Coutu announced that the Superior Court of Quebec upheld the royalty clauses in its franchise agreements. In particular, the court determined that the clauses don’t violate section 49 of the Code of Ethics of Pharmacists of Quebec, which prohibits pharmacists from sharing profits from the sale of drugs or professional fees with a nonpharmacist, the company noted.
Coutu said the December 29 ruling by Justice Michèle Monast indicates that its franchisees pay royalties “corresponding to the fair value of the rights granted to them and the goods and services provided in return.” Those include support services and benefits from the use of the Coutu name and trademarks in the operation of their businesses, the company said.
“We are pleased with this ruling that will provide reassurance to the pharmacist-owners affiliated with our network as to their franchise agreements and regarding the value of the goods and services they receive,” Coutu president and chief executive officer François Coutu stated.
The case stemmed from a court action brought in November 2008 by Coutu franchisee Michel Quesnel. The pharmacist-owner had been fined by the Ordre des pharmaciens du Quebec, a pharmacy practice professional group, for violating its code of ethics by sharing profits and fees from the sale of medications with a nonpharmacist — i.e., Coutu. As a result, Quesnel filed a motion requesting that the royalty clause in the Coutu franchise agreement be declared illegal because it required franchisees to pay a percentage of sales from drugs and professional fees to the company.
Currently, Coutu’s retail pharmacy network encompasses 418 franchised drugs stores in Quebec, New Brunswick and Ontario under the PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté banners.
Another legal action involving Jean Coutu franchisees is pending. This past summer, a class-action suit was filed against the company in the Superior Court of Quebec by 284 individuals representing 306 franchises in the province. Sopropharm, a Montreal-based organization representing the majority of pharmacist-owners operating under the Coutu banner, claimed the company has overcharged franchisees for services. Coutu said at the time that it would contest the action.