By stewartb – a long read

My curiosity was piqued recently by a BBC News website article (published 25 July 2023) on the provision of care services in Scotland. (See https://www.bbc.co.uk/news/uk-scotland-66274301)

It featured an individual ‘who runs Bluebird Care’, a business providing ‘care at home’ services. The BBC reported him saying (with my emphasis): ‘his company was providing better value for money to the taxpayer, but was not getting supported.’ He was quoted: “That hourly rate (that his company receives from local authorities) has to pay for the staff, the training, the office team – EVERYTHING we do has to come out of that” and “The margins are now so tight that it’s not encouraging people to come into the sector and ultimately that’s going to mean there’s less provision for my parents, your parents, ourselves when we get old, because it’s contracting.”  I was ‘thoughtful’ about what the ‘everything’ might actually be in the context of a private sector business.

From time to time on TuS there has been discussion of the business model and ownership of commercially operated residential care homes. However, I knew nothing about business model/s for the provision of ‘care at home’ services.

What follows is a ‘story’ of discovery which I trust some may find illuminating! As we in Scotland consider how best to deliver social care it’s a tale whose telling seems timely.

Bluebird Care franchises

The ‘Bluebird Care’ featuring in the BBC article is a franchise, one of a number delivering ‘care at home’ services in Scotland. Indeed there are many franchised ‘Bluebird Care’ operations: the corporate website of the franchisor – the company which sells the right to sell on services using its brand, expertise and intellectual property – reports ‘more than 220 offices and over 10,000 employees across the UK and Ireland’. Included in its current portfolio are the following operations in Scotland:

• ‘Bluebird Care Ayrshire, Edinburgh and Glasgow South’ – with offices in Prestwick, Clarkston and Edinburgh
• ‘Bluebird Care South Lanarkshire’ – based in Hamilton
• ‘Bluebird Care Inverclyde & Renfrewshire’ – based in Paisley
• ‘Bluebird Care Dunbartonshire’ – based in Bearsden
• ‘Bluebird Care East and Midlothian’ – based in Dalkeith.

Bluebird Care, the franchisor has current ambitions to grow across the UK. For Scotland, it lists on its corporate website the following ‘available territories’: those in bold/red are being offered currently as business opportunities (as of 9 August 2023).

• Inverness
• Aberdeenshire  (currently ‘under offer’)
• Moray
• Dundee & Forfar
• Perth & Cupar
• Stirling
• Dunfermline & Kirkcaldy
• Falkirk & West Lothian
• North Lanarkshire
• Glasgow North.

The Bluebird Care business model offers opportunities for franchisees to purchase additional ‘territories’. Over 30 of its franchisees have more than one territory: one franchisee in Scotland presently has ‘three territories’. It also offers franchise re-sale opportunities: below is the list of such opportunities at present (source https://www.bluebirdcarefranchise.co.uk/earning-potential-and-investment/).

The website businessesforsale.com recently listed nine similar ‘care at home’ franchises from other franchisors in the UK as re-sale opportunities. The website homecare.co.uk also lists franchises for sale, including on behalf of Bluebird Care. The following is an extract from the particulars of one of a number of current re-sale offers posted at https://www.homecare.co.uk/for-sale/profile.cfm/id/97007664213; this is from an unnamed franchisor (with my emphasis):

‘Lucrative Domiciliary Care Franchise based in the North of England’ – ‘The franchise has a solid reputation, broad client base, and notable achievements such as securing a long-term framework agreement with the local council, guaranteeing stability and revenue until at least 2025 (potential extension to 2028) with an approximate value of £1.45 million per annum.’ The guide price for purchasing this franchise is given as £1.5 million.

And the Bluebird Care’s corporate website has this from the owner of another of its franchises in Scotland (with my emphasis): “We’re pleased to say that our business is thriving, and we now have a great core team of 120 care workers working for our Edinburgh office. .… We’re looking ahead to more success, building our customer base and growing the business.”

Do you sense some variance here with the tone of the contribution from the Bluebird Care franchisee which was used in the BBC article? Recall the quote: ’it’s not encouraging people to come into the sector’ – well the Bluebird Care franchisor and its commercial competitors are certainly actively ‘encouraging’!

