In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the GNC franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a GNC franchise, based on Item 7 of the company’s 2020 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a GNC franchise, based on Items 5 and 6 of the company’s 2020 FDD
- Section IV – Number of franchised and company-owned GNC outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of GNC’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, highest, and lowest gross retail sales for the 944 franchised GNC Stores that were open and operating in the United States as of December 31, 2019 and had been in business continuously from January 1, 2019 through December 31, 2019
- number and percentage of franchised GNC Stores that attained or surpassed the average gross retail sales for the calendar year 2019
Section I – Background Information
16 Things You Need to Know About the GNC Franchise
Files for Bankruptcy and Plans to Close Up to 1,200 Stores
1. In late June 2020, GNC filed for bankruptcy and warned it will close up to a quarter of its stores and search for a buyer. At the time of the announcement, GNC reported that the company had been saddled with nearly $1 billion of debt and has faced declining sales at its brick-and-mortar locations since before the pandemic. However, GNC said that stay-at-home orders during the COVID-19 pandemic prevented the company from accomplishing its refinancing plans because of the abrupt “dramatic negative impact” on its business.
2. GNC will continue operating, but it will become a smaller company. It plans to close up to 20% of its 5,800 retail stores, which amounts to as many as 1,200 locations across the United States. GNC also sells its products in an additional 1,200 Rite Aid stores. GNC obtained $130 million in fresh financing from its largest vendor, vitamin supplier IVC, to help it restructure. GNC aimed to emerge from bankruptcy in the fall.
3. GNC explained that bankruptcy will give the company an “opportunity to improve our balance sheet while continuing to advance our business strategy, right-size our corporate store portfolio, and strengthen our brands to protect the long-term sustainability of our company.”
4. Around 30% of GNC’s stores in the United States and Canada were forced to temporarily close because of the pandemic. In its first-quarter earnings report released in May, losses accelerated to $200 million – far more than the $15 million it lost during the same time period in 2019 – because of the store closures.
5. In a letter to shoppers, GNC said, “The Chapter 11 process will allow us to accelerate these strategies and invest in the appropriate areas to evolve in the future, while improving our capital structure and balance sheet.”
Launches New Premium Supplement Line with TV Personality and Performance Training Guru Jay Glazer
6. In early December 2020, GNC launched an all-new line of clean supplements in partnership with Jay Glazer, TV personality and owner of the Unbreakable Performance Center, a gym known for training celebrity and elite athletes alike. Combining GNC’s proven experience in science-backed supplements with Glazer’s relentless commitment to training and recovery, the new Unbreakable Performance Fueled by GNC product line delivers transparent, certified Banned Substance Free by Informed Choice formulas that prioritize physical performance that is important for mental health.
7. Beyond its cutting-edge training and recovery product formulas, Unbreakable Performance also backs a united mission between GNC and Glazer to support the nation’s veterans, using fitness as a tool to transition them to civilian life. GNC carries that mission out through its Live Well Foundation and Glazer through his nonprofit, Merging Vets & Players (MVP). Guided by that shared purpose, a portion of Unbreakable Performance product proceeds will go toward MVP with a commitment from GNC to match those contributions up to $100,000 during the month of December.
8. Glazer said, “In the Unbreakable family, we support our teammates and always have each other’s backs. With GNC in my corner – a pioneer in the sports nutrition industry that continues to drive innovation – it was a no-brainer to create a clean product line that’s full of everything you need and nothing you don’t. Launching this product line with GNC has been a deeply meaningful moment for the Unbreakable community and everyone touched by our mission through the incredible MVP program.”
9. Ryan Ostrom, chief brand officer of GNC Holdings, Inc., added, “Our partnership with Jay has been fueled by the mutual passions for full mind and body wellness and the shared experience as leaders in the health and fitness space since day one. It’s our common pursuit to Live Well and inspire others to find their inner champion, achieve personal success and to ultimately help cultivate the talented leaders of tomorrow.”
10. Unbreakable Performance products were designed with safety in mind, so people can work harder, recover smarter – and do it all over again. Products now available at GNC stores and www.gnc.com/unbreakable include:
- 100% Whey Protein – Packed with 25g of high-quality protein, containing all nine essential amino acids, to support performance goals. Now available in two flavors: Supreme Chocolate and Thrilla n’ Vanilla.
- Whey Isolate – Packed with 25g of ultra-pure protein to support performance goals. Now available in two flavors: Supreme Chocolate and Thrilla n’ Vanilla.
