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Lilly Digest Reports on 1976 Community Pharmacy Operations
A N*
Respondents perceiving service as . important to them B C % N* N* %
%
25/28
89
10/12
83
Inexplicably, fewer A franchisees regarded specific services, or service categories in general, as important. Most frequently perceived as important were new pharmacy opening services and discount purchasing services (58-59 percent) .
Conclusions 1/8
13
38/61
62
16/19
84
7/12
58
38/46
83
13/16
81
3/7
43
19/33
58
8/14
57
10/17
59
40/67
60
9/21
43
4/11
36
59/66
89
11/13
85
nents as important. B franchisees frequently assigned rankings of importance to all services, but aggregate responses indicated relatively high importance rankings for training program, new pharmacy opening and advertising and promotion assistance services. C franchisees also attributed high rankings of importance to these services as well as to management services. In each case, 80 percent or more of the respondents perceived these services as important.
Lilly Digest Reports on 1976 Community Pharmacy Operations The Lilly Digest for community pharmacy operations in 1976 reports that although pharmacies continued to show increases in total dollar sales, net profit slipped to 3.6 percent of sales. In 1974 and 1975 net profit was reported as 3. 7 percent of sales. t Since the cost of goods sold increased as a percentage of sales when compared with last year's data," explains the Digest, "a lower gross margin resulted. Total expenses declined as a percentage of sales but not enough to offset a drop in gross margin. " The decrease, percentage wise, in proprietor's or manager's salary was the main reason again this year for the downward trend in total expenses. The increased cost of goods sold now stands at 64.9 percent of sales. The resulting
Vol. NS 17, No. 11, November 1977
This article describes selected results of a survey of franchisee experiences in the upper midwest. While several franchisees generally were satisfied with their programs, all identified areas of difficulty or dissatisfaction . However, consistent correlates of satisfaction among franchise types could not be determined. Dissatisfied franchisees reported that making royalty fee payments was a problem, indicating undercapitalization or less than anticipated sales volume as possi ble factors. Although franchise programs provided many services to franchisees, respondents indicated great variability, even within the same franchise type, in the nature of services offered (and used) . This indicates either a lack of communication of service availability to franchisees or a variable and inconsistent level of services offered to franchisees of the same franchise program. An important finding was that satisfaction with specific services offered by franchisors tended to vary extensively among franchise programs. Across all service categories and
gross margin of 35. 1 percent is at the lowest level since 1958 (1975 level was 35.5 percent). In effect, this means that pharmacies were allowed a lower percentage of sales dollars to cover total expenses and provide for an adequate net profit. As could be expected with decreasing gross margins, Lilly reports that pharmacies continued to trim their operating expenses. A decrease in the salaries of proprietors or managers, from 7.7 percent of sales in 1975 to 7.3 percent in 1976 was again the factor most responsible for the 0.3 percent decline in expenses. This percentage decreased despite an average increase of $128 in proprietors' salaries. Total income for a proprietor rose to a new high of $33,607, but it dropped from 11.4 percent of sales to 10.9 percent. The saving in total expense, mostly due
franchise programs, only in about one-half of the cases were 50 percent or more of the respondents at least fairly satisfied with services offered. In contrast, services were perceived as important to franchisees in most cases. These findings suggest important areas of unfilled expectations or unmet need from the perspective of the franchisee. It is hoped that objective assessment of operating success, problems and satisfaction of franchise pharmacies of this type can benefit existing and prospective franchisees as well as franchisors. Because the success of the franchise program depends on the success of each franchise unit, such an assessment would appear essential. A review of franchising characteristics across franchise types also can help franchisors to assess and modify their franchise package offering vis A vis others. Because of the important of this type of analysis of pharmacy franchise operations, the authors strongly urge that franchising operations in other geographic regions be reviewed . •
References 1. Anon .: Should you convert your store into a franchise operation?, Am. Druggist 168: 36 (July 15) 1973. 2. Lipson, D.P., Norwood, G.J., and Capettini, R.J.: The franchised pharmacy: opportunities and problems for the pharmacist, J. Am. Pharm. Assoc. NS17: 154 (Mar.) 1977.
to the pharmacist-owner's election to draw a lower salary, was not sufficient to prevent some loss of net profit which, before taxes, was only $9 higher than in 1975. When expressed as a percentage of sales, net profit slid to 3.6 percent. Average sales of $309, 725 represented growth of 5.4 percent over the 1975 average. Prescription sales continued to advance at a faster rate (7.6 percent) than other sales (3.4 percent). Prescription revenue accounted for 49.6 percent of total sales of the 1705 community pharmacies that reported data for 1976. Prescription revenue per prescription inventory dollar rose from $8.24 to $8.29 while other sales remained unchanged at $4.81. The increase in prescription revenue is attributed to a rise of 48 cents in the average prescription charge, from $5. 18 in 1975 to $5.66 in 1976.
