Home care franchise, membership network or independent agency?
Should I choose a home care franchise, membership network or be an independent agency as the business model for my company? This question comes up often as I consult with clients seeking to start a home care agency.
Answer: It depends.
Today let’s discuss what it depends on to help you choose what route is best for you: A Home Care Franchise, a membership network, or starting your independent firm.
Before you can determine which you should choose, you’ll need to do some soul searching. The different business models provide various benefits and features, some of which depend on what type of person you are with the skills you have as you enter your entrepreneurial venture. Find the questions to ask yourself here.
If you find that you follow directions better than creating your own directions for a business model, then a home care franchise or home care membership network is worth serious consideration. On the other hand, if you feel that you’re an independent thinking entrepreneur to the bone who wants to be free of a franchisor determining what your company can/cannot offer, where you can/cannot provide services – then launching your independent home care agency may be the path you’ll succeed with.
Money, Capital, Investment
Starting a home care agency is not expensive in the big picture. However, don’t be misled by that statement to thinking that you can get your home care agency off the ground on a shoestring of $10,000 or less. This business, while inexpensive comparatively to other businesses, requires upfront investment. A franchise or membership network will require more of an investment upfront than going it on your own in order to purchase the franchise/membership rights and territory. The rights typically run between $20k to $100k.
Independent operators have found that by forgoing home care/senior care franchise or membership network model, they are able to save that up front capital in addition to the ongoing royalties and place it to use in their own business model, reducing immediate start up costs and monthly bottom line profitability. Start up cost differences can make the difference between ability or inability to start your company. Find more in depth discussion on the costs of starting an agency here.
What To Consider with Franchises & Membership Networks
Essentially you’re partnering, or contracting, with a franchisor or membership company. Those contracts vary amongst the different organizations so what’s negotiable becomes variables in what you’ll ultimately work with. Consider negotiating the following areas:
Franchise Purchase/Start-Up costs
The franchise/membership network costs typically include the rights to use their name, a service territory, start up training, operational manuals, management training, staff training manuals and some marketing materials. Going independent means you put these materials together yourself or find an alternative source for these materials. (Full disclosure, we help independents with these tools, manuals and forms)
Ongoing Royalties/Monthly Fees
Franchises typically charge ongoing monthly percentage of your gross income as a royalty. Membership networks typically charge a fixed monthly rate. In exchange, they provide different levels of ongoing support, marketing assistance and/or share programs. The biggest amount of support will often come in the beginning as you get setup and running. Once you’ve got the “how to” of running the business down, reliance on support is less. As you consider the options, ask yourself if the benefit of having support available anytime worth the royalties you’ll be paying on a monthly basis.
As an independent, you’ll need to find your support through other channels. Whether through other local business organizations, networking with other independent home care agency owners, creating a mastermind team of your own or we can help in this area, allowing you to get the support when you need it paying for support only when you need it.
Franchises and membership networks assign you an area of service. Together with the territory, you want to be aware of the branding awareness the franchise or membership network holds in your area. If you’ve never heard of them before, chances are – no one else has either. On the other hand, if you select one that has great brand awareness, that can be helpful until you out grow your service territory, in which case, your fellow franchisees become competition or limit you from being able to grow into another region.
As you negotiate this portion of your contract inquire to the following:
- Does the franchise / membership network already exist in your service territory?
- Will the organization sell other franchises in the same territory?
- Will you be able to have multiple offices within your territory?
- What costs are involved if you expand to a second location or expand your territory?
As an independent, the limits of your territory are up to you which can allow you to grow without impeding restriction. Building your own brand and brand awareness is also part of the equation.
Length of the Contract Term
Each organization has their contract length and it varies from 3 years to 10 years. If it’s just 3 years, what happens if you choose not to renew? Will you be required to rename your business? It’s enough time to learn the ropes, limiting the ongoing royalties, however, is the benefit to starting with them only to have to drop the name in 3 years worth building their brand so you can start building your own later?
Is the 10 year period beneficial over the long term? Some will allow renewal of the term, some won’t. These are all negotiable items.
Somefranchises have established relationships with long term care insurance providers which is a nice selling point. Others provide training to help you establish those relationships within your own community. Your typical client sources amongst regardless of franchises will include private pay clients, long term care insurance and Medicare or government assistance programs. Organizations with a medical home health business model will assist you in setting up your Medicare authorization and certification requirements.
As an independent, the client sources will be much the same as franchises. HomeCareHowTo offers several additional client sources that largely untapped but aren’t discussed in this post. Those sources provided to clients receiving our coaching services.
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. Most organizations will tell you they have the brand recognition. To date no franchises have achieved this status, however some are making significant inroads. Once this happens, you could see greater profitability as well as higher resale value with a franchise.
Franchise and membership network organizations are strong in the start-up phase of your business. 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 you give up the franchise.
At the end of the day, the business model you choose should be the one that works for YOU. I encourage you to thoroughly investigate the benefits and features of several home care franchises and membership networks and independent agency models to find which one is your best fit.
To Your Success!