GNC Settles with Franchisees

PITTSBURGH--General Nutrition Companies Inc. (www.gnc.com), which has approximately 4,500 stores internationally, settled three lawsuits against it by one percent of its franchisees, who were seeking amends for all 1,400 franchisees.

The agreement reached by all parties provided franchisees (as a group) with $4.2 million in store credits to be used over 24 months for GNC products, which equals out to $125/month per store. In addition, the deal called for protecting franchisees from increased franchise renewal fees by putting a cap on a five-year renewal term and using the company's new Intranet system to immediately send notices of discontinued products and resulting reduced prices.

"Our franchisees are critical to the growth of the GNC brand, and we are committed to meeting their needs," said Mike Meyers, president and chief operating officer of the company. He added that GNC wanted to avoid a drawn out legal process, although the company admitted to no wrongdoing. Russ Cooper, senior vice president and general manager for GNC Franchising Inc. added, "These are changes that will benefit both GNC and our franchisees while strengthening the franchising system itself."

GNC met with previous legal problems this year when the Allegheny County Common Pleas court had to stall a vote that would have changed the proportion of dollars spent on local and national advertising. The Independent Association of General Nutrition Franchisees accused GNC of rushing through proposals that allocate ad dollars to a national campaign that would benefit corporate stores but would not include franchised stores. However, the company solved this situation by eliminating the co-op ad structure.

"We firmly believe that going to court is always the least desirable way to resolve business differences between a franchiser and its franchisees," Cooper concluded.