On The Path To System Improvements
Running a successful 24/7 convenience store business is challenging during the best of times, but it becomes downright discouraging when your franchisor creates more problems before solving the ones you already have. That has been the situation for franchisees over the last several years, but things as of late have been changing, and SEI has been working with the franchise community to make our business stronger and more manageable for both parties. With this goal in mind, we are now engaged in closer dialogue with SEI to resolve the issues creating the most problems for franchisees.
To move matters forward, the National Coalition spent time during its last few Board meetings gathering a list of all the issues affecting franchisees (the majority are accounting-related) and created a committee tasked with presenting these issues to SEI. The committee members met with our franchisor on February 3 and presented 32 topics of discussion to the 7-Eleven team, which consisted of accounting senior staff and some members of the executive team. Ray Dhaliwal covers many of the topics discussed during the meeting in his article on page 55, so I will discuss some of the issues that were sent over to the NBLC Accounting Committee for resolution.
The first issue is the creation of a “suspense” account for all disputed maintenance charges. Typically, franchisees get charged on their AP9 (Accounts Payable) for maintenance and other things, and see a small explanation of the charge. If they don’t agree with the charge, they have to open a case and dispute it. The problem is the dispute can take 60 to 120 days to be resolved and get the money refunded back to the franchisee’s account. In certain situations, when a franchisee is tight financially, an $800 to $1,800 maintenance charge could throw them under equity and generate other consequences, such as breaches and LONs.
In our experience when these non-contract charges are disputed by franchisees the vast majority of them get credited back. We requested that SEI open a “suspense” account the moment a maintenance charge is disputed where the franchisee can be credited and the money remains until the issue is resolved. This request was made very clear in the NBLC, and SEI has committed to make some system changes. They have promised to follow up and add resources to resolve this issue.
Another issue involves lottery reconciliation after an audit. Many franchisees have a hard time understanding their lottery audit results, so they would like to look for details to reconcile it with their records to make sure all deliveries and sales are properly accounted for. There is a report available in 7-Hub to help with this that provides the details on purchases starting with the last audit and accounts for all sales information received thru Cash Summaries. This report is available after 10 business days after the audit. The problem is that the report is nearly hidden under the Imaging menu: 7-Hub→Store Tools→Expand Imaging→Image Lottery Audits. We asked SEI why that report is residing under Imaging and recommended it should be moved to Seven Reports like other reports. SEI will look into standardizing these reports so results are displayed much quicker, and will also provide training and communication so franchisees can utilize the Lottery management tools.
We’ve been requesting for a long while to receive a deposit verification notice when our bank deposits are recorded. We informed SEI that many times we are not notified until several days after the deposit is made, and we would like to see instantly that the deposit was credited so we can take immediate action if there are any errors. Now the D-RA1 Daily Bank Activity Report is available to franchisees, which will be current up to deposits made the previous day.
Another issue given to the NBLC to resolve is common area maintenance (CAM) charges. With many leased stores in strip malls, etc. the leases contain a CAM charge for which the store is responsible. Quite often stores have no knowledge of how the charge is calculated or when it’s raised, and don’t know who negotiates these terms on their behalf. We see stores nationally where CAM charges jump significantly from year to year. Just like FM Facility Maintenance charges, these CAM charges are paid by franchisees but negotiated by SEI without any input from franchisees. We have asked SEI to give franchisees access to lease agreements to see the CAM charges, as well as information regarding the increases. SEI has agreed to review the details on this, and be very transparent on details. We will take this issue up again at the next NBLC meeting.
Although the California sick leave law affects only California franchisees, similar legislation could spread easily to other parts of the country. We’ve had a couple of conference calls with all the California FOA presidents and SEI Accounting on this topic. After quite a bit of discussion, SEI agreed to make some enhancements within the Store Payroll System so they can calculate and keep track of each employee’s accrued sick leave hours. SEI has promised a solution on this issue very soon so franchisees do not have to keep track of this themselves.
Audits continue to be a concern. When we moved from WIS to RGIS we hoped some of our concerns would go away, but unfortunately, that is not the case. Franchisees overall are still frustrated with audit results. They have to perform cycle counts immediately after the audits to keep the “I” accurate. The quality and training of the auditors is also a huge concern. We continue to work with SEI on this important issue, which impacts each franchisee’s bottom line.
Store remodels are starting up again in November in Southern California, and the plan is to update 800 stores by the end of 2016, each with one of five different remodel programs. So it’s not a cookie cutter approach and one remodel program for everyone—it will be based on individual stores. We requested more than a few changes of equipment and new counters. When the remodel is finished, we want it to be visible from the inside as well as the outside, so when customers walk in they can actually feel the change.
At the end of the day, for 7-Eleven to remain competitive all issues preventing franchisees from operating successful and profitable stores must be resolved. We’re hopeful SEI will allocate the resources to fix these issues, and will not base their decisions for the appropriate resolutions on just their bottom line, but instead on how these improvements will make franchisees more successful and our lives a little bit easier.