For Owners, CEOs and Directors
Start a Non-Medical Home Care Company
Evaluating Home Care Franchise and Membership Networks
When starting a home care company many of our customers and clients ask us which home care franchise or membership organization is best. That's a difficult question because different franchise organizations offer different features and dramatically different fee structures. You’ll need to assess for yourself which features are valuable to you as an individual entrepreneur.
To further confuse the issue, many individuals choose to be completely independent; feeling the money they would spend on start-up fees and royalties can be better spent on marketing or profit distributions.
We strongly encourage entrepreneurs to evaluate several different franchise companies and membership organizations before making a final decision. Comparing the resources you need and your skill sets to the offerings of these companies will help you make better business decisions. Ultimately you may decide that neither is appropriate for your business, but you will have made an informed decision.
When contacting a home care franchise company or membership organization, consider a few things when evaluating each organization.
Each company has an initial fee paid directly to the organization. This fee covers the cost of your start up training, training materials, operations manuals, and other resources provided as part of your franchise agreement. Determine what that fee is, and what you get for your money. Try to find the best value per dollar, rather than the lowest price.
Revenue sharing fees/Royalties
Most franchise companies charge additional fees based on your revenue. Other companies, particularly membership organizations, charge flat monthly membership fees regardless of revenue. Decide which is more beneficial to your organization. Also, compare the ongoing fees to the company's ongoing support. Some organizations provide the most support during the startup phase, while others offer continuing support as your company grows and changes. Again try to identify the best value. You may want to talk with owners of Private Duty franchises to evaluate the value of the initial investment, and their satisfaction with ongoing support.
Most organizations offer support and training. The depth and breadth of this training varies greatly. Take an honest look at your own skills. Do you need more expertise with marketing or recruiting or finance? Does the organization offer training in areas that you need to improve? Additionally, what training formats do they use? Are they live seminars, conferences, books and manuals, audio or video? Compare their training to your own learning style.
Some franchise companies are primarily located in one region, while others are nationwide. It's probably not a good idea to become the only franchise of your brand in your region. Ideally you want quality non-competing branches in your region to promote brand awareness.
Franchises typically divide territory by geography, where purchasing a franchise entitles you to specific areas such as certain specified zip codes. Other organizations base their franchises on population, for example a large metropolitan area may have multiple franchises. Here are some questions you should ask before you commit to an organization. Does the organization sell multiple franchises in the same community? Are you allowed to open multiple offices within a geographic area? Does a particular franchise already exist in your community? Are there additional start-up fees if you choose to expand to a second office?
Non-medical home care companies get revenue from three primary sources; Medicaid Waiver or other government programs, Private Pay, and long-term care insurance. Medical home care gets much of its revenue from Medicare, Medicaid or health insurance companies. Some franchise companies have established provider relationships with insurance companies. Other franchises will guide you through certification for Medicaid in your state. Still other franchises specialize in private pay cases. Deciding the demographic you hope to serve will influence your franchise decision.
Some organizations have brand recognition in your community, while others won't. Try to determine what organizations are respected in your community. One word of caution, most franchises claim to have brand recognition value, but to date none have established themselves as a clear national leader. Look at things such as national advertising, cooperative referrals, and other structures that will promote brand awareness and value as the franchise company grows.
Franchise vs. Membership Organization
Each has its advantages.
Franchises have a greater overall potential for brand recognition. By using the name of the franchise nationally, your company could become the “McDonalds” of home care. To date no franchises have achieved this status, but some are making significant inroads. Once this happens, you could see greater profitability as well as higher resale value with a franchise.
Membership Organizations provide their greatest value in the network that they create among owners who wish to remain independent. Sometimes existing home care companies choose to join a membership organization, because they’ve already established some brand in their community. Additionally, membership organization fees are based on your ongoing commitment to the network. You only have to pay those fees if you are continuing to get value.
Each has disadvantages as well.
Both types of organizations are strong in the start-up phase of your business. The biggest disadvantage to a franchise is that you own the franchise forever. Once you’ve launched your company, if your franchise fails to meet your expectations in the future you must change the name of your company to get out from under the franchise structure, and its fees. Additionally, some franchises have non-compete agreements that limit owners in their ability to start a separate organization in the home care industry if they give up their franchise.
While membership organizations provide a network of non-competing agencies, they don’t have as great a potential for brand recognition or the opportunities for cooperative marketing as franchise organizations.
Whether you purchase a franchise, join a membership organization or start an independent agency, resources are available. Some organizations are better than others, and it’s likely that only one will be the perfect fit. Here are some resources to get you started.