Senior and Home Care Franchise Industry Report 2012
Important Note: The provisions and fees illustrated in this report are only the most common and not a complete listing. Please review the Franchise Disclosure Document (FDD) for all of the provisions and fees related to investing in that specific franchise.
The qualifications needed for each franchise system vary by franchisor. Prospective franchisees considering the senior and home care franchise industry need to assess their qualifications to see if they match up with those required in this field. Prospective franchisees also need to determine which franchise most closely resembles their own personal business philosophy. One note from current franchisees is to stay open minded during the process. A franchise can be the right one for you even when it didn’t initially appear to be.
Prior Healthcare Experience Not Needed
If you have expertise in a certain field, taking advantage of it is a wonderful opportunity to use your existing skills to make your business a success. However, if you don’t have experience directly related to senior or home care that isn’t a problem. While direct experience is an asset, it isn’t a requirement to become a franchisee. Franchisors offer comprehensive training programs, which will provide you with the foundation you need to operate a successful business within the industry. In fact, a large majority of senior and home care franchisors don’t require medical experience. Instead, they overwhelmingly seek prospective franchisees that have the desire to help people, have a strong work ethic, and possess the necessary business savvy to oversee the operation.
Support Systems in Place
Ongoing support is a major benefit that comes with being a part of a franchise system. “The franchisor provides and assists us with developing those national relationships...with contract negotiations, especially long term care insurance or medical insurance", says CareMinders franchisee Lisa Reisman. “They also offer support from an administrative point of view", Lisa continues. “I'm not an accountant. I may have an accounting question. I can pick up the phone and ask them".
And for those with prior experience, it doesn’t mean you won’t run into a situation you haven’t seen before – a circumstance Lisa can attest to. Even though she carried 25 years of registered nursing and 15 years of nurse practitioner experience into her franchise, there are still times where she turns to the vast experience present within the franchise system. “They also offer us clinical support. Many times issues come up that as a nurse I may not know. Cumulatively, the franchisor has over 250 years of experience in home care, so I can pick up the phone and ask them that clinical question".
Franchisees may need a state license to operate a franchise within the senior and home care industry. Even if the franchise does not provide medical services in the client’s home, certain states have licensing, certification, or registration requirements governing the services (medical, non-medical, or personal) franchisees will provide under the franchise system. Prospective franchisees are advised to check with their Department of Health and Human Services and/or any government department that regulates the senior and home care industry. Some states also have record keeping requirements specifically pertaining to service providers that receive payments from Medicare, Medicaid, or private health insurance. Franchisees are responsible for researching and complying with any employment laws applicable to their area, including more general business laws e.g. corporate tax, workers’ compensation insurance, etc.
The rules and regulations stemming from the government and the franchise system are another point of comfort for potential clients. As Frances Zaglan divulged to us in her interview, “it gives the client security to know that they are being carefully scrutinized".
The range of investment between franchises can be large due to variations in their business systems and what it requires to execute them. The following charts demonstrate this by comparing initial costs associated with opening one of the 21 example franchises presented. Initial costs associated with opening a franchise include many items such as the franchise fee, training expenses (such as travel and living expenses, not the actual training courses), additional funds needed for a specified number of months, and more.
Estimated Initial Investment Range for Selected Franchises
One payment nearly all franchises have in common is the franchise fee. This part of the overall initial investment grants the franchisee the right to use the franchisor’s trademarks, service marks and other branding. It also gives the franchisee access to the franchisor’s business systems, including training classes.
|Age Advantage Home Care||$34,900|
|Caring Transitions||$31,900 - $37,900|
|Express Medical Transporters||$45,000|
|Griswold Home Care||$39,500|
|Home Helpers||$36,900 - $42,900|
|Nurse Next Door||$40,000|
|Preferred Care at Home||$38,500|
|Right at Home||$41,500|
|Seniors Helping Seniors||$45,000|
|Touching Hearts at Home||$29,500|
|Visiting Angels||$28,950 - $46,950|
Franchise Fee for Selected Franchises
A sometimes-overlooked financial requirement involved in franchise investment is the minimum amount of cash, or liquidity, required of a prospective franchisee by the franchisor. Liquidity is the amount of cash someone’s has immediate access to or assets that can be converted to cash right away such as certificates of deposit or stocks. The amount of liquidity desired by franchisors acts in a similar manner as a safety net in the opening days of the franchise by making as sure as they can that the franchisee has cash on hand to pay the bills until revenue starts coming in steadily.
