Entrepreneurship represents a fighter who never gives up, but is open-minded enough to look at new alternatives. One person who fits that mould is Gideon Hartono, founder of the K-24 pharmacy franchise. Gideon refused to admit defeat in his initial dream, and turned to another route to find success.
Gideon Hartono had already done well for the son of a poor Chinese family who made a living by making traditional cakes. He’d graduated as a doctor and dreamed of specializing as an eye doctor.
Although he was the only civil servant to apply for the course and had done well in his undergraduate course, in the Indonesia of the early 1980s, his ethnicity meant the door to post-graduate studies was closed to him. Indeed, it had been hard for him even to enroll in medical school in the first place.
Undeterred, he continued practicing as a doctor at a government health center (Puskesmas) in Yogyakarta and looked around to see what else he might do. He turned first to his early hobby, photography.
He opened the Agatha Foto studio, putting his younger brother Tulus Benyamin in charge. The business prospered, and Gideon handed over the reins completely to his brother.
Meanwhile, in his work as a doctor, he became aware that it was very difficult for sick people to buy medicine at the weekends and holidays, and if a pharmacy did open, it boosted its prices. “This was unfair for consumers. They had no choice but to pay whatever price was demanded by the pharmacy.”
Gideon saw the opportunity to not only right a wrong, but also for a new business. He began a pharmacy that has developed into a franchise with a total of 265 member stores.
The K-24 pharmacy chain boasts a logo featuring the colors green, red, yellow and white. These, for Gideon, are the symbols of pluralism, and recognition of his ideas of assimilation and the provision of affordable medicines for all.
Each K-24 franchisee has to agree with the anti-discrimination philosophy of the company and Gideon makes it very clear that he does not welcome any business partner who will demand that his employees are all of one particular religion or ethnicity.
On pricing, Gideon believes that a margin of between 17% and 25% is enough to cover overheads and provide a reasonable margin for profit. Some operators, he notes, mark up medicines by as much as 40%.
Another requirement is that K-24 stores must be open seven days a week, 24 hours a day. K-24 stands for komplet 24 jam.
“The vision of K-24 is to be a blessing and benefit for Indonesian society. We want to provide qualified medicines that are cheap and easy to get,” states Engeline Tjia, CEO of the K-24 operation.
Stab in the dark
Gideon had no thought of market research before he plunged into the pharmacy business, but merely followed his business instincts.
He also had to fight for the right to open his first store. He needed a license from the Association of Pharmacy Graduates (ISFI) and found that one of the members of the association’s board operated a pharmacy where he wanted to locate his business and was trying to block his application.
Gideon moved to challenge the ISFI with a law suit, but that drastic move proved unnecessary when other members of the board intervened and granted the license.
With initial capital of Rp400 million, he opened his first store in October 2002 on Jl. Magelang in Yogyakarta. Business was slow for the first three months but as people came to realize that it was always open – on Idul Fitri, Christmas or New Year holidays, as well as Sundays and in the middle of the night – custom began to pick up.
After a while, the response was so positive that in much less than a year, Gideon was able to open his second pharmacy, on Yogya’s Jl. Gejayan.
The government doctor was able to resign his position as a civil servant to concentrate on his new business and, nine years since he opened his first store and after deciding to franchise his concept, K-24 has 265 outlets across the country.
Gideon also has the honor of his business winning a place in the Indonesian Record Museum (MURI) as the pharmacy that has never closed its doors from the first time it opened.
Every K-24 pharmacy must have two pharmacists, while government regulations allow a pharmacist to change the medicine with the approval from the doctor or patient. In keeping with the company’s basic philosophy of providing access to medicines for all, K-24 pharmacists are not only encouraged to be professional, but also helpful to the poor.
“How? Easy! Offer them generic medicine, which is usually around 15% of the branded one. That will reduce our turnover, but that person will tell everyone how we helped him. That is very effective advertising,” says Engeline.
“To deal with the decrease in turnover which results from offering generic medicine to the consumer, we use a strategy called margin mix. We take a different margin for each medicine in line with the financial ability of the consumer.”
In order to control the quality of service at franchises, the K-24 management provides a coaching class every three months. If the franchise is distant, the coaching class is delivered by video.
It’s a good business for everyone concerned. A K-24 franchisee pays Rp800 million up front and royalties of 1.5% of turnover every month. The price covers two years’ rent of the business location and stock and working capital for three months. Since stores must be open 24 hours a day, employee salaries and electricity are additional challenges the franchisee has to expect.
How long does it take to achieve return on investment? “It depends on the franchisee’s commitment and creativity in doing business,” says Engeline. “The location of the outlet will determine the level of sales. Some franchisees achieve return on investment in one or two years, but there are also franchises where they have not achieved it in seven years.”
Gold mines they may not be, but K-24 pharmacies certainly help provide poorer members of the community with a reliable source of affordable medicine. GA