WeightWatchers 2007 Annual Report Download - page 16

management efforts during the previous week and to provide encouragement and advice. Part of the meeting is
educational, where the leader uses personal anecdotes, games or open questions to demonstrate some of our core
weight management strategies, such as self-belief and self-discipline. For the remainder of the meeting, the
leader focuses on a variety of topics pre-selected by us, such as seasonal weight management topics,
achievements people have made in the prior week and celebrating and applauding individual successes.
Discussions can range from dealing with a holiday office party to making time to exercise. The leader encourages
substantial participation and discusses supporting products and materials as appropriate. At the end of the
meeting, new members are given special instruction in our current weight management plans.
Our leaders help set a member’s weight goal within a healthy range based on body mass index. When
members reach their weight goal and maintain it for six weeks, they achieve lifetime member status. This gives
them the privilege to attend our meetings free of charge as long as they maintain their weight within a certain
range. Successful members also become eligible to apply for positions as leaders. Field management and current
leaders constantly identify new leaders from members who have strong interpersonal skills and are personable.
Leaders are usually paid on a commission basis.
Our traditional payment structure in our meeting business is a “pay-as-you-go” arrangement. A new member
pays an initial registration fee and then a weekly fee for each meeting attended, although free registration is
offered as a promotion during certain times of the year. We also offer prepayment plans consisting of pre-paid
meeting vouchers and coupons.
In fiscal 2006, we introduced the Monthly Pass commitment plan, or Monthly Pass, in NACO. In fiscal
2007, we launched Monthly Pass in the U.K., German and Australian markets. Monthly Pass is offered at an
approximate 20% discount to the typical “pay-as-you-go” weekly fee. Monthly Pass is charged automatically to
the member’s credit card on a monthly basis until the member elects to cancel. Monthly Pass is available for
purchase throughout the year. As part of Monthly Pass, members receive unlimited access to meetings at this
discounted monthly price plus free access to Weight Watchers eTools, the Internet weight management
companion for Weight Watchers meetings members. In fiscal 2007, approximately half of our member
attendances in NACO were attributable to Monthly Pass.
As of the end of fiscal 2007, less than 18% of our total worldwide attendance was represented by franchised
operations. We estimate that, in fiscal 2007, these franchised operations attracted attendance of over 13 million
people. Franchisees typically pay us a fee equal to 10% of their meeting fee revenues. 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 to pre-empt competition. Since then we have
acquired a large number of franchises and expect to continue to do so.
Our franchisees are responsible for operating classes in their franchise class territory using the program and
marketing guidelines 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, class
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.
Our Product Sales
We sell a range of products, including bars, snacks, cookbooks, POINTS value guides, Weight Watchers
magazines and POINTS calculators, that complement our weight management plans and help our customers in
their weight management efforts. Our emphasis has been on consumables that drive recurring purchases. Our
products are designed to be high quality, offer benefits related to the Weight Watchers plans, be competitively
priced and be easy to merchandise. We continuously update our products and share best practices around the
globe.
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