Corporate Bluebird Care

On its website we learn that the first Bluebird Care business started in 2004. The company now describes itself as: ‘The biggest private home-care provider in the UK.’ Information on the franchise model of Bluebird Care can be found here https://www.bluebirdcarefranchise.co.uk/about-us/#toggle-id-12.

Perhaps the most interesting information provided by its corporate website concerns the financials surrounding the franchising business model. The present cost of a Bluebird Care franchise is quoted as £40,000 plus VAT. In return Bluebird Care offers a business support package which includes: a dedicated ‘on-boarding manager’; recruitment support, a stationary package, promotional materials, uniforms and ‘marketing collateral’. It seems this is an upfront cost: the terms and scale of the recurring fee charged by the franchisor is not provided.

(The British Franchise Association explains: ‘Franchisees will pay an initial fee at the start of the relationship. In return they will receive a comprehensive package of training that will enable them to establish and run their business. There will also be monthly continuing fees throughout the term of the relationship. For this the franchisor will provide ongoing support, guidance and research and development to ensure the franchisee is successful.’)

The Bluebird Care corporate website also notes the working capital required by a new franchisee, advising that a total investment of £115,000 – £120,000 (Including the Franchisee Fee) is required.

More information for prospective franchisees is provided in responses to FAQs on the website (again with my emphasis):

1) Experience of the care sector? – ’When you see a care business for sale you could think prior home care experience is needed, but this is not a necessity and many of our franchisees have no sector experience. However, they all share an empathy with what we do and the importance of providing a high quality care service.

‘We seek franchisees with commitment, drive and enthusiasm for the business, rather than searching for relevant experience. We will teach you the care industry.’

2) Experience of running a business? – ‘One of the great things about joining a franchise is that you will learn how to run a business, with help and support from someone who knows your business inside out.’

So in short, neither prior business experience nor prior care sector experience is a requirement of the prospective franchisee!

3) Role in the business? – ‘The Bluebird Care business model is very specific about individuals’ roles within the business. The franchisee’s role is business development and you will employ staff to cover the more specific care management roles.’

Elsewhere this is expanded upon: ‘As this is a private market model, the role is about business development. You will be working on the business, building relationships through a combination of networking and undertaking promotional activity. You will employ staff who will work in your business covering the more specific care management roles, such as the recruitment and training of care staff.’

So stepping through this: the franchisee i.e. the owner/director of the operating franchise, will extract a salary and/or a dividend from their company. This remuneration may be derived substantially from earnings from public sector clients (mostly local authorities). It will recompense the owner/director for undertaking a commercial role, a business development role for the franchise, and one which upon success will benefit financially the franchisor on an ongoing basis.

Back to the FAQs:

4) Investment required? – the website states: ‘We enjoy an excellent relationship with HSBC, NatWest, RBS and Lloyds Banking Group, who are all willing to lend up to 70% of the total investment required. Therefore you will contribute 30% as your stake in the investment requirement. This means you will need a liquid capital (i.e. un-borrowed funds) of up to £35K.’

So more money will be extracted for commercial benefit, this time in interest payments to a bank!

5) Breakeven point? – ‘We support franchisees and we include incremental month-by-month targets that aim to achieve a break-even point at around month 9.’ Elsewhere on the website the current average time to break-even is given as 10 months.

And finally, and importantly, on the attractiveness to the franchisee:

6) Level of profit to be expected? – ‘Once your business is up and running, net profits of around 15-20% are achievable. However, this is subject to overall business performance.’

Readers will recall the earlier quote from the BBC article: “That hourly rate has to pay for the staff, the training, the office team – EVERYTHING we do has to come out of that”. Everything? What about the franchisor’s forecast ’15-20% net profit’ for the franchisee? ‘Net’ of what else that is NOT funding actual care – net of the recurring payment to the franchisor; net of interest payments on the loan to buy the franchise; net of a salary for the owner – the franchisee – for undertaking a commercial/business development role it seems.

The corporate Bluebird Care website poses the question: ‘Why Bluebird Care?’ One of the answers it gives is the ‘Huge Earning Potential’!

