Meetings With SEI Are Yielding Some Positive Results
Our relationship with SEI has improved over the last several months, but franchisees are still cautiously optimistic about the sudden turnaround in corporate’s attitude and approach in dealing with franchisees. We want to believe that our corporate partners are sincere in establishing a positive working relationship with the franchisee community, but, as the old proverb says, “The proof of the pudding is in the eating.”
The NCASEF officers and Board of Directors have already had a number of meetings with Joe DePinto and his executive team in Dallas, and Mr. DePinto has visited a few FOAs across the country in an effort to mend fences with franchisees. Both sides seem willing to comprise for the betterment of our system and brand, and we have had what seem to be candid and open discussions.
As a result of these meetings, SEI top management is hearing directly about the reality of the franchisee situation and the need to implement changes to help alleviate the burden storeowners have been carrying for the last several years. One such change involves the nearly impossible to understand, even more difficult to correct Financial Impact Worksheet (FIW), which has been costing franchisees lots of money. Mr. DePinto informed us that the company is going back to the drawing board with FIWs and revamping the program to make it simple and easier to understand. Additionally, although SEI decided last July not to issue any more FIWs, Mr. DePinto declared they will not restart the program until this simplification process has been completed.
Another issue the NCASEF officers and Board have been bringing up at these meetings—and for many years now—is providing help to low volume stores. They could be older stores that have come into a lot of competition or newer stores that have never reached a sales level that could make them sustainable and viable, and these stores have been asking for help for a long time.
SEI has recognized this and recently unveiled a new program to help low volume stores, assuring that any store below $185,000 gross income will get assistance up to $185,000, based on your last 12 months of rolling GP average. So, if your gross income is $150,000, you will be supported with the difference up to $185,000. This program doesn’t have a lot of criteria, is easy to qualify for, and is practical. Furthermore, qualifying franchisees with low volume stores interested in acquiring an additional store would not be charged a franchise fee. There is a short window of time to apply, up until July, but Mr. DePinto said they would extend the deadline if needed.
Also discussed with SEI’s higher-ups was the pending increase in maintenance fees. The National Coalition started pushing hard on this last year, as soon as we learned about the increase. It was supposed to go into effect in October 2014, but after several meetings with SEI and FM Facility Maintenance, SEI delayed it until the beginning of this year so a comprise could be worked out. After a couple more meetings the increase was delayed to March 1, 2015. Now it’s been delayed indefinitely because a comprise suitable to all sides hasn’t been reached.
During one of our more recent meetings, SEI announced that over 800 stores will be remodeled this year. Our request to them was that we want to see actual remodels, rather than just changing a couple of grills and installing a new floor or a new soda machine. We also urged SEI to improve the exterior of our stores in order to enhance curb appeal. When the remodel is completed, the stores definitely have to have a fresher, newer look. That’s the focus. We want to attract the millennials and a new generation of guests, and stave off competition from the likes of Wawa and Sheetz, which have really fresh looking stores.
Other issues and concerns that SEI is looking into as a result of our meetings are encroachment, our request for a 15-year contract with no renewal fee, the graduated gross profit split, the gasoline split, credit card fees, the minimum wage increases spreading throughout the country, and getting us the lowest cost of goods, especially through the CDC. These are the issues that are dramatically hitting franchisees’ bottom lines.
What we’re hearing a lot at these meetings and other conversations with SEI top leadership is that they are doing a “holistic review” of these issues. We have asked them for a timeline of when we could expect some action or resolutions. We didn’t get a clear answer, but they said it is an on-going thing and they will consider each issue while doing the holistic review.
SEI has shown a commitment to work on these issues, and while we appreciate the changes SEI has made with FIWs, the maintenance fee, and the program for low volume stores, over the last five years franchisees have lost a lot of ground, and too many expenses have shifted to our side of the ledger. We need to look at these issues, and to be fair and equitable, we need to put some money back on the franchisees’ bottom lines. We need to balance the system, and for the long-term sustainability of the system, we need to keep it balanced.