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BOOK EXCERPT

5.28.99  
How Jenny Craig Turned a Weight Problem into a Business Colossus
Excerpts from Women Entrepreneurs Only: 12 Women Entrepreneurs Tell the Stories of Their Success

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Nearly 40 years ago, Jenny Craig had an experience shared by millions of her weight-loss followers in one way or another. She looked in the mirror and didn't like what she saw: a five-foot-five-inch woman, who had always been slim, was 45 pounds overweight. It had happened, as with so many other weight worriers, gradually, during a difficult pregnancy with her second daughter.

Her baby arrived, but the excess pounds remained. Jenny saw another image in that unforgiving mirror, her mother: "My mother was always overweight after having six children. I was the youngest, and I never saw her thin. She died when she was only 49 from a stroke. Looking into that mirror, seeing her there in myself, made me realize that if I wanted to live to raise my two daughters, I had to watch my weight." Jenny had plenty of reminders in a family in which weight was the No. 1 health enemy. Her mother had nine brothers and sisters, and eight of them -- all overweight -- died before the age of 50.

What Jenny calls her "personal realization" led to a weight-management colossus: 780 Jenny Craig centers with revenues exceeding $350 million. (Eighty percent of the centers are company-owned, 20 percent franchised.) First, Jenny got her own weight under control (never deviating thereafter by more than three pounds), then she went to work for fitness clubs -- managing, owning, and selling one of her own. After divorcing her first husband and marrying Sid Craig, Jenny partnered with him in setting up meteoric Jenny Craig Inc. startups, first in Australia and then the U.S.

While Jenny was growing up in New Orleans during the Depression, her father transported supplies and crews to oil rigs in the Gulf of Mexico and took on two other jobs to pay the bills for a large family on a tight budget. Along with his example of a hard-work-never-hurt-anyone attitude, he fostered a positive outlook. It stayed with her. Sid Craig still remembers the impact the mature Jenny made upon him the first time he met her. He had flown in from California to recruit people to staff a fitness center in New Orleans. "The moment I met her I knew she was a top winner. She lit up a room when she came into it. When she attended a training session, she was far superior to the trainer I had sent in. It was obvious she was a gem and, besides that, she was very attractive. She had it all."

Jenny had gotten back into shape by joining a gym called Silhouette/American Health. Besides exercising regularly, she cut down on portion sizes, selected her food carefully, and eliminated desserts. She lost unwanted pounds and gained what was then an insight: "I noticed a need before it was a whole industry, and in that sense, I was entrepreneurial."

Whoever heard of cholesterol when I first started in this business in 1959? People didn't pay any attention to what they ate. When I grew up in New Orleans, my mother was a fabulous Creole cook. Everything we ate involved butter and fat, with lots of starches. I just figured that was the way to eat. With regard to my own weight problem, I was figuring out what to do. I was always one to exercise, and I wasn't losing weight. I was sure there were a lot of people just like me that want someone to tell them what to do. You'd talk to a doctor, and he would just say to eat less. That was the standard reply. Just eat less than you're eating. What really started me off in this business was my own research into what kinds of foods I should be eating.

Jenny spent the 1960s working for Silhouette and learning the business. Having started out as a regular at the gym, she became interested in people who had lost weight. The gym's managers couldn't help but notice Jenny's strong presence as she befriended fellow weight-losers. They hired her, and soon she was running the gym. After that, she was running four other gyms as well -- until she made her first entrepreneurial move. She mortgaged her house to raise enough money to open her own club, Healthetic, which her drive and knowhow made into an immediate success. Jenny then sold it to her former employer and went on the lookout for a franchise.

Enter 38-year-old Sid Craig, a former dance instructor and onetime child tap dancer. While in his senior year at Fresno State University majoring in business and psychology, Sid taught dancing at night for an Arthur Murray studio. After graduation, he joined Arthur Murray Co., where he ended up owning several franchises and joining the board of directors. His next stop was a chain of women's fitness salons, Body Contour Inc., which had 17 centers in California. Sid came on board as a partner to give the company a jump-start by going national. New Orleans was his first stop to open a salon, and Jenny was the first person he hired.

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. Because a two-year track record was required before they would franchise me, they offered me a job, and I took it. After I became director of the center, Sid and I talked on the phone every day, me in New Orleans, Sid in California. The New Orleans area began to do so well that we expanded from there and pretty soon I was supervising all of the Southern states. Sid called me up one day and asked if I would open Chicago and I agreed to do that. I eventually became national director of operations. At our first national convention, which was held in Chicago, Sid asked me where my husband was. I told him I was getting a divorce. He started to smile and said, "That's interesting. So am I." Until then, we had never discussed personal things on the phone. Whenever I talked to him it was strictly business. How many enrollments, how much gross, that kind of stuff.

They were married in 1979. Jenny had watched Sid build Body Contour into 200 centers. Jenny's enthusiasm was building for putting into action her nutrition-focused formula for losing weight: "People think of diets as something you go on and off. Ours is a lifestyle," she says. But Jenny's theme of combining exercise and nutrition didn't fly with Sid's partners.

I kept saying to Sid's partners that the world is changing, and we really need to start offering more nutritional guidance. But the partners wanted to keep everything status quo. Their attitude was that if something is working, don't change it. But you have to keep up with the times. So we gave them three options. Sell to us, buy us out, or you take half the centers and we'll take half. Their reply was that they liked things just the way they were. They were totally unreceptive to the options we offered, and so the end result was that Body Contour was sold in 1982 to Nutri/System.

