Trimming the Fat at Medifast: Six Ways the Company Could Better Spend Its Money

Yesterday, in Part One of this two part series, I talked about the fat cat package Medifast CEO Michael MacDonald is receiving from the diet company's board of directors -- a whopping 700% jump in total compensation -- from $1.1 million to $7 million -- between 2012 and 2013.

A law firm is currently investigating this sweetheart deal for the guy who earned his position by merit happened to be the brother of one of the company's former CEOs -- as well as the overall compensation of the entire C-Suite (which includes the former CEO's daughter) from $2.1 million to $12.1 million in the same time frame. This is a curious reward for serious missteps and lackluster growth in revenue and stock price, thanks to an executive team with a history of hiring relatives and college buddies' kids.

MED closed at 32.57 on Friday, Dec. 19, 2014. If you had purchased
the stock on Dec. 31, 2009 you would be up a measly 6% (with no dividends) in five years.
During the same time period, the total stock market index almost doubled --
and small cap stocks like MED performed even better.
(Graph courtesy of Medifast Investor Relations website)

So how could the board have better invested these millions of dollars instead of overcompensating the company's head honchos?

Here are just a few suggestions:

Offer free shipping for all purchases over $50: In one of its more boneheaded moves, the company recently increased the amount of money you need to spend on each order to receive free shipping, offering credits for future purchases instead. Given that we live in a microwave society where people prefer instant gratification, free shipping for smaller purchases would encourage more new people to try the program and current members to order more frequently.

Stop charging $40 a pound for popcorn: In a previous blog post, I did the math and figured out that Medifast's new popcorn snacks work out to be over $40 a pound. What are they sprinkled with gold? I'm betting even Donald Trump would take a pass, just on principle. Medifast is already perceived as expensive by many people; so why add to this overall misperception?

Million dollar prize for best video: Medifast could significantly up its coolness factor by offering a $1 million dollar prize for the best Medifast video and then airing the winning commercial on the Superbowl. Tens of thousands of YouTubers would jump at the chance to win a cool mil -- in addition to the many vloggers who already have Medifast channels -- - create more excitement and engagement around the brand.

Share the wealth: Aside from Medifast paying relatively low salaries to its rank and file corporate employees and weight loss center staff (who consistently complain about low pay), the company's Take Shape for Life division favors a select handful of health coaches. Orphaned members of Medifast's 34 centers that are closing on Dec. 31, 2014 were divvied up among only the highest ranking health coaches who already have hundreds of clients and only so many hours in a day to provide support. These clients could have been more fairly distributed to include more hard working health coaches who have demonstrated success and have more time to devote to these new clients.

Hire better mad food scientists: Though Medifast offers some palatable replacement meals, especially when combined with each other and cooked in a Babycakes Doughnut Maker, some of its newer products have clearly been duds. In particular, the new maintenance line was received with a collective WTF? since the products are costly and must compete with such popular items as Quest bars. The company also refuses to put instructions on its savory meal items, such as ziti marinara, to warn newer customers that the magic powder must first be soaked to avoid tooth breakage.

Invest more money in technology: Medifast's computer systems seem to have been designed in the Flintstone era with glitches and quirks that are aggravating to customers and health coaches alike. During the brief time I was a TSFL health coach, I could not use my primary email address because the program would not accept a domain name with a hyphen. And don't get me started on creating my health coach profile. It reminded me of the old days on the Internet using klugy programs like Geocities.

Ironically, I am a huge fan of the Medifast 5&1 Plan -- especially when combined with Take Shape for Life -- because it helped me lose 35 pounds in less than four months with minimal will power. If Medifast linked executive compensation more closely to performance, the company might actually make its investors some money and make its customers, employees and health coaches a lot happier.



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You can purchase Medifast replacement meals directly from Medifast Centers, the Medifast website or -- for no extra cost -- through the co-branded website of a Medifast TSFL health coach. Medifast does not recommend purchasing its products from third party vendors, but if you choose to do so, you can find them on both Amazon and eBay.

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More from Diet Skeptic:

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Medifast Centers Vs. Take Shape for Life

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