It notes: ‘Unlike many other domiciliary care franchisors, there are many proven opportunities to diversify the core business within the Bluebird Care model. Home care providers often focus on older people and in doing so limit their potential to provide additional critical services to their market. Bluebird Care is inclusive in its capability to provide high quality home care services across numerous market segments. These include providing support to people with learning disabilities, delivering respite services for children and their family carers, supporting NHS Discharge Teams with the transition of their patients from hospital to home and assisting with the delivery of complex care. In addition, there may be opportunities to purchase additional territories.’

Again there appears to be a difference between the positive messaging towards prospective franchisees on the corporate Bluebird Care website and the contribution from one of its franchisees in Scotland amplified by the BBC!

The corporate infrastructure

The quite specific commercial role of the owner/director of the franchise has been mentioned already: arguably this is an overhead on the provision of care funded by the public sector. To get a sense of the central ‘overhead’ being supported by the individual franchisees, one can inspect the Bluebird Care management and franchise support structure shown on its website (see https://www.bluebirdcarefranchise.co.uk/training-and-support/#trainingandsupport).

Commercial evolution of Bluebird Care

The first Bluebird Care business was started in 2004 by husband and wife team, Paul and Lisa Tarsey. It has its HQ in Hampshire.

The private investment company Halifax Group originally acquired US-based Interim Healthcare in 2012, and subsequently acquired and integrated Bluebird Care and Australia-based Just Better Care to form Caring Brands International (CBI).

This was reported by Insider Media in September 2013 as ‘Bluebird Care bought by Florida company’, viz. Interim Healthcare. (See https://www.insidermedia.com/news/south-east/98822-bluebird-care-bought-florida-company)

CBI rapidly established operations in over 535 locations serving seven countries. After 2-3 years it had ‘combined network sales’ of over $1 billion per annum. In September 2015, Halifax successfully exited the investment through a sale to CBI management and a ‘financial sponsor’. (See https://thehalifaxgroup.com/casestudies/caring-brands-international/)

As best as can be ascertained, CBI – headquartered in Florida and still with its three subsidiaries including Bluebird Care – was bought in 2015 by the Los Angeles headquartered, international private equity firm Levine Leichtman Capital Partners (LLCP). LLCP exited from its investment in CBI in 2021.

The Private Equity Wire website on 26 October 2021 reported that: ’Levine Leichtman Capital Partners (LLCP), a Los Angeles-based private equity firm, announced today that it has sold its portfolio company Caring Brands International (Caring Brands) to Wellspring Capital (Wellspring).’ (See https://www.privateequitywire.co.uk/2021/10/26/308222/levine-leichtman-capital-partners-exits-caring-brands-international ) 

‘Headquartered in Sunrise, Florida, Caring Brands is the largest franchisor of home healthcare services globally and the only franchisor offering the full continuum of care at home, including skilled nursing, assistance with daily living activities and end-of-life hospice care. The Company operates under three brands: Interim HealthCare (U.S.), Bluebird Care (U.K. and Ireland) and Just Better Care (Australia). The three brands represent over 585 locations operated by more than 290 franchise owners and produce approximately USD1.3 billion of annual systemwide sales.’

And for more on the 2021 Wellspring acquisition (see https://www.prnewswire.com/news-releases/wellspring-capital-management-acquires-caring-brands-international-301407211.html ) : ’Wellspring Capital Management (“Wellspring”), a leading private equity firm headquartered in New York, announced today that it has partnered with management to complete the acquisition of Caring Brands International Inc.’

Home Health Care news on 25 October 2021 reporting on this acquisition noted that the ‘Terms of Monday’s deal were not disclosed, but Caring Brands was expected to command 11 or 12 times its $45 million EBITDA ..’ (EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income.)

What I think is ‘interesting’ is that today the corporate Bluebird Care website in a section entitled ‘Our story’ still prominently displays a photograph of its two founders, the Tarseys: they resigned their directorships in Bluebird Care in 2013 according to Companies House. The ‘story’ makes no mention of the ownership and control by a by a New York based private equity company, no mention of the complex of successive acquisitions and private equity transactions involving Bluebird Care since at c.2012-13!

