Highlights of Medifast’s Item 19 Financial Performance Representations (2013 FDD)
Explanatory Notes for Part 1 – Gross Revenue and Cost of Medifast Goods for Franchised Medifast Weight Control Centers
- There were 25 Medifast Weight Control Centers operated by franchisees for the entire calendar year 2012. Of those Centers, only 20 of the 25 are required to submit revenue data to the franchisor. For the 20 Centers which are required to submit revenue data, the following is the annual data for 2012.
- The source of the Gross Revenue data is the franchisees’ reports submitted on a monthly basis as required under their franchise agreements and is not audited.
- The source of the cost of sales data is the internal records of the franchisor’s affiliate, Jason Pharmaceuticals, Inc., which sells the products to the franchisees. The cost of sales information is part of the data made available to the auditors of Medifast, Inc., although this table has not been audited or reviewed by the auditors of Medifast, Inc.
Explanatory Notes for Part 2 – Expenses for Company-Owned Medifast Weight Control Centers
- The following information demonstrates the average expenses for the 68 Centers operated by the franchisor’s affiliate, Jason Properties, LLC, throughout the entire calendar year of 2012.
- The line item expenses are expressed as a percentage of total expenses incurred by the centers and broken out into 3 categories based on annual Center sales; top 1/3, middle 1/3, and bottom 1/3.
- Please note that the performance information for 19 Centers that were not open for the entire calendar year 2012 and 2 centers closed during the course of the year were not included in compiling the data presented below.
- The franchisor’s 2012 financial statements, from which these figures have been taken, are audited and included in the Franchise Disclosure Document. However, the audited financial statements do not include the same level of detail.
- The basis for this disclosure is the top, middle, and bottom average expenses as a percent of total expenses of the affiliate’s 68 Centers that operated throughout the entire calendar year of 2012, and it is not based on the actual experience of any franchised units.
- The franchisor and its affiliate, Jason Properties, LLC, have agreements with Jason Pharmaceuticals that the wholesale prices charged to all Centers will be approximately 48% of the net product sales.
- The figure for Royalty expense is added into this disclosure even though the franchisor’s affiliate does not pay royalties to the franchisor, and it is expressed as a percent. The current royalty is 5% of Sales, capped at a maximum of $1,000 per month.
- The affiliates’ Centers benefit from the economies of scale inherent in the operation of several different Centers within a metropolitan area, particularly in Dallas, Texas; Houston, Texas; and Washington D.C. areas, and their ability to jointly advertise and promote the Centers’ business.
- If your Center is the first one in your area, you may need to incur substantially greater promotional and other costs, particularly during your first year of operations.
- There may be other costs and other expenses not identified and that the costs and expenses of company-owned locations may differ from franchisee-owned locations. In particular, company-owned locations do not pay Royalty Fees, training fees, late fees, audit fees, renewal fees, or any other fees you are required to pay to the franchisor.
- The company-owned locations also do not have a minimum local advertising requirement.
Part 1 – Gross Revenue and Cost of Medifast Goods for Franchised Medifast Weight Control Centers