Pharmacy franchises: Should you join one?

September 4, 2006

With some programs enjoying a resurgence and others on the wane, here's a look at what's out there

With some programs enjoying a resurgence and others on the wane, here's a look at what's out there

"Independents need a common identity and a common platform to leverage their collective strength. That is the cornerstone we built this franchise on." That's Tim Canning, VP of retail marketing for McKesson, which owns No. 2 franchisor Health Mart. Health Mart doubled its store count to 500 in the past year. Canning has visions of quadrupling numbers in 18 months to beat chain competitors at their own network games. Health Mart charges a flat monthly fee.

"How you pay for your franchise impacts on the value of your pharmacy," said pharmacist and pharmacy broker Tony De Nicola, founder of http://Buy-SellaPharmacy.com/. "If you are giving somebody a percentage of gross revenues, you will be less profitable. The form your franchise takes has an impact on profitability, and pharmacy valuation is all about profitability."

Déjà vu all over again

Part chain and part independent, franchising is the force that transformed pharmacy from the corner druggist at the turn of the 20th century to a national player at the turn of the 21st.

Americans of a certain age didn't grow up going to the drugstore, they grew up going to Rexall. At its height in 1958, Rexall had more than 11,100 stores, 20% of the national pharmacy market. That is more than double the size of the current pharmacy chain leader, CVS.

Today, there are only about 2,000 franchise pharmacies nationwide, around 3.7% of all pharmacies and just under 10% of all independent pharmacies.

"Rexall franchises were coveted," remembered California pharmacist Fred Mayer, who owned a Rexall store in the 1960s. "You built your own business by building on Rexall's reputation as the best pharmacy there was. As one owner, I had the buying power of thousands of Rexall stores nationwide. You acted like a chain, you bought like a chain, you merchandised like a chain. It was a truly professional image and operation."