Franchising: could it work for care homes?

Franchising: could it work for care homes?

William Laing

William Laing

William Laing, looks at whether this model could solve some of residential care’s woes.

Franchising works well in homecare. A prime example is Bluebird Care, which pioneered homecare franchising in Britain and at April 2016 boasted 86% good or outstanding ratings among those of its agencies which have been inspected under the fundamental standards regime, well ahead of the sector benchmark.

But the franchise model hardly exists for care homes. ‘Why not?’ is a good question, though perhaps the ‘so what?’ should be answered first. In other words, is there any reason to suppose that choice and quality assurance would be any better for consumers if the franchising model were to take off for care homes?

Maybe the best starting point is to look at the care home sector from the viewpoint of the care home manager or would-be manager. We all know (or think we do) that the manager is the single most important determinant of client satisfaction and financial performance of any given care home, just as head teachers are for schools. They employ good staff and don’t employ unsuitable staff, or vice versa, and their leadership (or absence of it) sets the ethos for the home.

“Good managers are like gold dust… and burn out is frequent”

Good managers are like gold dust and, as LaingBuisson’s recently published Care Home Pay Survey reported, their pay rates are being built up faster than general pay inflation. Yet the pressures of the job are severe and burn-out is frequent. When a manager leaves, many deputies prefer an easier life to stepping up into the number 1 role. So what is there in a care home manager’s career path to encourage the good ones to stay and the new ones to join?

“There are always good individual situations to find, and some will wish to take their chances in climbing the slippery corporate ladder.”

There are always good individual situations to find, and some will wish to take their chances in climbing the slippery corporate ladder.

There are several examples of former nurses reaching the top CEO position. But this is for a handful of people only. What’s missing, arguably, is the opportunity for qualified managers with the skills, energy, determination and the right balance of empathy and financial acumen to enter business on their own account without having to raise sums of money for full property ownership which are beyond the reach of most. That’s what the franchise model could offer.

“Franchising creates a space for high calibre individuals to take ownership of a local service for an affordable financial investment.”

At heart, franchising works because it creates a space for high calibre individuals to take ownership of a local service for an affordable financial investment. On the other side of the coin, it requires a credible and well-funded organisation dedicated to the franchise concept, with national (or international) reach, to put together the necessary systems and to find local entrepreneurs with the energy, commitment and skills to make a success of a local business over the medium to long term, and to be rewarded accordingly.

McDonalds is a great example, and selling hamburgers is not so far removed from delivering personal care as one might think. Both have a property element. Both are employers of low paid staff (typically young in fast food and on average older in care homes, but with many similarities). Both have – or should have – a very strong interest in training their staff to adopt a bright, warm and helpful attitude in the thousands (millions) of face-to-face customer interactions that take place every day. ‘Have a good day!’ may sometimes sound hollow, but it’s better than a sullen face and a rough manner.

So how might ‘high calibre’ franchisees perform better than employed care home managers? Of course we don’t know yet because the model does not yet exist in the UK. But it would not be unreasonable to expect that embargoes (which even in small numbers are hugely expensive to large corporate operators) would be less likely to happen, and franchisees might also be expected to exercise better control over the sometimes excessive employment of agency staff, which again is a particular bugbear of corporates. As to quality (CQC ratings) the message from the home care sector is that franchising works.

Carer

“The main concern of property investors… is to have reliable tenants who pay their rents”

So where would care home franchisors come from? Though it hardly exists in the UK at present, the building blocks are already there. From a financial perspective, the care home sector can be viewed as a property business involving long term investment in expensive property, with a skilled service component attached. Property and operations are already separated through sale and leaseback. The main concern of property investors, for their part, is to have reliable tenants who pay their rents in full and on time and, in case of default, to be able to find an alternative tenant at the same rent.

To date, investors have relied largely on corporate operators to run their operations well and deliver the rent, relying on large portfolios to spread the risk. But unfortunately the market has turned sour, at least for homes with high exposure to public pay, and many corporates have found themselves underwater, with property investors sharing their pain.

Generally, property investors have not seen small operators as their natural partners. When times were good, it is easy to see why. It‘s much less demanding to find a single tenant for an entire portfolio than to spend the additional time, expense and management resource to find a multiplicity of small businesses and to monitor and support them.

“Could large care home groups themselves diversify into franchisors?”

But now, when the leading public facing corporates are under such pressure, could ‘hands off’ property investors diversify into franchisors? Or equally could large care home groups themselves diversify into franchisors, for parts of their portfolios at least?  One of the responses of corporates to severe financial pressure has been quietly to dispose of some of their poorly performing homes one by one. Many homes have found a new lease of life under new owners. Occasionally, corporate ‘dogs’ have even become small business pearls. But while the secondary market for care homes is by no means thin, it could be much stronger if there were a thriving franchise sector already in place.

It would in some ways parallel what has happened in community health services where around the turn of the decade about 30 organisations were spun off from the NHS as Community Interest Companies, run by existing staff, who found new energy under a different ownership structure. Not the same as franchising, of course, which is a for-profit model, but the same benefits of motivated local ownership apply.

This article originally appeared in in Community Care Market news, May 2016. www.laingbuisson.co.uk