Case Study 1: The Generics Pharmacy
Year launched: Franchise operations started in 2007.
Key contacts: The Generics Pharmacy, 459 Quezon Ave., Banaue, Quezon City. Tel. 632-732-3333; 632-712-7777
Brief background or history: The mother company (Pacific Insular Co.) that gave birth to The Generics Pharmacy (TGP) franchise started in 1949 as a family enterprise involved in pharmacy importation and distribution. In 1974, the current TGP President, Mr. Benjamin Liuson, took over the helm from his parents. Some doctors urged their patients to use generics, but since the company was just an importer/wholesaler, it couldn’t sell drugs directly to patients.
Fortuitously, in 1989, Congress passed the Generics Drug Law (RA 9502), and with the prices of medical and pharmaceutical products soaring, the company decided to sell generic drugs primarily to government hospitals. (Generic medicines are finished pharmaceutical products having the same active ingredients, same dosage and form, and same strength as the branded drugs.) In 2001, the company opened its first pharmacy to sell generics, a major innovation in the pharmacy business at that time since no drugstore was exclusively selling generics. But generics were still slow-selling because of poor information to patients who would buy more expensive branded drugs instead. Nevertheless, there was a continuous flow of generics clients who were coming from nearby provinces of Bulacan, Tarlac, Pampanga, Laguna and Cavite (Anon, 2011).
In 2007, TGP tapped Francorp, the world leader in franchising, to energize its franchise development and growth, and thus became the first generics retail pharmacy to franchise in the Philippines. TGP opened its first franchise drugstore along Taft Ave., Pasay City and within three-and-a-half years, it has reached over 1,000 outlets all over the country. The Enterpreneur Magazine has named TGP one of the Top Ten Businesses of the Decade.
Target areas: Nationwide, focusing in locations of heavy traffic.
Health service focus: Pharmacy products.
Program legal status: The franchisor (TGP) is a duly registered company. Franchisees sign a franchise agreement with TGP. Franchisees need to register with the Department of Trade and Industry (DTI) if it is a single proprietorship, or with the Securities and Exchange Commission if it is a corporation. It also needs to be approved by the Food and Drugs Administration. It must satisfy all the requirements of the local government unit in which it is located, and the Bureau of Internal Revenue. There are over 300 franchisees, or an average of 3-4 outlets per franchisee.
Business format: Business franchising.
Sponsor or implementing organization: Itself and its franchisees.
Rationale: Among South and East Asian countries as well as countries of similar development level, the Philippines has one of the highest pharmaceutical price regimes. The goal of The Generics Pharmacy franchise is to make affordable generic medicines more available to a greater number of Filipinos at the soonest possible time.
Pharmaceutical franchisingis afinancing and delivery system modeled after the very successful franchising schemes in the fast-food industry. It involves a franchisor (in this case, The Generics Pharmacy) developing a brand of high-quality products, offering the right to use the brand plus all its associated business operating routines including training, to franchisees (individual investors) who are assisted in setting up their clinic practices along the same lines as the franchisor (brand name, signage and color scheme, menu of pharmaceutical products, and pricing and marketing) for which they pay a fee on a periodic basis.
From the supply side, the key economic principle behind franchising is the standardization of production. Specialization drives down costs, and the franchising arrangement focuses on delivering a few...
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