GNC Franchise Concerns #1: Corporate Instability
GNC franchise concerns include the stability of the parent company and franchisor of the GNC retail brand, Pittsburgh, PA-based General Nutrition Corporation. General Nutrition Corporation is a wholly-owned subsidiary of General Nutrition Centers, Inc. The ultimate parent company of General Nutrition Centers, Inc. is GNC Holdings, Inc., which is a public company (NYSE: GNC).
(UnhappyFranchisee.Com) GNC retail stores specialize in the sale of vitamins, minerals and other food supplements, natural cosmetics and other health management items. The company offers a franchise ownership program that requires an investment of between approximately $192,117 to $354,217 for a new store and $158,817 to $806,597 to convert a single company-owned store to a franchise store.
The company is aggressively seeking to transfer ownership of 1000 stores from company-owned to franchisee-owned within the next few years.
In our initial post on GNC franchise cost, we enumerated some of our concerns about the current GNC franchise opportunity.
The first of our concerns is the stability of GNC Holdings, Inc.
Concern #1: GNC Holdings, Inc. Lacks Stability and is Reportedly an Acquisition Target
GNC Holdings, Inc. seems to be in turmoil and both its future management team and ownership seems to be uncertain.
Amidst heavy consumer lawsuits, increased competition, and falling same store sales and earnings, the health and wellness retailer’s stock price has plummeted 30% in the past 12 months.
GNC CEO Mike Archbold resigned this past July, and Director Robert Moran was appointed interim CEO.
October 19, 2016, the Motley Fool stock analysis stated that shares of GNC Holdings Inc. (NYSE:GNC) recently jumped 11% “following reports the health and nutrition products retailer is fielding acquisition interest from China.
…The Wall Street Journal this morning cited ‘sources familiar with the situation’ as stating GNC has met with ‘a range of Chinese buyers in recent weeks’ to measure their interest in an acquisition…
Who Will Own GNC Holdings, Inc. This Time Next Year?
With top level management in doubt and uncertainty of whether foreign owners will be acquiring the parent company, it’s difficult for a franchisee to gauge the risk of purchasing the GNC franchise.
Franchisors have overwhelming control over the retail concept and franchisees in the franchise relationship.
One should be very confident that a franchisor’s leadership team and owners are both competent and consider the success of its franchisees to be a strategic priority.
How can one determine that if the identity of those holding the franchisees’ fate in their hands in not yet known?
It’s impossible to be confident in leadership and owners when it’s uncertain who will be leading and who will own GNC in the short, medium and long terms.
The reason people pay a premium for a franchise is to gain the level of certainty and predictability that comes from a proven concept and established system.
It seems that predictability and stability are two crucial elements absent from the GNC franchise opportunity.
Other concerns in this series:
- GNC Franchise Cost and Concerns
- GNC Consumer Lawsuits & Regulatory Actions
- Declining Same-Store Sales, Rising Competition
- Direct Competition from General Nutrition Center Parent
Click on each of the above links to read – and share your thoughts on – our concerns.
Sources:
GNC Franchise Disclosure Document (FDD) 2016
ALSO READ:
FRANCHISE DISCUSSIONS by Company
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