Area Developer FAQ
What is the advantage of rental income of an adult family home vs. a typical residential rental?
Rental Income from an Adult Family Home is often twice the amount one would find in a traditional single family home.
What do I get for my $375,000 investment?
One will have an area with a population of at least 250K to add franchises as the Area Developer (AD). The AD receives 50% of all franchise fees along with 45% of the royalty fee which is based on the total revenue of each adult family home in the area.
Can I take an SBA loan or use a self-directed IRA for the area fee?
While you cannot use an SBA loan to purchase an area, you can use self-directed IRA or 401K.
What happens if I find someone who wants to franchise, but it is not in my area?
If you find someone interest in franchising and they are not in a developed area, you will still earn 50% of the franchise and 1.5% royalty fees. If the area has an area developer, you will refer them to that developer.
Am I required to sign up a minimum number of franchises per year?
In order to grow your business successfully, there are minimum requirements of 1 Franchise signup in the first year, 2 in the second year and 3 in the third year. There are no minimum requirements after year four and beyond.
What support can I expect to receive from AFHSC?
We require a week of on-boarding where you will come to the main headquarters in Renton, WA. In addition to the on-boarding, you will work with the National Manager of Field Operations and VP of Real Estate for guidance with growing your area.
Do I have to rent an office?
At the Inception Phase, you can use an existing office/home office. As you enter the Growth Phase you will want to have a separate office. Many developers use executive suite facilities where you have shared office services such as copy machines, conference rooms, etc.
Will there be training that I receive as an area developer?
We require a week of on-boarding where you will come to the main headquarters in Renton, WA.
How long has AFH Senior Care been in business?
AFH Senior Care began as AFH Management and has over 25 years of experience in the Adult Family Home arena.
Do I need to be in adult care? Will I have to oversee the franchises?
It is not required to have training in adult care to be an area developer. While each franchise has its own business owner, you or your representative will use influence to help guide the businesses to profitability.
Real Estate FAQ
How does real estate generate positive cash flow?
Real estate can generate accessible cash flow as an investor. The real estate investor will be paid a long-term above market-rate lease. The lease terms are for 5 years with options that can be negotiated. The lease payment should always be able to cover the principal, interest, taxes, and insurance (PITI) for the real estate investor.
How does an SBA loan work?
SBA loans follow similar parameters of a conventional loan, but instead of lending on the value of the real estate alone, SBA loans can lend against the existing business. AFH Senior Care will help ensure that the existing business is viable and that it can be utilized to lend in an SBA loan.
Due to the complexity of the SBA process, they take longer than a traditional loan would.
What are the responsibilities in the participation of the business or as a landlord?
As the real estate investor/landlord, there is no requirement for participation in the business. The real estate investor is only responsible for the taxes, insurance, and structural maintenance of the home.
How does an AFH differ from traditional real estate investments?
With traditional real estate investments like, short-term rentals, long-term rentals, multi-family, flipping, etc., the investor must take some active participation in the investment.
- For a home flipper, there are financial barriers to entry, project management requirements that can greatly affect the profitability of the project, slim margins, long turn-around time, and market parameters that can greatly affect the ability to resale (inventory levels, interest rates, inflation, recession, etc.)
- Adult Family Homes are a recession and inflation proof investment model. With nothing but an increasingly aging demographic and extreme shortage of available beds, the demand for high-quality senior care will only continue to grow.
- Short-term rentals (STR), have challenges as well. Although they net a higher-rate of return vs other models, they require active participation and consistent bookings. With constant churn of tenants, the landlord must ensure that the home is properly cleaned, furnished, and ready for the next tenant. STRs are subject to liability issues with tenants, must follow SOPs for the parent company and can be restricted based on neighborhood HOAs.
- Adult Family Homes net a rate of return that exceed STRs and come with none of the stress that the participation of the business requires.
- HOAs cannot restrict the ability of an AFH to operate.
- Multi-family housing can be a great income producing venture, but the financial barrier to entry is much greater than an AFH. Even if a property manager is used, the landlord still must have oversight and/or participation in the business. One of the more troubling things with rentals occurred during the COVID lockdowns. Rent moratoriums greatly impacted multi-family landlords and had no avenue to recollect losses.
- AFH homes are able to generate cash-flows with no participation in the business, have the ability to purchase utilizing SBA loans, and are not affected by rent moratoriums.
- Commercial properties are another investment model, but once again have great financial barriers to entry. Commercial properties require constant upkeep and tenant improvements, in order to attract and maintain tenants. With a potential for churn in tenants or business failure, there is more risk in the volatility in commercial lease.
