the company calls its service offering “lifecare” because their franchisees provide services to clients of any age, from child to adult. While companies like BrightStar and FirstLight have broadened the senior

How long have you been a franchisee? Opened in 2004 Why did you decide to buy a franchise? Two reasons motivated me.  First,  I wanted to own my own business and make a contribution to my community.  Secondly, this is a feel-good business, and the rewards go beyond a paycheck. Why did you choose your franchise? After looking at many different franchise models, I zeroed in on  home care. I was motivated by the strong recommendation of a colleague, who had purchased a Right at Home franchise in 2003. What is the best part of being your own boss? I spent my whole career making my boss look good, but  now I can enjoy leading and developing others to reach our business goals.  Hey, now they can make me look good... What is the worst part of being our own boss? The worst part about being a boss is firing employees. The other challenging aspect is handling the responsibility of running the business profitably for the caregivers and families that rely on us. Where do you see yourself in five years? My kids are still young so I expect I will still be growing this business.  There is also a good chance I might hire a general manager so that I could spend more time traveling. What advice do you have for prospective franchise buyers? No doubt the demographics for home care look promising and you definitely can make a living. However, I wouldn’t bother if you don’t think helping seniors will be rewarding.  To date, this business is based on trust, so establishing relationships within the healthcare community is a must.

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2012 SPECIAL REPORT: Senior Care Franchises Interim Healthcare—one of the oldest companies in the home care space—has a similar model for franchisees.

Photo courtesy of FirstLight HomeCare

care definition to serve an expanded customer base, there are others that have stuck to the traditional seniorcare-only model. “Our care in our system is all about senior care. We don’t add in pet care, kid care—it’s senior care. That’s what we’ve been doing for 15+ years,” said Michael Newman, president and CEO of Always Best Care.

Always Best is one of only a few companies in the senior care space that offers both non-medical and medical care to its clients. However, new franchisees don’t start out offering all levels of care. Newman told us that new franchisees start out offering only non-medical and assisted living placement services, and then add skilled nursing care once they are established.

“Interim has always been a fullservice provider,” said president and CEO Kathleen Gilmartin. “Our franchisees are granted the rights to go up that escalator and offer that continuum, but they start at the level of personal care and support, which is really the building block of home care. This takes them to getting the first floor of the house built, and then, if they want to add on to the next level of complexity, they can.” (Note: Interim Healthcare utilizes a customized FBR survey with its franchisees and is therefore not eligible for our annual franchisee satisfaction awards program. However, the company consistently does well in the area of franchisee satisfaction.)

TURN RIGHT.

Take control of your financial future with Right at Home. In as little as 120 days, you can join the other 200+ Right at Home franchisees who have already benefited from aligning themselves with us, the leader in senior care. • $1,036,380 average annual revenue per office *‡ • Franchisees yield an average gross margin of 37%.**‡ • Right at Home boasts a 17% year-over-year revenue increase record, even in a troubled economy ***‡ “We’ve had several businesses before, and the thing I find remarkable about this sector is the quality of the people. They truly have a heart for helping seniors. It’s not just running a for-profit business, but it’s giving back… it’s not just success – it’s significance.” — Tom Bollum, Roseville, CA

Take the right turn to Right at Home

call 1-877-697-7537 or go online to www.rightathomefranchise.com.

*Net Billings in 2011 for 191 Offices open one year or more as of December 31, 2011. 66 or 35% of these Offices attained or surpassed the represented level of financial performance. **Average Gross Margin in 2011 of all 191 Offices open one year or more as of December 31, 2011. 87 or 57% of these Offices attained or surpassed the represented level of financial performance. *** Based on Average Net Billings Percent Increase from 2010 to 2011 of 191 Offices open one year or more as of December 31, 2011. ‡ Actual results vary from business to business. There is no assurance that your Franchised Business will do as well as those Offices referenced above. Right At Home, Inc. 6464 Center Street, Ste 150, Omaha, NE 68106 MN F-4053. This information is not intended as an offer to sell, or the solicitation of an offer to buy a franchise, it is for information purposes only.

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2012 SPECIAL REPORT: Senior Care Franchises “The biggest economic hurdle our franchisees have faced is access to credit,” said BrightStar’s Schnell. “We have been extremely proactive in helping our franchisees find solutions … We were the first franchisor accepted into Franchise America Finance’s SBA program whereby franchisees have financing available to them if they meet certain qualifications. We also are working on an accounts receivable finance program, which is important for franchisees in this industry.”

