Franchise Business Review recently released a report on the state of the senior care industry, announcing that it is one of the hottest business trends in franchising. I’ve received many questions about this report and why the industry is seeing so much success right now, so I thought I would answer your questions here.
How has the landscape of the senior home care industry changed over the years?
Right at Home is one of the oldest in-home care franchises, so we’ve been able to see firsthand how this industry has evolved. Our founder Allen Hager saw the need for this type of care in his experience working in hospital administration. He saw people being sent home from the hospital who weren’t necessarily ready to care for themselves on their own. The daily tasks that were once easy – cooking, cleaning, getting dressed – became more difficult to do, both initially and on a long-term basis. At first, there was an expectation that these in-home care services should all be paid for by the government or insurance, so the initial challenge was teaching referral sources and the public why these services should be paid for privately. Fast forward to today and this “private duty” industry has not only been accepted by the public, but has become a thriving business and a valuable service to many seniors. As a result, more competitors have entered the marketplace, but there is still plenty of room for growth as a result of the “silver tsunami” that happens as the baby boomers move through their retirement years.
We’re also seeing a fundamental shift in the motivations of our prospective franchisees for getting into this industry. Originally, the majority of people that came to us with interest in senior care were motivated by their passion for helping seniors. We still have those today, but we’re also seeing more and more people who inquire because they noticed that this is a good industry and a business opportunity with excellent long term demand and ROI numbers.
How are the baby boomers affecting this industry?
If you think about the years of baby boomer era, the average size of a family was larger. During this era, there was a ratio of almost four children per family. Now that number is less than two. The baby boomers grew up, but did not reproduce at the same rate. So, now there are fewer “adult children” to take care of them as they age, compared to their parents. The baby boomers are a fiercely independent generation and they will hold on to that as tightly and for as long as they can. There is definitely a strong preference to age gracefully in the comfort of one’s own home, so in-home care is a huge value to this generation and those that follow.
To put the future of the business into a different context, consider that 2011 was the first year that the baby boomers began to turn 65. Right at Home In-Home Senior Care now has more than 300 locations, in 41 states and 5 countries, and our franchise network billed over $200 million in 2011. Why is this significant? Because we’ve accomplished all of this, for the most part, without the benefit of baby boomers! Think about…even now, most of the care we provide is to the parents of the baby boomers, so we’re just barely scratching the surface of where this industry is headed.
The report states that the senior home care industry is consistently rated as one of the top 5 sectors for franchisee satisfaction. Why do you think that is?
You can’t imagine the difference in-home care makes in the lives of clients and families – and how helping someone the way we do feels – until you actually experience it firsthand. I had a franchisee once explain it to me this way: “When a parent gets sick or experiences an injury, it affects the whole family. Think of it as a mobile that you find in a baby’s crib. If you tap one of the toys on the mobile, the whole thing goes out of whack. It’s just like that with senior care – if mom gets sick, the entire family is affected.” Our franchisees are able to come into these situations and help provide stability and peace of mind for the whole family.
On the business side, Right at Home offers a lot of appeal to potential franchisees. Sixty eight of our franchisees whose offices had been open for at least 12-months for the period ending December 31, 2011 earned over one million in net billings (sales) in 2011*, so there has definitely been significant demand for the care and services that we provide. Plus, most people appreciate that it’s not a business with a lot of fixed costs. After opening, most of the costs are variable. The biggest cost in our business is labor (caregivers). You typically don’t pay caregivers unless they are working with clients.
The senior home care industry is a trifecta: significant demand coupled with ability to make a significant impact on people’s lives, plus the low cost of investment, all make this a very satisfying business to be a part of.
Explain the client relationship that your franchisees have, that contributes to this high satisfaction level.
What’s unique about the services that we provide families is that we really get to know our clients on a personal level. We aren’t just offering them a new pair of shoes or a burger. We are offering a helping hand at a critical time in a person’s life. Our clients don’t typically just hire us for a one-time service. It might be for a few weeks, a few months, or even a few years. This is a business that is built on trust so it is very important for us to match the right caregiver with the right client and build a customized care plan. In the beginning, you might be hired to just cook or clean, but as a person ages, their need for care tends to increase. If we are already working with them to simply provide companionship or housekeeping, as their need for care increases we can adjust their care plan accordingly – and the family enjoys peace of mind because they already trust Right at Home.
I would imagine that making the decision to hire an in home care company for your parent to can be a challenging decision. How are the adult children of your clients affected by opening the door to services like Right at Home?
The sandwich generation, as we refer to them, has an exceptionally challenging time when faced with an aging, sick, or injured parent. Trying to balance the commitment of raising their own family, combined with the responsibility to make sure parents are cared for can lead to a lot of emotions. Sometimes there can initially be a guilt factor when hiring in home care services. That feeling of, “When I was a kid, my parents took care of me, now it’s my turn to take care of them.” The reality is that everyone is usually better off with the parent receiving professional care anyway. Some of the daily assistance we provide – such as helping them get dressed or assisting with hygiene – often falls into an area that causes everyone involved to become uneasy. Having caregivers provide those types of services allows the parent to retain their dignity, and removes the adult child from an uncomfortable situation.
Competition is heating up in the marketplace. How does Right at Home differentiate themselves from the competition?
We’ve got all kinds of things that we do differently that set us apart, but none of them matter if they don’t translate into results. The fact is, I have yet to find another franchise system in senior care that officially discloses (in Item 19 of their FDD) as many franchisees averaging over $1 million in sales per year as we do*. The old saying that the proof is in the pudding certainly applies here. When you’re trying to differentiate franchises within the senior care market, look first to the historical performance of the franchisees to see if the differentiating factors are translating into positive results.
Where do you see this industry in the next 5-10 years?
In short, I see exponentially increasing demand, and as a result, an increase in competition. This industry has so much potential for growth because of the aging baby boomer population, and seniors’ strong preference for aging in the familiar surroundings of their own home. In 2030 there are going to be twice as many people over the age of 65 as there were in 2008. More demand means more customers. More customers, means there will be more competition. But if you really study the numbers you’ll find that this industry, over the longer term, offers business owners a tremendous opportunity to build a substantial, personally fulfilling business. And, when you compare it against other industries in terms of ROI and satisfaction, it’s no surprise that Franchise Business Review named it one of the hottest trends in franchising.
*Net Billings in 2011 for 191 Offices open one year or more as of December 31, 2011. 68 or 36% of these Offices attained or surpassed the represented level of financial performance.