Herbalife's Nutrition Clubs

Herbalife's Nutrition Clubs

     Herbalife's Nutrition Clubs

 Distributors are able to launch their own establishment with minimal upfront investment. Combine that with the assurance of riches from their mentors and many see the business opportunity as the chance of a lifetime.

The addition of Nutrition Clubs to Herbalife's selling model has provided Herbalife with the potential to dramatically increase revenue and provide it with its most essential success catalyst-its ability to recruit new distributors and increase the retention rate of current distributors.

It was no surprise that the clubs were a major focus for Herbalife during its analyst presentation on January 10th. While Bill Ackman presented some less than desirable photos of Nutrition Clubs during his "Who Wants to Be a Millionairepresentation, Herbalife responded with a heartwarming video to show that you can't really judge a club by its cover.

Ackman presented some of the onerous restrictions placed on club owners (as discussed in the next section), yet in our opinion he failed to unearth what we believe is a significant concern - the legality of the Herbalife Nutrition Clubs.

     The Rules

If you want to open a Herbalife Nutrition Club you need to abide by an exhaustive list of rules and regulations. Yet, they are also sure to note that distributors are independent business operators and that Herbalife does not "approve, endorse, authorize, guarantee or assume any obligation with regard to Nutrition Clubs".

With that noted let's highlight some of the key points in the Herbalife Nutrition Club Rules:

1. Nutrition Clubs are not franchises

2. Nutrition Clubs are not restaurants or carry-outs

3. Nutrition Clubs are not food service establishments

4. Nutrition Clubs are not retail stores

5. Nutrition Clubs cannot post prices for products but may charge a membership fee

6. Nutrition Clubs may keep inventory on hand and may sell product at retail

7. Nutrition Club owners must deface or destroy product labels and containers before disposing in order to protect against counterfeiting 

8. Nutrition Clubs must cover the windows so that the interior of the club is not visible from the exterior

9. Herbalife instructs distributors that all opened products must be consumed on club premises.

10. Herbalife instructs distributors that any opened product cannot be removed from the club. Following these instructions, distributors are given the false information that: "This is a key differentiation from operating a retail location, which is not allowed".

11. Herbalife's Nutrition Club Manual is 32 pages; yet devotes a mere 54 words describing regulatory requirements, i.e., business, tax and health permits and/or licenses in connection

12. Open/Closed sign cannot be visible from the exterior. 

13. Clubs cannot advertise on radio or television

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