Five franchisees filed a lawsuit last week against General Nutrition Cos. over promotional pricing in GNC stores.
The suit, filed in Federal District Court in Newark, NJ, alleges that GNC’s price promotions sell items for less than what franchisees pay, and that company-owned stores pay less than franchisees do for products.
That forces franchisees to sell some products below cost, with an average loss of $4 per item, said franchise attorney Gerald Marks, who represents the plaintiffs.
The suit alleges that GNC requires third-party vendors to sell through its own subsidiary, General Nutrition Distribution Co., and not directly to franchisees. The suit also charges that GNC imposes “arbitrary and inconsistent store appearance standards” that favor company-owned stores.
The suit was filed against GNC Franchising by five New Jersey GNC franchisees and the nationwide GNC Franchisee Association, which represents nearly 400 franchisees nationally.
“We plan on vigorously defending the case,” said GNC spokesperson Patrick Fitzgerald. “We are very proud of our franchise system, which has been recognized repeatedly for its commitment to quality franchising,” including 15 years as Entrepreneur Magazine’s No. 1 retail franchise opportunity in dietary supplements.
Pittsburgh-based GNC has 4,800 U.S. stores, 1,300 of them franchised. There are another 900 GNC mini-stores in Rite Aid drugstores and 800 GNC stores internationally.
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