SAN ANTONIO--(BUSINESS WIRE)--Less than one year after receiving a No Confidence vote from the Board of Directors of the National Coalition of Associations of 7-Eleven Franchisees (NCASEF), corporate management at 7-Eleven, Inc. (SEI) has continued to ignore requests from franchise owners to create a more transparent relationship. At the same time, franchisees are leaving the system, creating a glut of available stores across the nation, including in major markets like Los Angeles and New York.
“It seems clear 7-Eleven’s leadership in Dallas and Tokyo are not interested in the best interest of franchise owners. We continue to see the company taking steps that benefit its income statement and balance sheet without consideration for store-level profits,” said NCASEF Chairman Jay Singh. “As a result franchisees are leaving the system and replacements are hard to find.”
According to publicly available franchising data from SEI:
- 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.
The gross margin for franchisees has been slipping, yet 7-Eleven has started taking a bigger portion of the declining gross revenues. 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. Franchisees are also required to purchase 85 percent of their products from 7-Eleven’s supply chain, which does not guarantee the lowest cost of goods. With the remaining revenue, franchisees must pay labor and maintenance, among other operating costs.
“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.”
The National Coalition 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.”
About the NCASEF: The National Coalition of Associations of 7-Eleven Franchisees is the independent national trade association for 7-Eleven franchise owners. Originally founded in 1973, NCASEF is comprised of 41 Franchise Association members who represent more than 4,400 7-Eleven stores in the U.S.