National 7-Eleven Franchisee Coalition Raises Concern Over Operators Leaving the System, Blames Corporate
SAN ANTONIO — Less than one year after the board of directors of the National Coalition of Associations of 7-Eleven Franchisees (NCASEF) voted no confidence in its parent company, 7-Eleven Inc. (SEI), some franchisees are opting to leaving the system, creating a glut of available stores nationwide.
According to NCASEF, the move comes after continued ignored requests from franchise owners to SEI's corporate management to create a more transparent relationship.
"It seems clear 7-Eleven's leadership in Dallas and Tokyo are not interested in the best interest of franchise owners," said NCASEF Chairman Jay Singh. "We continue to see the company taking steps that benefit its income statement and balance sheet without consideration for store-level profits. As a result franchisees are leaving the system and replacements are hard to find."
NCASEF said it believes a change in corporate leadership, starting at the top, will help make the company more appealing to new and existing franchisees. "There is a reason 7-Eleven has fallen to No. 10 from No. 2 on the list of best franchised businesses," Singh said. "Leadership has failed to establish a collaborative, transparent way of doing business with its franchise owners. As a result people are not rushing in to buy available stores."
According to publicly available franchising data from SEI:
18 percent of 7-Eleven stores in the U.S. are currently available for franchising.
Since April 2018, the number of available stores has increased more than 57 percent from 999 to 1,578.
Since April 2018, stores currently owned by a franchisee and put up for sale (known as goodwill stores) have increased more than 95 percent in California; 39 percent in New York; 314 percent in Illinois; 84 percent in Virginia and 60 percent in Washington State.
Completed sales of franchised stores more than quadrupled from 2013 to 2018.
Turnover of franchised stores due to terminations, non-renewals and abandonments doubled from 150 in 2013 to 314 in 2018.
Last year, the franchisee association asked SEI to revise its 2019 Franchise Agreement, which NCASEF said included a net reduction in franchisee income, an increase to store-level operating costs and a requirement that stores stay open on Christmas Day, as Convenience Store Newspreviously reported.
The new 2019 franchise agreement calls for a much steeper gross profit split, with a marginal rate as high as 59 percent in favor of the company, directly hitting high performing stores in California and New York — major markets for 7-Eleven franchised stores, the association noted.
"The corporation benefits from the supply chain, even as store-level profits are sinking," Singh said. "And now with the new 7Rewards program, franchisees are under pressure to sell food and beverages at a discount."
When asked for comment, 7-Eleven told CSNews that the company is proud of the recent growth toward its goal to double the size of the system by 2027. Through the acquisition of more than 1,000 Sunoco stores, in addition to organic new store growth, the convenience store operator has 1,385 stores available for franchise.
"That's 185 more stores than this time last year with 158 of those coming from the Sunoco deal providing more opportunity for franchisees to grow their businesses or new entrepreneurs to join the system," 7-Eleven said.
"During the past 10 years, the 7-Eleven brand has generated over $15 billion in earnings for franchisees across the country. In fact, average franchisee gross income is at an all-time high," the company continued. "The opportunity with the brand is tremendous as attested by the 4,700 franchisees that signed a new 15-year franchise agreement in the last 12 months and continued robust interest from entrepreneurs looking to franchise with this system."
NCASEF is comprised of 41 Franchise Association members who represent more than 4,400 7-Eleven stores in the U.S.
Irving, Texas-based 7-Eleven operates, franchises and/or licenses more than 69,000 stores in 17 countries, including 11,800 in North America. The company ranked No. 1 on the 2019 Convenience Store News Top 100 ranking