Patrick: Hey, Patrick Findaro here, co-founder at Vetted Biz and managing partner at Visa Franchise. At Vetted Biz we help you find, vet and buy a franchise or business for sale. At Visa Franchise we help foreign national investors that are looking to move to the U.S. by investing in a franchise. Today I’m excited to have two senior executives from Success On The Spectrum also known as SOS Franchising, Nichole Daher, who’s the founder of Success On The Spectrum as well as Joe Souza, who leads their franchise development efforts. We are going to talk about Autism Treatment.
Patrick: We’re going to learn all about the autism treatment industry today, ABA, applied behavior analysis, how this industry is growing, how they’re the only franchise in this industry, how much it costs to open one, general industry profit margins.
Nichole: Hi. Thank you for having us, Patrick.
Joe: Glad to be here.
Patrick: Thank you, Nichole. And Joe, really appreciate it. I would love to just hear how you two entered the autism treatment industry.
Nichole: Once upon a time I was a nuclear medicine technologist. I had zero knowledge whatsoever about autism. And then, I had a baby girl who was diagnosed with an autism spectrum disorder. In the process of trying to find treatment for her, we discovered applied behavior analysis. And also discovered that ABA for short is not nearly common enough. There are not very many providers out there and they’re few and far between. They kind of congregate in big cities, there are not too many in rural areas at all. And I was having trouble finding a place for her. Lots of places had waiting lists and it was terrible.
So, I decided to open my place and it grew way quicker than I could have ever imagined. I had no experience in it, but thankfully I had wonderful people help me out just like Joe. And we’ve built something wonderful. And we pride ourselves on being a very high-quality center. Most of the franchisees are very near and dear to autism, and we’re passionate about what we do.
Patrick: And Joe, could you tell me about how you connected with Nichole and how you also entered this industry?
Joe: Absolutely. In 2012 my firstborn, Samuel, came into our lives. And when he was about 18 months old we noticed a few things that turned out to be autism. What they refer to as the high functioning autistic kid. That’s how my wife and I got into this. And the way I gotta get involved with Nichole and this amazing company was because we wanted to start our first unit here in Florida and she was like, “Oh, that’s great, but I also need help”.
Nichole: Most people do learn about ABA because they have a child with autism or know someone with a child with autism. We do see a lot of parents that are franchisees, but some very savvy business people that find us through great recommenders like Vetted Biz.
Patrick: It’s a great social good. And it’s also a profitable business. How big is this market? How big is the autism treatment industry?
Joe: So this industry is expected to be well over $2 billion by 2026. And there are studies out there showing. The numbers are ever-increasing, Patrick. The latest study from the CDC shows that 1 in every 54 kids in America is somewhere within this spectrum. And, that number is a lot higher with boys. It’s 1 in every 28.
Patrick: And is this something that’s there’s more diagnosis or is the actual rate increase? Or that’s still uncertain from a medical standpoint?
Joe: I believe is because of awareness. When you look back 20 years ago, we didn’t have enough awareness at that time for someone to sit down and say, “Hey, let’s get this issue diagnosed, and then let’s go into treatment.”
Nichole: There are 50 years of research studies done on when and how much is the effective amount of treatment. And the earlier you start and the harder you start, the better the child does. Mostly because autism is a result of a brain disorder. It’s a brain abnormality. Sometimes it’s actual physical form or it’s a neurological development, and when you’re young, when you’re under 5 years old, your brain is developing at a very rapid phase. You grow to a full-sized adult head by the time you’re five. That’s when most of your brain growth happens. And if you can exercise that muscle while it’s growing it can help the development of that child and you carry those skills out into adulthood. So the earlier, the better.
Patrick: That’s exciting. So tell me, I imagine a big part of your job is just bringing awareness and educating the general marketplace.
Nichole: Absolutely. We have a special community outreach program where we do just that. We throw events for special needs kids and in those events we talk to parents about what they can do. What ABA is, what autism is, and what it means. It doesn’t mean your child is gonna be disabled for the rest of their lives. They can live independently, they just have to be taught how.
Patrick: That’s great. From Visa Franchise, we’ve had at least three clients that moved to the U.S. and that was the principal reason. The U.S. is more at the forefront of autism treatment.
Nichole: I think a lot of that has to do with stigma as well because in America mental health is becoming something that is very accepted in society. Whereas in other countries especially third world countries it’s still very shameful to seek help. And it prevents a lot of parents from even admitting that their child has a disorder.
Patrick: Joe, tell us about the average industry returns in this general marketplace from a financial perspective.
Joe: I have been a business broker for almost 10 years now and the one very particular thing you see is that there aren’t any ABA centers for sale. You know that is usually a very good indicator.
Patrick: I think you showed one and it was a crazy multiple, a multimillion…
Joe: It was insane and I believe I did even send you, like, their PLI. They were in Miami actually and they had 43 Medicaid clients. They were in business for less than 3 years and they sold for $2.8 million.
Patrick: Wow. What revenue they were doing to sell it that high?
Joe: Yeah. They were doing the average which is roughly about $1.5, $1.8 million in gross revenue. Of course, your net is gonna vary greatly where you are, but expected to be somewhere between 25% and 35%.
Patrick: It’s very healthy.
Patrick: And most of the centers in the industry are owner-operated where the owner is working day-to-day in the business?