And the board membership of Bluebird Care changed again as recently as 7 July 2023: ‘Paul Mastrapa is replacing Jennifer Sheets as CEO of Interim HealthCare, the company announced Friday. Sheets had served as the president and CEO of Interim since January of 2019. She also served as the president and CEO of Caring Brands International, the parent company of Interim, the U.K.-based Bluebird Care and the Australia-based Just Better Care. Mastrapa will step into the role as president and CEO of Caring Brands International as well.’ And: ‘Prior to Friday, there had been no indication from the company that Sheets would be stepping down.’ (See https://homehealthcarenews.com/2023/07/former-help-at-home-ceo-paul-mastrapa-to-replace-jennifer-sheets-at-interim-healthcare/ )

In a profile in the same Home Health Care News article, the new director of Bluebird Care is quoted: “Now I’ve done a fair amount of private equity and I’ve really, really enjoyed the private equity experience. There’s nothing like bringing a lot of smart people to the table with a focus on investment and capital to really create an exciting opportunity. I’ve tended to focus now on working with private equity-backed businesses.” (my emphasis)

Bluebird Care’s structure today

What follows utilises public domain information from Companies House (CH) to examine further the corporate structure of Bluebird Care.

Searching the CH register online using the term ‘Bluebird Care’ finds the following, all with their registered office at the same address in Waterlooville, Hampshire, England:

• BLUEBIRD CARE COMPANY LTD – incorporated on 23 July 2008  – the US resident Paul Fernando Mastrapa was appointed as a director on 26 June 2023: he is now the only named company director
  
  
• BLUEBIRD CARE ASSOCIATES LIMITED – incorporated on 28 March 2018 – listed directors as above.
  
  
• BLUEBIRD CARE FRANCHISES LIMITED – ‘Matching previous names: BLUE BIRD CARE FRANCHISES’  – Incorporated on 8 February 2006 – listed directors as above.
  
  
• BLUEBIRD CARE GROUP LIMITED – Incorporated on 15 February 2006 – listed directors as above.
  
  
• BLUEBIRD CARE SERVICES LIMITED – Incorporated on 24 May 2004 – listed directors as above.

Mr Mastrapa is now also the sole named director of companies in the UK associated with Caring Brands International (CBI), all registered at the same address in Crawley, West Sussex:

CARING BRANDS EUROPE LIMITED – incorporated 30 August 2013

CBI UK MIDCO LIMITED – incorporated 30 July 2015

CARING BRANDS AUSTRALIA LIMITED – incorporated 15 September 2014

CBI UK TOPCO LIMITED – incorporated 29 July 2015

CBI INTERNATIONAL PARENT LIMITED – incorporated  30 July 2015.

The website ‘Companies in the UK’ claims to identify who ‘controls’ companies (see https://www.companiesintheuk.co.uk/company/bluebird-care-franchises/control). Based on searches using the facility on its website, it appears that for example:

• Bluebird Care Associates is ‘controlled’ by Bluebird Care Franchises Limited
• Bluebird Care Franchises Limited is ‘controlled’ by Bluebird Care Group
• Bluebird Care Group is ‘controlled’ by Caring Brands Europe Limited
• Caring Brands Europe Limited is ‘controlled’ by CBI International Parent Limited
• CBI International Parent Limited is controlled by CBI UK Midco Limited
• CBI Midco Limited is ‘controlled’ by CBI UK Topco Limited
• CBI UK Topco Limited has its ‘control’ given as Mr Matthew G Harrison and two others, all c/o Wellspring Capital Management Group Llc, 605 Third Avenue, 44th Floor, New York.

End note

Whilst Bluebird Care services appear to be well regarded by peers, all the above seems a very long way from a Bluebird Care franchisee operating out of an office in Hamilton, Lanarkshire! It’s a long and winding path from a franchisee earning revenue in return for care at home services – funded by local authorities and individuals in Scotland – to a slice of those earnings aggregating up in a portfolio of franchise companies in a manner sufficiently attraction to a succession of US-based, international private equity firms. 

Reflect on the BBC Scotland report on the views of the local Bluebird Care franchisee: “That hourly rate (that his company receives from local authorities) has to pay for the staff, the training, the office team – EVERYTHING we do has to come out of that” and his complaint that “The margins are now so tight that it’s not encouraging people to come into the sector …” 

All the above would suggest there are controlling interests that take a rather different view on how the financials work and there are international investors with a rather different view on the commercial attractiveness of providing care!