WeightWatchers 2003 Annual Report Download - page 11

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In the United States during 2001, our licensee, WeightWatchers.com as part of its business,
launched two online paid subscription products, Weight Watchers Online and Weight Watchers eTools.
Weight Watchers Online offers information on FlexPoints, POINTS values, content on various weight-loss
subjects, professionally-developed low-POINTS recipes and weekly meal plans for different POINTS
ranges. In addition, Weight Watchers Online provides an online journal, an online POINTS calculator, a
recipe POINTS calculator, a weight tracker and progress charts and targeted messages to help
subscribers achieve their weight-loss goals. This product targets self-help dieters who choose the Weight
Watchers plan but not the Weight Watchers meeting services. Weight Watchers eTools is designed to
supplement and strengthen the Weight Watchers classroom business. Weight Watchers eTools is a suite of
electronic tools available only to Weight Watchers members, designed to help them achieve greater
success by making it even easier to follow FlexPoints and by reinforcing our weight-loss approach
between meetings.
Our Corporate Solutions line of weight-loss offerings also includes discounted prepaid local meeting
plans, Weight Watchers online subscriptions and the At Home kit.
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 2003, sales of our proprietary products
represented 29% of our revenues. 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 4,200 meeting locations that generated
$392.4 million in meeting fee revenue for the fiscal year ended January 3, 2004. North America
attendance was 34.6 million for the fiscal year ended January 3, 2004.
International operations consist of approximately 9,400 meeting locations outside the United States
that generated $214.8 million in meeting fee revenue for the fiscal year ended January 3, 2004.
International attendance was 26.3 million for the fiscal year ended January 3, 2004.
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
26% of our total worldwide attendance for fiscal 2003. We estimate that, in fiscal 2003, these franchised
operations attracted attendance of over 21 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.
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