FRANCHISING SERIES: Starting a Generic Pharmacy Franchise
Health care is a necessity. Thus cost-saving innovations are always in the minds of everybody anywhere.
Just like any price but quality- conscious people, Filipinos prefer their medicines to be affordable and within their budget. They want to have choices without sacrificing their health and other expenditures.
Therefore chemists or pharmacies that sell affordable, generic brands were established. Generic pharmacies at the same time have given entrepreneurs a profitable and stable business over the last decade or so.
If you are interested in franchising a generic pharmacy, here are some helpful information to get you started:
NOTE: Bear in my mind that franchise opportunities vary. Thus, some of the information and figures provided here are approximate calculations only.
Advantage of Franchising Generic Pharmacies
The growing demand for affordable medicine will continue to increase in the coming years.
Medicines are an essential part of daily life. Thus, the pharmaceutical industry is less vulnerable to sudden market changes, making it one of the most reliable and stable ventures for any entrepreneur.
The capital needed to set up a generic pharmacy is more affordable than a full line drugstore (those carrying over-the-counter medicine, medical equipment, personal care items, household needs, and cosmetic products) because generic medicines are much cheaper than their branded counterparts.
Generic pharmacies have higher profit margins since mark-ups of one hundred percent are common for generic medicine, unlike the usual five to ten percent mark-up on popular branded drugs.
Generic Pharmacy Costs
Generic pharmacy franchises are actually more affordable than you think. Franchise packages can start as low as P345 000 (€6506). This is basically what you pay your franchisor. But price and packages vary according to the type of outlet that is opened (Small Town, or Drugstore Conversion).
The package usually already includes the franchise fee. Franchise fees can start as low as P50 000 (€943) for small town/satellite/twin establishments, and as low as P125 000 (€2357) for standard drugstore conversion. Drugstore conversion refers to the change of a no name ordinary drugstore to one of the franchisor’s drugstores. The franchise fee is typically a one-time payment, which is good for the entire duration of the franchise (initial term of the Franchise is usually 3 years, though some companies prefer longer terms with subsequent renewals of 3 years and another 3 years, for a total of 9 years).
- Small Town Packages are usually granted for municipalities with limited population, usually P 50 000 or below. However, whether a store qualifies as SMALL TOWN remains the sole decision of the Franchisor and depends on various considerations such as population (number and density near the site), foot traffic and estimated market potential based on the income levels, competition, and other relevant factors.
- Drugstore conversions is often a full line store.
In total, franchisees usually have to prepare or invest about P600 000 (€11314) to P 1.2 M (€22629) to cover the entire funding requirement for a franchise including working capital and reserve for contingencies. However, there are ways to decrease costs especially if your outlet falls under a DRUGSTORE CONVERSION, a SATELLITE, or a TWIN STORE concept.
A “satellite” is a smaller drugstore established by a Franchisee who already operates a main outlet in or near the vicinity of the location where he wants to establish a “satellite”.
A Twin store is also a satellite, since it is an additional store. The Twin store applies when the new store is only within a 300-meter radius from the existing store, meaning very near the existing store.
In the case of Generika Drugstore, you can reduce your overall cost of the package through the following:
> If the site where you plan to open for franchise is deemed by the Franchisor eligible to qualify as ”SMALL TOWN PACKAGE”, then you are eligible to significant reductions in the overall cost of the package:
- The Franchisee Fee, in such case, is reduced to P50 000 only
- Retail Expert POS cost is lowered to P50 000
> Another way to reduce the overall investment amount is if you operate an existing drugstore and convert it to DRUGSTORE CONVERSION PACKAGE.
- The Franchisee Fee, in such case, is reduced to P100 000 only
- Retail Expert POS cost remains at P80 000
> Overall investment can also be reduced if the franchisee establishes a satellite or a twin store, which reduces the franchise fee of P50 000. For twin stores, additional benefits include a reduction of P50 000 for the retail expert’s service, and the security deposit payable to the franchisor is reduced to P70 000
> You can also have a discount on the Franchise Fee:
- Finder’s Fee – A discount of 30,000.00 Pesos will be applied if the Franchisee found the location himself/herself and will operate it. This is called the “finder’s fee”. In this case, the Franchisee pays P30 000 less on the Franchisee Fee.
