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Hoshi Franchise Store
This page describes Hoshi's franchise system and leads to links of pages that provide more in-depth detail on its operation.
Hoshi Pharmaceuticals originally did not have regulations concerning the spatial layout of its individual franchises. A franchise, by definition, was simply an exclusive contract. But as the company expanded, it examined ways to increase revenue. One of the most important ways was to control distribution, and most important of all was the attempt to control the point of contact between merchant and consumer. Controlling the space of the drugstore was so important for drug manufacturers because consumption was not a given. Indeed, the popularity of franchising across the world in the early twentieth century can be attributed, in large part, to how franchises helped ameliorate the loss of control over products once produced. Hoshi structured the space of its drugstores in order to define and delimit the boundaries of contact. These are, as the following pages illustrate: 1.) the local, 2.) the regional, and 3.) the global.
The "Exclusive Contract" Store
Hoshi Pharmaceuticals based its franchise system on a simple contract between the company and an independent, individual store. After signing an exclusive contract (tokuyaku) with the company, a store became a franchise -- literally an exclusive contract store (tokuyakuten). A franchise could engage in other side businesses and sell other goods, provided that they did not compete with Hoshi-manufactured products. In exchange, the franchise had access to the company's national advertising network, marketing advice, and, of course, merchandise.
Hoshi's franchise system depended on growth and recruitment. It pursued a strategy for recruiting franchise members that attempted to build loyalty and trust, not only between customers and stores, but also between the company and the franchise workers who sold the products. Hoshi set barriers to entry deliberately low: the cost of the contract was a deposit originally set a minimum of 10 yen in 1910, but later increased 25 yen by 1912, paid up front to the company.
The company did not just use franchises to market its products, but to advertise the franchises themselves. It lured prospective merchants with the potential for exponential profits. One its earliest national recruitment campaigns invited prospective franchisees to contact the company for an application, stating "any person, in any location, can with as little as 10 to 15 yen of capital, earn more than 80 yen in a year." Another recruitment campaign boasted that "Based on a calculation of growing profit from the use of newspaper advertising, there are those who have earned more than two-hundred yen with as little as 25 yen of initial capital, while there are many cases of those who, with a two hundred yen investment, earned more than 2,000 yen." The advertisement continues by guaranteeing that if a hardworking location puts down 50 yen of capital, it would earn more than 300 yen in a year.
The Franchise Network
control; space; network; medicine distribution; wholesale system; Toyama; Doshōmachi; Honmachi
Previous paths have explored the importance of controlling the individual space of the franchise drugstore. This path, however, examines the value of managing the spatial arrangement between franchises within a broader network. Here, the interactions not only occurred between franchises within the network, but between different prospective franchise systems, whether it was Hoshi's or Shiseidō's or some other competitor's distribution network. It involved controlling the locations of individual franchises over a given region, in order to maximize sales.
As a newcomer trying to break into Japan's pharmaceutical industry in the early twentieth century, Hoshi relied on franchises because they addressed two fundamental problems. First, franchises helped the company gain a foothold into an already well-entrenched medicine distribution system in Japan. Second, they helped provide brand recognition. The selling of medicines, after all, is about selling promises, which is based on trust, reliability, and name recognition; franchise licenses ensured that merchants would sell Hoshi-brand products, rather than those of other brands.
Hoshi's franchise system attempted to overtake the prevailing wholesale system (tonya seido) for distributing medicines, which was similar to the distribution systems of other consumer goods. The wholesale system resembled, in both structure and function, the medicinal distribution system from Tokugawa times, which was composed of an intra-Asian network that funneled medicines from Nagasaki through monopolies in Ōsaka's Doshōmachi and Tokyo's Honmachi. The linchpin connecting manufacturers to retailers was, of course, the wholesaler (tonya), which substantially provided the same functions as their Edo period predecessors. The wholesaler took orders from the "ordering stores" (chūmonya) and the "stores selling to stores" (miseuriya). These stores then provided medicines to regional wholesalers (chihō-tonya), which were the final distributors to retail stores, doctors and pharmacies across the nation. This system roughly lasted from the beginning of Meiji up to the late 1930s.
Hoshi's franchise network also attempted to overcome another patent medicine network from Toyama, which was a sales system that explicitly catered to the rural backwaters of Japan's seacoast and which also had its origins from the early modern period. Toyama patent medicines were, perhaps, better known for how they were sold -- through a door-to-door system of peddling throughout the countryside -- than for the efficacy of the medicines themselves (gyōshō). The guiding ethos -- and principal sales slogan -- behind the sale of these medicines was the elevation of humanitarian needs over business interests: senyō kōri (“use first, pay later"). Medicine peddlers traveled to individual homes, and left a box of assorted medicines at the doorstep. Customers would have easy access to medicines the moment a sickness would occur, and they would only use what they needed. About half a year -- or perhaps even a year -- later, the merchant would return to settle accounts, restock supplies, and then customize later shipments. These deliveries and collections were often timed with the rhythms of rural life, often during or after seasonal holidays like New Year's or the summer festival of the dead, O-bon. Despite falling sales, partly due to state medical authorities criticizing the unscientific nature and poor quality of the medicines sold, this system of peddling medicine continued, adapting to the socio-economic changes of the twentieth century.
A rough sketch of Hoshi's franchise network is as follows. The company permitted only one franchise in each town or village. It did so to avoid, at all costs, competition among franchises as well as promote a cooperative group mentality among them. Each individual store, in a sense, had a sphere of influence in its designated area -- the store directly purchased its merchandise from Hoshi Pharmaceuticals, and it had the sole right and responsibility to sell goods for its area. The company likened these privileges to the "same special privileges as government-granted monopoly rights" (senbai tokushu wo etaru to tōitsu no tokuken). In practice, of course, there were a number of franchises that continued to sell other competitor's products in addition to Hoshi's, and if found out, they were summarily expelled.
The production of a space necessarily involved controlling the people who inhabited particular places. The next page, Placing People, further describes this logic, and the pages thereafter describe how this occurred through particular sites and vehicles.