One of the key responsibilities of our franchisee trade association is to manage the relationships between all of the groups on whom 7-Eleven franchisees depend. This includes our relationship with 7-Eleven, Inc., our relationship with vendor partners, and especially, the relationships between FOA members and the National Coalition, in order to represent the interests of all franchisees.
Over the past two years, the National Coalition has worked hard to make these relationships work, by meeting with 7-Eleven, Inc. top management on issues identified by our Board, by bringing in expert legal opinions on complicated issues, by addressing vendor opportunities and problems, and by getting involved in legislative issues that impact our businesses and our livelihoods.
Still, much work remains to be done. The issues surrounding our business are numerous and complex. 7-Eleven continues to expand nationally, and test new programs, new proprietary and non-proprietary merchandise, and new ways of going to market. In order to maintain our status as the leader in the industry, it is essential that the National Coalition provide accurate feedback to 7-Eleven and help our franchisor “get it right” for franchisees.
One of the first issues on the franchisee agenda in 2011 was to address the issue of low-volume stores. While progress is slow, we continue to talk to 7-Eleven, Inc. and ask for a “fair and reasonable” solution. We do not want these franchisees to have to jump through hoops, and more importantly, we do not want these franchisees to have to spend money to make more money. National Coalition leadership will continue to focus on this issue.
Another issue we have continued to address is declining gross profit and the CDC. The economy has had a huge impact on our income, and our delivery system has a lot to do with the impact on our gross profit. In 2011 the National Coalition, on the direction of the Board, was successful in working with 7-Eleven to eliminate CDC flat fees, the first step needed to provide franchisees with cost of goods transparency. For the first time in over a decade, franchisees are seeing an accurate cost of goods, and there is no question that we now believe CDC products cost too much.
So the hard work still remains. Putting the most appropriate products through the CDC can only happen with accurate franchisee feedback. Franchisees need to get involved if we are to get the right product mix, at the right gross, from the right vendors. Hot foods after write-offs must be a 40 percent margin, and we’re working to get dairy out, because we can’t let hot dogs and milk subsidize fresh sandwiches and drive the results.
To work on CDC problems our FOAs must work together with 7-Eleven, Inc. to pick the products and the vendors they would like to see going through the CDC. Constant feedback will be needed to go in the right direction, and this means we must work ongoing with the company. Most importantly, 7-Eleven has to get it right for our stores and our customers.
Over the past two years, the National Coalition’s relationship with 7-Eleven, Inc. has continued to develop. Whether at the national or local level, respect and trust builds the influence of franchisee leaders with 7-Eleven, Inc. to represent the interests of all franchisees. We must first get in the door to have access to management to do the job. On a local level, the leaders of our 38 franchisee associations have the same responsibility to their members.
We have many challenges to face in the coming year. Increasing competition from QSRs on coffee, the decline of the tobacco category and the challenge of fresh and hot foods, encroachment from 7-Eleven’s expansion, and BT—7-Eleven’s new way of going to market, to name a few.
As 7-Eleven grows towards 6,000 franchised stores in 2012, I urge everyone to get involved with your local FOA. Report problems and opportunities to local leadership. Talk to your market manager, your zone leader and franchisee leadership, and identify issues for the National Board. If we build relationships with the people who impact our business every day, we can continue to grow our sales and profits while we improve the system.