633: Assisted Living Housing Franchises

SHOW NOTES FOR EPISODE 633: ASSISTED LIVING HOUSING FRANCHISES

10,000 people turn 65 years of age EVERY DAY and that’s just one reason why the residential assisted living industry is booming!  In today’s podcast, Certified Franchise Executive and CEO and Co-Founder of Majestic Residences Franchise System Chuck Bongiovanni shares new investment opportunities available in the lucrative senior residential assisted living space.

What You Will Learn

• How franchisees and investors are making $10,000 per month and more with just one single family home
• The benefits of operating a senior residential care home franchise as opposed to starting a home by yourself
• How a franchise support system makes success so much easier
• Why successful assisted living home operators purchase multiple properties
• A simple way you can turn a 4 bedroom home into an 8 or 10 room home to comfortably accommodate additional residents
• How new technology is improving the senior care experience

About Our Guest

Chuck Bongiovanni

Chuck Bongiovanni is a Certified Franchise Executive and the founder of CarePatrol Franchise Systems, the largest franchised senior placement company in the nation with over 150 offices. He is currently CEO and Co-Founder of Majestic Residences Franchise System, a senior residential care home franchise.

More About Chuck

• Born and raised in Rochester, NY
• Went to college at Colorado State University
• Transferred to Arizona State University
• Got a BA in Psychology
• Also got to Masters degrees – one in Social Work and an MBA  in Marketing
• During college he was a CNA (Certified Nurse’s Assistant) in a nursing home
• Upon graduation from college, he founded a company called CarePatrol that helped families to find assisted care facilities and homes
• Later, his company was purchased by a private equity company
• He stayed on for a couple of years and then started Majestic Residences, a residential care franchise

How His Residential Care Franchise System Works

• Everyone is familiar with large assisted living places like Brookdale, Sunrise and Atria
• But there are also more than 30,000 smaller places for assisted living across the U.S. – that are in small homes in residential neighborhoods
  • You could be right next door to one of those homes and not even know it
  • They typically hold from 6 to 16 residents per home
  • Fair Housing laws do not restrict these homes from HOAs
• What Majestic Residences does:
  • Majestic Residences screens potential franchisees and, if they meet their requirement, is awarded a franchise
    • They have a long vetting system to make sure the franchisee will be successful
    • Once they are awarded a franchise, they are introduced to potential landlords
    • Often the franchisee will look for homes in their area and then Majestic will help the franchisee to find a landlord/investor to purchase the hoe
  • They help their franchisees to get licensed through their state
  • Teach them the operations, marketing and branding
  • Majestic provides their franchisees with special software, extensive policies and procedures, weekly meetings and are available to train, answer questions, etc. by Majestic to help assure their success
    • Majestic also oversees all the data and financials to help direct the franchise
  • An investor/landlord either finds the home or Majestic helps them find a home
    • Usually, a single story, ranch-style type home
    • If it is a 4-5 bedroom home, Majestic helps them to add more rooms by converting garages to two, sometimes 3 more bedrooms
      • They can often get 8-10 residents in one home without it feeling cramped at all
      • How many rooms/residents that they can have is determined by the state it is located in (unless it is a commercial property)
        • California is 6, Texas 16 and Arizona 10
  • Then, the investor/landlord leases the home to the franchisee
    • It’s usually a triple-net renewable lease, minimum of 5 years
    • The lease paid to the investor is usually at 1% of the home purchase price (this is negotiable) – So, if the investor purchases the home for $600,000, the franchisee would pay the investor $6,000 per month
      • They arrange for the rent to be lower for the first 3 months so the franchisee can get residents and then increase it in month 4 up to the full 1%
    • The great thing about this (for the investor) is that the franchisee always keeps it in tip top conditions because they receive visitors all the time for the residents and new, potential families are always visiting, touring and inspecting the home for family members who could become potential residents as well
  • Franchisees will lease their first home but will likely buy homes 2, 3, 4, etc.

