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Why franchises in the care sector are in such rude health

Written by Eric Johansson on Wednesday, 08 February 2017. Posted in Analysis

The care sector is seemingly going from strength to strength. But the looming prospect of Brexit and the challenge of bridging the widening talent gap could end up throwing a monkey wrench into the industry’s growth

Why franchises in the care sector are in such rude health

The British care sector’s expansion over the past four decades is nothing short of astonishing. In 2016, the healthcare consultancy LaingBuisson estimated that the private care sector was worth over £45.4bn. So it’s hardly surprising that the bfa has predicted that the industry will be the fastest-growing franchise sector in 2017.

Obviously the birth of the industry and its subsequent expansion didn’t just happen. In fact, franchises operating in the sector are now reaping the benefits of a societal change many years in the making. “Five decades ago, most care was delivered by public care homes,” says Dan Archer, managing director of Promedica24 UK, the care franchise. However, the political landscape began to shift during the Margaret Thatcher era to allow more private operators to enter the market. “Since then, both Labour and Conservative governments have pushed for it, as they’ve recognised that the private sector is best placed to deliver these services effectively,” says Dominic Rothwell, director of operations of Kare Plus, the care franchise. The latest of this long string of legislative changes was the Health and Social Care Act 2012, which allows individuals to choose whether public authorities or independent contractors should offer them care.

But an industry cannot become profitable on regulatory fluctuations alone: the ageing British population is another key driver behind the sector’s growth. “People are living longer and need care as a result,” says Archer. This means that demand for these services is only expected to grow. According to Age UK, the charity dedicated to helping older people, there will be more than 20 million over-60s in Britain by 2030. “There’s a huge demand for our services,” says James Carratt, founder and managing director at Clarriots Care, the care franchise. Given the increasing number of septuagenarians and octogenarians in the UK, franchises are not going to run out of customers any time soon.

That’s doubly true considering the demand for care services doesn’t just come from people old enough to remember the Beatles releasing Please Please Me: the industry also benefits from the opportunity to provide care for people with disabilities. “Thanks to advances in medicine and technology, we’re seeing more young adults with long-term health conditions choosing to live at home,” says Carratt.

However, while changes in Britain’s demographic make-up and its legislation mean opportunities are ripe for care companies, it doesn’t explain why franchising is such a profitable model for businesses in the industry. “The reason franchising is so well suited to the care sector is because you need somebody at a local level who is passionate about making a difference to people’s lives,” says Archer. Thanks to many franchisees’ eagerness to provide compassionate care and to fine-tune different franchises’ models to their respective local markets, companies have been able to establish themselves at the community level. In return, franchisees benefit from the franchisor's network and experience. “The moment they set foot inside the business there's an established model available to them,” says Rothwell.

And that's essential for the continuous growth of the industry. “A franchisee who recently joined our network said ‘it’s very easy to get things right in this sector but it’s even easier to get things wrong’,” says Carratt. “Franchising not only provides the support you need to succeed but you also get another vital ingredient: reputation. That’s key.” Keeping these symbiotic benefits for franchisor and franchisee alike in mind, it really is a no-brainer why franchising has proven to be so well suited to the care industry.

But even though franchising provides a resilient model, companies in the sector still have several hurdles to overcome. “The biggest barrier to growth for franchises in the care sector is the availability of staff because there simply aren’t enough people,” says Archer. As of January this year, there were 83,302 healthcare vacancies listed on the job platform Adzuna. Additionally, the government’s official shortage occupation list points out that the country is desperately in need of professionals ranging from nurses to medical radiographers. “There’s a chronic undersupply of people providing care in the UK,” says Archer. And that skills shortage is only going to worsen as one in three nurses are set to retire in the next decade, according to a study from the Institute of Employment Studies, the international centre of research in employment policy and human resources. The same research also highlights that recruiting from outside the British borders has been the traditional way to bridge the talent gap.

However, international recruitment may soon become trickier due to the Brexit vote in June last year. “If there are freedom of movement restrictions, that will pose some challenges for us,” says David Glover, franchise recruitment manager at Caremark, the care franchise. In light of this, you'd be forgiven for thinking that franchises would be worried about Theresa May’s hard Brexit. But even franchisors that do recruit from the EU don’t seem that concerned. Some believe that the government will introduce exemptions allowing the care industry to recruit from the continent, while others suggest that care franchises will simply up their efforts to source talent from the UK. “We will cope and adapt like we always do,” continues Glover. “At the end of the day, care happens everywhere and that’s not going to stop just because we leave Europe.”

But the fact that sterling went into free fall after the referendum and has yet to fully recover may present the sector with a third hurdle to overcome: a shortage of capital. This wouldn’t be anything new. After the crash of 2008, several banks were less willing to help budding franchisees raise funds for their enterprises, resulting in fewer people taking the opportunity to join the sector. “My concern is that if there is another major crisis off the back of Brexit, we could end up seeing less lending being issued to franchisees,” says Rothwell. “This could be a concern for our business confidence.”

And even if there isn’t an economic downturn caused by Brexit, franchises would still have to overcome the paucity of public funding. “We have to address this issue very soon,” says Rothwell. “We have an ageing population with a high level of dependency who are living with chronic conditions. But we don’t have the funding structures in place to support that. This is the biggest challenge and unknown we face.”

Still, despite the trepidations caused by the challenges on the horizon, franchisors remain optimistic about their future prospects. “The care sector is full of opportunities, tremendous growth potential and a chance for franchisees to make a difference,” concludes Carratt. Having continuously gone from strength to strength in the years gone by, it certainly seems as if that confidence is well placed.

About the Author

Eric Johansson

As web editor and resident Viking, Johansson ensures Elite Franchise is filled with engaging and eclectic entrepreneurial stories. While one of our most prolific franchise writers, he has sharpened his editorial teeth by writing about entertainment and fitness. Follow him on Twitter at @EricJohanssonLJ to catch up with his stream of consciousness.

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