Photo courtesy of BrightStar

“Home care gets into your blood. I see a real passion for the industry with all of our owners.” Brian Petranick, Right at Home

Investment From an investment perspective, owning and operating a successful senior care franchise can be very fulfilling. The median initial investment required to open a single senior care franchise office in 2012 is $66,148, and the potential return on investment is significantly higher than many other franchise businesses. It is not uncommon among the top senior care franchises to build gross revenues to a million dollars or more, with gross margins of 30%–40%. Compare that to many food and retail franchises that require an initial investment that can easily exceed $500,000 and operate with slim margins and you will quickly see what makes senior care franchises so attractive. Senior care, like all franchising sectors, has felt the impact of the recession in terms of financing. It is

much more difficult for prospective franchisees to access capital than it was five years ago, so while the return on investment might be better than other sectors, it’s no easier for a potential franchisee to borrow that initial investment. Many franchisors have made changes at the corporate level to help ease this burden.

BrightStar is also one of many franchise companies that has increased its financial requirements in order to ensure that new franchisees are properly financed to survive and thrive in a struggling economy. “Although our initial investment has not changed dramatically, we are extremely mindful of the investment needed for franchisees to get beyond the initial three to six months in business and disclose in our FDD the estimated initial investment for the first year,” Schnell said. Along these lines, BrightStar increased its net worth requirements

Investment Levels for FBR’s Top Senior Care Franchises Home Instead Senior Care

$50,550 – $63,550

Visiting Angels

$55,285 – $76,035

Homewatch CareGivers Right at Home BrightStar

$90,000 – $140,000 $63,590 – $99,680 $95,067 – $162,158

FirstLight HomeCare

$68,060 – $94,265

Caring Senior Service

$50,905 – $65,255

Home Care Assistance

$20,000 – $250,000

Nurse Next Door Care Patrol

$122,850 – $163,150 $45,000 – $72,000

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2012 SPECIAL REPORT: Senior Care Franchises from $250,000 to $500,000 in 2009 and increased the required minimum credit score for potential franchisees who need to borrow money to finance their business. From a time perspective, senior care requires a significant investment. All of the executives we spoke with said they require franchisees to focus on the business full-time from the start, and they emphasized the amount of time that must be invested early on to be successful. “Similar to any business you would start on your own in any industry, you may work as hard as you’ve ever worked in your life,” said FirstLight’s Bevis. “I think you go into it with the understanding that you’re going to

work probably 10 to 12 hour days at least five to six days a week for first four to six months.” Lisa Ganem, a Home Instead franchisee in New Hampshire, estimates that she worked approximately 60 hours a week (both weekends and weekdays) when she started her business 10 years ago. Then, for a period of time, she says she was able to cut back, but that all changed in 2008 when the stock market crashed. Now, she’s back to 60-hour weeks, trying to mentor and cultivate her team and constantly reach out to consumers. Ganem says that although the senior care industry is somewhat recession-resistant, her client base is not. People don’t have the funds they expected to have to care for their aging loved ones, which

Top 5 Most Profitable Sectors vs. Median Initial Investment Annual Profit*

Median Investment**

$350,000

$300,000

$250,000

$200,000

means franchisees like Ganem must invest more time reaching out to consumers and educating them about home care. Pros/Cons The senior care sector consistently scores well on Franchise Business Review’s franchisee satisfaction surveys and that’s largely because of the “pros” that the sector provides— both in terms of lifestyle and financial rewards. Senior care is one of the few industries that combines a “feel good” service offering with attractive unit economics. Although it is a business that requires a significant time investment, senior care does provide relative scheduling flexibility once your business is established and you have the right employees (especially managers) in place. Many franchisees are able to initially work out of a home office, which keeps the initial cash requirements low, and the senior care market is one that continues to grow and prosper despite what’s going on in the world economy. For all of these reasons and more, senior care is one of the most profitable sectors. Financials aside, perhaps the biggest “pro” for the senior care sector is that franchisees have the opportunity to develop strong ties to their communities and their clients.

$150,000

$100,000

$50,000

Senior Care

Food & Beverage

Business Services

Automotive

Cleaning & Maintenance

*Annual Profit is based on average annual pre-tax earnings information reported by franchisees in Franchise Business Review’s satisfaction survey. This data includes multi-unit owners and is not an estimate of individual unit performance. **Median Investment is the median initial investment level of the award-winning franchise companies within a given category, and not the median of the entire industry segment.

