When it comes to household names in the pharmacy world, Walgreens is right up there with the likes of CVS and Rite Aid. With over 9,000 stores across the United States, there‘s a good chance you have a Walgreens location in your neighborhood. But have you ever wondered – is Walgreens a franchise that entrepreneurs can buy into? Or does the company operate on a different business model?
In this article, we‘ll take a deep dive into how Walgreens is structured and answer the question once and for all: is Walgreens a franchise? We‘ll also explore some alternative paths for those interested in owning their own pharmacy business. Let‘s get started!
What Is a Franchise Business?
First, let‘s make sure we‘re on the same page about what a franchise is. In simple terms, a franchise is a business model where a company (the franchisor) grants an individual (the franchisee) the right to operate a location of their business using the company‘s brand, products, and systems. The franchisee typically pays an initial franchise fee as well as ongoing royalties to the franchisor. In return, they get access to a proven business model, brand recognition, training and support.
Some well-known examples of franchise businesses include fast food giants like McDonald‘s and Subway, hotel chains like Hampton by Hilton, and even retail concepts like Ace Hardware stores. The specifics can vary quite a bit between franchise systems in terms of start-up costs, royalty structures, territory rights, and level of franchisor involvement. But the general idea is allowing entrepreneurs to own and operate their own location of an established brand.
Walgreens Company Overview
Now that we know what a franchise is, let‘s turn our attention to Walgreens. Officially known as Walgreens Boots Alliance, Inc, the company is one of the largest pharmacy chains in the United States with over 9,000 locations as of 2020. Walgreens has a long history dating back to 1901 when Charles R. Walgreen Sr. purchased his first drugstore in Chicago, Illinois.
Over the past century, Walgreens has grown both organically and through numerous mergers and acquisitions. In 2014, Walgreens merged with Alliance Boots to form the first global pharmacy-led health and wellbeing enterprise. The company‘s two main business segments are United States retail pharmacy and international retail pharmacy. Walgreens stores sell prescription drugs and a wide assortment of retail products including over-the-counter medications, health and wellness products, beauty and personal care items, groceries and more.
Walgreens Stores Are Corporate-Owned, Not Franchised
So, back to our original question – is Walgreens a franchise? The short answer is no. All 9,000+ Walgreens stores are corporate-owned and operated, meaning they are not franchised to individual owners. When you walk into a Walgreens store anywhere in the country, you are walking into a location that is owned and run by the Walgreens corporation itself.
This is a key difference from pharmacy franchises like Medicine Shoppe or Care Pharmacies where each location is individually owned and operated by a local franchisee. With Walgreens‘ corporate model, the company has complete control over store operations, inventory, pricing, marketing and more. Individual store managers and staff still have some degree of autonomy in their day-to-day roles. But major decisions are made at the corporate level to maintain brand consistency and operational efficiency across all locations.
Why Doesn‘t Walgreens Franchise?
You might be wondering – why has Walgreens chosen not to franchise its stores? Especially in an industry where many of its competitors do use a franchise model. There are a few key reasons:
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Control and consistency – By owning all of its locations, Walgreens can ensure a consistent customer experience no matter which store you visit. The company can roll out new products, services, and initiatives across its entire network without having to convince independent franchisees to get on board.
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Profitability – Walgreens gets to keep all of the profits generated by its stores rather than sharing a percentage with franchisees in the form of royalties. This also means not having to provide the support infrastructure and resources a franchise system requires.
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Flexibility – A corporate model gives Walgreens more flexibility to open, close, or relocate stores as it sees strategically fit. The company can respond more nimbly to market conditions, competitor actions, and its own business needs.
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Purchasing power – By negotiating as a large national chain, Walgreens can typically secure more favorable terms with suppliers and vendors than an individual franchisee could. This allows the company to improve its margins and pass some savings on to customers.
That said, there are some drawbacks to Walgreens‘ corporate structure as well. Running a network of 9,000 stores is extremely complex and costly from an operational standpoint. Walgreens also misses out on the local expertise and community connections that individual franchisees often bring to the table. But for now, the company has determined that the benefits of a corporate model outweigh the potential upside of franchising.
Walgreens‘ Pharmacy Acquisition Program
While you can‘t buy a Walgreens franchise, the company does have another program that involves taking over existing pharmacies. It‘s called the Walgreens Pharmacy Acquisition program and it allows independent pharmacies to sell their prescription files and inventory to Walgreens.
Here‘s how it works: Walgreens‘ acquisitions team will work with an interested pharmacy owner to evaluate their business and come up with a fair purchase price. If both parties agree to move forward, Walgreens will take over the pharmacy‘s prescription records and customer information, transferring it to a nearby Walgreens location. The pharmacy owner typically agrees not to open another pharmacy within a certain geographic area for a period of time after the sale.
According to Walgreens, the program is a win-win – pharmacy owners can monetize their business while ensuring their patients have a smooth transition of care. And Walgreens gets to grow its customer base and prescription market share, especially in markets where it may not have a strong presence. Since 2010, Walgreens has been the industry leader in number of pharmacies acquired.
So while the Pharmacy Acquisition program is not a traditional franchise model, it does represent a way for independent pharmacies to "join" the Walgreens brand in a sense. But the key difference is they are selling their business to Walgreens rather than continuing to own and operate it themselves.
