Jenny Craig in administration in Australia and New Zealand

Administrators are trying to restructure the iconic Australian weight-loss business that started in Melbourne 40 years ago, after its US arm defautled on a loan repayment.

Jenny Craig collapsed in the US and is now in voluntary administration in Australia and New Zealand.

The Australasian arm of weight-loss business Jenny Craig has appointed voluntary administrators, after being caught up in the collapse of its US parent company.

The move came despite the Australian business having previously been profitable, with administrators FTI Consulting blaming the non-repayment of a loan by the failed US parent company for its appointment.

Jenny Craig’s US parent began liquidating its operations in the US this week after filing for Chapter 7 bankruptcy on Friday in a Delaware court, meaning it will cease operating in America and sell off remaining assets.

The company, started by entrepreneur Jenny Craig with a weight-loss centre in Melbourne in 1983, has been hit by the rise of weight-loss drugs, home exercise machines and health food stores.

While owned by the parent company, the Australian and New Zealand companies of Jenny Craig operate separately to the US business.

Documents lodged with the corporate regulator last year showed the Australian arm made a $1.38m net profit in the 2021 calendar year and a profit of almost $7m in 2020. Revenue in both years was about $61m.

Rebel Wilson was an ambassador for the brand. Picture: Mike Marsland/WireImage

The management team of the Australian and New Zealand businesses had hoped to avoid administration despite the US collapse, but said the non-repayment of the loan – after undertakings to do so – had led them to making the move.

The administrators intend for the Australian and New Zealand companies to continue trading while they explore options to restructure them.

“It is unfortunate where an overseas parent company enters bankruptcy and impacts the local business, in particular, where they are operated independently to each other,” administrator Vaughan Strawbridge said.

“Interest [in the businesses] has already been received and we will be working with those parties and stakeholders of the business to secure the ongoing business and provide clarity to its loyal and committed staff and customers as soon as possible.”

Jenny Craig’s closure comes after new drugs like Ozempic, Wegovy and Mounjaro have shaken up the weight-loss industry. The drugs are ripping up long-held beliefs that diet, exercise and willpower are the way to weight loss.

Some Jenny Craig competitors like WeightWatchers have embraced the drugs to adapt to changing consumer habits.

Entrepreneur Jenny Craig started her namesake business after struggling to lose weight following the birth of her first child. She and her late husband Sid Craig opened their first weight-loss centre in 1983 in Melbourne, and later expanded to the US.

The company went public in 1991 when it had about 164,000 customers across the world through more than 400 company-owned centres and 220 franchises.

Additional reporting: Dow Jones newswires