- AFH homes, while classified as residential, will have a commercial AFH business operating out of them. Because of this unique scenario, the real estate investor is obtaining real estate market equity, long-term lease payments, and in some cases may negotiate for a portion of the profits from the business.
If the business is run by a Provider, what happens if that Provider or business has shortcomings?
As a part of the Franchise family of homes at AFH Senior Care, the Provider and business are given all of the tools, knowledge, operational know-how and support, in order to be successful. There is oversight from both the Area Director and the Corporate office to drive compliance and success in the business. It is recommended to all real estate investors, to withhold some of the cash-flow to build a “reserve” should any unforeseen event occur. If something does occur, AFH Senior Care will actively participate in the management of the business until a suitable Provider replacement can be found.
What is the average cost of a business and real estate acquisition?
Real estate acquisitions are very market specific, and the business financials will greatly vary from business to business. We provide our trusted real estate agents with the tools to ensure that the property and business are viable options for our investors.
- Above and beyond the purchase of the real estate and/or business, there is a Franchise fee for existing businesses and new businesses ($25,000 for existing/$50,000 for new businesses). This start up fee goes towards all of the documentation, preparation, marketing, support, etc. for this business)
Are there opportunities to own in areas outside of my geographic area?
As a real estate investor, you can participate in purchase of any real estate and/or business anywhere that AFH Senior Care operates. As we are a nationwide company, we have the ability to operate in all 50-states. With no active participation in the operation of the business required, the real estate investor can be paired with a vetted Provider in the desired area. Once again, the investor is responsible for the real estate taxes, insurance and structure of the property.
What is the roadmap for AFHSC?
AFH Senior Care has a roadmap for growth in all areas of the United States. We currently have active markets in all corners of the contiguous United States. As the need for senior care continues to grow, we know that there will be an influx of demand as supply struggles to keep up. By 2050, it is estimated that over a fifth of our population will be 65 years of age or older. Right now, that number is about 15.6%.
Where are most Adult Family Homes located?
Adult Family Homes are a protected housing model that are allowed operation anywhere in the United States. Therefore, they can be located in any neighborhood, even those with HOAs. All states have different regulations and requirements for becoming an Adult Family Home. In Washington State, as of 2022, there were just over 3800 Adult Family Homes in operation.
Are there any restrictions on owning/operating an AFH?
Operation of an AFH requires that all regulatory and compliance procedures are followed to the letter. Every state has variations of these regulations and license requirements.
What are the advantages of franchising an AFH compared to the conventional route?
- Operating a senior living facility, in particular, an Adult Family Home, calls for a wide range of skills and a commitment to high standards of elder care. The requirements are numerous and demand capacity for attention to details and thoughtful planning. While there are many sources of information and assistance in this complex business, franchising provides organizational structure and expertise to guide you in each step of the process.
- Paired with our in-house referral agency, marketing suite, and operations support, you’ll have peace of mind that your home is the industry standard.
What do I get with my franchise fee?
- The awarding of a franchise opens access to the AFH Senior Care network and resources. All franchisees have access to our in-house referral agency to help fill beds, alongside a dedicated marketing team branding your business’s social media, website, and online presence.
- Our years of experience and expertise have developed a system that is successfully being used with our Franchisees, putting time, freedom, and finances back into the Provider’s lives.
Do I need to have AFH experience?
- All franchise Providers must be properly licensed with credentials required by the State they are operating in. AFH Senior Care can help you navigate the process.
Is there franchise training?
- All new franchisees go through our training program where the opportunity to shadow an operating franchise is available. An initial interview process will gauge the candidate’s skill set dictating where the candidate will be placed within the AFH Senior Care Franchise orientation. Franchisees are given expert training to become familiar and confident with AFH Senior Care processes and systems.
- Providers within the AFH Senior Care Franchise system are experts of the industry equipped with the knowledge and skill set to provide an excellent care experience for residents.
How do you fill beds?
- An advantage of being a franchisee is access to our in-house referral agency (All About Care). Dedicated to filling the beds of our franchisees, referrals from All About Care are half the cost of the industry standard.
- However, we advise our franchisees to not rely solely on All About Care’s services. Franchisees must also advocate on their behalf to fill vacancies.
Do I need to own Real Estate?
- If a franchisee owns Real Estate AFH Senior Care can certainly assist in converting the property to a franchise. However if this is not the case, one can still join the franchise without Real Estate on hand. Our franchise network has state licensed AFH’s ready for Providers to own and operate the business.
Provider license process?
- As part of our initiative to empower caregivers, we help newcomers navigate the Provider licensing process.
Will there be ongoing support?
- Each franchise is assigned an Area Developer that will locally assist in the franchise development. Acting as a liaison for franchise support, the Area Developer will be in close contact with franchises to assist in the success of the business.