Marketdata has tracked the weight loss market since 1989, and has witnessed the strong growth of franchising in the industry in the 1980s-1990s. However, that model no longer is viable, as explained below.
“The diet industry’s growth model of the 1980s-1990s is no longer working. Brick & mortar commercial weight loss centers and franchises don’t meet the needs of today’s dieters and investors and are not profitable enough, due to high overhead costs, and are mismanaged. The blame lies with both the franchisors and the franchisees.”, according to Research Director, John LaRosa.
Some the findings of our research:
Franchisor lack of experience: Most of the small regional commercial diet franchisors operating today have not been in the business very long and have limited operating experience with which to counsel franchise buyers. They may not know how to build multiple locations.
The profit margin for a typical commercial weight loss center is about 14% of net sales, down from about 20% 15 years ago. This is based on gross annual revenues of $569,000 (industry avg.). So, if a franchise buyer hires a manager, two counselors and a receptionist to run a typical retail strip mall center, he’s earning about $79,000. This is not enough to attract many investors, who want to be absentee owners. $569,000 is the average but many centers only generate $250,000 – $500,000 per year.
Successful weight loss franchisors have strong leadership, don’t overcharge franchisees for diet products, maintain a strong and consistent advertising presence, are able to regularly launch new products and programs to keep up with competitors and market trends, and maintain strong quality control. They are in it for the long term, and are picky about who they sell to. They also monitor the practices of franchisees to make sure they are not being deceptive and are providing quality services (mystery shoppers, surprise visits). Too often, this is not done.
“Due to the lack of regulation or a national trade association in the weight loss industry, too many commercial weight loss franchise buyers are attracted by promises of making a quick buck, and will use any marketing tactics they can to make a sale. Franchisors turn their backs. There are too many variables in weight loss franchising today to control.”, according to John LaRosa.
Marketdata Can Help
Contact John LaRosa, Head Consultant, and Marketdata Enterprises, for help with your franchise, whether it’s established or you’re just starting out. We will take an objective look at your operations and determine WHY you are not selling more franchises, WHY they are not profitable enough, whether you are obtaining the RIGHT franchise buyers–or whether you should be franchising at all. Maybe corporate-owned centers will work better for you.
See complete Press Release here: