When I recently raised this question with a colleague, he initially looked at me strangely and wondered whether I had “lost my marbles”. I re-assured him that I was fine and that my question was indeed a serious one.

At that point we discussed my question at length and somewhat surprisingly to my colleague, he concurred with my proposition that new cars and pharmacy franchises do indeed have something significant in common.

In particular we agreed that whether a new car buyer was assessing the new car category or a pharmacy owner was assessing the pharmacy franchises category, the different “brands” may appear to offer similar features and functions but that a detailed knowledge based on experience and research was required to enable a proper comparison and an informed decision.

Having drafted franchise agreements over almost 20 years for many different franchisors operating in a variety of industries (including pharmacy industry franchisors) when it comes to pharmacy franchises, I can say without qualification that I feel confident in my intimate “cover to cover” understanding of franchise agreements, and especially in my ability to identify critical legal nuances buried within a myriad of clauses and also to assess whether a specific legal provision is fair and reasonable, based on pharmacy industry measures.

However, when it comes to assessing and comparing new cars, I am as knowledgeable as the next “have never changed a spark plug” mug.  That is, my ability to assess the merits of a new car is based solely on my personal experience in using a car to get from point A to point B and so when test driving a new car, I can only assess it at a superficial level of how does it drive, look and feel.

My superficial assessment skills are clearly inadequate to properly assess different brands or indeed even one brand of new car.

Fortunately, while my detailed technical car knowledge is next to none, as with most new car buyers I am able to freely access a wide range of comprehensive detailed reviews which have been carried out by expert car reviewers.  It is fair to say these reviews give a new car buyer some comfort as they provide a detailed insight into the pros and cons of a specific vehicle, as well as allowing considered comparisons with other similar vehicles.  I expect a lot of car buyers rely widely on these expert reviews before making what they consider an informed decision when buying a new car.

However, when it comes to pharmacy franchises, I am still amazed at how many pharmacists (being well-educated, intelligent and successful business people) blindly sign franchise agreements without making any real effort to obtain an expert legal review.  I am unsure whether these pharmacists hark back to the old marketing/buying group days and are blinded by a “she’ll be right”” mentality when agreeing to sign a pharmacy franchise agreement.

In reality a pharmacy franchise agreement is a significant legal document lasting many years which governs the manner in which the pharmacist’s business must operate (whether by the current owner or any subsequent owner of the business), and thus may be an invisible time bomb which can detrimentally affect the goodwill value of the pharmacy in coming years.

To illustrate this point, I was recently engaged by a client to review a pharmacy franchise agreement for a well-known national pharmacy franchise group.  When summarising the outcome of my review for my client, she was shocked by a number of issues buried in the fine print, including for example a provision which required the pharmacist to transfer her shop’s phone number to the franchisor at the end of the franchise term.

So that there is no misunderstanding, this provision appeared in a franchise agreement which the franchisor had indicated to my client was a “standard straightforward” document.

Suffice to say, my client relied on my experience to recommend and negotiate a number of acceptable amendments to the pharmacy franchise agreement before it was in a form suitable to be signed by her.

Conclusion

As we all know, pharmacy goodwill values are now in many instances worth millions of dollars. As such, it defies belief as to why in today’s day and age any pharmacist would jeopardize their goodwill value by signing a legally binding franchise document affecting the operation of the business without first having it properly reviewed by a lawyer with specific expertise in the pharmacy franchising field. A classic example of false economy!

Prepared by
Anthony Cannizzo
Partner
Robert James Lawyers
Level 10, 200 Queen Street
Melbourne 3000

Tel (03) 8628 2000
Fax (03) 8628 2050

Email: Anthony@robertjames.com.au
Website: www.robertjames.com.au