BrightStar Owners Association Continues Fight Over Call Option
Is Home Care Franchisor using Call Option to become next Blockbuster Healthcare Acquisition?
PALM DESERT, Calif., Sept. 13, 2022 (GLOBE NEWSWIRE) -- BrightStar Owners Association (BOA) President, Mark Woodsum, recently spoke with Beth Ewen of Franchise Times to discuss the ongoing legal challenge to the call option added by BrightStar Franchising, LLC (Franchisor) to new franchise agreements.
Three BrightStar franchisees supported by BOA sued the Franchisor last month in California and BOA expects it to be just the first step in a national legal strategy to declare the call option unlawful in as many jurisdictions as possible. The Call Option gives the Franchisor, at its sole discretion, the right to terminate the franchise agreement and acquire the franchisee's assets at a predetermined price, that may be at less than fair market value and prevent resale in the open market. Since the Call Option was first disclosed by the Franchisor in April, BOA has seen financial contributions more than double to its Trust that supports legal actions, among other services that benefit member franchisees.
Woodsum told Franchise Times that BrightStar founder, Shelly Sun, has openly shared she's having conversations with strategic partners and that BOA members believe Sun wishes to use the call option in order to attract a partner, such as CVS's recently announced $8 billion offer to buy home healthcare provider Signify. Given recent transactions in the space, including Home Instead being acquired by Honor Technology, Inc. last year, franchisees disagree that the call option is the only solution for the Franchisor to find a strategic partner. A recent survey of its membership found that 76% of franchisees would have never bought a BrightStar Care franchise with the call option in place. However, owners remain committed to providing the personalized and compassionate care their clients depend on at the local level.
Sun responded to Franchise Times defending the call option by stating that it was necessary for the brand to evolve and it provides a way for franchisees who do not want to change to exit at a fair price. Part of that evolution, Sun believes, is an expansion into government pay, such as Medicare Advantage. Over 85% of BOA members disagree with the Franchisor's vision to become a leader in Medicare Advantage due to low margins, limited hours, low conversion to private pay clients, and questions surrounding long-term Medicare funding and administration. In terms of the call option providing an exit, the call option does not guarantee a franchisee can exit, the option is solely at the franchisor's discretion. This is one of the many issues with the call option that concerns BOA members - if you wish to exit, what happens if the franchisor decides not to buy you, and no one else will? A franchisee put option may solve this concern, but so far a franchisee option has not been proposed by the Franchisor.
Read more about the interview here: https://www.franchisetimes.com/franchise_news/owners-group-sues-brightstar-care-ceo-alleging-unfair-business-practices/article_daab188a-32ba-11ed-a8f4-c388ac480b90.html
Mark Woodsum, BOA President
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