GNC 2012 Annual Report Download - page 110

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Table of Contents
NOTE 16. SEGMENTS (Continued)
The following table represents sales by general product category. The category "Other Wellness Products" includes other wellness products sales from
the Company's point of sales system, sales from LuckyVitamin.com of $14.5 million, which is not on the Company's point of sales system, and certain
required accounting adjustments of $2.2 million, $6.5 million and $5.7 million for the years ended December 31, 2011, 2010 and 2009, respectively.
December 31,
2011 2010 2009
(in thousands)
U.S. Retail Product Categories:
VMHS $ 542,575 $ 496,093 $ 496,427
Sports Nutrition Products 621,751 531,269 443,408
Diet Products 139,612 122,259 128,039
Other Wellness Products 116,454 100,058 99,885
Total U.S. Retail revenues 1,420,392 1,249,679 1,167,759
Canada retail revenues(1) 98,102 94,679 88,555
Total Retail Revenue $ 1,518,494 $ 1,344,358 $ 1,256,314
Canada sales are presented in total not by category as product sales for Canada are managed in local currency.(1)
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 17. 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 franchise 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 $3.0 million, $2.8 million, and $2.4 million for the years ended December 31, 2011, 2010 and
2009, respectively.
105