Jenny Craig mortgaged her home to start a gym, partnered with Sid Craig, and sold their weight-loss business to Nestlé for $600 million. She spent heavily on TV and celebrity ads, shifted from coaching to packaged meals that became 91% of revenue, and turned a forced move to Australia into a chance to expand.
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Hi, I'm Evan Carmichael and welcome to another edition of Modeling to Masters. Today we're going to look at how a former gym manager and how a dance instructor mortgaged their home to start a business they felt was needed, then moved everything to Australia, and later how they sold their business for $600 million. This is the story of Jenny Craig and the top 3 lessons that you can learn from her success.
Jenny Craig is an American weight loss guru and founder of Jenny Craig Incorporated. Craig was raised in New Orleans and married Sidney Craig in 1979. In 1983, she and her husband created a nutritional, fitness, and weight loss program in Australia. They founded the company and began offering the program in the United States in 1985. The company became a part of Nestlé Nutrition in 2006. The story begins after Jenny had her second daughter. She discovered that she couldn't lose the weight she had gained as easily as she had before. She was 45 pounds overweight and knew she had to change something. She mortgaged her house and used the money to open up her own gym and call it "Healthetic." The gym became extremely popular and she soon sold and went on the hunt for a new venture. That's where she met Sid Craig, a partner with Body Contour Incorporated. A chain of women's fitness salons. Sid Craig went to New Orleans to open up a body contour salon and hired Jenny as his first employee. The rest is history. They got married in 1979 and became frustrated with their business because they wanted to offer more nutritional guidance. Sid's partners refused and the Craigs sold the business to them as a result. The deal carried a 2-year non-compete clause in the United States, so the Craigs, both in their 50s, moved to Australia to start their nutritional company Jenny Craig Incorporated. They created 69 centers in Australia and then moved to the US once a non-compete expired. In 1991, the company went public and generated $73.5 million in capital. 5 years later, after having expanded to the United States, New Zealand, Canada, Puerto Rico, and Guam, the Craigs decided to sell their company to Nestlé for $600 million.
So the next question becomes, how can you model the success of Jenny Craig? Here are 3 action items that you can put to use into your business.
Action Item #1: Promote, promote, promote. Building a better mousetrap is not enough anymore to get a company off the ground. You need to aggressively promote your business to make sure your customers know that you exist. From advertising and public relations to with search engine optimization and social media, you have many opportunities to spread the word about your company, and you should never take your foot off the gas. In the company's early years, Craig made sure that exactly 10% of sales was directed back into commercial advertising each and every year. Individual franchises were also expected to spend 10% of sales, or at least $1,000 a week, on local advertising for their own centers. They used traditional advertising on television programs, leveraged celebrity endorsements, and created direct mail campaigns. But they also tried many offbeat approaches. As one example, Sid got the company a lot of publicity during one televised international cricket match, where cameras picked up on a sign in the crowd directed at the captain of the English team that read, "See Jenny Craig, quick!" Action Item #2: Offer products and services. I believe the best way to build a business is to start a service. It's low cost and gets you close to your customers. Your chances of survival are much higher and you learn what future services and products your clients need. Once you've established a base of customers and know exactly what's missing in the marketplace, you can create your products. You've got cash flow from your service business to keep the company running and you've got a loyal group of clients who are ready to buy. Jenny Craig had the same philosophy. Her business started with Jenny Craig Centers where they would help clients establish a workout program, offer nutritional guidance, and also give motivational services. Her business grew every year as she added more centers and people to her team. It was a very successful service-based business. Jenny Craig's big break came when she started offering prepared food products as a part of her offering. She brought on board a highly qualified staff of dietitians and psychologists, and physicians to help her create a menu that was healthy and nutritional. In doing so, Jenny's Cuisine became a central component to her program. All of her clients were required to purchase these portion and calorie controlled foods, which included over 60 different breakfast, lunch, dinner, dessert, and snack options. Jenny's Cuisine proved so popular that the company's gross revenues from food sales increased to 91% by 1993. It's important as an entrepreneur to never give up on your idea. Every business owner will face a moment of crisis which forces you to think whether it's all worth it. The long hours, the mounting debt, the personal sacrifices—these moments will help define you as an entrepreneur. It's the founders who stare those moments square in the face and keep on building who go on to be the ultra-successful entrepreneurs. From losing weight to starting her own business to not being able to run her business in America, Craig has proved that with perseverance, anything is possible. When the Craigs first sold their chain of Body Contour Gyms, they did so in agreement to a non-compete clause. They were not allowed to set up shop again anywhere in the US for 2 years. And so, refusing to wait 2 years before they could make their next move, the couple went on a search for their next destination. Where could they begin their new line of fitness centers? What country was similar to the US in terms of diet and fitness levels but presented no language barrier? The Craigs decided on Australia. Their friends thought they were nuts, but the couple never gave up and turned their new business into a company that sold for $600 million.
So remember, promote, promote, promote. Use products and services. And never give up. I wanted to end the video today by sharing one of my favorite true stories about Jenny Craig.
Jenny met Sid through an ad that Sid placed in a newspaper looking for a team to open up his New Orleans body contour salon. According to Jenny Craig, Sid ran an ad in the paper. I had just sold my business and I was looking for a franchise. I thought it sounded interesting, so I went in to see what it was all about.
Thank you for joining me for another edition of Modeling the Masters. I hope you enjoyed. I'd love to hear your thoughts and comments if you want to leave Feedback below the video and stay tuned for the next episode.