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“Home care gets into your blood,” said Right at Home president and COO Brian Petranick. “I’ve been doing it for twenty years, and it is one of those professions you learn to love. I see a real passion for the industry with all of our owners.” “I’ve probably never felt this fulfilled before,” said Home Instead franchisee

2012 SPECIAL REPORT: Senior Care Franchises Ganem. “You’re bettering people. You’re helping someone maintain independence, age where they want to age… you help families, too, who go through hard times. You’re affecting them to in a positive way.” That’s not to mean it’s not a lot of work. In the past few years, competition in the market has heated up. “It’s getting harder and harder to differentiate yourself in the space because there are over 40 brands now where 10 years ago there were half a dozen,” Petranick said. “There’s a lot more noise in the marketplace. It’s harder for the consumer to differentiate the differences between companies and their offerings.” Other typical challenges for franchisees in the senior care sector include staffing-related issues

“This isn’t like we all sing ‘Kumbaya’ every day – it’s frantic, it’s crazy...But at the end of the day, you know you have a sound business that delivers a quality service, and you respectfully make a profit on that business to be able to earn livings and employ people.” Kathleen Gilmartin, Interim Healthcare (e.g., caregiver hiring and training, turnover, management problems), the 24/7 nature of the business (a franchisee is always on-call to some level), and ever-increasing federal/ state/local regulations and licensing requirements.

“No matter how technology changes, no matter how many leads are generated, at the end of the day, you have to go out there and build trust and give good service. That makes it time-intensive,” said Always Best’s Newman.

Based on our 2012 survey, franchisees in senior care work more hours (including more nights and weekends) as compared to franchisees in other business sectors. Senior care franchisees also rated their “work-life balance” lower than franchisees in all sectors.

At the heart of it, senior care may “feel good” but it’s not necessarily an easy business. “This isn’t like we all sing ‘Kumbaya’ every day – it’s frantic, it’s crazy, you see circumstances that really make your heart skip a beat,” Interim’s

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2012 SPECIAL REPORT: Senior Care Franchises Gilmartin said. “But at the end of the day, you know you have a sound business that delivers a quality service, and you respectfully make a profit on that business to be able to earn livings and employ people. It’s kind of the whole circle that makes so much sense in this business.” Market Analysis Much has been written about the promise of the senior care franchising sector since we released our last report. The population of seniors (age 65+) is expected to double in the next 25 years, according to the U.S. Census Bureau, and the average life expectancy continues to increase. When you add in the home care services segment for non-seniors (medical and nonmedical services provided to clients

for market share. We did not see as much in the way of mergers and acquisitions in the past two years as we expected, and the top franchise brands from two years ago remain largely the same today. The CEOs we interviewed predicted that any “There are not as many places for consolidations that might occur in people to go,” said Right at Home’s this sector in the near term will be Petranick, speaking about the growing need for home care services. in the certified home care space— providers that are reimbursed “There are not enough beds to handle the demand. More people are through Medicare and Medicaid going to have to get care in the home rather than private pay (the typical model for franchised senior whether we want them there or care companies). not. All of the macro-environmental factors are pushing for care in the “As you look at some of the public home environment.” sector companies that are in home care, they have appetite and they The home care industry is highly can get scale and leverage resources fragmented, with over 35 different when they can see an opportunity to franchise brands and many more non-franchise businesses competing have some of those consolidations with smaller providers,” said Interim’s Gilmartin. “In the sector of non-medical/personal care, I think there’s still pretty much an open field for growth. I have not witnessed a lot of consolidation.” with acute care needs, long-term health conditions, permanent disabilities, or terminal illnesses), the market opportunity increases significantly.

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As Right at Home’s Petranick mentioned above, we expect to continue to see new franchise start-ups entering the market and competing for demand for services. While young and unproven franchise systems present a higher investment risk to a prospective franchisee candidate, start-ups typically have the advantage of offering more flexible terms and larger protected territories to their first franchisees. Whether or not you consider a start-up in your franchise opportunity search depends greatly on your comfort with risk and your confidence in your own skills as an entrepreneur and business owner.

