WeightWatchers 2012 Annual Report Download - page 19

management experts. Our more than 10,000 leaders worldwide run our meetings and educate members on the
Weight Watchers method of successful and sustained weight management. Our leaders also provide inspiration
and motivation for our members and are examples of our program’s effectiveness because they have lost weight
and maintained their weight loss on our program. Leaders are usually paid on a commission basis.
Meetings typically begin with registration and a confidential weigh-in to track each member’s progress.
Leaders and receptionists are trained to engage the members at the weigh-in to talk about their weight
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 shopping for healthy foods. The leader
encourages substantial participation and discusses supporting products and materials as appropriate. At the end of
the meeting, new members are given special introductory 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 potential new leaders from members who have strong interpersonal skills.
The primary payment structure for our meetings business globally is through a monthly commitment plan,
referred to as Monthly Pass in NACO and many other geographies. With Monthly Pass, members receive
unlimited access to meetings at a discounted monthly price plus free access to Weight Watchers eTools, the
Internet weight management companion for Weight Watchers meetings members. We offer the Monthly Pass
commitment plan in eleven countries, including the United Kingdom, Germany and Australia. Monthly Pass is
generally offered at an approximate 20% to 25% discount to our traditional “pay-as-you-go” weekly fee
depending on the country. Under the terms of Monthly Pass, a fee is charged automatically to the member’s
credit or debit card on a monthly basis until the member elects to cancel. Monthly Pass is available for purchase
throughout the year.
The Company’s meetings business payment structure has shifted significantly in recent years toward
Monthly Pass. In fiscal 2012, on an aggregate basis across the markets where we offer Monthly Pass, well over
three quarters of our meeting paid weeks, and approximately three quarters of our member attendances, were
attributable to Monthly Pass. Our traditional payment structure in our meetings business had been a “pay-as-you-
go” arrangement. Under this traditional method, 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 some countries.
As of the end of fiscal 2012, less than 17% of our total worldwide attendance was represented by franchised
operations. We estimate that, in fiscal 2012, these franchised operations attracted attendance of approximately
ten 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 opportunistically.
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
3