CWH restructuring to full franchise model


Chemist Warehouse
Image by Francisco Anzola https://www.flickr.com/photos/fran001/

Retailing under current regulations is like “fighting with one arm tied behind your back,” says Chemist Warehouse co-founder Jack Gance

Speaking to the Weekend Australian’s Victorian Business Editor, Damon Kitney, Mr Gance has again denied recent rumours of an Initial Public Offer or float – but outlined changes to its ownership model.

In late 2017, rumours began to circulate that the discount giant was considering an ASX listing—but in March 2018, Mr Gance spoke to The Australian’s Eli Greenblat and said that while Chemist Warehouse had considered a number of options, it had no interest in an IPO.

Now, he has told Mr Kitney that such a move is “not on our horizon”.

“We have no immediate plans to IPO and are not moving ­towards a float,” Mr Gance said. We have other priorities that are more important.

“To float, we would have to make a lot of changes that we haven’t had the time or bandwidth to do. At the moment we are more focused on growth. And we don’t want to take money off the table. We want to grow the business among our own partners.”

Instead, Chemist Warehouse has been in the process of restructuring its ownership, moving from an individual partnership model to a full franchise model.

This will allow “more effective and efficient operations,” he said.

It may be talk of this restructure that sparked the resurgence of rumours about a float, he said.

The article also outlines Chemist Warehouse’s current and ongoing plans for expansion, which include the intention to open around 30 new pharmacies each year, “despite opposition from the powerful Pharmacy Guild,” Mr Kitney writes.

“For years Gance and Verocchi have exploited a loophole in the rules to expand their empire but the two sides continue to butt heads,” he writes.

Mr Gance said that Health Minister Greg Hunt’s support for the status quo “hurts pharmacies generally” as well as hurting Chemist Warehouse.

“Our growth hasn’t been at the expense of pharmacies generally. Our growth has come from super­markets and specialty stores. I think the health food store business has been decimated by our vitamins business.

“We are working within whatever rules the guild throws at us. We have very strong loyalty with consumers. So we are just getting on with it. It is like fighting with one arm tied behind your back but I think we have a pretty powerful punch.”

Chemist Warehouse co-founder Damien Gance recently told the Queensland Parliamentary Inquiry into pharmacy that Australians did not care who owned pharmacies, and that ownership should be restricted to a “fit and proper person” test.

More plans for the group include further expansion into vitamins, after it supported the launch of The Natural Vitamin Co; the first bricks-and-mortar store in one of China’s free trade zones; and potentially stores in Singapore and the United States.

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16 Comments

  1. Peter Crothers
    03/12/2018

    Not even the pretence of being a pharmacy.

  2. Ex-Pharmacist
    03/12/2018

    C’mon Jack, float this thing so we can all get some skin in the game. All power to you in your fight against the PGA & their trickery & duplicitous visits to the house on the hill.

    • Red Pill
      04/12/2018

      Hahaha. I actually think pharmacists will be better off buying Warehouse shares than to work as community pharmacists.

      Go learn a new trade that pays well and simultaneously watch your investment portfolio grow. Win win

      The longer I look into the community pharmacy model the more I realise the Productivity Commission was right!

      • Michael Khoo
        04/12/2018

        Absolutely, If all you care about is the money go find another job. Please.

        Our Profession is about doing what is right despite the money, and the regulations that Mr Gance and Co are “fighting” are all about protecting the public from the impact of greed.

          • Red Pill
            04/12/2018

            Hahaha. Check mate.
            I’m pretty sure there are lower tiers than a pharmacist. We should make the pharmacist salary close to $40,000 (absolute minimum) in order to allow only those that are doing it for the love of the profession to stick around.

          • Michael Khoo
            07/12/2018

            I suspect Mr Gance earns a bit more than that, Don’t you?

        • Red Pill
          04/12/2018

          Despite the money! The number one motivater to retain the best in the bunch is a great salary. The moment you can’t make a living doing what you love it is no longer a job but a hobby.

          The level of mental gymnastics people use to make themselves feel better is unbelievable

          • Michael Khoo
            05/12/2018

            With regards to wages, I absolutely agree, the award rate as determined by the “independent arbitrator” Fair Work Commission is appallingly low, and something exploited to the hilt by the discount operators. The politicians who introduced our current IR system should be ashamed, and the other crowd, who promised not to change it at the last two elections are not much better.

            Wage stagnation is NOT unique to pharmacy, indeed, today’s lead article in this very journal suggests pharmacy is one of the few industries where employees are able to increase wages as demand increases despite the machinations of various unions. It is easy to blame one party for all the problems in our industry, easy but simplistic.

            We, being a profession with variable demand and where experience counts, were much better off with independent workplace agreements, and state awards were much easier to change.

            Nevertheless, my understanding of the original article is that Mr Gance is not addressing wages in any way. When I refer to “despite the money” I refer to the Profession placing the community benefit ahead of the profits that can be made if, for example, location rules were relaxed.

            I find it better serves the quality of a debate to quote ones opponents in context, and in a manner that is both polite and respectful.

        • Paul Sapardanis
          05/12/2018

          Michael you cannot be more wrong. Sitting around wearing bow ties will not put food on the table. Our motivation should always be to make money which we will be to provide health solutions. It should not be to provide health solutions and hope to be paid

          • Michael Khoo
            05/12/2018

            well, it works for me, I don’t have to break the law or sell out my profession to make a comfortable living.

          • Paul Sapardanis
            05/12/2018

            Quite correct we shouldn’t and don’t break the law to make a comfortable living. ( At least most of us ). But as a profession we need not be embarrassed about wishing to be well paid for the services we provide. Discounting, free deliveries free DAAs free bp testing $1 profit for NDSS is not helping us move to a service model as there is no financial motivation to do so

          • Michael Khoo
            07/12/2018

            Thank you Paul for a reply that is relevant and not snide, these forum seem to have attracted some commentators who do their cause no good by tipping a bit too much vitriol into the brew.

            The regulations that are holding back Gance et al are not related to fees and professional services. They are related to location and PBS approval, and I humbly believe that those rules still allow ample room for a financially successful pharmacy. I am certain that I could make far more money if those rules did not apply to me, but as they have a clear benefit to the public, I play with the cards I am given.

    • Michael Khoo
      07/12/2018

      So, some believe the community pharmacy “Ship is sinking” and as there are not enough lifeboats to go around they seek to make holes in the rest so we all go down together. Bravo

  3. PharmOwner
    04/12/2018

    “Our growth hasn’t been at the expense of pharmacies generally.” Laughable, really. If you open a store and within a few years are doing 500 scripts a day, that’s 500 scripts a day you’ve taken away from real pharmacies.

  4. Andrew Gray
    20/01/2019

    Is franchising of pharmacies even legal? I distinctly recall my forensic pharmacy lecturer saying it was not. Have we stopped bothering to even argue legal angles now?

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