Transparency Or Opacity?

Opacity is defined as “the condition of lacking transparency or translucence, or obscurity of meaning.” If something is transparent, nothing is hidden from plain sight and everything is exposed—warts and all. If an object is opaque, then nothing inside is visible.

During SEI’s recent CEO roundtable discussion in Dallas with various franchisees, our CEO spent some time discussing the pressure on our business from external factors such as Walmart and other retailers. The popular phrase is “channel blurring,” where most retailers are engaging in sales activities not part of their typical strategy. For example, Walgreens and CVS are moving aggressively into the grocery business and convenience stores are pursuing the fast food customer. Additionally, many of the big box retailers like Walmart and Target are experimenting with smaller, convenience store-type locations as part of their expansion plans in urban areas.

This was presented by SEI senior management as newsworthy, yet this has been the case for nearly twenty years. I wrote about this in one of my articles stating that 7-Eleven franchisees are facing not only external, but also internal pressure. External is the outside competition that in many cases is adapting rapidly to the current retail landscape. Ask any franchisee who competes with a Wawa or Quik Trip about their daily challenges! Internal pressure meaning higher expenses on the franchisee’s side, encroachment, complexity in operations, an aging physical plant, and various other issues. Is it any wonder that many franchisees are in survival mode?

Let’s talk about transparency. This idea of transparency just does not seem to exist in Dallas on merchandising, contract negotiations and/or on procuring the lowest cost for products. If you don’t believe me, just ask your friends with other c-stores, restaurants and liquor stores if you do not already own one yourself. I can share with you my own personal experience: all of my Pepsi and Frito products are cheaper outside of 7-Eleven. In one enterprise, Coke supplied the entire chain with Turbo Chef Ovens free if the entire company switched to Coca Cola, and still their cost on 20-ounce and BIBs is LESS than 7-Eleven.

On one of my recent trips, I found out that an independent chain—one of SEI’s potential acquisitions—receives monthly rebates in the thousand dollar range from a major supplier, yet I never seem to make the 90 percent on any given month to get that CPM from the SAME supplier. I don’t blame our vendor partners one bit! My purchase summary provided by SEI has always been more than the vendor invoices, so in Los Angeles the vendors were instructed by our franchisor not to provide us with invoices. I suppose this is one of the hidden benefits of BT.

Besides the fact they are building smaller stores to compete with us, why else should we be worried about Walmart? For one, their upper management folks are not “allowed” to accept a $5 lunch from their suppliers, let alone Super Bowl tickets. Is that the case with our company? Forget the tickets; let’s look at our 7-Eleven Experience. Vendors mostly fund this event—and many times not by choice, from what I’ve heard. Some of the suppliers shared that the 2015 7-Eleven Experience will cost them all collectively over $10 million dollars. Does Walmart or Costco demand such monies? Second, Walmart’s supplier partners have full access to their respective product data from Walmart at ZERO cost. This was designed so that suppliers would be fully vested and engaged in achieving the highest velocity in sales of their products. Any idea what SEI charges for the sales data that is in YOUR ISP that you manage?

So you figure it out. Is the culture at SEI like the obscure cloudy glass in a bathroom window where the images on the other side are distorted and disfigured, or is it clear as the double pane window found in the mansions of the wealthy? Just think of the new and improved maintenance contract and the lighting and equipment agreements, the costs of which have increased to double digits. Better yet, let’s ask SEI to see those contacts or to see any agreement between SEI and a supplier. NO is the answer they always give us.

To paraphrase a famous saying, “For change to take place, first I must change!” Has that change taken place in Dallas? I have sat in on those roundtable discussions many times, and we have gone round and round like the carousel at Disneyland. How many times have we seen SEI folks attend national meetings and listen and take copious notes? What happened to those guys? Better question: what happened to those notes, requests and suggestions? Do we start with a new CSA all over again, really? As one senior vice president at a National Coalition Board meeting stated, “SEI, instead of doing remodels has been spending money on acquisitions.” While they were watching the headlines, they forgot to look at the trend lines in franchisee income, expenses and morale.

These are my thoughts and as always I love to hear yours!