- Pre-Workout – Ultra-concentrated with 200mg of caffeine, 2.5g of creatine, and 1.6g of beta-alanine. Now available in two flavors: Cryo Blue and All Out Punch.
- Aminos – Provides 8g of aminos (4g BCAA and 4g EAA) with 585mg of electrolytes. Now available in two flavors: Berry-on Acai and Unbreak-a-berry.
- Energized Aminos – Provides 8g of aminos (4g BCAA and 4g EAA) with 585mg of electrolytes and 80mg of caffeine. Now available in two flavors: Berry-on Acai and Unbreak-a-berry.
- Plant-Based Aminos – Provides 6g of BCAAs and 1.26g of coconut water powder. Now available in two flavors: Lemon Tea and Unbreak-a-berry.
- Protein Shakes – Provides 20g of protein for just 130 calories and 5g of carbs. Now available in two flavors: Supreme Chocolate and Thrilla n’ Vanilla.
11. Ambassadors with powerful stories who have participated in the MVP program will share their own Unbreakable moments on GNC social channels. To join the Unbreakable family, and win the chance for a private meet and greet with Jay Glazer himself, GNC invited fans to follow along and share their own Unbreakable story on social media by using #IAmUnbreakable and @gnclivewell, or by resharing from @JayGlazer or @gnclivewell.
12. GNC dates back to 1935 when David Shakarian opened a small health food store in Pittsburgh, Pennsylvania. Shakarian’s store specialized in selling yogurt, which Shakarian’s father had helped introduce in the United States, but other healthy foods like honey, grains, and healthy sandwiches were also available. Even though health food was believed to be a passing fad at the time, Shakarian’s store received enough business that he was able to open a second location six months later. Over the next few decades, Shakarian opened additional stores in the Pittsburgh area.
13. In the 1960s, when more people began embracing the concept of natural foods and better nutrition, Shakarian saw the opportunity to expand outside of Pennsylvania. Around this time, he changed the company’s name to General Nutrition Centers (GNC). Shakarian continued to run the company until he stepped down as CEO in 1984. However, he continued to serve as GNC’s chairman until his death later in the year.
14. Following Shakarian’s death, GNC was sold to Thomas H. Lee Partners, a private equity investment/management fund. A decade later, in 1999, GNC was acquired by Numico, who then sold GNC to Apollo Management in 2003. Just a few years later, GNC was once again sold to the Ontario Teachers’ Pension Plan and Ares Management.
15. Over a decade later, in 2018, Chinese state-owned Harbin Pharmaceutical Group agreed to acquire an approximately 40% stake in GNC. Despite the new leadership, GNC’s sales slumped and in 2019, the company announced that it would be closing 900 mall locations in 2020. Then, in June 2020, GNC filed for Chapter 11 bankruptcy protection and indicated plans to close hundreds of stores. Although GNC has had to close numerous stores, the brand still has locations across the United States and in 50 countries.
Entrepreneur’s Franchise 500
16. GNC did not rank on Entrepreneur’s 2021 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of GNC franchise costs, based on Item 7 of the company’s 2020 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on GNC’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 1,178
- Outlets at the End of the Year: 1,099
- Net Change: -79
- Outlets at the Start of the Year: 1,099
- Outlets at the End of the Year: 1,037
- Net Change: -62
- Outlets at the Start of the Year: 1,037
- Outlets at the End of the Year: 1,956
- Net Change: -81
- Outlets at the Start of the Year: 3,293
- Outlets at the End of the Year: 3,173
- Net Change: -120
- Outlets at the Start of the Year: 3,173
- Outlets at the End of the Year: 2,984
- Net Change: -189
- Outlets at the Start of the Year: 2,984
- Outlets at the End of the Year: 2,727
- Net Change: -257
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- Below is an historical financial performance representation that is based on information from existing franchised GNC stores that have been open for business to the public within the United States for at least one year during a one-year measuring period from January 1, 2019 through December 31, 2019.
- As of December 31, 2019, there were 956 franchised GNC Stores that were open and operating in the United States. Of those 956 franchised GNC Stores, 944 of them had been in business continuously from January 1, 2019 through December 31, 2019, and the franchisor used the financial performance data from those 944 franchised Stores for that period in arriving at the financial performance representation below.
- The financial performance representation does not include information for franchisees who were terminated, reacquired, not renewed, or left the system for other reasons during the 2019 calendar year.