Staff

• Staff for a typical larger home:
  • 2 care givers during the day
  • 2 care givers in the evening
  • 1 care giver at night (who must stay awake)
  • Also, every home has a certified/licensed administrator or manager who run the business
    • Most franchisees are not that person
    • Because most franchisees own multiple homes

Technology and Systems

• Technology and Systems
  • Their homes have technology that most similar homes don’t
    • For example, they have a technology that operates on radio waves that can determine if a resident’s briefs are wet or soiled and it alerts the caregiver immediately
    • It documents what time it happened and how long it took the caregiver to change it
  • They also use the same software that many hospitals have
  • They also utilize Scent Technology that releases scents that stimulates the brain to feel comfortable and secure
  • They also use Virtual Reality
    • People in wheelchairs can walk through a forest with VR
  • And they have robotic pets
• Because of the technology and systems they utilize, they are able to change $500-$1,500 more than similar homes
• It also helps them to lease up quicker and keep their homes full

Costs

• Associated Franchise Costs
  • Generally 70% occupancy is generally break-even
    • In a 10 bedroom home, the last 3 beds are your profit
  • Staffing costs 45-50% of your revenue
  • Cost expenses:
    • Lease payment
    • Food
    • Insurance
  • Franchise fee: $49,500
  • Monthly royalty fee: $6,000
• Resident fees
  • Range from $5,000 per month to $7,000 per month
    • Long-term health insurance can take care of that
    • Medicade can also cover the fees, depending on the state

To Become a Franchisee

• To get a franchise, go to their website at DiscoverMajesticResidences.com
  • Fill out the form there at the “Start Your Journey” link
  • This begins a 6-7 week process
    • They will send videos and emails
    • They will also have live meetings (both group and individual)
    • There’s business skills testing as well
    • They will send a FDD (Franchise Disclosure Document)
      • Majestic gives 23 disclosures to the franchisee
      • Franchisee reviews the docs
        • There are discussions and sometimes negotiations
      • Franchisees can interview other current Majestic franchisees
  • Final interview
    • If they did well in the previous steps, they generally pass this part
  • Then, they go out to start looking for properties

Biggest Franchise Mistakes

• He learned a lot of the mistakes in his first franchise system (CarePatrol) and the business was still successful
• The second time around there were a lot less mistakes and roadblocks
• Majestic Residences was different in that he has had to deal with real estate
  • Because of real estate prices, many potential franchises are uncertain if they should buy a house now because if they wait, prices could be higher or lower

Biggest Success

• His late partner, Gene Guarino (see Old Dawg Podcast episodes #041 and #213), had a company called Residential Assisted Living Academy that teaches and helps people to open their homes and get them licensed
• But the graduates of the program then thought… “Now what?”  And that’s where Chuck’s franchise came in
• He was able to put feet on their training
• It enabled his franchise to start off with a good number of interested people with some good class experience
• He still works with a lot of the RALA students today

Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years

• He sees his senior living franchise as a good, solid long-term cash flow investment
• Because it’s a franchise, his company is committed to seeing his franchisees successful
• His brand only succeeds when his franchisees succeed
• His company does all he can to make his franchisees succeed
• A 5-year agreement can turn into a 10 and 15 year agreement later on

How They Get New Tenants/Residents

• He has been in the senior care industry for 33 years, especially in senior placement industry (with his first company CarePatrol)
  • He worked with families to show them homes, like a real estate agent
• He’s also the founding president of the National Placement and Referral Alliance (a trade organization for all placement agents)
• In any area where they open a home, he knows agents that can assist in getting people into his homes
• For his franchisees
  • They handle all their Internet and SEO marketing
  • They host a grand opening where they invite professionals (health care professionals)
    • They get great turn-outs
    • The people attending get excited about their technology
• Filling the homes is not an issue with them at this point
• Every home in his franchise has been with them for more than 3 months and they average 97% occupancy

How to Reach Chuck

• Website: DiscoverMajesticResidences.com
• To apply for a franchise or find out about investing: DiscoverMajesticResidences.com/StartTheJourney
• Call Shannon at 877-777-7916

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.