Wayne Fiander, PEI Public Hearing Testimony

WAYNE FIANDER: None. Absolutely not. We provide a pharmacy marketing merchandising operation service to the stores. But there’s absolutely no indication of where they should buy, when they should buy, how they should buy. Buying is all done at store level.

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Legislative Assembly of Prince Edward Island
October 25, 2001

Public Hearings on draft franchise legislation.
Charlottetown, PEI, Canada
Wayne Fiander, Pharmasave

Standing Committee on Community Affairs & Economic Development
Session 2/61

PHARMASAVE GROUP
MR. WAYNE FIANDER

BETH MacKENZIE (PC) CHAIR: The next presenter is the Pharmasave Group. Come forward please. Good afternoon. Welcome. You’ve been allocated a half-hour for your presentation and if you would entertain questions at the end, and if you want to begin by identifying yourself.

WAYNE FIANDER: My name is Wayne Fiander. I’m the Marketing and Business Manager for Pharmasave Drugs Atlantic Limited. If I could, just give you a few prepared remarks and then your questions.

Pharmasave Drugs is a unique company, similar to the gentleman from Canadian Tire who just spoke. The company that I work for, Pharmasave Drugs Atlantic Limited is a sub-franchisor of Pharmasave National. We have the right in Atlantic Canada to sell the franchise to independently owned pharmacies in this region. There are similar Pharmasave regional companies in Ontario, Manitoba, Saskatchewan and Alberta and British Columbia.

The unique thing is, is that the company that I work for owns the shares of the national company, so the regional companies across the country own the national company. Further to that, the franchisees own the shares of the regional company. So any store member, for each store there is one share issued when they join the program and right now, there are 80 storeowners in Atlantic Canada.

Pharmasave is, to go one step further, the members meet as shareholders of the company annually. They elect their own board of directors and the board meets at our offices in Dartmouth, Nova Scotia monthly. And as the regional managers, we take directions directly from that group. The boards, in turn, elect the members of the National Board for Pharmasave. While I can’t tell you, we’re in franchise heaven, because Pharmasave is 99.9 per cent a co-op. The members own the program. The benefits of the program are all given back to the members at the end of the year.

As a marketing and business manager for Pharmasave Atlantic, when I visit the store, I don’t direct the storeowner or manager to do things. We consult with them and achieve agreement with the storeowner and manager based on what we both feel is best for the store in that market.

I’m here today because one of our owners, Alan MacPhee, asked me to come and talk to you about our experience with Pharmasave in relation to the proposed legislation. Overall, we would find the goals of disclosure and fair play most agreeable. That’s how Pharmasave was born and operates today. Some areas though do have some concern. Section 3 refers to current contract and legislation probably should recognize that commerce has already happened between two parties and may create an unlevelled playing field.

For example, Pharmasave would have an existing franchise agreement with stores in Nova Scotia, New Brunswick and Newfoundland and may have to have a different agreement in this province. Section 5.5 calls for proximity protection. It’s a valid concern within our group. When we are recruiting existing independently owned storeowners, drug stores, to join the Pharmasave program, once an expression of interest is received by us, we approach the closest storeowner and ask them if there is a concern. That concern, if there is one, is taken to the board. The board is the final arbitrator of that decision as to whether or not the new member is allowed into the program. But in the eight years that I’ve been with Pharmasave, the board has always sided with the existing member. We’re here to work for our existing member. We’re here to work for our existing members so proximity in a global or a broader sense of franchising may want to include a test that is reasonable.

There are different business models for franchising in the world; Tim Hortons in Metro Halifax has expanded. The number of locations, I believe is over 45 and growing. And I know franchisees in that market and they all seem to be doing well. So again, I would suggest that maybe some consideration would be given for that.

Section 7 calls for payments in trust but doesn’t specify whether or not these funds in question are for the purchase of a franchise, or for ongoing franchise fees. Such a triggering, I would suggest that a triggering mechanism for both be in place and not arbitrarily left up to the franchisee without some sort of test of material failure by the franchisor.

