Between 1976 and 1980, Nutri/System's revenues increased at a compounded annual rate of 150%. Net income as a percentage of revenues more than doubled, going from 7% to 16%.
Now Nutri/System is fast approaching market saturation. It currently owns or franchises 496 weight-loss centers, and estimates that the United States can support about 200 more; it should reach the magic 700 figure within the next two, years.
Faced with the unusual problem of earning too much money to invest in its original business, Nutri/System has gone on an expansion binge. Within the past year, the company has started an international division, created a new company, and acquired three others. The expansion and diversification are being financed by earnings, which continue at record levels, and by the proceeds of a January 1981 stock offering. As of January 31, 1982, the firm still had $14 million in cash in the bank and no long-term debt.
Nutri/System's sales of its first Canadian franchise is pending; it estimates that Canada will eventually support 70 centers. The firm is also completing a study of overseas possibilities and plans to have centers operating in Australia, the United Kingdom, Germany, and Italy by the end of 1983. It faces no clear-cut competition in any of these countries.
The company has started up a new business, Tele-Cut. In August 1981, it purchased Fox-Morris Associates, an executive placement firm, and in March 1982 acquired a cosmetics company and a chain of figure salons. By confining itself to companies that can make use of its franchising expertise and its in-house capabilities in sales and marketing, it hopes to minimize the risks associated with diversification. It is also adding new employees to handle the increased load. Ten management and middle-management officers have been hired during the past year, and the company now employs a total of 900 people.
Tele-Cut is a hair-styling salon that makes use of television and computer technology. Clients view a variety of hairstyles on a small screen. Once the styling is completed, it is videotaped. On subsequent visits, the tape is replayed so clients can point out what they want done differently. In the future, computer capability will enable a stylist to superimpose different styles and hair colors on a customer's head before any work is done. One salon is now operating experimentally, and the firm plans to begin franchising within six months.
Fox-Morris Associates, a 20-year-old executive placement company, was acquired by Nutri/System for $4.2 million. Based in Philadelphia, the firm has 18 offices in a number of cities and is expected to do $10 million in business this year. Plans call for movement into new markets, the addition of 10 more company-owned offices, and 30 franchises during the first year, and the expansion of hiring services to include secretaries, temps, health-care and home-care workers, and others. Nutri/System believes it can triple Fox-Morris's revenues in less than two years and is investing the necessary money and time.
The firm is also looking at the possibility of a live-in weight-loss facility; the clinic would offer the regular program and do away with the possibility of cheating. In November, Nutri/System began test marketing its own brand of body-care cosmetics, including cleansing and toning lotions, through its weight-loss centers. It plans to market these products with those of its March 1982 acquisition, Nutrient Cosmetic Ltd., which sells nationwide through a chain of "i Natural Cosmetics" shops.
In March 1982, Nutri/System also acquired the Gloria Marshall Figure Salons; it will operate about 200 of them under the Gloria Marshall name.