Long-established Beehive, home care mainstay BrightStar and newcomer Majestic offer different franchise models
It isn’t a boom yet, but interest in franchise ownership of senior living properties has grown recently, and this model shows signs of becoming more prevalent as baby boomer demand gains strength in the coming years.
Franchise-based senior living already was gaining steam prior to COVID-19, and the pandemic might have increased the appeal of this business model. That’s in part because smaller properties, which are common in franchise-based businesses, proved easier to secure against COVID-19 infections. Also, unemployment spiked during the pandemic, and purchasing a franchise is a route forward for laid-off workers. In home care — where franchising is commonplace — some businesses were seeing record levels of new franchise agreements in the spring of 2020.
Of course, there are complexities when it comes to creating and scaling a senior living franchise as opposed to owning, say, a fast-food restaurant.
It’s not like hamburgers. The model has to be proven, and it has to be scaled,” said Gene Guarino, co-founder of Majestic Residences Franchise Systems, LLC, and President of the Tempe, AZ-based Resident Assisted Living Academy, which focuses on senior home care investment and business education.
Majestic launched in October 2020 and is part of a small but growing club of companies franchising senior living.
The Franchise Players
Groundbreaker Beehive Homes has been following a successful franchise model for decades, while BrightStar Senior Living, Majestic and Avendelle Assisted Living are taking their own approach to the senior housing franchise model.
Majestic is emphasizing the experience of its team, an accessible price-point, and tech. BrightStar is building its franchise in part on lessons learned from franchising home care, and Beehive has built its model on new construction and the mentoring skills of its veteran franchise owners.
Majestic and Beehive are small home providers. BrightStar’s buildings are a bit larger, but they’re planning a small-home format as well.
SHN decided to take a closer look at these three franchise operations.
Beehive Has Franchisees in 22 States and Counting
Beehive has been developing its franchise model for almost three decades.
In 1987, the Idaho-based company got its start building properties in the Boise area. After a few years of building some properties and franchising others, Founder Twayne Walker and his team decided to focus exclusively on franchising in the mid-1990s, said Franchise Sales Director Troy Veach.
As of 2021, Beehive has 219 communities spread across 22 states. Well established in the Mountain States, Bible Belt, Texas, Indiana and Ohio, Veach is now working with prospective franchisees in Maryland, Virginia and New Jersey.
Size, Location & Fees
Initially, most Beehive homes were in small towns with maximum populations of 15,000. Now, they’ve found a niche in many larger markets, including suburban Salt Lake City, Dallas/Ft. Worth and Minneapolis.
Most Beehive locations are 16- to 24-bed homes. A 16-bed home will typically have two rooms designated for couples, while a 24-bed home will have four rooms for couples, according to Veach.
Franchise fees are charged on a sliding scale, decreasing with each new franchise property that an owner adds:
- 1st property: A franchise fee of $75,000, payable in two parts, when the contract is signed and the other contingent on the builder’s permit.
- 2nd property: $65,000
- 3rd property: $55,000
“There’s a 5% royalty paid on beds filled, and it takes time to fill them,” Veach said. “We don’t ask for royalty payments until a home is 65% full.”
Though Beehive does not offer in-house financing, the company does have preferred bankers who are experienced in working with franchisees. Because of the trust developed during this long-term relationship with Beehive, most of these bankers can push through loans faster, Veach noted.
Approved Designs are Another Cost-Saving Perk
Nearly all Beehive Homes are ground-up construction, created according to plans from Ohio-based architect James M. Alt, who is licensed in all 50 states. The construction drawings typically run to about $25,000, and are included as a line item in the construction loan.
Franchisees are under no obligation to use Alt’s plans, however.
“With us, you’re not locked into an architect, builder or bank,” Veach emphasized.
Adding Experienced Owners to the Management Team
Beehive’s team works with franchisees as long as they need assistance.
“For some, that’s a week; for others, they’re still coming to us 15 years down the road, which is fine. We always tell owners, ‘Don’t be afraid to pick up the phone,’” Veach explained.
In many cases, Beehive collaborates with long-term franchisees as “sub- franchisers/mentors,” who help new franchisees in their regions learn the ropes. Many of these mentors have been with Beehive for decades, and there are currently six of them across the country.
We split franchise fees and royalties with the sub-franchisees, so there are no extra costs to the new franchisee,” Veach said.
Manning Emphasizes Front-Line Training for New Franchisees
Albuquerque-based Jay Manning has been a Beehive franchise owner for 20 years; he now owns 35 franchises in three states with 400 employees. As a mentor, he currently oversees 12 new franchise owners across New Mexico, Arizona, Colorado and Texas, bringing them to his headquarters in Albuquerque for hands-on training at his properties.