There’s a clause dealing with non-renewal of a franchise and a call for compensation for the franchisee. In our experience, this wouldn’t apply to a Pharmasave situation but I would say that different franchises require different solutions and therefore study.

Section 9, in termination, I would suggest that the franchisor have the right in law to take over the franchise immediately if conditions in 2(a) are not met.

Section 10, we would agree with a transfer to, or within a family. The time line may not be expedient for a franchisor if they’re based in Central Canada or the US.

Section 11 calls for notice in writing. Not to be facetious, but I could under this suggestion send it by mail to Afghanistan and still comply with the legislation. Most franchise agreements stipulate notice not only in writing but by registered mail.

Section 16 deals with dispute resolution that we feel is an excellent suggestion, but doesn’t clarify who pays.

Section 18, I believe, is beyond the stated goals of the legislation. It is far too strong. We believe the courts should determine liability and what penalty and what form of penalty is appropriate.

Section 23 allows for an association of franchisees. We feel that’s a good suggestion. It would help provide some balance and a means for franchisees to share problem solving. I would suggest though that any association not be allowed to participate in any action as that association does not have a contract with the franchisor.

In Section 24, enforcement, we find that overextending the stated goals and should be scrapped completely. For example, sweeping powers of search and seizure would leave PEI as a police state in the natural form of business. I’m not a lawyer but I’ve been advised that contemporals in trials would surely remedy any of those kinds of situations.

That leaves, that’s what really what I came here to say. I’d be more than happy to answer any questions.

BETH MacKENZIE (PC) CHAIR: Thank you very much for your presentation. Gentlemen?

HON. MITCH MURPHY (PC): Just wondering, Wayne, with regards to your remarks to Section 3, I take it this is what you’re concerned about. It says, “This Act applies (a)…(b)…and (c) to current operating franchising agreements in effect in Prince Edward Island at the time of proclamation of this act.”

WAYNE FIANDER: That’s right.

HON. MITCH MURPHY (PC): I just want you to elaborate on your concern there.

WAYNE FIANDER: Well we feel we may have an unlevelled playing field with a member in St. John’s, Newfoundland or Halifax versus a member in Charlottetown, Montague or Souris.

HON. MITCH MURPHY (PC): I guess my follow-up question to that would be is that you know, you agree that franchise legislation is a good thing?

WAYNE FIANDER: Yes.

HON. MITCH MURPHY (PC): To protect both parties operating underneath it. So how would you suggest that that be remedied to deal with the situation that the Pharmasave group finds itself in?

WAYNE FIANDER: Well perhaps on renewals as agreements come to expire, then, it would have to be part of the new franchise agreement.

HON. MITCH MURPHY (PC): So we would offer one level of protection to renewals or new agreements and a lower level of protection to existing agreements?

WAYNE FIANDER: Exactly.

HON. MITCH MURPHY (PC): Okay, thanks for your answers.

HON. RON MacKINLEY (L): You got a franchise in PEI, right?

WAYNE FIANDER: Three.

HON. RON MacKINLEY (L): Three. Where are they at?

WAYNE FIANDER: Souris, here in Charlottetown and in Montague.

HON. RON MacKINLEY (L): The one in Souris, who’s got it?

WAYNE FIANDER: The MacPhee family.

HON. RON MacKINLEY (L): Is it the same building as the IGA?

WAYNE FIANDER: Yes.

HON. RON MacKINLEY (L): And when they sell, if I went in there now to that, it’s in the same building, if I went in there your franchisees, under their agreement they buy their drugs from you. Is that correct?

WAYNE FIANDER: No. They buy from any of the various drug wholesalers that are in Canada. We have a distribution agreement set up with one and if the price is right they buy there.

HON. RON MacKINLEY (L): They buy there. And then they have a druggist there, an administrator. Now, getting back to the question, I just want to ask quick. In their drug store down there they, do they just sell drugs or do they sell paper towels or anything like that?

WAYNE FIANDER: Their prime business is pharmacy but the front store has the full variety of over the counter merchandise, health and beauty aids, household cleaning supplies.

