At some point in their career, many doctors of chiropractic are faced with the following question: How do I start a chiropractic practice? Choosing how to begin building your chiropractic legacy isn’t something to take lightly. For most DCs, there are three options: 1. start from scratch, 2. buy an established practice or 3. buy into a franchise.
All three options come with unique benefits and challenges, so choosing the correct model requires understanding how the options differ and how your experience and disposition as a DC aligns with each model.
Explore your options
When to establish a chiropractic practice is a pivotal decision. Those who opt to build from the ground up typically do so when their exact vision cannot be fulfilled by existing options. Perhaps they envision a state-of-the-art facility or seek a location where clinics for sale are scarce. However, statistics from the U.S. Bureau of Labor Statistics paint a sobering picture of startup success rates, with only 50% of startups surviving the first five years, and only 30% still open at the 10-year point. The inherent risks driving these dismal success rates include years of hard work and trial and error before you see any profits, plus uncertainties about location suitability, treatment methods and marketing efficiency.
Conversely, in addition to yielding immediate cash flow, buying an existing practice provides a proven track record, an established customer base, time-tested treatment methods and valuable historical data, enabling the buying doctor to forecast performance and strategize for future growth. With infrastructure, equipment and trained staff already in place, DCs can focus on leveraging their expertise and passion to drive further success, bypassing the arduous early stages of building a practice from scratch. However, because many clinics being sold are very established, they may not match a new clinic owner’s hope for a modern and fully systematized practice.
For DCs who like the idea of a fresh and modern practice and proven systems and practices, a franchise can be a great solution.
Franchises: What are they and what are the benefits?
A franchise is a contractual arrangement where a party (known as the franchisee) obtains permission from another party (the franchisor) to use the franchisor’s proprietary knowledge, operational methods and trademarks for the purpose of selling products or offering services under the franchisor’s brand. In return for this privilege, the franchisee typically pays the franchisor initial fees for startup and annual licensing fees.
Similar to buying an existing practice, there is an obvious appeal to starting a business by buying a franchise: While starting a business from scratch comes with unknowns, a franchise is proof of a successful model already in motion. With the allure of a ready-made system, brand recognition and comprehensive staff training, franchising can be an appealing shortcut to success.
Benefits of purchasing a chiropractic franchise license
Skip the startup stage
The most difficult part of owning a business arguably comes in the startup stage, where you draft a business plan, conduct market research, create a minimum viable product, test that product and then scale (if testing goes well, that is). Buying a chiropractic franchise helps you skip this section: The system has already been tested and proven to work. Thus, all that remains for you to do is apply their system to your market.
Brand recognition and established marketing
Chiropractic franchises offer the advantage of an established brand, making it easier to attract patients from the start. This brand recognition significantly reduces the need for extensive marketing efforts when setting up a new clinic. Choosing a franchise over starting from scratch allows you to leverage the franchisor’s branding, marketing resources and local advertising. Additionally, franchises provide guided setup assistance and ongoing support, which can be beneficial if you are unsure about marketing or feel overwhelmed by the business setup process.
Ease of access to loans
Because banks understand investing in a franchise is a safer bet than investing in a new, untested business, getting a business loan to start a Small Business Administration (SBA)-approved franchise is easier than getting a loan for a startup. For even more stability, lenders will also allow you to combine an existing practice and a franchise together, allowing you to benefit from the immediate income from the existing practice while you convert it to the franchise model.
Support from the experts
Franchises are often more secure investments than new businesses because they have the support and backing of a larger, established entity that has traversed this path many times before you. These franchisors have business models that have been effective and tested in different markets across the country.
Staff training and systems
Franchises often come with comprehensive training programs for both owners and staff, ensuring the clinic operates smoothly and professionally from day one. These systems can lead to higher patient satisfaction and retention rates, contributing to the overall success of the practice.
A tested business plan
Offering thorough business plans including financial projections, detailed marketing plans and detailed specifics about company vision, franchises draw from a deep well of detailed research and real-life case studies to gauge the future success of their businesses.
Scalability
Are you looking to own multiple practices or transition into a passive ownership model? The structure and training that comes with a franchise can be a great support for these future business transitions.
Despite the many benefits of franchise ownership, as with any business endeavor, this path comes with its own unique set of challenges. Despite lower initial risk, buying a franchise license does not guarantee instant and sustained success. In fact, franchises can be just as risky as any other practice ownership model. Running a practice is demanding work, and there are drawbacks to opening a business that operates under someone else’s control.
Drawbacks to purchasing a franchise license
High financial obligation
The initial investment to buy into a franchise can be substantial. Ongoing franchise expenses and marketing and royalty fees can strain the clinic’s budget. Especially in the early stages of operation, when there is little to no money coming in, these expenses can become problematic. And later in your career, when you feel experienced in running the practice, it can be frustrating to still have the same obligations.
No immediate cash flow
Franchises often have specific buildout and design requirements, resulting in a longer lead time to get the business off the ground. Moreover, while a franchise provides some of the benefits of an established business, it still requires building a new business within the framework of an existing model. This means higher expenses without immediate profits. However, some DCs bridge this gap by buying an existing practice and a franchise territory with the same loan.
Limitations on operations
Franchisees often face restrictions on how they can run their practice, from the appearance of the clinic to the services offered and vendors used. These limitations can stifle creativity and may not align with the DC’s vision for their clinic.
Corporate support is not universal
While the corporate office will provide some support, as the business owner you are ultimately responsible for solving any problems and overcoming any financial losses.
Financial information is shared with corporate
Franchisors collect financial information from franchisees to improve their business model and audit royalty payments. While this lack of privacy in business finances can feel invasive, it does have the silver lining of providing an opportunity for franchisees to benchmark their performance and improve profitability.
Financing challenges
While it may be easier to get a loan for a franchise compared to a startup practice, qualifying for a franchise loan can still be more difficult than for an existing profitable practice.
Contractual agreements
Franchisees sign contracts outlining what they can and cannot do. Breaking these requirements can result in losing the business. Further, selling or closing a franchise can be more challenging than it would be with an independent business.
Final thoughts
Buying a chiropractic franchise has its advantages, including turnkey operation and brand recognition. However, franchises also come with significant financial commitments, operational limitations and challenges in financing and resale. Before making a decision, weigh these factors carefully to determine if they align with your professional goals and your disposition as a DC.
If a franchise aligns with your goals and resources, it can be a very supportive, structured path to practice ownership. However, for those seeking more autonomy and flexibility, acquisition of an independent practice might be a more suitable option.
For DCs who desire the structure of a franchise but yearn for the financial stability that comes from buying an existing practice, there is also the option to buy an existing practice and convert it into a franchise location. In addition to yielding immediate profits, this “best of both worlds” structure can provide more options for financing.
CRYSTAL MISENHEIMER, leading expert in chiropractic practice sales, is the first and only chiropractic broker to earn the coveted Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA) and sets the gold standard in expertise, quality and service. A former clinic owner herself, she is uniquely qualified to provide comprehensive support on the many complexities of clinic valuations and practice sales. You can contact Misenheimer and her team at 888-508-9197, marketplace@progressivepracticesales.com or online at progressivepracticesales.com.
