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JENNY CRAIG - FDD UFOC ITEM 1 Detail

ITEM 1.���������������� THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND

AFFILIATES

The franchisor is Jenny Craig Franchising, LLC ("we", "us" or "our"). We are a Delaware limited liability company, organized in August 2003. We do business under the name Jenny Craig Franchising, LLC, and we do not do business under any other name. We have not offered franchises in any business other than weight loss and weight management.

Our principal business address is 5770 Fleet Street, Carlsbad, California 92008. The identity of and principal business address for our agents for service of process are disclosed in Exhibit C.

 

Corporate Background and our Parents

 

Sid Craig and Jenny Craig started the "Jenny Craig" concept in Australia in 1982. Jenny Craig Holdings, Inc. ("JC Holdings"), through both Jenny Craig, Inc. ("JO"), a direct subsidiary, and indirectly through other JCI subsidiaries, owns and operates Jenny Craig Weight Loss and Weight Management Centres ("Centres"); franchises others to own and operate Centres; provides weight-loss and weight management products and services through telephone consultations; procures and supplies food and other products for Jenny Craig Weight Loss Centres; leases Centres; and provides management and information systems services. Nestle Holdings, Inc., a subsidiary of Nestle S.A. ("Nestle"), a Swiss business company and world''s largest food and beverage company, headquartered in Vevey, Switzerland, acquired JC Holdings in July 2006, and Nestle is now our ultimate parent.

 

Until March 28, 2007, we were a subsidiary of Jenny Craig International, Inc. ("JC International"). On that date, JC International transferred ownership of us to Jenny Craig NA Franchising, Inc. (formerly known as JCCHI) ("JC NA Franchising"). JC International itself was merged into JCI on March 29, 2007.

As a result of the mergers and transfers described above, we are now a direct subsidiary of JC NA Franchising, which in turn is a direct subsidiary of Jenny Craig Weight Loss Centres, Inc., which in turn is a direct subsidiary of JCI. JCI is a direct subsidiary of JC Holdings, which in turn is a direct subsidiary of Nestle Holdings, Inc., which in turn is a direct subsidiary of Nestle. (Collectively, JC NA Franchising, Jenny Craig Weight Loss Centres, Inc., JCI, JC Holdings, Nestle Holdings, Inc. and Nestle are our "Parents").

 

Our Predecessors and Affiliates

Before November 2003, our predecessor and immediate parent company JC International held the right to franchise the Jenny Craig System in the U.S. and Canada. In November 2003, JC International, which was our direct parent, assigned its rights in the Jenny Craig franchise agreements that were then in effect in the U.S. and Canada to us, and we have been the exclusive franchisor of the Jenny Craig System in the U.S. and Canada since then. As of December 31, 2006, there were 93 franchised Centres in the U.S. (including all U.S. territories) and 9 franchised Centres in Canada

Before November 2005, JC International both owned and franchised Centres in Australia and New Zealand through subsidiaries. In November 2005, JC International entered into master franchise agreements with a master franchisee for Australia and New Zealand. As part of the November 2005 transaction, the master franchisee acquired the subsidiary that owned and operated Centres in Australia and New Zealand (JC International acquired the New Zealand Centres in 2003 from the Craigs). As of December 31, 2006, there were 99 Centres owned by the master franchisee in Australia and 17 Centres owned by the master franchisee in New Zealand. The master franchisee also subfranchises 20 Centres in Australia. On March 28, 2007, JC International transferred those master franchise agreements to our affiliate, Jenny Craig ANZ Franchising, Inc. (formerly known as Jenny Craig Australia Holdings, Inc.) ("JC ANZ").

 

Our affiliates Jenny Craig Products, Inc. ("JC Products"), also an indirect subsidiary of JCI, and Jenny Craig Operations, Inc. ("JC Operations") offer food and nutritional supplement products for use in Centres. Until December 31, 2007, another indirect subsidiary of JCI and affiliate, Jenny Craig Management, Inc. ("JC Management"), provided accounting and administrative services for us, including providing computer specifications and software for our franchisees, tracking franchisee payments, and administrating the billing of franchisees for food and nutritional products. JC Management also provided information systems and other management services to JC Holdings and its subsidiaries. JC Management was merged into JC Operations on December 31, 2007.

 

Except for JC International and The Haagen-Dazs Shoppe Company, Inc. ("H-D Shoppe Company"), a subsidiary of Nestle, none of our affiliates has offered franchises for sale in the U.S. or Canada. H-D Shoppe Company is the franchisor of H�agen-Dazs� ice cream shops in the U.S. H-D Shoppe Company has been offering franchises since July 1993, but does not offer franchises for the type of business that you will be operating. As of December 31, 2007, there were 258 HSagen-Dazs� shops operating in the U.S., all of which were owned by franchisees.

The names, jurisdictions of incorporation, and principal business addresses of our parents, predecessors and affiliates mentioned above are set forth below:


 

Name


Jurisdiction/Form/ Date of Organization


Address


 


Jenny Craig Holdings, Inc.������ Delaware/corporation/January 2002


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig, Inc.


Delaware/corporation/June 1989


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig Weight Loss Centres, Inc.

