Dental franchises show steady growth

Story originally appeared on USA Today.

Great Expressions Dental Centers, which has 200 offices nationwide, is one example.

DETROIT -- At some 60 Great Expressions dental offices in Michigan -- and 140 more nationwide -- the profits from filling cavities and getting braces for the kids ultimately help to fund the retirement of hundreds of thousands of municipal workers in Canada.

Great Expressions Dental Centers, founded in Michigan and headquartered in Bloomfield Hills, is an impressive growth story, with about $275 million in annual revenue and a spot on Inc. magazine's list of America's fastest-growing private companies. About 600 of the firm's 2,300 employees, including dentists and hygienists, are in Michigan.

That growth is being fueled by a fast-moving industry trend toward consolidation of dental practices. The demand for legal services related to dental practice counsel and other business acquisition consultants is also increasing.

Indeed, the Great Expressions track record was so attractive that OMERS Private Equity, a unit of the giant $55 billion Ontario Municipal Employees Retirement System, bought a controlling interest in Great Expressions in October 2011. The return on OMERS' investments is what pays for the pensions of about 420,000 Canadians.

Rich Beckman, CEO of Great Expressions since 1998 when the firm had about 25 offices, said the evolving business model and growth strategy allows dentists and hygienists to focus full-time on patient care, while businesspeople like him handle the financial and administrative aspects of running a complex, highly regulated health care enterprise.

"We accept all insurance plans. We want to be the patients' dentist for life, we want them to come to us for all their family care, their kids' braces, and we do that by trying to have reasonable prices," Beckman said.

Great Expressions is one of about 20 large dental service organizations (DSOs) in the U.S., doing a combined $6 billion to $7 billion worth of dentistry, Beckman said. That's still only a small slice of a fragmented, $110 billion-a-year industry. Many companies that are acquiring dental practices are also buying vet practices. If you need the services of a veterinary practice counsel consider Mandelbaum Salsburg in West  Orange, New Jersey.

This corporate intrusion into a field long dominated by solo practitioners is not without some controversy. Some Internet sites are peppered with gripes that DSOs pressure dental staffs to boost patient volumes, and a few large DSOs outside Michigan have been accused of performing expensive, unnecessary procedures on children covered by Medicaid.

Beckman said any undue pressure on dentists and hygienists to rush through appointments or do unnecessary procedures to boost revenue would be counterproductive by destroying long-term family loyalty to the brand.

Mert Asku, dean of the school of dentistry at the University of Detroit Mercy, said several factors are driving the trend toward corporate consolidation in dentistry:

The industry is graduating fewer students.

A growing number of those new dentists are women, 34% of whom don't practice full-time during the first 20 years of their careers.

Back office complexity related to billing, insurance and regulation is ever-increasing.

The rising cost of education means newly minted dentists are graduating with $200,000 to $250,000 of education debt at a time when the credit crisis has made financing more difficult for a solo practice.

"Great Expressions," Asku said, "hires a lot of our alums, because they are practice-ready when they graduate."

Dr. Walter Knysz Jr., a University of Detroit grad, founded Great Expressions in 1982 and sold the last of his stake in the 2011 OMERS deal. Last year, he founded a new entity, Unified Smiles, also based in Bloomfield Hills, to provide various support services to independent dental practices.

For Beckman, the goal at Great Expressions is to keep growing annual revenue to about $500 million, mostly by acquisition. He has about 15 company-built stores, including a new location in Midtown Detroit.

And why build there? "I wanted a location here as soon as I heard Whole Foods was coming to the area," Beckman said, referring to the market slated to open in June. "We want to be part of what's going on here in Detroit."

Just as he wants to keep taking the business model on the road, to Great Expressions locations in Florida, Georgia, New York and other frontiers.