Jenny Craig bankrupt, will close down business in U.S. and Canada

After 40 years in business, weight-loss chain Jenny Craig has announced it is closing down in the U.S., Canada, and possibly several other markets around the world.

Reports of the chain's demise first emerged last week, when the chain was scrambling to come up with cash to cover a looming debt payment, and warning staff of major layoffs to come

The business — which offers pre-made meals and coaching lessons to millions of people trying to lose weight — has roughly 500 franchises across the U.S. and Canada, and more globally.

It was founded by American entrepreneur Jenny Craig in the 1970s but changed hands numerous times over the years.

Its most recent sale was in 2019, when it was purchased by private equity firm HIG Capital for an undisclosed sum.

WATCH | Jenny Craig goes bankrupt:

The chain's efforts to fix its business proved fruitless as the chain filed paperwork with bankruptcy courts in the U.S. and Canada in recent days.

"Thank you to our loyal Jenny family," a notice on the company's website reads. "It's with a heavy heart we're announcing the close of our business."

The move means that effective immediately, all of the chains activities have ceased. Any food scheduled to be delivered has been cancelled, as are all orders for coaching sessions and merchandise sales.

Canadian court filings suggest the chain owes more than $323 million to various unsecured creditors in Canada.

In addition to its core market of North America, the chain also has an extensive presence in Australia and New Zealand, where as recently as last week, the chain was telling its customers there that "local operations are unaffected by the recent news regarding Jenny Craig USA centre closures."

On Tuesday, local media reports suggest the company has appointed "voluntary administrators" in those two markets, which is a form of corporate restructuring designed to save a viable business, but it's one that does often end in the business's closure.

Business pressures

The move by Jenny Craig to pull the plug comes at a time off uncharacteristic weakness for the weight-loss industry, which has previously been seen as relatively recession proof.

Data from market research firm IBISWorld tabulates that Canada's weight loss industry took in a little over $350 million in revenue last year, a figure that has shrunk by an average of 0.1 per cent per year for the past five years.

And Jenny Craig isn't the only one feeling the squeeze. Rival Weight Watchers, whose stock trades on the NYSE, saw its revenue fall by almost 20 per cent last quarter, as its subscriber base dropped from 4.2 million people to just 3.5 million.

The company, which operates a very similar business to Jenny Craig's, has embarked on a turnaround plan built around a development that's upending the entire industry: prescription weight-loss treatments.

Weight Watchers paid $132 million to buy digital health provider Sequence, which offers numerous telehealth services to its 24,000 members, each of whom pays about $99 a month.

That's a reliable revenue stream in any environment, but a major appeal for Weight Watchers may well be the service's ability to prescribe prescriptions for drugs such as Ozempic, Wegovy and Trulicity, all diabetes treatments that are exploding in use right now in part because of a major side effect they share: they suppress appetite by triggering the release of insulin and blocking sugar production in the liver.

While any weight-loss benefits disappear the moment the user stops taking the drug, their impact on the weight-loss industry has been dramatic, according to Yann Cornil, a marketing professor at the University of British Columbia.

"They have been struggling already for the past decade, [but] the introduction of those new drugs that are indeed effective in the short run have been the nail in the coffin for Jenny Craig," he said in an interview.

Customer's fears confirmed

Jenny Craig customer Anna De Biasi came to one of the company's Toronto-area locations on Monday and was disappointed to learn that her worst fears had been confirmed.

"I just had the feeling that something was happening," she told CBC News in an interview. "It was a gut feeling, I just knew it."

She says she has had success with Jenny Craig's system in the past and was disappointed to learn that the company has shut its doors. She actually got a prescription for Ozempic from her doctor a few months ago because she is considered to be pre-diabetic, but she was hoping to combine that with another round of Jenny Craig to improve her health and treat her arthritis.

"It's really difficult when you have arthritis and you're in pain. You gotta do as much as you can to really help yourself," she said. "So I was just trying to combine them both."