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Nutri-System Franchises to Get Food Shipments

June 03, 1993|From Associated Press

PHILADELPHIA — Distribution of packaged diet food to 857 franchises of bankrupt Nutri-System was guaranteed Wednesday in a settlement reported to a bankruptcy judge.

Michael Heisley, a Chicago businessman who has been running the company, said he assured franchise owners who were experiencing difficulty replenishing supplies.

"It means that Nutri-System customers will be able to get the food items they want," Heisley said after his lawyer reported the agreement to U.S. Bankruptcy Judge David Scholl.

Nutri-System was forced into bankruptcy May 4 after bank creditors seized the company's cash and bank accounts a week earlier while it was negotiating a sale to Heisley.

Nutri-System closed its 283 company-owned stores and laid off 1,800 employees. Heisley said he hopes to reopen a "significant portion" of the company-owned centers.

He said he is creating a new firm, Heico Food Co., to order the packaged food and to ship it to franchises across the country.

Nutri-System has food warehouses in Plymouth Meeting, Pa.; Kansas City, Mo.; Macon, Ga.; Reno, Nev.; Dallas, and Munster, Ind.

Lawyers for the franchises had sought a hearing before Scholl to make sure Heico was restocking the warehouses. Based on Heisley's assurances, they withdrew their motion to deal directly with the suppliers.

Eventually, Heisley said, he plans to own Nutri-System and predicted that it will come out of bankruptcy in a few weeks "stronger and better than it was before."

He said the firm never should have been shut down, blaming a lack of communication between previous company management and the bank creditors. He urged Nutri-System customers not to switch to any other diet system.

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