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Is It Possible to Franchise a Medical Practice Successfully?

Yes…but you must proceed with caution and a precise plan.

When it comes to health law and physician based franchises the primary "legal" barrier that a franchisor faces relates to state specific laws that prohibit the "corporate practice of medicine". Although every state is different – with New York and California being the most stringent and severe – generally‚ the corporate practice of medicine doctrine refers to a series of state specific regulations that prohibit a corporate entity from maintaining control over a licensed physicians delivery of medical services. That is‚ the corporate practice of medicine doctrine seeks to prevent non-physicians from profiting from or interfering with a physicians delivery of medical services.

So How Does Franchising Fit In – If Franchising Fits In at All?

Franchising fits in when it provides a licensed physician with a business platform – comprised of "advertising and business" systems that enhance a physician franchisees earning potential along with his or her ability to deliver valuable medical services. Franchising does not fit in where the franchise model is established as an end-run around state licensing requirements with the goal of permitting non-physician investor franchisees (and franchisors) to profit from a physician employees and/or physician franchisees delivery of medical services.

So‚ as a franchise lawyer‚ my take on this issue is that "franchising and physician services" mix best when:

  1. The franchise model is focused on franchisees who are licensed physicians;
  2. The franchise model is focused on providing franchisee physicians with a marketing plan and system focused on distinguishing and branding that physicians services;
  3. The franchise model is focused on elective procedures and preventative care that does not‚ necessarily involve third-party payers; and
  4. The franchise model is focused on a fixed fee royalty structure that is not tied to the physicians revenues.

At the International Franchise Expo this past weekend‚ I came across "Tru-Skin Dermatology". Although I did not have an opportunity to review Tru-Skin's FDD‚ from their marketing materials‚ it appeared that they were focused on "physician franchisees" and the development of marketing systems‚ service offerings and products designed to enhance a physicians marketing position within his or her local community. That is‚ Tru-Skin appears to have created "marketing packages" for services that many physicians either fail to offer or fail to properly market. So‚ from a franchise and marketing perspective‚ try-Skin caught my attention. However‚ I would be curious to learn how Tru-Skin structures its royalties‚ whether or not non-physician franchisees are permitted to purchase a franchise and how they deal with potential issues involving the corporate practice of medicine?

Definitely interesting – especially since healthcare and franchising appear to be two trends bound to continue accelerating toward one another. If you are a franchisor or prospective franchisor of corporate wellness programs‚ appearance enhancement services‚ emergency care service or screening services‚ I would be really interested in hearing your take on these issues.

DISCLAIMER – I have not reviewed Tru-Skin's FDD and business model‚ as such‚ I have no idea as to whether or not Tru-Skin is a good investment. Nor do I have any clue (without having reviewed the FDD) as to whether or not the Tru-Skin business model complies with corporate practice of medicine regulations. As a consistent policy of Franchise Law Solutions‚ The Internicola Law Firm‚ P.C. and as a franchise lawyer‚ I do not recommend particular franchises nor franchise investments.

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