The Rise of Senior Living Franchises

A recent press release from Best Life Brands caught my attention, because it suggests that senior living franchise companies will rise and create new competitive pressures in the aftermath of Covid-19.

Fueled by private equity capital from The Riverside Company, Best Life Brands is assembling a platform of franchise-based companies serving the older adult market. The companies that are already in its portfolio — home care providers, a senior housing and care placement firm, and an estate sale business — logged record growth in 2020, with 71 new franchise agreements signed, according to the Jan. 13 press release.

Best Life Brands is on the hunt for other companies to acquire, including possibly senior living providers, CEO J.J. Hunt told me in an email.

Best Life could have a widening array of potential acquisition targets, because franchise-based senior living providers were increasing prior to Covid-19, and the pandemic appears to be fueling further growth.

And if these expanding franchise-based senior living providers are integrated into platforms that provide a spectrum of services for older adults — like the one Best Life Brands and other firms are assembling — they could prove to be attractive options for consumers and even move the industry in new directions.

Franchises rise

The record growth of Best Life franchises in 2020 is not all that surprising, considering that the pandemic put a massive number of people out of work. Becoming a franchise owner is one route forward for people who are unemployed or who want to be their own boss, and given how hard Covid-19 hit the restaurant and hospitality industries, health-focused franchises hold even more appeal than usual at the moment.

In fact, some franchisors in the home care space — where franchising is commonplace — saw an uptick in prospective franchisees as soon as the first wave of Covid-19 brought labor market disruption last spring. Senior living franchise companies also logged growth last year. A new player in the senior housing franchise space, Majestic Residences, launched in mid-2020. In its first month, the company awarded 12 franchises, it has more than 40 franchises in the pipeline, and expects to hit 200 by the end of 2022, Co-Founder and CEO Chuck Bongiovanni told me recently.

Majestic is part of a small but growing group of senior living providers that operate on a franchise model, with other players including Beehive Homes, BrightStar Senior Living and Avendelle Assisted Living.

In addition to the sheer number of people who are looking for new careers, franchise-based senior living could be poised for growth for another reason: Covid-19 created a groundswell of interest in small-home models, which are easier to secure from an infection control standpoint and offer more options for safe socialization among residents. Small home senior living is a natural fit for the franchise model, allowing franchisees to start a business without facing the high real estate costs of larger buildings.

Majestic and Beehive are small home providers. So far, BrightStar’s buildings are a bit larger but still aim for a “bed and breakfast” vibe, and the company is also piloting a 10-room, small-home format, CEO Shelly Sun said during our BUILD event last October.

Integrated platforms

If the BrightStar name rings a bell, that’s likely because the company already is one of the largest home care providers in the United States, with over 300 independently owned and operated locations.

“We were being asked to put our reputation on the line and recommend assisted living [communities] … to families that had been part of our care journey,” Sun said during BUILD. “It got me thinking about what are all the things that our families might need, and how can we be a part of their journey?”

This line of thinking resulted in the founding of BrightStar Senior Living. But, Sun also picked up eight different trademarks when she secured the BrightStar Senior Living name in 2009.

She is remaining quiet about what those trademarks are, but she is envisioning additional ways that BrightStar can serve its target market by “putting the consumer at the center.”

In other words, Sun has observed the fractured nature of the older adult market and can see the value in providing a more integrated experience, with franchise-based home care and senior living as pillars.

This is similar to the Best Life Brands vision. As Sorrenti told me: “Best Life Brands is actively looking at acquisitions that fit into our ecosystem, which is taking care of seniors anywhere on the care continuum … shared resources, team members (where appropriate), approaches, and key learnings often benefit everyone under the portfolio, and can lead to exponential growth.”

One of Best Life’s portfolio companies is CarePatrol, which provides placement services for older adults in all levels of senior living and long-term care. CarePatrol was founded by Chuck Bongiovanni — who has since started Majestic Residences — and his wife Becky Bongiovanni remains its president.

While Sorrenti did not call out Majestic by name, he did tell me: “There are many well-established senior living franchises that could strengthen our brands in the short term, as well as smaller or younger companies that may or may not be franchise-based, but have a unique and/or appropriate concept that we can benefit from and grow.”

No senior living acquisition is “imminent,” he clarified, but Best Life is watching the space.

What stands out to me is that both BrightStar and Best Life are aiming to support the preferred lifestyles of aging baby boomers through their diversified, integrated platforms, with senior living communities being one component. As I observed in another recent note, special purpose acquisition companies (SPACs) are pursuing similar strategies.

All these players recognize that many companies serving older adults currently are disjointed from each other and technologically out of date, which leads to frustrating, confusing consumer experiences. For instance, I find it particularly interesting that Best Life Brands acquired the CarePatrol placement service, considering the frequent griping that I hear from all sides about the dysfunctional relationships among senior living providers, consumers and third-party referral platforms.

As a consumer, I might be suspicious if I learn that a single private equity firm owns both the referral services company that I’m using and some of the senior living communities that I’m being referred to. But I also think that consumers face a complex and daunting process in choosing a senior living community, and creating better alignment between referral services and providers could be a step toward improving the consumer experience.

Big picture, the plays from Best Life Brands and BrightStar — and the SPACs — should compel senior living providers to contemplate how they can work with partner companies or diversify the service lines that they own and operate, to play a larger role in meeting the holistic needs and wants of older adults. That includes reaching older adults before they move into senior housing. The rising class of competitors sees that senior living is a crucial offering, but also that it’s becoming easier for older adults to age in their own homes by harnessing telehealth and on-demand services for food, companionship and other social determinants of health, paid for through Medicare Advantage and other programs.

And you don’t have to take my word for it. Consider the perspective of Five Star Senior Living CEO Katie Potter. She is considering how to transform Five Star from a senior housing provider into an integrated “life services” company.

“I think this concept of life services that empower a lifestyle … is going to be really important in how we approach securing the business of this demographic,” she told me last September.

In the past, some senior living providers have struggled to run home care operations or add other ancillary services, and have warned about the difficulties in branching out in new directions. There is merit in companies recognizing their strengths and playing to them, but as the industry continues to evolve and mature, providers may have no choice but to figure out how to diversify.