WeightWatchers 2002 Annual Report Download - page 11

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Product Sales
We sell a range of proprietary products, including snack bars, books, CD-ROMS and POINTS
calculators that are consistent with our brand image. We sell our products primarily through our
classroom operations and to our franchisees. In fiscal 2002, sales of our proprietary products
represented 29% of our revenues, up from 11% in fiscal 1997. We have grown our product sales per
attendance by focusing on a core group of products that complement the Weight Watchers program.
We intend to continue to optimize our product offerings by updating existing products and selectively
introducing new products.
Company-Owned Operations
Our North American operations consist of approximately 3,600 meeting locations that generated
$350.7 million in meeting fee revenue for the fiscal year ended December 28, 2002. North America
attendance was 30.8 million for the fiscal year ended December 28, 2002.
International operations consist of approximately 8,400 meeting locations outside the United States
that generated $170.0 million in meeting fee revenue for the fiscal year ended December 28, 2002.
International attendance was 24.5 million for the fiscal year ended December 28, 2002.
Franchise Operations
We have enjoyed a mutually beneficial relationship with our franchisees over many years. In our
early years, we used an aggressive franchising strategy to quickly establish a meeting infrastructure
throughout the world to pre-empt competition. Our franchised operations represented approximately
33% of our total worldwide attendance for fiscal 2002. We estimate that, in fiscal 2002, these franchised
operations attracted attendance of over 27 million. Franchisees typically pay us a fee equal to 10% of
their meeting fee revenues.
Our franchisees are responsible for operating classes in their territory using the program and
marketing materials we have developed. We provide a central support system for the program and our
brand. Franchisees purchase products from us at wholesale prices for resale directly to members.
Franchisees are obligated to adhere strictly to our program content guidelines, with the freedom to
control pricing, meeting locations, operational structure and local promotions. Franchisees provide local
operational expertise, advertising and public relations. Franchisees are required to keep accurate
records that we audit on a periodic basis. Most franchise agreements are perpetual and can be
terminated only upon a material breach or bankruptcy of the franchisee.
We do not intend to award new franchise territories. From time to time we repurchase franchise
territories.
Licensing
As a highly recognized global brand, Weight Watchers is a powerful marketing tool for us and for
third parties. We currently license our Weight Watchers brand in certain categories of food, books and
other products. We believe that opportunities exist to further capitalize on the strength of our brand
and the loyalty of our members by more aggressively licensing our brand while maintaining its integrity.
Food and Beverage Trademarks
At the time of our acquisition by Artal Luxembourg, we and Heinz formed WW Foods, LLC, or
WW Foods, a 50-50 joint venture, under which we maintain and preserve the Weight Watchers
trademarks covering food and beverages. WW Foods granted an exclusive, worldwide, royalty-free,
perpetual license to Heinz to use the food and beverage trademarks for use on food products in its
core categories (including frozen dinners, frozen breakfasts, frozen desserts (excluding ice cream),
frozen pizza and pizza snacks, frozen potatoes, frozen rice products, ketchup, tomato sauce, gravy,
canned tuna or salmon products, soup, noodles (excluding pasta), and canned beans and pasta
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