Joe: The small ones are. But then you talk about the big centers, the big names out there. Then these are conglomerates with thousands of employees. And I believe that’s exactly what happened with the one in Miami. It was bought out by a huge company that was just acquired there is in the market.
Patrick: That makes sense. And how are payments handled? I imagine it’s mostly private insurance for Success On The Spectrum?
Nichole: Far all of our SOS franchisees are working on a private health insurance-only model. We can expect Medicaid if that particular state had that approved obviously. Texas does not, New York does not, but Florida does, Georgia does, and most states had been mandated by the federal government to cover ABA. They’re just kind of in the process of setting up that service.
Nichole: We had a program that we use that does all that electronically and the health insurance companies directly reimburse for the services, usually by direct deposit. We send a claim out to them and we see the money arrive in our bank anywhere between 2 weeks to 35 days from the day we submit that claim.
Patrick: Great. And are you getting involved, like, with negotiating with insurance?
Nichole: Most of our franchisees have no experience, whatsoever. We train everybody to do absolutely everything. We do a lot of hand-holding, especially in the beginning, and negotiating, reimbursement rates, and contracts with private health insurances.
Patrick: And what’s the average cost… What’s the average price per month or what’s the range for the clients that they’re paying?
Nichole: The average client pays between $8,000 and $10,000 a month for their services. Again that varies depending on which state you’re in, and which insurance company you’re negotiating with, but it’s quite a comfortable amount.
Patrick: Sounds like it. And so they’re having what? Ten to 40 kids for the center?
Nichole: That’s correct and most of the clients are full-time clients. They come with us, you know, Monday through Friday, 8:00 to 5:00. They don’t go to school, they just stay with us. The average client stays with us for three to five years before they transition into the school system. So we follow them for quite a long while.
Nichole: We start the treatment as early as 18 months old. So essentially as soon as you’re old enough to obtain a proper diagnosis, we’re able to treat that diagnosis. And so far we go up to 18 years old simply because at the moment most insurances stop paying for treatment at 18. But I have a feeling that’s going to change and that will be extended, and we’ll be able to serve older kids.
Patrick: And tell me a bit about your plans to grow. So you have a couple of corporate locations in the greater Houston area, a few franchises already open, seven or so in development. I’m curious to hear a little bit about your growth plans.
Nichole: Far all of the clinics that are open and existing at the moment are all in Texas, but we have franchisees in the process who have signed, who are getting there, and the office is ready and painted. It’ll happen any day now. We have them in New York, Georgia, and Florida. And my goal is to expand across the entire United States. These services are needed everywhere. The demand is so high and it is our mission to provide access to services to the kids that don’t have them.
Patrick: I could see a lot of people being interested in investing in the SOS franchise. Who’s your ideal candidate to be a Success On The Spectrum franchise?
Nichole: As Joe mentioned earlier, there are a few very large companies out there that are gobbling up mom-and-pop clinics and those clinics are not owner-operated. It’s one head honcho at the top and they assign little managers everywhere. And the quality gets lost in that type of model which is why we decided to franchise. We want owner-operators. So we want someone that is going to be present at the clinic not all the time, but 20 to 30 hours a week. We need you to be involved with your staff, not with the kids, with your staff. The better your staff is, the higher the quality of services you can provide.
Patrick: So a big part of the team and getting them excited. I imagine it can be draining.
Nichole: It can be. But we have a lot of clients and staff retention strategies. And we teach you how to keep morale up in your team. We talk about leadership skills and as a CEO what your job is, how you do it well, and how do you gauge if you’re doing well or not. And we send out a survey once a month that tracks your KPIs, and your key performance indicators.
Patrick: For these centers, you have generally the owner, the franchisee, CEO, and then underneath you have maybe a couple of admins, and then you have individual techs.
Nichole: Right. We are a one-on-one service. So there is one technician per child. The CEO at the top is just gonna handle hiring and firing, and payroll. We have an office manager that takes care of the office, checking people in and out, answering the phones, and making the schedule. The analyst is the one who creates the education plans for the children. Each child has an individual plan that’s different than everybody else’s. And they train the techs to work with the kids.
Nichole: So far every franchise that has opened has had a client waiting list before they opened. Finding clients is not the hard part. The demand is so high and the supply is so low. It is harder to find employees than it is to find clients.
Patrick: Great. And why decide to franchise? You mentioned a bit these corporate companies that, you know, aren’t necessarily doing the one-to-one ratio and they have no connection in the industry, and they just probably care more about the money. Why franchise instead of you go out and grow, and open up more centers?
Nichole: So I talk about this a lot and of course, being both parents of kids with autism, to us it’s about the quality. We wanna do whatever we can to give the kids the best therapy possible because the earlier you get this done, the better off they are and if the quality of your services is just low, they’re not gonna do it. They’re not gonna get as much progress early on as they would with high quality. So mom-and-pop shops that pay attention to their employees care about if someone gets angry in the lobby and all of these little things, tend to have higher quality services, you pay attention better.
But you can’t serve all the clients in the United States that need this. You can’t do a service to the public if you only have one and I can’t do it on my own. I wanna run them well and so instead of being a big company that goes around and eats everybody else’s little shop, and runs everything on a cookie-cutter platform, we are a combination of mom-and-pop shops holding hands.
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