Risk Score
Pending analysis
Investment Range
$130,000 - $894,876
Total US Locations
63
Business Summary
Medicap Pharmacy operates retail pharmacy stores offering prescription and nonprescription medicines, vitamins, and other healthcare items. The business primarily serves the general public, with an emphasis on elderly persons. Medicap Pharmacy franchisees gain access to a network for health insurance plans and pharmacy benefit managers, allowing them to participate as providers in various insurance plans.
Corporate History
Medicap Pharmacies Incorporated was established in Iowa on February 16, 1971, and began operating its first retail pharmacy that same year. In 1974, Medicap Pharmacies expanded by offering franchises for its pharmacy business model. Between 2001 and 2003, it ventured into offering franchises for wellness centers through a subsidiary called Medihealth Solutions, Inc. Medicap Pharmacies is a wholly-owned subsidiary of Medicine Shoppe International, Inc. (MSI), which was founded in 1970 and also began offering pharmacy franchises in that year. In 1995, MSI itself became a wholly-owned subsidiary of Cardinal Health, Inc., a major pharmaceutical distributor. While some affiliates of Medicap Pharmacies previously operated company-owned locations, all such stores were either closed or sold by June 30, 2009. Currently, Medicap Pharmacies operates solely through its franchised locations and provides support services and optional 'Retail Solutions' to its franchisees via Cardinal Health and its affiliates.
Financial Overview
Investment Range
$130,000 - $894,876
Royalty %
3%
Equipment Costs (Low)
$138,000
Equipment Costs (High)
$345,000
Working Capital
$210,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
Medicap Pharmacies' FDD notes that its financial condition, as reflected in the financial statements of its parent, Cardinal Health, Inc., "calls into question the Franchisor's financial ability to provide services and support to you." While the consolidated financial statements of Cardinal Health, Inc. show significant revenues (e.g., $226.8 billion in 2024) and positive net earnings in recent years ($852 million in 2024), and strong cash flow from operations, the company also reports a negative shareholders' deficit (e.g., $(3,212) million in 2024). The financial statements are audited by Ernst & Young LLP, who issued an unqualified opinion. However, the explicit "Special Risk" disclosure is critical and suggests potential concerns about Medicap Pharmacies' ability to provide support, despite its parent company's overall large scale and positive operating cash flow.
Financing Details
Medicap Pharmacies does not offer any direct or indirect financing to its franchisees. Medicap Pharmacies also does not guarantee any franchisee notes, leases, or other obligations.
Performance Metrics
Total US Locations
63
Franchised Units
63
Corporate Units
0
Avg Square Footage
2,500
Franchising Since
1974
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
23
Litigation Summary
Medicap Pharmacies itself has no required litigation disclosures or arbitrations against franchisees in its last fiscal year. However, its parent companies, Medicine Shoppe International (MSI) and Cardinal Health, have a significant litigation history. MSI has faced multiple breach of contract and good faith/fair dealing arbitrations with its franchisees. Many of these involved franchisees claiming overpaid fees, while MSI counterclaimed for unpaid amounts. These cases often resulted in settlements, with franchisees converting agreements or terminating and paying MSI, or MSI winning awards. The most recent MSI-initiated case against franchisees was filed on April 7, 2023, for collection of franchisor fees and supplier purchases. Cardinal Health has been involved in several large-scale legal matters, including a 2007 SEC case for fraudulent earnings (settled with a $35 million civil penalty), and a 2015 FTC case for radiopharmaceutical monopoly (settled with a $26.8 million payment). More recently, Cardinal Health is a defendant in the ongoing National Prescription Opiate Litigation, which has involved a 2022 National Opioid Settlement Agreement with most states and political subdivisions (with expected payments of up to $4.4 billion through 2038), a February 2024 settlement with Alabama for $123 million, and approximately 371 pending private plaintiff lawsuits as of August 7, 2024. Cardinal Health is also involved in the Generic Pharmaceutical Pricing Antitrust Litigation (pending as of June 30, 2024), Cordis IVC Filter Litigation (with a $275 million settlement in April 2023 for many claims, but remaining lawsuits), and In re Valsartan, Losartan, and Irbesartan Products Liability Litigation (pending as of June 30, 2024). Additionally, in November 2023, Cardinal Health received a Civil Investigative Demand from the Department of Justice concerning potential Anti-Kickback Statute and False Claims Act violations related to a 2022 transaction.
