Today, Nutrisystem can boast of over 40 years in the weight loss industry, from its humble beginnings as a basic meal shake company to its massive franchise operation. That is not to say everything has been smooth sailing. Along the way, there have been struggles and outright upheaval.
As a young man, Harold Katz had watched his mother struggle with weight loss, losing weight then gaining it back. In 1971, Harold began a little weight loss clinic called Shape Up, a diet center that focused weight loss efforts on protein meal replacement shakes.
A few years into the venture shakes fell out of favor and put Katz in the position of making changes, so by 1977 he had recruited microbiologist Jay Satz to come on board and assist in developing a line they called the Nutrisystem Foods of the Future 2000.
During the late 70s and early 80s Nutrisystem rocketed to stardom, Harold Katz was making money hand over fist and the company reached saturation level with franchises. At this point, Katz’s stake in the company was worth nearly 300 million dollars. The company went public and all seemed right in the weight loss world.
Unfortunately, Katz thought he could take his success with Nutrisystem and translate it into other venues including but not limited to, salons, dentistry, executive recruiting and more. He quickly learned not all businesses would benefit from his franchise model. In addition to losing money on diversified investments, Nutrisystem began to face lawsuits from franchisees over the cost of the food.
It didn’t take long for sales to plummet amid the turmoil of lawsuits. By 1984, company profits fell over $17 million dollars. Harold Katz made the wise decision to step down as CEO of Nutrisystem and make way for fresh ideas in the mind of David McCulloch.
Things would get somewhat better, but it would be nearly a decade and chapter 11 before the company would see any real turn around in fortune.
Michael Hagan bought out Nutrisystem for a steep discount, but he had a long road to recovery ahead for the embattled company. Down to a handful of franchises, a pitiful call center, and outdated options, it was going to take a complete overhaul to get back in the game.
Hagan started by rehiring Jay Satz who had left in the early 90s and the two began revamping the menu, reflecting the glycemic index, ranking carbs on how they affect blood sugar. Michael Hagan tried the diet himself and lost 12 pounds!
This was the beginning of the turn around where sales reps who barely made $30,000 per year morphed into top earners who are easily in the six-figure range. This upswing took a lot of hard work and the foresight to bring on good people such as Jay Satz for food and Thomas Connerty for marketing.
What is the takeaway? Nutrisystem is a company that has weathered many storms throughout the years while learning to adapt and change to offer better solutions for their customers. Today, they focus on a balanced and nutritional diet rather than fad shakes or even harmful drugs.