699
Respondents perceiving service as . important to them B C % N* N* %
%
25/28
89
10/12
83
Inexplicably, fewer A franchisees regarded specific services, or service categories in general, as important. Most frequently perceived as important were new pharmacy opening services and discount purchasing services (58-59 percent) .
Conclusions 1/8
13
38/61
62
16/19
84
7/12
58
38/46
83
13/16
81
3/7
43
19/33
58
8/14
57
10/17
59
40/67
60
9/21
43
4/11
36
59/66
89
11/13
85
nents as important. B franchisees frequently assigned rankings of importance to all services, but aggregate responses indicated relatively high importance rankings for training program, new pharmacy opening and advertising and promotion assistance services. C franchisees also attributed high rankings of importance to these services as well as to management services. In each case, 80 percent or more of the respondents perceived these services as important.
Lilly Digest Reports on 1976 Community Pharmacy Operations The Lilly Digest for community pharmacy operations in 1976 reports that although pharmacies continued to show increases in total dollar sales, net profit slipped to 3.6 percent of sales. In 1974 and 1975 net profit was reported as 3. 7 percent of sales. t Since the cost of goods sold increased as a percentage of sales when compared with last year's data," explains the Digest, "a lower gross margin resulted. Total expenses declined as a percentage of sales but not enough to offset a drop in gross margin. " The decrease, percentage wise, in proprietor's or manager's salary was the main reason again this year for the downward trend in total expenses. The increased cost of goods sold now stands at 64.9 percent of sales. The resulting
Vol. NS 17, No. 11, November 1977
This article describes selected results of a survey of franchisee experiences in the upper midwest. While several franchisees generally were satisfied with their programs, all identified areas of difficulty or dissatisfaction . However, consistent correlates of satisfaction among franchise types could not be determined. Dissatisfied franchisees reported that making royalty fee payments was a problem, indicating undercapitalization or less than anticipated sales volume as possi ble factors. Although franchise programs provided many services to franchisees, respondents indicated great variability, even within the same franchise type, in the nature of services offered (and used) . This indicates either a lack of communication of service availability to franchisees or a variable and inconsistent level of services offered to franchisees of the same franchise program. An important finding was that satisfaction with specific services offered by franchisors tended to vary extensively among franchise programs. Across all service categories and
gross margin of 35. 1 percent is at the lowest level since 1958 (1975 level was 35.5 percent). In effect, this means that pharmacies were allowed a lower percentage of sales dollars to cover total expenses and provide for an adequate net profit. As could be expected with decreasing gross margins, Lilly reports that pharmacies continued to trim their operating expenses. A decrease in the salaries of proprietors or managers, from 7.7 percent of sales in 1975 to 7.3 percent in 1976 was again the factor most responsible for the 0.3 percent decline in expenses. This percentage decreased despite an average increase of $128 in proprietors' salaries. Total income for a proprietor rose to a new high of $33,607, but it dropped from 11.4 percent of sales to 10.9 percent. The saving in total expense, mostly due
franchise programs, only in about one-half of the cases were 50 percent or more of the respondents at least fairly satisfied with services offered. In contrast, services were perceived as important to franchisees in most cases. These findings suggest important areas of unfilled expectations or unmet need from the perspective of the franchisee. It is hoped that objective assessment of operating success, problems and satisfaction of franchise pharmacies of this type can benefit existing and prospective franchisees as well as franchisors. Because the success of the franchise program depends on the success of each franchise unit, such an assessment would appear essential. A review of franchising characteristics across franchise types also can help franchisors to assess and modify their franchise package offering vis A vis others. Because of the important of this type of analysis of pharmacy franchise operations, the authors strongly urge that franchising operations in other geographic regions be reviewed . •
References 1. Anon .: Should you convert your store into a franchise operation?, Am. Druggist 168: 36 (July 15) 1973. 2. Lipson, D.P., Norwood, G.J., and Capettini, R.J.: The franchised pharmacy: opportunities and problems for the pharmacist, J. Am. Pharm. Assoc. NS17: 154 (Mar.) 1977.
to the pharmacist-owner's election to draw a lower salary, was not sufficient to prevent some loss of net profit which, before taxes, was only $9 higher than in 1975. When expressed as a percentage of sales, net profit slid to 3.6 percent. Average sales of $309, 725 represented growth of 5.4 percent over the 1975 average. Prescription sales continued to advance at a faster rate (7.6 percent) than other sales (3.4 percent). Prescription revenue accounted for 49.6 percent of total sales of the 1705 community pharmacies that reported data for 1976. Prescription revenue per prescription inventory dollar rose from $8.24 to $8.29 while other sales remained unchanged at $4.81. The increase in prescription revenue is attributed to a rise of 48 cents in the average prescription charge, from $5. 18 in 1975 to $5.66 in 1976.
699