Bankruptcy History
Medicap Pharmacies has no bankruptcy history to report.
Agreement Terms
Initial Term
5 years
Renewal Term
5 years
Renewal Conditions
To renew, Medicap Pharmacies franchisees' agreements will automatically renew for an additional 5-year term, provided neither party gives a non-renewal notice at least 6 months before the term ends. If Medicap Pharmacies requests, franchisees must sign the then-current form of franchise agreement as a condition of renewal, and the terms of this new agreement may be significantly different from their original one.
Training & Support Program
Franchisor Assistance
Medicap Pharmacies provides limited pre-opening assistance upon request, which may include help with selecting or purchasing equipment, signs, fixtures, or supplies. However, Medicap Pharmacies does not assist with site selection or lease negotiation. During operation, Medicap Pharmacies offers a variety of optional "Retail Solutions" that franchisees can select for additional fees, though a $300 monthly credit is provided for some of these. These solutions encompass services like business consulting (for operational and financial analysis), reimbursement consulting, marketing advantage programs (including website services, digital marketing, and communication packages), reconciliation services, inventory management, point-of-care testing, and immunization services, as well as front-end product management tools. Medicap Pharmacies also assists with marketing by providing advertising templates and guidance, grants access to private label products (Leader, Rugby, Major), and facilitates participation in its managed care network for health insurance plans. Franchisees receive copies of the Operations Manual. Additionally, Medicap Pharmacies currently aids in reviewing third-party reimbursements, reconciling payments, offers an EQuIPP Program for performance benchmarking, provides a Compliance Management Service for regulatory training (HIPAA, Fraud, Waste and Abuse), and offers audit education. Medicap Pharmacies explicitly states that it does not provide any direct training programs, but it may assist franchisees in accessing web-based training for compliance obligations.
Training Location
Not applicable as no initial training programs are provided by the franchisor.
Ongoing Support
After opening, Medicap Pharmacies offers a variety of ongoing support through optional "Retail Solutions" and other programs. These include business consultants who provide operational and financial analysis and recommendations. Franchisees can access reimbursement consulting services with bi-weekly advisor contact, Pharmacy Marketing Advantage for digital marketing and patient engagement (via website, app, text, email, and social media), and reconciliation services for claims. Medicap Pharmacies also provides Cardinal Health Inventory Manager for inventory replenishment, a Compliance Management Service for online regulatory training (such as HIPAA and Fraud, Waste and Abuse), and audit education regarding contracted payors. Additionally, Medicap Pharmacies franchisees get access to a line of private label products and participation in Medicap Pharmacies' managed care network for health insurance plans.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
retail
Owner Participation
Absentee Allowed
Territory Type
Non-Exclusive
Territory Size Requirements
Medicap Pharmacy franchisees are granted the right to operate a retail pharmacy in one specific location. The franchise does not provide an exclusive territory, meaning Medicap, its affiliates, and other franchisees may operate competitive businesses or solicit customers regardless of their location, without providing compensation to the franchisee. The franchisor considers a site's proximity to other Medicap businesses when approving a new location, but this is a site selection factor rather than a defined territory size requirement.
Staffing Notes
Medicap Pharmacies requires that each location always operates under the direct supervision of a licensed pharmacist. Franchisees are responsible for ensuring that all pharmacists they employ are properly licensed. Medicap Pharmacies does not require franchisees to impose any specific restrictions on any managers they hire. While personal participation from the owner is recommended, it is not mandatory, suggesting that the business can be managed by hired staff as long as pharmacist supervision is in place.