Big Bucks From Little Franchises Grow

 

A successful franchisor enriches himself, but a good one, someone like Harold Katz, enriches others as well. The Nutri/System formula perfected by Katz has provided dozens of franchisees with a business opportunity that seems hard to beat; a number have won millionaire status via the weight-loss route.

Ed Richey and Barry Goodman, both 30, were college classmates who had gone into the insurance and concrete businesses, respectively, in Nashville. In 1980, after hearing about Nutri/System from a mutual friend, they and a third party raised $63,000 -- $43,000 for the franchise fee and $20,000 for start-up expenses -- to open a center in Evansville, Ind. It paid off more richly than anyone had expected. They recovered their initial investment in four months, grossed $800,000 during the first year, and enjoyed earnings of 25%.

Realizing that they were onto a good thing, Richey and Goodman began scouting other locations. They had trained local people to manage the first weight-loss center, so they could simply oversee the operation from their headquarters in Tennessee. That made it relatively simple for them to become, in effect, subfranchisers. In July, less than four months after they had opened their first center, they opened a second, in Topeka, Kans. The following month, they added two others, in Wichita, Kans., and Des Moines, Iowa; in September, a fifth began providing Nutri/System service to the overweight residents of Omaha, Nebr. Since then, the growth has continued unabated. The young entrepreneurs are now principal stockholders in six companies that own or manage 27 centers in 12 states and that last year had revenues of more than $11 million. According to the partners, all but the first four centers were financed by Nutri/System profits.

Richey and Goodman term their experience with Katz a "very rewarding" one. "It's considerably better than the concrete business," attests Goodman.