2012 SPECIAL REPORT: Senior Care Franchises

Photo courtesy of Interim

Franchisee Attributes The home health business is extremely people dependent—with small offices typically managing 50 or more caregivers and large offices exceeding several hundred. People researching a franchise in this space should be aware that it is a highly personal business that operates 24 hours a day, 7 days a week. Caregiver issues, service emergencies, and client deaths can be frequent occurrences. While running a senior care business requires empathy and people management skills, it does not necessarily require healthcare experience. The executives we spoke with for this report said their franchisees have a variety of backgrounds and expertise—not always in healthcare. What successful franchisees do have, however, are strong skills in networking, marketing, and operating a business.

Characteristics of Senior Care Franchisees

76%

Have been in business for less than five years

57%

Are in big markets with a population of at least 250,000 people

65%

Are over the age of 45

86%

Are Caucasian

74%

Are female and have at least a bachelor’s degree (vs. 57% in all of franchising)

“I suppose if I had to pick, I would go first with the business background and expertise, and we’ll teach franchisees the home care,” said Petranick of Right at Home. “We can teach our franchise owners in a relatively short amount of time how to operate a good quality home care business…But having that person go from a $1 million office to a $3 million office has a lot less to do with knowing home care and a lot

more to do with how you execute the business model.” Home Instead franchisee Ganem is one of those franchisees whose background helped her to be successful. Ganem, who expects to bring in about $3 million in revenues this year, is a former corporate CFO, and she says her business experience was critical to her success.

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2012 SPECIAL REPORT: Senior Care Franchises “You really are starting a business as if you were putting out your own shingle,” Ganem said. “As a business person I could look at the model. I understood it from a financial perspective … But it’s complicated. It’s not flipping burgers. Every state has different regulations, a different culture, a different community.”

ones. Brightstar’s Schnell told us that approximately 85% of their franchisees sought in-home care services for a loved one in the 24 months prior to becoming a franchisee.

It goes without saying that, apart from their personal or professional background, franchisees in any sector One anecdotal statistic that came out must be comfortable following the of our interviews with CEOs is that, franchise model. while franchisees in the senior care space don’t always have professional “If they can follow a system, they healthcare experience, many have have a skillset that says they can had personal experience researching digest information and they can and accessing home care for loved execute policies and procedures,”

In 2012, senior care franchisees rated their satisfaction higher than the benchmark in every category of FBR’s survey.

said Interim’s Gilmartin. “But if there’s a tendency to not want to follow a system—create everything brand new—that’s problematic.” To ensure that prospective franchisees know what they are getting into when they buy a senior care business, Interim Healthcare and some other home care companies have made changes to their franchise sales process. “We’ve made changes that engage our prospects a lot sooner and give them an opportunity to get to know both the sector and our brand in a way that employs technology, a lot more interaction, even meeting folks without it being a formal Discovery Day. That helps people see the real picture of what this service line looks like,” Gilmartin said. Franchisee Satisfaction Senior care consistently comes out as one of the top 5 sectors for franchisee satisfaction in Franchise Business Review’s annual survey. In fact, in 2012, senior care franchisees rated their satisfaction higher than the benchmark in every category of our survey: Training & Support, Franchise System, Leadership, Financial Opportunity, Core Values, and Franchise Community. Overall satisfaction in the senior care space was 11% higher than our benchmark. Although it can be a very demanding, hands-on business, senior care franchisees appear to be very satisfied both emotionally and financially, and that satisfaction seems to only increase every year. Overall satisfaction in 2012 is up 5% from 2011.

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2012 SPECIAL REPORT: Senior Care Franchises

Most Popular Sectors by Franchisee Satisfaction 1 Cleaning & Maintenance 2 Fitness 3 Health & Beauty 4 Pet Services 5 Senior Care

Summary Senior care has proven itself to be one of the strongest sectors in franchising. What two years ago may have looked like a “safe” industry in a down economy is today one of the hottest sectors, offering some of the best franchise opportunities. The demand for services will likely remain strong for many years to come.

will need to work extra hard to make their business stand out among others. But with the right support people, a strong focus on delivering exceptional care, and the right franchise brand, franchisees in this sector have the potential for a very successful business.

Of course with any growing business sector, competition in this space will undoubtedly increase. Franchisees

As we caution with every franchise model in every sector: Not all franchises are created equal.

Photo courtesy of Right at Home

Many franchise companies in this sector offer only an average or even below average investment opportunity, so it is important to do your homework, talk to current franchisees, and be sure the brand is a good fit for you. For more information about Franchise Business Review’s research or the companies in this report, visit: www.FranchiseBusinessReview.com.

Download detailed satisfaction reports on these senior care franchise brands at: www.FranchiseBusinessReview.com

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