7-Eleven Owners Air ‘Cold, Hard Facts’ Against Corporate
7-Eleven operators are calling for “a change in corporate leadership, starting at the top.”
Franchisees leaving the 7-Eleven system are “creating a glut of available stores across the nation, including in major markets like Los Angeles and New York,” says the latest missive from the convenience store giant’s biggest critic—its coalition of 7-Eleven owners.
The National Coalition of Associations of 7-Eleven Franchisees is comprised of 41 franchise association members representing more than 4,400 7-Eleven stores in the United States, the group says, and they’re calling for “a change in corporate leadership, starting at the top,” to help “make the company more appealing to new and existing franchisees.”
The release included publicly available franchising data from SEI, the parent company, the group said, including:
-Eighteen 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.
7-Eleven in Dallas sent the following statement touting accomplishments over the last decade and the past year:
"We are proud of the recent growth toward our goal to double the size of the system by 2027. Through the acquisition of over 1,000 Sunoco stores as well as organic new store growth, we now have 1,385 stores available to be franchised. 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," it 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 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," the statement from 7-Eleven said.
Eric Karp, general counsel for the National Coalition, explained in an interview the reason behind the press release. “The reasons we want to put it out is because we want people to appreciate and understand” the impact of corporate decisions, said Eric Karp. “They are cold, hard facts because they’re taken from publicly available documents…The trends on all of those statistics are unfavorable.”
Karp noted the National Coalition’s board vote about a year ago expressing “no confidence” in management. “We don’t understand how 7-Eleven could ignore these trends because they don’t bode well for either the franchisors or the franchisees. We have repeatedly, and when I say repeatedly I mean it, attempted to sit down with them and have an arms length, amicable, transparent, collaborative discussion about where this system is headed.”
I said it sounded similar to the franchisee association for Jack in the Box, who said over several months they had tried but failed repeatedly to get corporate’s attention and then filed a lawsuit in December 2018. Would that be in the cards for this group?
Karp didn’t answer directly but pointed to three misclassification lawsuits pending in California, Illinois and Massachusetts by 7-Eleven franchisees. “Those cases received a boost when California affirmed the Dynamex” decision in state supreme court and then the state legislature passed Assembly Bill 5 in September, Karp said. Both are seen as a threat to the franchise business model because they may lead to independent contractors being classified as employees.
“We said to 7-Eleven, you can’t hold your breath. You can’t assume that 100 percent of the wisdom to address these challenges rests in Dallas or Tokyo,” the chain’s two headquarters, Karp said. “If you want franchisee buy-in you have to bring them to the table and not treat them like glorified store managers.”
According to the release, the gross margin for franchisees has been slipping, “yet 7-Eleven has started taking a bigger portion” of gross revenue. “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,” it said.