Nutrisystem 2005 Annual Report Download - page 13

Slim and Tone Franchise Business
On December 2, 2004, we acquired Slim and Tone LLC, a franchisor of women’s express fitness centers.
Slim and Tone franchisees provide women with an exercise facility that is safe, convenient, comfortable,
supportive and one that meets their fitness needs. Members obtain a 30-minute workout using hydraulic
resistance training equipment. Franchise operators now offer the NutriSystem Nourish program to their members,
providing a comprehensive weight loss program that brings together diet and exercise. As of December 31, 2005,
there were 117 Slim and Tone franchise centers open and operating. Revenue from our Slim and Tone operations
represent 1% of 2005 revenue.
In the physical fitness market, many current and potential competitors have larger customer bases, similar or
greater brand recognition, and significantly greater financial, marketing and other resources. The women’s
express workout market is dominated by Curves, which operates in approximately 9,000 locations. Competitors
have and are expected to continue to adopt aggressive pricing schemes and innovative product and service
offerings. Increased competition may result in reduced operating margins, an inability to increase market share
and a diminished brand franchise for our company.
To succeed as a franchisor, Slim and Tone must have a successful network of franchisees and attract new
franchisees to the business. We believe that we can compete effectively in these areas and that our diet program
enhances Slim and Tone’s market position and provides us with additional brand recognition.
Employees
As of January 31, 2006, we had approximately 470 administrative, sales, counseling and customer service
personnel, 100 employees dedicated to fulfillment and 19 employees in marketing. None of our employees are
represented by a labor union, and we consider relations with our employees to be good.
Seasonality
Typically in the weight loss industry, revenue is strongest in the first quarter and lowest in the fourth
calendar quarter. We believe our business experiences seasonality, driven by the predisposition of dieters to
initiate a diet and the price and availability of certain media. However, in 2005, our revenue increased
sequentially every quarter due to our increased level of advertising spending. We believe the overall impact of
seasonality on revenue is difficult to predict at this time. As a franchisor in the women’s express workout market,
Slim and Tone experiences relatively little seasonality.
Available Information
All periodic and current reports, registration statements, code of conduct, code of ethics and other material
that the Company is required to file with the Securities and Exchange Commission (“SEC”), including the
Company’s annual report on Form 10-K, quarterly reports on Form10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934
(the “1934 Act Reports”), are available free of charge through the Company’s investor relations page at
www.nutrisystem.com. Such documents are available as soon as reasonably practicable after electronic filing of
the material with the SEC. The Company’s Internet web site and the information contained therein or connected
thereto are not intended to be incorporated into this Annual Report on Form 10-K.
The public may also read and copy any materials filed by the Company with the SEC at the SEC’s Public
Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet
site, www.sec.gov, which contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC.
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