Franchising the Care and Feeding of Grandma
Time.com -- by Francine Russo -- Monday, Sept. 14, 2009
In 1994, while keeping his grandmother company at his mom's house in Omaha, Neb., Paul Hogan hatched a business. Barely mobile when her children moved the 89-year-old in, Grandma Hogan, newly pumped up by attention, would live to be a lively 100. What, Paul wondered, did families without available kin do? Providing that answer has propelled Home Instead Senior Care into an international franchising dynamo that reaped $661 million last year and projects a 2009 jump to $738 million on domestic growth of 10% and 26% growth internationally.
With people over age 65 rising from 7% to 15% of the world's population by 2050, Hogan (a veteran Merry Maids franchiser) and his wife Lori were the first to franchise a new senior-care niche: nonmedical companion-caregivers. In most of the world, private-pay care services are virtually unknown. But with seniors' numbers soaring, public care dollars shrinking and extended families geographically scattered, Home Instead is mining a virtually untapped and limitless market. "Stimulate, energize and assist" is how CEO Hogan describes its services, usually provided by female caregivers ages 55 to 60 for 15 to 20 hours a week. The typical cost in the U.S.: $18.40 per hour, with the caregivers getting $9.43 of that. Besides helping with activities ranging from cooking to laundry and playing Scrabble, the caregivers may also plan excursions, such as having lunch in New York City, viewing cherry blossoms in Osaka or taking in cattle auctions in New Zealand. Depending on local regulations, some franchises also offer personal care.
From the start, Hogan's business model called for marketing to professionals like geriatric-care managers and hospital staff, who would refer clients. He sold his first franchise in 1995 and has steadily racked up sales to 874--currently sold for $35,500 each and 5% of royalties. New owners troop to Omaha, where they learn staffing, pricing and marketing and imbibe the company's feel-good vibe of helping seniors.
The same intersection of the personal and profitable that inspired Hogan brought Yoshino Nakajima to his door. A master franchiser for Blimpie's in Poland, the American-educated, Japanese-born Nakajima came across Home Instead while seeking help for her aging parents in Osaka. She asked Hogan for franchising rights in Japan, and he lit up. "The world's second largest economy, with its most rapidly aging society?" he quickly calculated. "I brought her on," he says.
Seeking a Japanese partner, Nakajima discovered that the huge Japanese housekeeping franchiser Duskin already knew Hogan from a Merry Maids connection. Partnering was easy. Harder was selling the idea of for-pay companionship to the public and government-subsidized health-care gatekeepers. In a media blitz in 2000, Duskin coined the word companionshippu. But only patience and painstaking matching persuaded elders to bring a stranger into their typically small, private realms. "The seniors," Nakajima explains, "would invite the caregivers first to pull weeds in their garden and size them up from the window. Afterward, they'd invite them in for tea."
With Nakajima heading global development, 268 franchises have sprouted in 15 countries, from Portugal to South Korea, always with a local master franchiser to navigate native customs. In New Zealand, for example, managers must observe such niceties as never matching a Maori client from the Ngai Tahu tribe with a caregiver from the Tainui.
Competing franchises have sprung up, but only one, Comfort Keepers, has expanded abroad. Besides, there's plenty of business to go around. Even in dismal 2008, the industry expanded. While some clients have trimmed hours in the downturn, new ones just keep coming. This wave of seniors seems unstoppable, says Sheila McMackin, president of the National Private Duty Association, an industry trade group. "I've never seen anything like it."
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