GNC 2010 Annual Report Download - page 120

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Successor Predecessor
Year ended Year ended March 16- January 1-
December 31, December 31, December 31 March 15,
U.S Retail Product Categories: 2009 2008 2007 2007
(in thousands)
VMHS $ 496,427 $ 465,245 $ 342,731 $ 98,447
Sports Nutrition Products 443,408 410,133 299,035 87,983
Diet and Weight Management Products 128,039 148,158 120,099 36,647
Other Wellness Products 99,886 106,681 81,218 21,211
Total U.S. Retail revenues 1,167,759 1,130,217 843,083 244,288
Canada retail revenues (1) 88,555 89,088 66,181 15,025
Total Retail Revenue $ 1,256,314 $ 1,219,305 $ 909,264 $ 259,313
(1) Canada sales are presented in total not by category as product sales for Canada are managed in local currency.
The data above represents the majority of the revenue reported for the domestic portion of the Company's retail segment. In addition to
these sales, additional revenue and revenue adjustments are recorded to ensure conformity with GAAP. This includes wholesale revenue (to
the Company's military commissary locations), deferral of our Gold Card revenue to match the twelve month discount period of the card, and a
reserve for customer returns. These items are recurring in nature, and the Company expects to record similar adjustments in the future.
In addition to the Retail product categories discussed above, Franchise revenues are primarily generated from (1) product sales to
franchisees, (2) royalties from franchise retail sales and (3) franchise fees, and Manufacturing/ Wholesale sales are generated from sales of
manufactured products to third parties, primarily in the VMHS product category.
NOTE 20. FRANCHISE REVENUE
The Company's Franchise segment generates revenues through product sales to franchisees, royalties, franchise fees and interest
income on the financing of the franchise locations. The Company enters into franchise agreements with initial terms of ten years. The Company
charges franchisees three types of flat franchise fees associated with stores: initial, transfer and renewal. The initial franchise fee is payable
prior to the franchise store opening as consideration for the initial franchise rights and services performed by the Company. Transfer fees are
paid as consideration for the same rights and services as the initial fee and occur when a former franchisee transfers ownership of the franchise
location to a new franchisee. This is typically a reduced fee compared to the initial franchise fee. The renewal franchise fee is charged to
existing franchisees upon renewal of the franchise contract. This fee is similar to, but typically less than the initial fee.
Once the franchised store is opened, transferred or renewed, the Company has no further obligations under these fees to the franchisee.
Therefore, all initial, transfer and renewal franchise fee revenue is recognized in the period in which a franchise store is opened, transferred or
date the contract period is renewed. The Company recognized initial franchise fees of $2.4 million for the year ended December 31, 2009,
$3.3 million for the year ended December 31, 2008, $1.4 million for the period March 16 to December 31, 2007, and $0.3 million for the period
from January 1 to March 15, 2007. 114