CVS and Rite Aid Are Also Corporate-Owned
It‘s worth noting that Walgreens is not alone in its corporate ownership structure. Its two biggest competitors, CVS and Rite Aid, also operate on a non-franchise model. All 9,900+ CVS locations and 2,400+ Rite Aid locations are corporate-owned and operated just like Walgreens.
So why is the pharmacy industry dominated by corporate chains? It likely comes down to the highly regulated nature of the pharmacy business. Operating a pharmacy is far more complex than running a typical retail store due to strict laws around the storage, handling, and dispensing of prescription drugs. Maintaining compliance requires significant resources and expertise that may be harder for individual franchisees to manage.
The pharmacy industry has also undergone significant consolidation in recent decades as companies look to achieve economies of scale. Bigger players like Walgreens, CVS, and Rite Aid can leverage their size to negotiate better reimbursement rates with insurers and PBMs (pharmacy benefit managers). They can also invest in technology, talent, and infrastructure in a way that smaller or independent pharmacies often struggle to match.
How to Start Your Own Pharmacy Business
If your dream is to own your own pharmacy, not being able to buy a Walgreens franchise may feel like a roadblock. But there are still paths forward for entrepreneurial pharmacists! Here are a few options to consider:
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Open an independent pharmacy from scratch. This involves finding a location, building out the space, stocking inventory, and establishing relationships with suppliers and insurers. It‘s a significant undertaking, but allows for complete control over your business.
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Buy an existing independent pharmacy. Similar to Walgreens‘ acquisition program, you could look for a local pharmacy owner who is ready to retire or exit the business. Buying an established pharmacy comes with a built-in customer base and possibly some staff already in place.
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Investigate pharmacy franchise opportunities. While the big players don‘t franchise, there are some smaller pharmacy franchise systems out there. Examples include PharmaChoice in Canada and The Medicine Shoppe (under the Cardinal Health umbrella). These may be worth exploring if you like the franchise model.
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Consider specialty pharmacy niches. Finding a specific niche to serve, such as long-term care facilities or fertility clinics, may offer a way to differentiate your business from the big box retailers. Specialization often allows for higher margins as well.
Of course, each of these paths comes with its own set of challenges and capital requirements. Starting a pharmacy is not a simple or inexpensive endeavor. But for the right entrepreneur with a passion for patient care, it can be an incredibly rewarding business venture.
What Does the Future Hold for Walgreens?
As we‘ve seen, Walgreens has found success with its corporate-owned business model for over a century. But what does the future hold for the pharmacy giant? The company has made some bold moves in recent years to stay competitive and relevant in an evolving healthcare landscape.
In 2018, Walgreens launched a partnership with LabCorp to open at least 600 patient service centers inside Walgreens stores. These centers offer specimen collection services for LabCorp testing, making it more convenient for patients to access lab services. Walgreens has also expanded its partnership with VillageMD to open 500-700 "Village Medical at Walgreens" primary care clinics in its stores over the next five years.
These moves reflect a broader shift in the pharmacy industry towards becoming more integrated with the larger healthcare system. As reimbursement pressures intensify and competition from online players like Amazon heats up, brick-and-mortar pharmacies are looking for ways to provide more value to patients. Offering additional health and wellness services is one strategy to drive traffic and build deeper customer loyalty.
At the same time, Walgreens has also been trimming its store footprint in recent years. The company has closed a number of underperforming locations and sold off its in-store clinics to local health systems in certain markets. This reflects a recognition that the "growth at all costs" mentality is no longer sustainable in today‘s environment. Instead, Walgreens is focusing on optimizing its existing asset base and investing in higher-value areas of the business.
As for whether Walgreens might ever consider franchising, never say never. Business models can and do evolve over time as market conditions change. But for now, all signs point to Walgreens sticking with its tried-and-true corporate structure as it navigates the future of pharmacy. The company seems to believe that maintaining tight control over its operations is the best path to delivering value for all its stakeholders – from shareholders to patients to employees.
The Bottom Line: Walgreens Is Not a Franchise (For Now)
So there you have it – the definitive answer to the question "Is Walgreens a franchise?". Despite being one of the most ubiquitous pharmacy brands in the country, Walgreens stores are not available for franchise ownership. The company‘s 100+ year history and 9,000+ store footprint have been built through a corporate ownership model where the company calls all the shots.
While this model has some downsides, it has allowed Walgreens to achieve a level of scale, consistency, and clout that would be challenging to maintain in a franchise system. Walgreens has also shown creativity in growing through alternative means, such as its Pharmacy Acquisition program. And the company continues to evolve its business model to stay relevant in the fast-changing world of healthcare and retail.
For entrepreneurs eager to own their own pharmacy business, there are still many paths to success outside of a Walgreens franchise. From starting an independent pharmacy to exploring niche market opportunities, pharmacy ownership is still a viable and rewarding career path. Like any business venture, it requires significant planning, capital, and hard work to succeed. But with over 60,000 pharmacies in the US, there‘s clearly demand out there for these vital community healthcare providers.
As for the future of Walgreens and the broader pharmacy industry, change is undoubtedly on the horizon. But if the past century is any indication, smart and nimble companies will find ways to adapt and thrive. And Walgreens has proven itself nothing if not resilient since those early days in Charles Walgreen Sr.‘s Chicago drugstore. The pharmacy game may be changing, but expect to see that iconic red and white Walgreens logo in a neighborhood near you for many years to come.