Because the deal carried a two-year noncompete clause in the U.S., the Craigs had to look abroad to carry out their goal of starting a weight-loss company based on Jenny's nutrition-based formula. Australia was their choice. It looked like a Down Under version of the U.S. and presented no language barrier. So the Craigs went for broke, using as capital Sid's proceeds from the sale of Body Contour. "We were both fifty when we went to Australia in 1983 and laid everything on the line," Jenny recalls. Sid remembers the doubters who "told us we were nuts," trying to introduce weight-loss centers in a country where the preferred look could be described as "Midwestern beefy." They were warned that Australia was "the toughest market in the world," with 30 paid holidays a year and an understated way that resisted U.S.-style marketing and promotion. They were advised that the U.S. and Australia are two countries divided by a common language.

The Craigs knew what they were doing. Their former company was already in the Australian market and doing well as Gloria Marshall Figure Control Salons. They started with 12 centers in Melbourne and, by the first year, had expanded to 50. They also took pains to pick a name that would work, as Jenny recalls.

We put down about twenty different names on a piece of paper and we talked to every Australian we came in contact with, asking them what they thought would be the best name. Most of the names were generic, things like Ultra-System or New Dimension. Without exception, everyone picked Jenny Craig. When we asked why, they said because we like dealing with a person rather than a corporation.

Jenny led the way in developing the formula that has become the trademark of Jenny Craig Inc. The formula is, as summed up by Jenny, "a weight-loss program that involves nutritional guidance, pre-packaged food, exercise and behavior modification." Sid, as the quintessential marketer, won national attention for Jenny Craig with his strategy of placing live TV advertisements on Australia's top talent show, New Faces. The entire country started talking about Jenny Craig, which rapidly achieved the 14th-highest company name recognition. Australians began mentioning Jenny Craig in good-natured wisecracks as the name became synonymous with losing weight and looking good. At one televised international cricket match, the cameras panning the crowd picked up a sign aimed at the overweight captain of the English team: "See Jenny Craig. Quick."

In Australia, their working partnership crystallized. "I am an extreme optimist," Jenny says, "while Sid likes to play the devil's advocate. He wants to know the worst thing that can happen," Jenny says. "I don't even want to think about the worst case. I provide the discipline and stick-to-it-iveness, the elbow grease. Sid is an absolute genius in marketing." Sid also provides the financial knowhow that sets centers in motion.

I always told people in Australia that I had a 24-hour job because we'd get up in the morning, talk business at breakfast and again at dinner. Our whole life was the business when we were developing the company. Luckily, our kids were grown and on their own, my two daughters and Sid's daughter and two sons. He always tells me that I'm the most unrelenting person he's ever met, and it's true. If I make a commitment to something I will stick to it no matter what.

By 1985, the Australian operation had a gross income of $50 million and was providing $10 million a year for its U.S. parent company. The two-year noncompete clause had expired. It was time to start up Jenny Craig in the U.S., in familiar territory -- California.

We chose Los Angeles because it was our home and had enough population to justify opening 12 centers in the area. Our timing was good, but as we realized after opening on a Monday with full-page newspaper ads, we had 11 competitors with a foot already in the door. We knew the competition was there, but were surprised at how strong they were in terms of advertising. We realized that we had to do something different. That's when we started researching frozen dinners and found that no other company was offering frozen dinners on the premises. Weight Watchers had frozen dinners in the supermarket, but they were not part of their program.

We also found an interesting phenomenon. The markets where we had the most competition were our best markets. I realized why. There was greater awareness of the risks of obesity and a major reason is the advertising we and all the other companies were doing. As to picking locations, we had the advantage that Sid had lived in Los Angeles and knew the market from his years with Gloria Marshall salons. He knew the best neighborhoods and sections. Here we had a leg up on competitors who go strictly by demographics. We had other ways of identifying locations, a lot of it based on previous experience.

Five years after entering the U.S. marketplace, the company became the sixth-fastest-growing private firm in the country. Jenny and Sid have no doubt that the need and the market are there for what they offer. They point to the statistics. Obesity is widespread and increasing. U.S. government estimates in 1997 showed that 35 percent of the adult population is clinically obese, their numbers increasing by 10 percent since 1980. Obesity is characterized by many health experts as the most common chronic disease in the U.S.

The 1990s presented new challenges for the company in the face of increasing competition, a 1993 hassle with the Federal Trade Commission about advertising (settled in 1997 with a consent agreement), and fiscal pressures stemming from a downturn in the weight-loss industry.

The company was restructured in the mid-1990s, and its approach updated. Jenny Craig introduced in August, 1997, a user-friendly ABC Program that emphasizes convenience and simplicity. It replaces lengthy workbooks and structured menu plans with a short, interactive pocketbook guide and a flexible menu plan for making daily choices from an A, B, or C category, without needing to calculate calories or fat grams. It also places greater emphasis on the hardest time in losing weight -- the first few weeks -- while continuing to emphasize a combination of nutrition, physical activity, and behavioral changes. As far as Jenny is concerned: "Life should be enjoyed, not wasted counting fat grams and calories."

Gregory K. Ericksen is the National Director of Entrepreneurial Services of Ernst & Young, which provides tax, business advisory and consulting services for domestic and global clients. He is also Chairman of the Entrepreneur Of The Year Institute. He is also the author of What's Luck Got to Do With It?: 12 Entrepreneurs Reveal the Secrets Behind Their Success (Wiley; 1997).

Reprinted with permission from
Women Entrepreneurs Only: 12 Women Entrepreneurs Tell the Stories of Their Success by Gregory K. Ericksen
Copyright 1999 by Ernst & Young LLP
Published by John Wiley & Sons, Inc.
Adapted with permission of the author and John Wiley & Sons, Inc. May not be modified, reproduced, republished, uploaded, posted, transmitted, or distributed in any manner.
Title available from bookstores, online retailers, and from the publisher at www.wiley.com or by calling 1-800-225-5945

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