Brightstar's Expansion Plans Include Assisted-living Facilities

Friday, June 07, 2013

Shelly Sun has proved her BrightStar franchisees are capable of providing in-home care services across the country. Seeing to the needs of elderly residents in BrightStar assisted-living facilities is another matter.

Ms. Sun is starting small but has grand ambitions. In early April, she hosted the groundbreaking of the first BrightStar Senior Living center, in Madison, Wis. Scheduled to open early next year, the prototype will have just 36 beds, with half set aside for patients with Alzheimer's disease. She foresees a chain of 30 facilities within five years. She would like to take her Gurnee-based BrightStar Group Holdings Inc. public even sooner, as early as 2015.

"We want to be one-stop shopping for families," says Ms. Sun, 42, BrightStar's founder and CEO, who has taken her company from zero in 2002 to $220 million in revenue last year. "We've been providing home care, but as clients age many families have been asking us for recommendations for assisted living beyond that. Instead of referring them on to other companies, we'd like to keep them as our own." While her progression may be logical, it has eluded virtually all of her competitors. Rivals say the gulf is immense between supplying lightly trained, pop-in caregivers and operating a string of around-the-clock living centers, which require licensed nurses and other skilled practitioners. And upfront expenses will be enormous: The pilot facility will cost $6 million to build.

"We've had lots of temptations and opportunities to diversify into new businesses, but we believe strongly in the home-care segment of the industry," says Roger Baumgart, CEO of Home Instead Inc. in Omaha, Neb., which has grown since its founding in 1992 into the biggest home-care franchiser in the nation, with 1,000 agencies. (BrightStar has 285, up from 240 a year ago, ranking it No. 7.) "A lot of companies, like BrightStar, have looked to expand their scope," he says. "But the fact is that home care and building brick-and-mortar facilities of your own are two very different businesses. I have yet to see anybody do both well." In the home health care business, BrightStar has its formula down. The company, which charges each investor a franchise fee of $48,000 and then 5 percent of all revenue, has expanded to 38 states, establishing agencies recently in Las Vegas and Oklahoma City.

BrightStar has had a harder time outside the U.S., however. It has only one agency in Canada. "We are taking our time on international expansion," Ms. Sun says.

B&B SETTING The company has had managerial turnover, too. Both its president, Brian Schnell, and Ms. Sun's husband, J.D. Sun, who played a role in franchise development, left during the past year with little explanation.

Now BrightStar is facing new challenges. When it comes to franchised home care, bigger is better, consultants say. But the Affordable Care Act requires businesses with more than 50 full-time employees to provide workers with health insurance or an equivalent. "You may see a lot of home-care agencies looking for a way to downsize to stay under the 50-worker threshold," says Aaron Marcum, CEO of Home Care Pulse LLC in Rexburg, Idaho, a researcher in home care.

As the economy improves, he predicts, franchisees will have a harder time finding home-care workers, who typically are paid $12 an hour or less. Mr. Marcum estimates the number of home-care agencies has doubled since 2007 to about 23,000. "Don't expect this industry to grow another 100 percent over the next five years," he adds.

We want to be one-stop shopping for families.

Shelly Sun, founder and CEO, BrightStar Group Holdings Inc.

Still, Ms. Sun wants BrightStar to be a publicly traded company within two or three years. To pull that off, she will need more revenue. The assisted-living business could be that source.

There undoubtedly will be demand for more live-in facilities. Sheila McMackin, owner of Wellspring Personal Care Corp. in Chicago and past president of the Indianapolis-based Home Care Association of America, notes that 10,000 people are turning 65 every day. Roughly 1 in 9 will be stricken with Alzheimer's, if current trends hold.

BrightStar will be facing off against entrenched brands such as HCR ManorCare's Arden Courts and Sunrise Senior Living LLC, which has 19 facilities offering Alzheimer's care in Illinois. Ms. Sun intends to differentiate her business from the start.

"Most of the others offer homes with 200 residents or more. We'll focus on smaller bed-and-breakfast-type settings," she says. "Our rates will be higher as a result, sure. But we'll be offering more of a Four Seasons-Neiman Marcus kind of experience."

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