In the same vein as liquidity requirements, many franchisors also have guidelines pertaining to net worth, which includes the liquid assets as described above and/or financing available to the franchisee. Net worth is defined as the total amount of someone’s assets (including their home, any stocks or investments, or other items of value) minus their liabilities (the amount owed on their mortgage, credit card debt, or other money they owe).
The most common length of the initial franchise agreement for a franchise within the industry is 10 years with the range typically going from a five-year agreement to a 15-year agreement (some franchise systems may vary further). Extension of the franchise agreement is offered by most franchise systems, subject to the franchisor’s discretion and renewal requirements.
Regardless of the term length there will be costs that must be paid regularly during that time period of the franchise agreement. These costs are assessed primarily for the franchisee to continue reaping the benefits that come with being a part of the franchisor’s business system. Although fees like these are common, the amount and way they are assessed aren’t universal.
The most frequently assessed ongoing fee is the royalty fee. It is usually a consistent rate (either a percentage of the sales or revenue, or flat dollar amount) collected weekly or monthly.
|Age Advantage Home Care||3%|
|Angel Companions||3 - 5%|
|BrightStar||5 - 7%|
|CareMinders||3.75 - 5%|
|Comfort Keepers||3 - 5%|
|Express Medical Transporters||5%|
|Griswold Home Care||3 - 4%|
|Home Helpers||4 - 6%|
|Interim Healthcare||3.25% or 5.25%|
|Nurse Next Door||5%|
|Preferred Care at Home||5%|
|Right at Home||5%|
|Seniors Helping Seniors||6%|
|Touching Hearts at Home||up to 5%|
|Visiting Angels||2 - 3.5%|
Royalties for Selected Franchises
Some royalties, however, can be conditional. For example, royalties for Interim Healthcare are based upon if the sale is to a client on Medicare, Medicaid, or neither. Others are scaled to the franchisee’s specific level of revenue. One example of a scaled royalty structure is with Angel Companions as seen below. The royalty amount the franchisee pays is set from a declining scale based on gross sales with a minimum royalty amount of $500 per month in place.
|Gross Sales||Royalty Percentage|
|Up to $85,000||5%|
|$85,000 to $170,000||4%|
Example of Scaled Royalty Structure (Source: Angel Companions)
There are additional ongoing fees that are assessed regularly such as technology fees to cover items like server hosting, internet access, etc. Franchisors also collect advertising or marketing fees to aid in developing strategies to promote the brand and fund the creative and production costs of local franchise marketing materials.
Select fees are assessed on an “as needed” basis such as audit fees or costs for additional training. All prospective franchisees should do their research and carefully review a franchisor’s FDD for more detailed information on all systems, procedures and costs involved before in investing in that franchise.
A Feel Good Career
Being a senior and home care franchisee offers the opportunity to build a rewarding business that has benefits professionally and maybe more importantly, personally. “We make sure they stay in their homes, and lead an independent life without having to go to a nursing home or an assisted living [facility]. The amazing feeling at the end of the day is worth all of the hard work. When you know you've made a difference in someone's life”, says Lisa Reisman. “That is amazing".
Yet, the good feelings of helping someone aren’t limited to the franchisees. As Gary Kneller, president of CareMinders told us, “We're motivated to work with potential franchisees and have them become part of our system. It is rewarding when you see a franchisee that wants to be their own boss, wants to have control of their life become a success story".
Check out our senior and home care franchise section to learn more about ways for you to make a difference in your community through this dynamic field.