“I take them to these homes and say, ‘This is the business.’ They see it up close,” Manning said.
Franchise owners attend yearly meetings in Boise and, in the Southwest, twice-yearly training meetings in Albuquerque.
Most new franchise owners have some business experience but little knowledge of senior housing or health care, so Manning educates them and breaks down the business.
“Labor is the biggest expense we have,” he said. “How much does it cost to take care of 15 people in an adequate way so they (residents and families) think you’re doing a good job?”
Manning helps new franchisees find good locations and secure financing. Successful Beehive properties all feature bathrooms in each bedroom and a caregiving ratio of 1 caregiver to 7 residents.
“Also, one of my trade secrets is that for our homes to really be top notch, you’ve got to have an activity director,” Manning said.
Regional mentors help new franchise owners understand the reality of front-line workers in assisted living and the impact caregivers have in the lives of residents, he added.
“Beehive’s model is to create a home-like atmosphere with small, intimate places that can really give people good care,” he said. “This business will not run itself. And you have to be engaged and you need a caregiver’s heart or you’re not going to make it.”
Beehive properties can net between 25% and 30% margins.
“If you’re taking in $70,000 dollars a month, that will net you between $14,000 and $20,000 a month,” Manning said.
Newcomer Majestic Vetting Dozens of Prospects
Although Phoenix-based Majestic launched in the fall of 2020, it is led by a team of five with decades of experience in real estate and senior housing, including Co-Founders Guarino and CEO Chuck Bongiovanni, who is also founder and former CEO of senior living and care placement service CarePatrol.
Focusing on residential care homes ranging from about 6 to 16 units apiece, Majestic is rolling out in phases.
“Our second phase, which started about a month ago, included educating referral and placement agents to our model with the hopes of having them recommend current residential care home owners who would be a good fit for us,” Guarino said. “To date, I have met with 350 agents so far who sent over 150 leads to us.”
The company has an initial goal of 50 franchisees with a longer-term goal of 400 homes across the country. In its first month, Majestic awarded 13 franchises, and Bongiovanni anticipates awarding another 30 to 40 in the next three months.
Of the first 13 franchises, about 40% were existing providers who opted to come under the Majestic umbrella, while 20% purchased and are renovating an existing property, and the remainder are still looking for locations, Bongiovanni said.
An Affordable Investment with No Predetermined Design
Unlike Beehive, there are no set floor plans or blueprints for Majestic’s residential care homes.
The cost to build or convert an existing residence into a 16-bed Majestic Property is $1.5 million to $2.0 million and 8-bed properties can cost less than $1 million.
“Someone in Phoenix can buy an 8-bed house for $600,000 to $700,000 and spend $200,000 for necessary renovations,” Bongiovanni said.
Down payments range between 10%-20% and franchisees earn margins of 23%-27% once their properties are full, he added.
Majestic’s Franchisee Pool Falls into Two Groups
So far, most Majestic franchisees have come from two sectors — real estate and health care.
“One recent example of new franchisees are a husband and wife; he’s in real estate and she’s a nurse. They found us through real estate channels,” Bongiovanni said.
Majestic offers three paths for prospective franchisees: Conversion, Start-Up and Investor.
1. The Conversion path involves people who already own and operate a residential care home and want to take advantage of Majestic’s marketing relationships, contracts, operational expertise and technology. Their franchise fee is $10,000 with a monthly royalty of 6%.
2. The Startup Path is for individuals who want to get into the business. In these instances, Majestic offers help in locating a site, obtaining licensing, training a staff, and all the other services offered to franchisees. The franchise fee is $49,500.
3. The Investor Path is for individuals who want to purchase a property, get it licensed and then sublease it to one of Majestic’s other franchisees.
Majestic is approved by the Small Business Administration (SBA) and provides applicants with a vetted list of lenders. About 80% of franchisees will finance through the SBA, Bongiovanni said.
EMRs, Incontinence Detection and More Tech Set Their Model Apart
A commitment to new, innovative tech ranging from entertainment to essential care services separates Majestic’s model from its competitors, Bongiovanni said.
“Only about four percent of care homes have EMRs (electronic medical records), but EMRs will be part of all Majestic properties,” he said. “We’ll have system care alerts to monitor resident vital signs and often detect significant and subtle changes before caregivers do.”
In addition, Majestic:
· Developed MajesticResidences.TV which is kind of a “Netflix for Seniors” offering older TV shows, Movies and Radio.
