July 2, 2015

National Coalition Solicits Franchisee Opinions And Views

Eric H. Karp, Esq., General Counsel

 

As your General Counsel, one of my roles is to ensure that the issues we advance on behalf of the National Coalition accurately reflect the priorities, concerns and viewpoints of not just the Executive Officers and the Board, but also of the constituent franchisees who are members of the FOAs that comprise what is truly a National Coalition.

To that end, we recommended that the Board engage a professional research and polling firm to conduct a scientifically valid survey of 7-Eleven franchisees. The Board readily agreed to retain FranchiseGrade.com to carry out this project. Great care was taken to make sure that the survey questions elicited information regarding matters of the greatest interest to franchisees. We also wanted to make sure that the responses would be confidential in all respects.

In the end, 642 surveys were completed, which creates a 95 percent confidence level in the results with a margin of error of 3.7 percent. Those who responded reflected a valid and broad cross-section of the system in terms of age, number of years as a franchisee, level of education, prior business experience and number of stores owned. This meets statistical and academic survey collection standards.

The results of the survey indicate that the relationship between SEI and its franchisees is on the whole not positive, and in need of a great deal of substantive change for the better. The results also validate the depth of concern and unhappiness among franchisees that has been described to SEI by us as your General Counsel to our counterparts at the franchisor, and by the Board in its dealings with SEI’s management team.

Here are some of the results of the survey:

Operational Issues

  • 50 percent of franchisees believe that the DVR security system has not contributed to store safety or reduced theft
  • 66 percent do not believe that SEI’s audit process is fair and transparent
  • 47 percent are dissatisfied or very dissatisfied with the performance of McLane; details are shown in the chart below: (SEE AVANTI PAGE 39 FOR CHART)
  • 44 percent are dissatisfied or very dissatisfied with the performance of their local CDC
  • 74 percent do not believe that their CDC offers the lowest cost of goods available on most products; here are the details: (SEE AVANTI PAGE 39 FOR CHART)
  • 54 percent do not believe it is worthwhile to own a gas store in light of the commission structure
  • 60 percent of the respondents have been part of BT
  • 32 percent of the BT respondents believe their store has benefited from BT; 54 percent believe that there has been no benefit to the store from BT

Relationship Issues

  • 80 percent do not believe that they are treated as independent contractors by SEI
  • 61 percent do not trust SEI
  • 75 percent believe that SEI does not trust them (SEE AVANTI PAGE 40 FOR CHART)
  • 45 percent disagree or strongly disagree with the statement “I am proud to be a 7-Eleven Franchisee”
  • 58 percent are dissatisfied or very dissatisfied as a franchisee of 7-Eleven
  • 49 percent would not choose to be a 7-Eleven franchisee if they had the decision to make all over again (SEE AVANTI PAGE 40 FOR CHART)
  • 67 percent would not recommend a 7-Eleven franchise as an investment to a family member or friend; here are the details (SEE AVANTI PAGE 40 FOR CHART)

We publish these results with a single goal in mind. In recent months, your franchisor has pledged in numerous forums to reset the relationship between the company and its franchisees. The National Coalition has over and over again made the point that communication alone will not suffice; the reset will be judged by concrete and measurable changes in the legal and financial relationship between 7-Eleven and its franchisees on a wide range of issues, including those raised in the survey.

We can only hope that the information in this survey will make clear to SEI that the path to a better relationship, to increased market share, to higher store level profitability, to expansion of the franchise system, and ultimately to better financial results and equity value of the franchisor, is a truly collaborative relationship marked by a fair balance of the risks and rewards of the franchise relationship. As my fellow tennis enthusiasts would say, the ball is in their court.