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ST. LOUIS — A group of Medicine Shoppe International and Medicap franchise owners is filing claims against the two companies over an alleged breach of contract and failure to support the franchise systems.
Calling themselves "Franchisees for Fair Value" and accusing MSI-Medicap parent company Cardinal Health of "unfair and predatory practices," the nearly 60 franchise owners said that in recent years, an "arbitrary decision by MSI/Medicap to stop supporting its own franchise system" has led to dwindling services, while the company has continued to collect "exorbitant" franchise fees. Meanwhile, they said, MSI and Medicap have introduced an offer for new franchisees to join the system for $499 per month while charging the remaining franchisees royalties equal to more than 5% of store sales. Unlike retail pharmacy chains, MSI and Medical operate under a franchise system in which member pharmacies adopt the MSI or Medicap brand while continuing to operate as independent businesses.
Cardinal Health dismissed the group's accusations.
“The overwhelming majority of our franchisees are pleased with the franchise system and its current offerings," Cardinal Health spokeswoman Tara Schumacher told Drug Store News. "We believe these claims are without merit, and we intend to vigorously defend our position.”
The complaint stems from a class-action suit filed in March 2010. The same organization, representing seven franchisees with more than 600 stores, sued Cardinal Health over the $499 fee for new franchisees, which the company introduced in July 2009, saying that Cardinal tried to renegotiate franchise agreements and then began reducing services across the board when it failed to reach its goal of getting 95% of stores to accept it, a claim that the company also dismissed at the time as having "no merit." In February of this year, a U.S. District Court judge in Ohio decided that the franchisees could refile individually in Missouri and Iowa, where MSI and Medicap originally had their headquarters, as opposed to filing a class-action suit.