GNC 2010 Annual Report Download - page 10

Table of Contents
Most of our company-owned and franchised U.S. stores are between 1,000 and 2,000 square feet and are primarily located in shopping
malls and strip shopping centers. We have approximately nine times the domestic store base of our nearest U.S. specialty retail competitor.
Website. In December 2005 we 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 have limited or no retail operations. Some of the products offered on our website may
not be available at our retail locations, 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 most 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. Over the last several 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.
Franchised 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 franchised 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 2007, we extended our alliance with Rite Aid
through 2014 with a five year option. At December 31, 2009, Rite Aid had opened 698 of an additional 1,125 stores that Rite Aid 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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