Non medical Home Care franchise- what are the pros/cons?

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November 29, 2022

by a searcher from Washington University in St. Louis in Chicago, IL, USA

I am currently under LOI for a non-medical homecare franchise. $5M+ Rev with $1M+ EBITDA. I wondered if anyone here has acquired, operated, and exited a franchise. I would love to have a conversation. I am looking to raise part of the equity, and it has been a challenge, as investors are reluctant due to it being a franchise. I have done my research and evaluated the pros&cons. However, I would appreciate it if someone could provide me with some perspective based on personal experience.

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Reply by a searcher
from University of Notre Dame in Charlotte, NC 28277, USA
I bought and sold a non-medical homecare franchise about a decade ago and would be happy to discuss with you - feel free to DM me. As others have said, this is a highly competitive industry with limited differentiation among franchisors. The franchise I owned had a unique advantage which was eventually eliminated by regulatory changes in my state after I exited - you need to be 100% confident that the franchisor's differentiation is sustainable as well as what value they bring to the table versus doing it yourself as an independent business. The remaining franchisees in my state were essentially left with an expensive contract for a commoditized business offering nearly identical services as dozens of competitors in each local market (three years after I sold my business ~90% of the remaining franchisees in our system had closed or exited). IMHO most trade publications focus on the positives but gloss over the negatives and risks of franchises beyond the royalties/fees.
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Reply by a searcher
from Arizona State University in Louisville, KY, USA
We've been targeting home healthcare for 3 years now ($18M in acquisitions pre-COVID) and have avoided franchises due to the operational constraints.

We have a true organic growth model (as opposed to the 'spreadsheet growth' model) so need operational flexibility to drive revenue and census growth.

From the operator standpoint: if you have domain expertise in marketing you'll probably want to avoid franchises, because your skills can grow and scale the business. If your experience is in sales, you can probably make a franchise work well since they give you a model to follow. If your skills are in any other domain...

Lastly, I look at franchises as the "value investor option' for entrepreneurship. You're not going to have the asymmetric win - but you have less risk of going broke too. That means you need to be more like Buffett and own a whole bunch of low-risk, low-reward businesses to aggregate your cash flow.
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