The Proof Of The Pudding Is In The Eating
7-Eleven franchisees over the last several months have been experiencing momentous change in approach from SEI management that seems unprecedented in the recent history of the National Coalition. Although the two organizations don’t always see eye-to-eye, franchisees have seen SEI reaching out on both national and local levels to work more closely with franchisees, attend local and national meetings, and be willing to at least discuss issues that franchisees believe are key to their success. We’re hoping against hope that franchisees can get something out of it.
The change began last September when I was with a group of franchisee leaders attending an NBLC meeting in Dallas, and we got our first opportunity in quite a number of years to meet directly with SEI President and CEO Joe DePinto. We interacted with him for two days at the NBLC meetings and evening social events, and he got an earful from a lot of folks. He could feel the frustration that had built up in the system. He could feel how franchisees felt alienated and demoralized, and the message was very consistent. I had an opportunity to talk to Mr. DePinto at great length at one of the dinners, and I gave him a good summary of what franchisees were feeling.
Following the NBLC meeting, during the first week of October, three National Coalition officers met one-on-one with DePinto and several of his executive team members. We had not met directly with our CEO and his senior team in many years. At that meeting we talked about the issues near and dear to franchisees’ hearts, the same issues we discuss at the National Coalition Board meetings: the graduated gross profit split, a 10-year versus 15-year contract, the franchise renewal fee, franchisee gasoline commission and profitability, credit card fees and the looming FM Facility Maintenance rate increase of up to 23 percent. We also talked about CDC and obtaining the lowest cost of goods, about Regis and auditing, about FIW packets and markups, and other issues relating to accounting. We had questions about operating expenses, which were being moved over to Unauthorized Draw.
The conversation was open and honest, and this had a lot to do with the recent trust level between franchisees and SEI. It also had a lot to do with how the management approach within SEI has shifted focus now to be more about helping franchisees. Several senior staffers on the CEO’s executive team were shuffled to other positions, replaced by those more open to working with the franchise community. We welcomed these changes, and started to feel that the CEO was engaged and paying attention to our needs.
We had our National Coalition meeting in late October in Hawaii, and news of SEI’s new attitude had reached the NCASEF Board. There was much engagement on the Coalition’s side. Even our general counsel Eric Karp had a meeting with SEI’s general counsel so they could formulate a more cooperative relationship and work together to resolve some of the litigation, like the DVR. It was a positive meeting overall.
From that point on, DePinto started to put some of his words into action. Over the course of the next three or four months, the FM Facility Maintenance rate increase was put on hold. The operating expense policy of moving expenses into Unauthorized Draws was pulled back. On the accounting side, they set up a couple of committees to work on streamlining some of the accounting policies regarding bill backs and how they could simplify the reports. Along with that, some of the systemic issues related to BT and accounting were addressed through NBLC committees. Also, more importantly, a very high level committee is set to take a complete new look at the FIW markups.
Throughout all this, the National Coalition remained focused on the bigger issues that impact franchisees’ bottom lines. At the beginning of this year, the National Coalition executive team met with 7-Eleven senior management. We reiterated that while we appreciate some of the systemic changes that have taken place and the others being worked on through the NBLC committees, we need to address the bigger issues that we mentioned the first time we met with DePinto and at meetings since, including conference calls.
DePinto and his team informed us they are doing a “holistic review” of the company, and these issues are on that agenda. We tried to get a timeline on when we could expect a substantive response, but we have not received an answer yet. Then in February, our CEO and seven of his top executives attended our National Coalition Board in Sandestin, Florida, spent two days with us, and many of these issues were brought up again. There was also a discussion about the minimum wage, which is rising throughout the country, and its severe impact on franchisees.
I know the issues mentioned here are on the minds of all franchisees. National Coalition officers are actively working on them and discussing them with 7-Eleven, and we bring them up to SEI at every opportunity. We feel good that SEI is engaged, but like our CEO has said many times, “The proof of the pudding is in the eating.” We are waiting for the pudding to see how it goes. We need a reason to believe that SEI and franchisees can work together collaboratively to make the system stronger and more vibrant. We are leaders in the convenience industry and we want to continue that status in the future.