Actual figures will vary depending on the store’s size, condition, etc.
Pharmacy franchises often come in package deals. This means that it will already include everything you need to jumpstart your business.This includes comprehensive support from the franchisor to launch and manage your store.
- The Franchise fee itself
- Computer hardware (2 or 3 PC package) and OS licenses
- Retail experts who can help you manage your sales transactions, inventories and facilitate customer service and is regularly loaded with new features and modules
- Security deposit to commissary (refundable)
- Initial inventory of P200 – 300 000, including P200 000 worth of inventory with deferred payment
- Pharma supplies
- Marketing supplies and sound system
- Operations supplies
You will also be entitled to the following:
- The right to use the franchise trademark and logo
- Architectural/store design and construction assistance
- Pre-opening and start up assistance
- HR support, the assistance of recruitment of store personnel
- Classroom and store-based training of your store personnel on pharmacy retailing and management, computerised operations and customer service
- Ongoing business consulting and guidance
- Refresher training on new products and services
- National and local marketing support
- Easy stock replenishment and direct delivery to your outlet
- Updates on new products
Franchise Development Process
To know about generic pharmacy franchising opportunities you should call, fax, email, or make a personal visit to the franchise company. It is better that you set an appointment so that they can thoroughly explain the nature of the business and answer your questions immediately. To avail of the franchise, you have to undergo the application process. This entails submitting a Letter of Intent, filling out an application form, providing the franchisors a photo or sketch of your proposed franchise location, submitting your resume with colored ID photo and any of the following business registrations:
- Business Registration Certificate issued by the Department of Trade & Industry
- Registration Certificate issued by the Securities and Exchange Commission
- Cooperative Development Authority Registration Certificate
Most generic pharmacy companies have downloadable application forms on their websites.
Other costs shouldered directly by the Franchisee are the following:
- Store signage
- Cost of store renovation and equipment (counters, shelves, air-conditioning, refrigerator, etc.)
- Security deposits to the lessor for the rental of the store space
- Initial permits – The cost of the permits to be secured before opening the store
- The operating capital
Estimated expenses/outlays for drugstore conversion are shown below:
Store renovation = P200 000 to P300 000
Air-conditioning system and Refrigerator = P40 000 to P80 000
Advance rent and deposit for Leased space = P0 to P 80 000
Signage = P30 000 to P50 000
Working capital = P50 000 to P200000
Contingency = P100 000
TOTAL ESTIMATED EXPENSES/OUTLAYS = P420 000 to P810 000
This will vary depending on how well your business performs, but Return of Investment (ROI) will begin 1 to 2 years. Royalty fee usually requires 1% of gross sales.
Points to Consider
Unlike other franchises such as food carts and salons, generic pharmacy franchising companies may be more selective of their franchisees because of the nature of their business. Medical and healthcare industries are handled with care and caution because they deal with helping and treating people. Thus, franchisors want franchisees who can build a good reputation for their brand. When applying for a franchise, companies will check if you can do the following:
- meet the investment required
- run the business full time
- be willing to learn the business and operate within a franchise system
- be people and customer service
- be very honest and trustworthy
- be proactive and hardworking
- be motivated to succeed and grow
Location is the most important factor when setting up your own generic pharmacy franchise because it is what determines your sales. The site must be accessible to both pedestrians and motor traffic, and should be near strategic points such as hospitals, medical clinics, big drugstore chains, public markets, supermarkets, malls, department stores, convenience stores, bookstores, and health food stores.
Generic Pharmacy Companies
Many generic pharmacy companies offer affordable franchise packages and assistance to budding entrepreneurs. You can check their websites for more information.
- Gamot Publiko > http://www.gamotpubliko.com
- Generika Drugstore > http://www.generika.com.ph
- The Generics Pharmacy > http://www.thegenericspharmacy.com
- Farmacia ni Dok > http://farmacianidok.com/
- Botika ng Bayan > www.botikangbayan.com.ph
- Rapa Generics’ Pharmacy > http://www.rapapharmacy.com/
|TIPS FOR PUTTING UP A GENERIC MEDICINE OUTLET: Benjamin Luison, the president chief executive officer of The Generics Pharmacy, offers the following tips to franchisees and other pharmacies offering generic medicine:
(Source: Entrepreneur PH)