BrightStar CEO: We Are Cracking the Code on Franchise-Based Senior Living

Entrepreneur Shelly Sun built BrightStar Care into one of the largest home care providers in the United States, and Covid-19 has made her even more bullish on her company’s growing, franchise-based model of senior living.

Specifically, she believes that BrightStar Senior Living is meeting the moment by blending efficiencies of scale with a highly personalized resident experience, in modestly sized communities that include high staffing ratios and robust clinical care.

This model has proven resilient in the face of Covid-19 challenges, and Sun believes that BrightStar Senior Living is well-positioned to gain increasing market share in the years to come. If that comes to pass, BrightStar would join a handful of other companies that are showcasing the potential for franchising in the senior living sector.

Building BrightStar Senior Living

With a background in accounting and a track record of success working for large corporations, Sun founded BrightStar Care in 2002. About three years later, the home care company began franchising, and has since grown to more than 300 independently owned and operated locations across the country.

Home care is largely paid for out-of-pocket, so affordability can become a problem for older adults and their families over time. Sun observed that at a certain point — often around the time when they need 12 hours or more of hands-on care per day — budget difficulties were compelling some BrightStar customers to consider moves to assisted living.

“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,” she said during the recent Senior Housing News BUILD event. “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?”

In 2012, Sun purchased land for the first BrightStar Senior Living building, in Madison, Wisconsin. As she had with the home care side of BrightStar, she invested her own capital and ran the senior living business herself to learn the ropes. The plan for this first community was to sell it to franchisees after reaching stabilized occupancy.

“It irritates me to see people franchise in the home care space, and they’re not doing it themselves and they never did it themselves — putting their own capital at risk, employing their own people, making those mistakes, figuring out technology, figuring out service,” she said.

Following this principle is even more important in senior living, she believes, because of the size of the investment for a franchisee. While a home care franchise might require a $150,000 upfront investment, the upfront investment can be $6 million to $10 million for senior living.

The concept for the BrightStar Senior Living was to create an experience reminiscent of a bed-and-breakfast, to appeal to older adults who were turned off by the prospect of moving into a large building of 100-plus units. So, the BrightStar model calls for between 40 and 46 living units, with generous common spaces and a homelike atmosphere.

BrightStar has staked out a competitive differentiator in the home care space by offering skilled care in addition to private duty services such as assistance with dressing. Carrying that over into the company’s senior living model was important to Sun, so every building is staffed with a full-time health and wellness director, a part-time registered nurse, and maintains a staffing ratio of one full-time employee for every eight residents in assisted living and every six residents in memory care.

Being able to offer both assisted living and memory care was another key piece of the BrightStar offering, because Sun wanted to enable couples to live in the same building even if one spouse has advanced dementia.

The Madison community proved to be successful, and BrightStar did turn the keys over the first franchisees about two years after opening. Subsequent growth has occurred with another project in Wisconsin, as well as in Fort Wayne, Indiana and Mason, Ohio. BrightStar purchased the land for these communities and is seeing them through to stabilized occupancy, but plans to transition to a more typical franchising model soon.

“We really wanted to know that we had cracked the code on how you do this,” Sun said.

Throughout these first projects, the BrightStar team has meticulously documented successful processes and pitfalls to avoid, on every aspect of the construction and operation — from choosing furniture and selecting technology, to hiring and training a team, to marketing and selling a community, to operational concerns from creating clinical programs to buying food.

Given that finding and securing real estate is necessary, BrightStar is creating a two-part fee structure for future franchisees, in which they would pay half upfront and the other half after a site is found and purchased. Then, the franchisee would pay a monthly royalty — typically around 5% of revenue — for the guidance and backend support from BrightStar.

The company is “evolving” toward a multi-site agreement under which BrightStar would have fewer franchisees in each market, but each franchisee would build and operate three or four communities. Economies of scale are needed to mitigate risk and generate the best returns on investment, Sun said, but she believes that having smaller buildings on a few different sites supports a better consumer experience than a single large building.

“We believe the consumer experience comes first,” she said.

A pandemic stress test

Covid-19 has tested senior living providers across the country, and BrightStar Senior Living is no exception. Sun is pleased with how the communities rose to the challenge, and believes that the strong performance proves out the company’s value proposition.

Synergies with BrightStar’s home care business have always been part of the senior living equation, including referrals from home care locations and the ability for home caregivers to pick up shifts at the communities. But being able to tap the resources of BrightStar Care during the pandemic made a huge positive difference, Sun said.

“We’re in 40 states on the home care side, so we had pretty broad knowledge of what this might look like and how it might evolve, and we positioned ourselves very early,” she said.

Thanks to its scale, BrightStar Care was able to source and pay for about $2 million of personal protective equipment (PPE) when it was scarce and expensive, and those supplies were shared across the senior living communities as well. An additional $2 million went into a national television campaign to keep the brand front-and-center for consumers.

Of course, safety has been the paramount concern, and BrightStar Senior Living has benefited from its smaller-footprint communities. With fewer people, infection control is simplified — one major reason why small-home format senior living could become more commonplace in the years ahead, as a result of the pandemic.

Consumers have responded well to these efforts and advantages, with BrightStar Senior Living communities welcoming four to five new residents each month during the pandemic, Sun said. At the new community in Fort Wayne, occupancy has gone from 11 to 20 residents in the last 90 days.

“Even in the middle of a pandemic, doing the right things and following the right processes can have a great outcome,” Sun said.

What the future holds

With its model holding up well during Covid-19, Sun foresees more growth on the horizon for BrightStar Senior Living.

One avenue for gaining market share could be through working with existing mom-and-pop senior living communities that have been overwhelmed in the last several months. Without the benefits of scale, these smaller operations may have struggled to secure PPE, maintain sales and marketing activity and invest in needed technologies.

Becoming a BrightStar franchisee could be a way for these small businesses to survive, Sun proposed. In these cases, different startup fee structures would likely be utilized, perhaps including required investments to bring physical plant and operational infrastructure up to BrightStar brand standards. Similar approaches are commonplace in the hotel industry.

Despite her belief that franchising can be a successful route toward building a senior living brand, Sun is not expecting that her closest competitors in the home care space will follow BrightStar’s lead into the sector. That’s because most other large home care franchise companies are owned by private equity firms.

Particularly in the midst of a pandemic or its immediate aftermath, Sun does not see PE companies investing the large amounts of capital necessary to create a senior living platform, given that returns on investment are not yet proven.

But as the sole owner of BrightStar, Sun has the latitude to pursue opportunities and build a business for long-term success without having to worry about quarterly financial reporting or five-year investor horizons. With this in mind, assisted living and memory care communities may only be the start for where she envisions taking BrightStar in the coming years.

She is also piloting a 10-room, small-home format for senior living, for instance. Such a model could also be a fit for franchising, at a lower price point than the $5 million to $10 million needed for more traditional senior living. In total, she picked up eight different trademarks at the same time that she secured the BrightStar Senior Living name in 2009.

But even as additional brands roll out in future years, Sun stressed that the overall BrightStar philosophy will remain consistent: “Putting the consumer at the center.”

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