Sale of Debt-Ridden Nutri-System Ends Bankruptcy-Ordered Closures : Franchises: Announcement comes as FTC says it will settle claims against the firm and two others accusing them of misleading the public.


A Chicago-based holding concern Tuesday acquired the debt-ridden Nutri-System weight-loss company, ending Chapter 11 bankruptcy proceedings that had forced the temporary closure of 282 company-owned centers and disrupted operations of some Nutri-System franchises.

Heico Inc., whose chairman, Michael E. Heisley, served as chairman of Blue Bell, Pa.-based Nutri-System after it sought protection from creditors, acquired the weight-loss firm by buying a $31-million loan during a Bankruptcy Court auction in Philadelphia.

The announcement of the sale came as the Federal Trade Commission announced separately Tuesday that it has given final approval to consent agreements with three weight-loss firms, including Nutri-System, to settle charges that they misled the public.


For Nutri-System’s 1,800 employees, the acquisition by Heico marks the end to a period of chaos that began in April when a consortium of seven creditors seized the company’s cash and accounts. The seizure disrupted the flow of prepackaged meals and supplies to the 857 Nutri-System franchises around the country and also shut down company-owned centers.

Bruce Epstein, a Los Angeles businessman and investor in 85 Nutri-System diet center franchises, said that before the surprise seizure, the company had been seeking a buyer for nearly a year to take over a $40-million debt that was caused by what he described as an ill-conceived national expansion plan.

Publicity about the FTC investigation and other consumer complaints about the diet industry contributed to Nutri-System’s financial problems.

The FTC had charged that some diet companies made unsubstantiated weight-loss and weight-loss maintenance claims and engaged in false or deceptive advertising practices, among other misrepresentations.

The FTC said in a statement that the final agreements bound the three companies, including Akron, Ohio-based Physicians Weight Loss Centers of America and Diet Center Inc. of Pittsburgh, not to misrepresent the performance or safety of weight-loss programs, and required them to have scientific data to back up future claims. The FTC said the orders also set out standards for the type of evidence required to support various claims.

With the purchase of Nutri-System, Heisley adds to his list of more than 20 companies, ranging from heavy equipment to consumer goods.


“I did not buy this company to maintain the status quo. I bought this company because I believe it has the potential to be a very profitable company and, at the same time, make a difference in the lives of thousands of American consumers,” he said.

The weight-loss industry racks up between $2 billion and $5 billion in sales annually.