HON. RON MacKINLEY (L): So they could sell their Tide out of there if they wanted to.

WAYNE FIANDER: Yes, they could.

HON. RON MacKINLEY (L): It’s just, like he said you couldn’t sell Tide out of IGA, then the other fellow told me you couldn’t put a store next to it. Now, I know you probably wouldn’t know what Loblaws they signed with but they wouldn’t have any authority over him selling Tide out of his drug store next door. I don’t know if he does.

WAYNE FIANDER: I can’t speak for the Loblaws arrangement but to our arrangement, if Alan MacPhee found a better deal on Tide that helps Alan MacPhee but it also helps Alan deliver a lower retail to his customers.

HON. RON MacKINLEY (L): Your group don’t sell Tide, just drugs.

WAYNE FIANDER: Our stores sell Tide. Our stores sell every name brand.

HON. RON MacKINLEY (L): Oh, it does. So your stores that he belongs to, franchisee, has a price on Tide and the stores are all the same building. Maybe you’re both too high on Tide. That’s all the questions I have.

BETH MacKENZIE (PC) CHAIR: Chair: Wilfred?

WILFRED ARSENAULT (PC): Just a clarification, Wayne. Ninety-nine per cent of the stores, the operators, they’re the owners of Pharmasave.

WAYNE FIANDER: The only shareholders are storeowners. There are no other shareholders.

WILFRED ARSENAULT (PC): With a corporate office somewhere.

WAYNE FIANDER: Well, there’s a regional office that I work out of in Burnside in Dartmouth, Nova Scotia. There’s a national office Langley, BC.

WILFRED ARSENAULT (PC): Is Pharmasave in the US, for instance?

WAYNE FIANDER: No. We operate in all provinces but Quebec.

WES MacALEER (PC): Wayne, would you define your arrangement between the various parties, your franchisees, being one of the purchasing of goods? In other words would you define your group as a buying group as opposed to…I’m wondering to what extent your franchise agreement dictates or describes the kind of business that can be operated. Are you restricted to the products that are being sole in those stores?

WAYNE FIANDER: There’s actually no, there’s no portion of our contract or agreement with the franchisees that tells them where to buy.

WES MacALEER (PC): Where to buy.

WAYNE FIANDER: None. Absolutely not. We provide a pharmacy marketing merchandising operation service to the stores. But there’s absolutely no indication of where they should buy, when they should buy, how they should buy. Buying is all done at store level.

WES MacALEER (PC): Okay. You mentioned about dispute resolution being somewhat acceptable. Do you have a requirement that the dispute be adjudicated in any particular region or jurisdiction?

WAYNE FIANDER: Oh, no. Pharmasave would not have a problem adjudicating in any province.

WES MacALEER (PC): Okay.

HON. MITCH MURPHY (PC): So in the absence of any platform, I guess, in the agreement with regards to purchasing, etc., if I apply to be a Pharmasave owner then there is not the traditional arrangement where the Pharmasave franchisor is taking a certain percentage of sales from each store. I’m just wondering what does the franchise agreement say vis-à-vis Alan MacPhee’s obligations to Pharmasave as a franchisor?

WAYNE FIANDER: There is a franchise fee that the stores do pay. It’s 1¼% of sales. About 80% of that stays here in the region, 20% of it goes to Pharmasave National to run the national program. With regard to the obligations of the franchisee is simply to uphold the brand Pharmasave.

HON. MITCH MURPHY (PC): But as a shareholder you would obviously share in the dividend payment if there is one.

WAYNE FIANDER: Yes.

BETH MacKENZIE (PC) CHAIR: No further question. Thank you very much for your presentation.

WAYNE FIANDER: Thank you.

This document is a spelling-corrected copy of the Verbatim Transcript of House Committee Proceedings, Province of Prince Edward Island, Canada.


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Risks: Prince Edward Island Public Hearings, Canada, 2001, Must buy only through franchisor (tied buying), Cooperatively owned franchise system, Canada, 20011025 Pharmasave Group

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