Delaware/corporation/October 1991


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig NA Franchising, California/corporation/June 1996 Inc.


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig Operations, Inc.��� Catifornia/corporation/December 1995


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig Products, Inc.������ California/corporation/December 1995


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig Weight Loss Centres (Canada) Company

Nova Scotia/corporation/September 1997


5770 Fleet Street Carlsbad, CA 92008


 


Jenny Craig ANZ Franchising, Inc.


Delaware/corporation/June 1989


5770 Fleet Street Carlsbad, CA 92008


 

Name


Jurisdiction/Form/ Date of Organization


Address


 


The H�agen-Dazs Shoppe Company, Inc.

New Jersey/corporation/June 1983


500 Washington Ave. South Suite 2040.

Minneapolis, MN 55415


 


Nestl� Holdings, Inc.


Delaware/corporation/January 1994


Merrittview, 383 Main Avenue, Norwalk, CT 06851


 


Nestl�, S.A.


Switzerland/chartered company/1905


Avenue Nestl� 55 1800 Vevey Switzerland


The Program

 

Jenny Craig offers weight loss and weight maintenance programs through Centres (both company-owned and franchised) and through other direct channels, such as through telephone sales under its Jenny Direct program. The Program combines a calorie controlled, nutritionally balanced menu with education and motivation to help clients manage their weight. The program includes individual consultations, recommended moderate exercise, proprietary food and food supplement products, vitamins and minerals supplements, and other related products that change periodically (such as cookbooks, audio and video tapes, etc.).

"Jenny Craig"-branded foods and nutritional supplements are made by suppliers to specifications approved by JC Products. Jenny Craig offers a variety of breakfast, lunch, dinner and snack food items, including prepackaged frozen meals, shelf-stable and canned foods, snacks dried products, and meal supplements.

 

The Franchise

As a franchisor, we offer franchises to operate Centres under our format and system (the "System"). The distinguishing characteristics of the System include individual consultations, recommended moderate exercise; "Jenny Craig"-branded food and food supplement products, which are proprietary ("Branded Products"), and other related food and beverage products that we may designate; vitamins and mineral supplements; procedures for operations; procedures for management and inventory control; training and assistance; and advertising and promotional programs; all of which may be changed, improved, and developed by us.

Each franchised Centre operates under a franchise agreement ("Franchise Agreement") (the current form of which is attached to this Franchise Disclosure Document as Exhibit C), and in accordance with our confidential operations manual, which has several volumes (the "Confidential Operations Manual").

We also offer franchisees the right to develop multiple Centres within defined geographic markets under an area development agreement ("Development Agreement") (the current form of Development Agreement is attached to this Franchise Disclosure Document as Exhibit D). The development schedule ("Development Schedule") attached to each Development Agreement describes the mandatory number of Centres you must open and the date by which each Centre must be opened and

 

 

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Mu! listate


I4702462W-1 (3/24/08)


Jenny Craig FDD 3/2008


operational. We will negotiate the Development Schedule with you before we enter into a Development Agreement.

We do not operate businesses of the type being franchised and we do not engage in other business activities. As of December 31, 2006, Jenny Craig Operations, Inc. ("JC Operations"), an indirect subsidiary of JCI, owned and operated 406 Centres in the United States. JC Operations also provides weight loss and weight management products and services through telephone sales in the U.S. and Canada. Since 1997, our affiliate Jenny Craig Weight Loss Centres (Canada) Company Limited ("JC Canada"), another indirect subsidiary of JCI, has owned and operated Centres in Canada. As of December 31, 2006, there were 26 Centres owned by JC Canada.

 

Market and Competition

There is an established market for the weight loss business. You will compete with national chains such as Weight Watchers and LA Weight Loss Centers and with regional and local weight loss businesses. You will also compete with self-administered weight loss regimens and books, direct marketers of weight loss programs (e.g., Nutri System), doctors, bariatric surgery, nutritionists, dietitians, the pharmaceutical industry, government agencies and non-profit groups which offer weight control help using diets, exercise and drugs. There is also competition from food manufacturers and distributors of low-calorie and diet products. Nestle sells Lean Cuisine products and other products that focus on the weight management and healthy living marketplaces. New methods of weight control are continually introduced into the marketplace and will compete with you.

 

Industry-Specific Regulations

Some state consumer protection laws and regulations cover contracts for the provision of weight loss services and/or for the rescission of consumer contracts, including within the weight management industry. These laws and regulations may require you to include certain language in contracts with your clients. These laws permit clients to withdraw from the program and receive a refund within periods ranging from three to ten days.

Some state laws and regulations also restrict the duration of prepaid contracts for certain types of services, including for weight loss and weight management services. You may have to limit the duration of prepaid contracts and when and how prepaid contracts may be renewed. Some state health club and related laws also require businesses like Centres to post bonds for the protection of their customers. These bonds may be in an amount equal to any prepaid amounts paid to you by customers of the Centre.

Sales of prepackaged foods which are part of the program are regulated in most states by rules for retail food stores. These rules govern refrigeration and frozen storage of foods, cleaning and sanitizing requirements, toilet facilities, service sinks, and similar matters. You should consult your own lawyer on federal, state and local laws and regulations that will apply to your business.





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