Priceline owner Australian Pharmaceutical Industries (API) is focusing on franchisee profits and believes tough retail conditions are driving more independent pharmacies into its franchise network.

API CEO Richard Vincent said tweaking the business model to boost franchisee profitability is key.

“Given our franchise and distribution model our success relies on having successful business partnerships.

“We’ve taken steps to improve the franchise partner metrics our pharmacists regard as key. I’m of the view that this is an area where we have significant opportunity to refine our business model to increase profitability for ourselves and our business partnerships,” he continued.

Vincent said Priceline has a “strong pipeline” of franchisees interested in joining the network, which he expects to continue in FY18.

“[The pipeline] provides us with a high level of confidence that we’re still viewed as a strong, sound long term investment by potential franchise partners,” Vincent said.

The company will be assisting franchisees with landlord negotiations over the next 12 months, criticising centre owners for being “out-of-step” with current conditions.

“Some retail landlord’s expectations are out of step with trading conditions, we’ll be taking a tougher line in those negotiations,” he said.

“Even though it’s not our preferred position we might have to close some stores that have become un-economic.”

In full-year results last week, Priceline revealed modest growth for the 12 months ended 31 August, impacted by what Vincent described as “difficult market conditions” during FY17.

Like-for-like sales across its 125 company-owned stores were down 0.4 per cent and retail register growth (excluding dispensary sales) slowed by 5.8 per cent to $1.15 billion.

The addition of 20 new locations to the overall 462 store portfolio helped increase total network sales by 5 per cent to $2.1 billion.