GNC 2008 Annual Report Download - page 9

Table of Contents
Most of our company-owned and franchised U.S. stores are between 1,000 and 2,000 square feet and are located in shopping malls and
strip centers. We have approximately ten times the domestic store base of our nearest U.S. specialty retail competitor.
Website. In December 2005 we also started selling products through our website, www.gnc.com. This additional sales channel has
enabled us to market and sell our products in regions where we do not have retail operations or have limited operations. Some of the products
offered on our website may not be available at our retail locations, thus enabling us to broaden the assortment of products available to our
customers. The ability to purchase our products through the internet also offers a convenient method for repeat customers to evaluate and
purchase new and existing products. To date, we believe that a majority of the sales generated by our website are incremental to the revenues
from our retail locations.
Franchise Activities
We generate income from franchise activities primarily through product sales to franchisees, royalties on franchise retail sales, and
franchise fees. To assist our franchisees in the successful operation of their stores and to protect our brand image, we offer a number of
services to franchisees including training, site selection, construction assistance, and accounting services. We believe that our franchise
program enhances our brand awareness and market presence and will enable us to continue to expand our store base internationally with
limited capital expenditures on our part. Over the last two years, we realigned our domestic franchise system with our corporate strategies and
re-acquired or closed unprofitable or non-compliant franchised stores in order to improve the financial performance of the franchise system.
Store-Within-a-Store Locations
To increase brand awareness and promote access to customers who may not frequent specialty nutrition stores, we entered into a
strategic alliance in December 1998 with Rite Aid to open our GNC store-within-a-store locations. Through this strategic alliance, we generate
revenues from fees paid by Rite Aid for new store-within-a-store openings, sales to Rite Aid of our products at wholesale prices, the
manufacture of Rite Aid private label products, and retail sales of certain consigned inventory. In the third quarter of 2007, we extended our
alliance with Rite Aid through 2014 with a five year option. At December 31, 2007, Rite Aid opened 140 stores of 1,125 additional stores that
Rite Aid has committed to open by December 31, 2014.
Marketing
We market our proprietary brands of nutritional products through an integrated marketing program that includes television, print, and
radio media, storefront graphics, direct mailings to members of our Gold Card loyalty program, and point of purchase promotional materials.
Manufacturing and Distribution
With our technologically sophisticated manufacturing and distribution facilities supporting our retail stores, we are a vertically integrated
producer and supplier of high-quality nutritional supplements. By controlling the production and distribution of our proprietary products, we can
protect product quality, monitor delivery times, and maintain appropriate inventory levels.
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