Senior-Care Business Booms for Franchisers

Posted on August 15, 2016

One of the hottest trends in franchising these days isn’t sit-down restaurants or real estate. It’s seniors.

Providing home-health aides and other services to older Americans is a fast-growing business, as brands and franchise owners seek to capitalize on an aging U.S. population and low costs of entry.

“There is no way to lose with the demographics we see,” said Claudine Halpern, chief operating officer of My Elder Advocate LLC, a recent entry into franchising. “All of us are planning on living until 100.”
Ms. Halpern and her husband, Jack, decided two years ago to expand his eight-year-old New York City business, which helps senior citizens and their families navigate the world of elder care. The couple have sold two franchises for $39,500 each this year.

The Halperns aren’t alone. Over the past three years alone, the senior home-care sector has grown by 6.6% annually, faster than the overall franchise industry’s 2.6% compound annual growth rate, according to market researcher FRANdata. About half of home-care agencies are now franchises, up from about one-third five years ago, according to Home Care Pulse LLC, a market-research firm.
Home Instead Inc., a provider of home-care services, has grown by 25% since 2010 to nearly 1,100 Home Instead Senior Care franchises in 12 countries. BrightStar Group Holdings Inc., a home-care and medical-staffing provider, has expanded from 199 BrightStar Care locations in 2010 to 315 locations in 38 states.

Patricia G. Kallsen, 78 years old, a retired administrator, said that in-home care provides “an enhanced quality of life” for her husband, Jim, a retired banker who has multiple medical problems, and allows the couple to maintain their independence. Chris Brenz, a certified nursing assistant employed by BrightStar, typically works five mornings a week with Mr. Kallsen, 79, assisting him with showering, swim therapy, exercises and other activities of daily living.

The Census Bureau projects that by 2025, the number of Americans age 65 and older will hit 66 million, up 38% from 2015. Meanwhile, home health-care aides and personal-care aides are among the nation’s fastest-growing occupations, according to the Bureau of Labor Statistics.

For smaller companies, franchising is a way to grow quickly. But turning years of experience into easy-to-replicate guidelines is challenging.

Brendan Skeen, president of Loved Ones In Home Care LLC, a family-owned West Virginia home-care agency, started working on the company’s move into franchising in 2014. The challenges included preparing detailed disclosure documents and figuring out how to codify tasks such as “senior proofing,” or safeguarding the environment for seniors.

“We had five different books as well as numerous handouts we had to condense,” said Mr. Skeen, whose 20-year-old company operates five company-owned locations. He sold his first five franchises this year.

For franchisees, the attractions include low startup costs. Initial investments averaging $115,000 for home-care franchises, according to FRANdata, well below the nearly $1 million needed for sit-down restaurants.

“Of all the sectors we look at, it has one of the highest returns on investment,” said Eric Stites, chief executive of Franchise Business Review. Pretax income for senior-care franchises averages $118,000 a year, he said, versus $82,000 for the franchise industry as a whole.

But changing regulations and increases in the minimum wage are adding cost pressures. The Department of Labor, for instance, has prohibited companies that employ and send health-care aides to work in client homes from claiming an exemption from the minimum wage and overtime pay. Some franchise operators have cut hourly pay for health aides in an effort to rein in costs, while others have stopped providing 24-hour care. Christine Friedberg, the owner of a Griswold Home Care franchise in Alexandria, Va., took on more staff to limit time-and-a-half.

Griswold International LLC, which has 196 Griswold Home Care franchises and 19 company-owned locations, is revising its franchise contract. As part of the agreement, it will reduce the royalties in cases where the overtime rules have a financial impact.

Franchisees also struggle with high staff turnover. About 60% of caregivers typically leave in any 12-month period, according to Home Care Pulse.

Jeffrey Tews, owner of four BrightStar Care franchises in Wisconsin, offers perks, such as flexible hours, a 401(k) plan with matching contributions, and paid time off. But for the first time in his 10 years of operation, Mr. Tews has turned away some prospective clients because of staff shortages.