Looking to build partnerships similar to the one it recently formed with Kindred at Home, home care franchise company Right at Home plans to push a new conversion strategy in 2019.
The reason for the strategy, Right at Home executives say, is to expand the company’s U.S. footprint, filling in geographic holes for further business appeal to Kindred and other potential partners looking for a one-stop-shop home care solution. The conversion approach — which transitions independent home care agencies to the franchise model — will also allow Right at Home to better serve the wave of aging baby boomers in the not-too-distant future, they say.
Several other home care franchise companies have in the past year launched conversion initiatives of their own with varying results. They include Cincinnati-based FirstLight Home Care and Gurnee, Illinois-based BrightStar Care.
Omaha, Nebraska-based Right at Home and its franchise partners provide a mix of medical and non-medical home services across nearly 500 U.S. locations. Despite strong location growth over the past couple years — about 6%, according to industry estimates — Right at Home still has plenty of “open spaces on the map,” Chief Development Officer Eric Little told Home Health Care News.
“We’re less than three years away from the oldest boomer turning 75 years old,” Little said. “If you think we’ve been busy now, as an industry, just wait a couple more years when those boomers start to move in the 75-and-over ages. We need to get ready now because we can’t do this after the fact.”
Currently, Right at Home has a presence in 184 metropolitan statistical areas (MSAs), or geographic regions with relatively high core population densities and close area economic ties.
There are 175 MSAs where Right at Home does not have an operational presence, Little said. The list ranges from larger cities such as Buffalo, New York, to smaller metro areas such as Kokomo, Indiana. Other MSAs Right at Home is targeting include Bakersfield, California, and Springfield, Massachusetts.
“It’s a bit of a race,” Little said. “Who can have the points of disruption on the map the soonest out there?”
Coveting conversion opportunities
Right at Home has grown its system-wide sales from under $300 million in 2013 to more than $480 million in 2018, according to estimates.
In the past, Right at Home has typically tracked growth on a territorial basis, Little said. Its focus on MSAs is a philosophical shift of sorts, meaning the franchise company is still figuring out exact expansion goals and figures for next year.
A territory is defined as the area where a franchisee has the legal right to operate their business. For Right at Home and many other franchises, territories are a collection of zip codes.
“We’ve really looked at our goals from a territory perspective in the past — how many territories we have operating,” Little said. “We’re not totally moving away from that, but we’re looking more closely at major metro areas out there now. If we can take down 20 to 25 of those [untapped] MSAs next year, I’d be happy.”
For comparison, Right at Home regularly adds between 30 to 50 new territories in any given year, with an all-time annual high of 70 new territories, Little said.
Besides its conversion strategy, the Nebraska company plans to expand into new MSAs by also taking a more geo-targeted recruitment approach, ramping up its digital advertising efforts, and proactively recruiting prospective franchise owners.
Right at Home quietly kicked off its conversion strategy in September with a soft launch. It hasn’t landed any agency conversions yet, but the franchise company is currently in talks with at least half-dozen independent owners.
“There are going to be some [owners] who fold their arms and say, ‘Nope. I don’t need a franchise.’ And that’s perfectly fine,” Little said. “The ones having conversations with us are those who are looking forward, seeing how bigger brands are taking a bigger and bigger share of the market, seeing how they might have trouble keeping up with them.”
BrightStar, FirstLight updates
For some independent home care businesses, converting to a franchise model may offer relief from today’s complex regulatory climate and competitive market. By paying a relatively small royalty fee — 5% of gross sales, in Right at Home’s case — and joining a franchise network, independent agencies could gain access to recruiting support, regulatory guidance and other benefits.
Being part of a franchise system can also offer advantages when independent agency owners are looking to sell. Right at Home has facilitated at least 125 business re-sales in its 18 years of franchising, according to Little.
FirstLight, a non-medical home care franchise company with more than 161 U.S. locations, saw its first agency conversion in September in Greensboro, North Carolina. It has seven additional conversions in progress and nine more projected for 2019, FirstLight CEO Jeff Bevis told HHCN.
“Independent agencies are realizing there are some major benefits to be had by transitioning to the franchise model,” Bevis said. “Our conversion efforts are going really well. Several markets have expressed increased interest in the process.”
BrightStar, a franchise network of 321 U.S. locations that offers both skilled nursing and non-medical services, has taken a fairly selective approach to agency conversions. It completed a major conversion deal in April by acquiring HomeChoice Senior Care, the largest independent home care operator in the Des Moines, Cedar Rapids and Iowa City metro markets.
“Prospective partners would have to share and demonstrate our same commitment to quality and be performing in the top quartile of the industry,” Dean Ulizio, BrightStar executive vice president, told HHCN. “Maybe it’s just our high standards, but we haven’t seen as many opportunities in the markets we’re targeting.”
Eyeing national partnerships
In August, Right at Home announced it had struck a preferred partnership arrangement with Kindred at Home, the largest home health provider in the country. Kindred at Home is owned by Humana, Inc. (NYSE: HUM) — a top player in the Medicare Advantage (MA) market — and two private equity firms.
“We are hopeful our partnership with Kindred at Home puts us in a position to better leverage the new 2019 Medicare Advantage opportunity.” Right at Home President and CEO Brian Petranick said at the time of the announcement.
Specifically, Petranick was referring to expanded opportunities for certain non-skilled in-home care services under MA plans starting next year.
A key part of the partnership between Kindred at Home and Right at Home is a very similar national footprint, Little said. Leveraging a conversion strategy to fill out Right at Home’s operational gaps will likely give the home care franchise company a boost in landing more deals moving forward.
“One of the things that made the Kindred partnership so good for us — and so good for them — was that if you lay our footprints on top of each other, there’s a lot of similarities between the two,” Little said. “The reality is the more flags we have on the map with Right on Home on them, the better positioned we are to collaborate with other industry partners and other technology partners.”
Written by Robert Holly