INDUSTRY SPOTLIGHT: SENIOR CARE

By Khadija Cochinwala, FRANdata

The senior care industry is a large and growing market space that includes businesses and franchises offering assisted living centers, adult daycare facilities, long-term care facilities, nursing homes, hospice care and more recently, in-home care.

Booming Senior Care Market

According to American Health Care Association (AHCA) and the National Center for Assisted Living (NCAL), there are currently more than 800,000 Americans residing in assisted living, half of whom are 85+ and female. Additionally, the number of Americans aged 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group’s share of the total population will rise from 16 percent to 23 percent, as indicated by data from the Census Bureau. The numbers speak for themselves, indicating tremendous market opportunity in the elderly caretaking business which is projected to grow from $445.58 billion in 2022 to $476.91 billion in 2023, according to the Services For the Elderly and Persons with Disabilities Global Market Report 2023.

Based on FRANdata’s research, the number of franchised senior care locations has grown at a steady CAGR of 3.1 percent from 2019, demonstrating the demand for these service offerings. The future seems promising with explosive growth slated for the industry but are the senior care franchise players ready to grow fast enough?

Challenges to the Senior Care Industry

The incredible demand for senior care-related services also comes with real and critical challenges related to staffing. According to a New York Times article, even though the 80+ population is projected to increase by 79 percent by 2030, the caregiver demographic (ages 45-64) will increase in the same period by just 1 percent. This appalling decline in the number of family caregivers as well as the pressures that accompany the job positively impacts the demand for professional elderly care services.

However, the biggest obstacle to the industry, which was triggered by the pandemic, is the high attrition rate of employees, due to the limited flexibility of hours and low pay. Data from the Bureau of Labor and Statistics and CMS Payroll Based Journal reporting shows nursing facilities lost 14.5 percent of their employees from 2019-2021 and assisted living facilities lost 7.7 percent. By 2025, US providers will face a collective shortage of about 500,000 home health aides, 100,000 nursing assistants and 29,000 nurse practitioners according to Mercer, a global health care staffing consultancy. This intense skilled labor shortage and operational costs abetted by rising inflation and interest rates in 2023 negatively constrains profit margins and growth rate. Limited federal funding and aid post COVID continue to make operators anxious about 2023 and beyond. More nursing homes (120+ in 2022 alone, according to Centers for Medicare & Medicaid Services) have closed shop in recent years due to staff shortages domino impacting admission and acceptance rates to senior residents. Nevertheless, the loss for nursing homes is a gain for at-home care franchising models within the industry which is also observed to be one of the continuing major developments in 2023.

Significant Industry Trends of 2023

• The positive recovery post pandemic is visible with the increasing occupancy rates across the senior care industry. Data from the AHCA/ NCAL shows the average occupancy rate in the U.S. was 75.3 percent as of January 1, 2023. With differing recovery rates for independent living, assisted living, and skilled nursing facilities, the trend is still welcome news to all senior care franchising models and suppliers. The AUR (Average Unit Revenue) has grown at an annualized rate of 6 percent since 2019 across all franchise business types in the senior care field, demonstrating improved performance post the pandemic and thriving market opportunities across the industry. (Data is from FRANdata, based on a wide range of franchise brands that have reported franchise unit sales for the last 4 years.)
• Seniors are looking at predominantly age-in-place alternatives that includes staying in their homes as long as possible. An AARP survey found that 77 percent of adults 50 and older want to remain in their homes for the long term. This interesting development indicates a larger shift towards a serviceat-home franchising paradigm within the industry.
• American families are moving towards multigenerational homes with adult children residing with or closer to aged parents and relatives. This change supports the shift towards seniors choosing to age in place, yet the pressure that puts on adult children (according to a report by the AARP Public Policy Institute, the ratio of potential caregivers or the caregiver support ratio (CSR) for every senior in the high-risk ages of 80 and up will decline to 4:1 by 2030 and 3:1 by 2050), is conducive to the growth of professional senior care and related franchises in the industry.
• With 10,000 people turning 65 every day according to AARP, the baby boomer generation has entered the retirement and senior care category. As such, a demand for wellness and preventive support care and programs that offer such services are on the rise. Franchises that incorporate these programs within their service offerings are predicted to have a healthier CAGR than others.
• Technology and AI is a global changemaker in every industry including senior care defining future market developments. Innovative solutions are being created for seniors that range from path-breaking humanoids such as Grace, designed by the GeriPARTy Laboratory and ChihiraAico, that is designed to resemble a 32-year-old woman, which offer companionship and assistance, not replacement, to human staff to tiny digital pill dispensers that help monitor medical consumption.

Insights into the Future of Senior Care

Hi-tech solutions can be the groundbreaking force to revolutionize the way the industry and its elderly clientele age while offering answers to its most persistent problems. Overall, AI and tech solutions can help resolve labor shortages by streamlining record taking, administrative tasks and patient communication while at the same time bringing down costs and improving care quality. With the Baby Boomers (who have elementary gadget experience unlike previous generations) entering the senior category, franchises who understand and invest in the ever-transforming digital healthcare ecosystem will be better equipped to attract and capture a larger share of the market. 

Khadija Cochinwala is a Research Analyst at FRANdata. She is part of a team of analysts who measure, track, and analyze franchisor performance. Khadija is committed to producing quality franchise insights that enable strategic decision making and propelling business growth. For more information about IFA supplier member FRANdata, please visit franchise.org/suppliers/frandata.