· Created TV content streamed to residents.
· Introduced a proprietary scent that will be pumped from an oil-based diffuser every few minutes.
Majestic’s 3-Part Training Process
There are three phases of training focusing on:
2) Operations, including hiring, recruiting, software training, lessons on hiring and retaining caregivers.
3) Marketing and Strategy, including training on best practices for working with families, and helping owners and caregivers give effective site tours.
“We have a value system called ‘Welcome HOME,’ which stands for Honesty/Observation/Memorable/Empathetic. Everything we do focuses on those values,” Bongiovanni said.
Self-Financed for Now
Though Bongiovanni and Guarino are funding the operation for now, they are open to outside investors, Bongiovanni said.
“I’m really looking for some kind of fund out there that wants to work with us. In many ways a REIT would be ideal, but they’re all used to investing in huge places, often with a minimal investment of $20 million,” he said.
$20 million represents about 16 Majestic locations; Bongiovanni suggested that a REIT could package 15 or more properties together.
BrightStar’s Meticulous Approach to Franchising
Despite a history of success franchising its home care model, Gurnee, Illinois-
based BrightStar hasn’t jumped head-first into senior housing.
The brand is taking a slow and steady approach toward concept and prototype development for its BrightStar Senior Living brand, building and tweaking properties in Ft. Wayne (IN), Mason (OH), Madison and Waunakee (WI) before actually franchising senior living communities.
From concept development to pilot projects to launch, the evolution of the BrightStar Senior Living franchise took over a decade.
“I’m not looking for immediate gratification and we don’t franchise without having a hand in, making sure protocols are in place,” said Shelly Sun, Founder and CEO of BrightStar.
Planning began in 2009, with BrightStar purchasing land for its first project in 2012 and opening its initial pilot project in 2014. Now, with the original properties running smoothly, the brand is ready to begin franchising.
“With this approach, we’re the ones taking all the risk with an understanding that we will transfer to the franchisee,” Sun said. “I’m not asking franchisees to take on something before we prove that it works. We want to get most of the bumps and bruises on our own dime.”
Currently, BrightStar properties range from 30 to 44 suites, with communal spaces such as dining rooms, bistros, terraces, game rooms, libraries, multipurpose rooms, life enrichment nooks and a salon.
The properties average 30,000 square feet and are located on grounds of an acre or more.
“We want the properties to look similar, with ample outside walking space and gardens to walk though, and a safe garden area for memory care residents,” Sun said.
COVID hasn’t dimmed the popularity of these properties.
“I hear about occupancy being down, but our occupancy has risen in our Ft. Wayne and Mason, Ohio properties,” Sun said.
A BrightStar Senior Living Franchise is a Long-Term Commitment
Total project cost typically runs between $8 million and $10 million.
BrightStar Senior Living’s model requires one staffer for every eight residents in assisted living and one for every six in memory care, Sun said. The model features assisted living on the first floor and memory care on the second.
BrightStar’s franchise model features:
- A minimum $50,000 franchise fee
- Royalty fees of 5% of revenue
- 10-year renewable contracts for franchisees
In return, the company guides its franchisees through the development process, helps source financing and supports operations once they get off the ground. When appropriate, BrightStar also connects potential franchisees with lenders who understand the franchise model.
For now, about 90% of future BrightStar locations are likely to be conversions of existing properties rather than new construction, which has proven too expensive to date.
BrightStar Care Homes Coming
In Q2 of 2021 the company will introduce BrightStar Care Homes, 5,000-6,000 square-foot, ranch-style housing built on half-acre lots, featuring 10-12 bedrooms, with outdoor patios or decks.
While conversions are an option, many of these smaller properties will be new construction, with architectural plans available to franchisees, Sun said.
“BrightStar Care Homes is the branding we’re using for the pilot, but we currently have a six-figure project to validate (potential) names that resonate,” Sun said.
One reason for branching into these smaller-format care homes is that the larger BrightStar Senior Living model is not a good fit for every metro market or every state, particularly given land prices. But there will be “pockets” that make sense for the care homes, Sun said, flagging rural areas and locations with pricey real estate, such as New York, New Jersey and California.
Argentum President Predicts Gradual Expansion
While new brands are slowly introducing franchising models, intense growth isn’t likely anytime soon, predicts James Balda, CEO of senior living trade association Argentum, who shared his thoughts through email.
“Person-centered care continues to be a hallmark of senior living—and that won’t change,” Balda wrote. “So, the need to figure out a franchising model that supports this level of personalization continues to be critical to its success in senior living.”
Written by Andy Smith and edits by Tim Mullaney