I’ve tried to understand the franchisee model but I really can’t figure out how it benefits the person who takes the franchise. I’ve even spoken to a friend of mine who owns a couple of pharmacies and he can’t understand it too.
So basically sastasundar wants someone who has relevant pharma qualifications to buy or rent a 120 sq ft shop. They then want that person to hire 2 pharmacists and a driver. This store would also need a freezer for last day storage.
However, since there’s no inventory how does this act like anything but a marketing ploy for sastasundar and wealth destruction for the franchisee? A client needs to visit this shop and then use it only to place an order which will be delivered to his or her house a few days later. Why would the client choose to do this and not visit an actual inventory based pharmacy? Also for the subsequent visit the client could just visit the website and bypass the store?
It works for sastasundar but do the actual franchisees make money? If sastasundar plans on only using a franchisee based model for these health buddies is it really sustainable if thats the case? Tbh it looks like they are getting their marketing and shop and staff for free… While it’s good for SS I really don’t see how the health buddies are profitable for the franchisee and if growth via this angle is sustainable long term considering this. Are there any reviews from actual franchisee owners online that we could look at? Also is there a split between how many stores are owned outright by SS and how many are franchisees(sorry if mentioned in public domain. I couldn’t find it in my cursory study)
Regards the Ipo of pharmeasy… Its the usual case of retailers being sold outrageous valuations. SS unfortunately is already listed. If they were to do an Ipo now and use words like break even, physical stores, PE backing etc im sure the market would have given it higher valuations too. That being said this entire epharma sector doesn’t sit well with me. It looks like a case wherein those with access to huge amounts of cash will win and even with fund raising sasta sundar looks in serious risk of enjoying a few profitable years but a dagger of margin destruction hanging over them permanently. Even small pharmacies are creating a Web presence in my area to service customers in their locality.
I am not sure if SS will survive but at least the valuations price in that risk so any good news will be an upside(maybe even an exit via a buyout since its so cheap) .
However, What i am sure of is pharmeasy is getting away with daylight robbery commanding such high valuations in this very, very dangerous segment.
Side note: I still don’t understand how SS have spelt health supplements as health suppliments front and center on their main page Considering its out there for all to see and isn’t hidden somewhere deep inside.
Disc: not invested but studying this space and I’ve realised the feeling of uneasiness is directly proportional to the more I study.