Comfort Keepers: SOLD!

Allied Capital Buys Comfort Keepers for $44.3 Million

DAYTON, Ohio (Blue MauMau) - Allied Capital Corp. has agreed to provide the private equity firm of Webster Capital with up to $44.3 million to acquire CK Franchising, Inc., d/b/a Comfort Keepers. Allied Capital's investment will take the form of senior and subordinated debt, a revolving credit facility and a minority equity investment.

"Both companies have long histories of identifying strong comanies with significant growth potential and providing guidance and resources for growth," said Jim Both, president and CEO of CK Franchising. "This is an ideal marriage for CKFI and our franchise Owners."

Comfort Keepers which was formed in 1998 and began franchising in 1999 provides non-medical in-home care to individuals and couples who need limited assistance with day to day life tasks. With more than 550 locations in 46 states and 34 locations in 7 other countries, franchisees provide services like:

  • In-Home Companionship
  • Meal Preparation
  • Light Housekeeping
  • Errand Service
  • Grocery Shopping
  • Transportation Services
  • Daily "TLC" Phone Calls
  • Laundry & Linen Washing
  • Clothing Shopping
  • Recreational Activities
  • Grooming & Dressing Guidance
  • Organize Incoming Mail
  • Emergency Response Systems
  • Periodic Review with Family
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Comments

Great deal, are we sure?

Hope this is also a great deal for the international licensees. The company sold eagerly master licenses to pay off a loan of over $3 Million to prior investors at 18 percent if I remember correctly. Sorry franchisees, but you are paying that heavy load. Details should be in the old 2003 and 2004 UFOCs if you want to look it up. In any case, the licenses were sold on great promises and hot air about the support and assistance, even abroad. Shortly after the deals were made, the initial efforts under way, the 2 international folks were let go and the master licensees stuck in business scenario they did not buy into. In the USA, franchisees received hardly the support they paid for with their royalties and franchise fees. The network surely grew fast, the promises were consistent, but the thing that lacked was the franchisors investment in infrastructure to keep up with the network growth and obligations to meet. Paying back the loan was obviously more important. Hope the same stuff won't happen in this new environment, lets hope for honest deals down the road, and lets surely support the idea that the franchisees won't have to pay for huge interest rates the franchisor burdens them with in the future. Having 500 units sold is a great result in a normal and honest environment, but this far I have seen nothing but questionnable practices that will cause heavy debates if not legal battles when franchisees become aware of the facts and truth about the practices at HQ. With a good and timely concept like this, one would only hope that smart investors don't blow it and make the necessary investments, qualified people and support infrastructure to keep it growing nationally and internationally where the need is high and growing with an aging population.

Regulatory Concerns

Isn't this an area fraught with regulatory concerns? 

Michael Webster PhD LLBMisleading Advertising Law

REGULATORY CONCERNS?

NAH!! Nobody reads that stuff. It's the insolvency exemption. If your debt overwhelms your expectations, why worry about regulation?

The break even period is so long that by the time you get there the statute of limitations has run out on any regulatory issue

In the instance of CK, a great deal of franchisee upheaval was created by a franchisor violation of regulatory requirements in many states that they were allowed to cure by finally saying that they do not provide any medical services. Waiting for that glitch to get sorted out is a horror movie lived out by many franchisees.  

Richard Solomonwww.FranchiseRemedies.com

Limitation Period

Richard wrote: "The break even period is so long that by the time you get there the statute of limitations has run out on any regulatory issue"

Interesting point, and there is a related pointed.  By the time you break even, and realize that you may have a regulatory monster, your limitation period under the relevant franchise act may have run out.

Michael Webster PhD LLBMisleading Advertising Law