Easing The Burden Of Rising Labor Costs

One of the bigger issues causing tremendous concern for 7-Eleven franchisees these days is the wave of minimum wage increases spreading across the country. As small business owners it’s very troubling to see cities raising their minimum wages from $7.25 an hour or a little more, to as much as $15 an hour, because it represents a huge spike in our payroll expenses. It’s a topic that’s been discussed at the National Coalition meetings and at FOA meetings nationwide, and during our meetings with SEI.

Although minimum wage increases are inevitable, having such large increases imposed on us over a short period of time is oppressive financially. Add to this the rising costs of credit card fees that we share with SEI and the roll out of the hot foods program—which requires more labor—and we have a recipe for financial disaster.

Looking back to when we first franchised our stores, the agreement was pretty simple. The minimum wage was low, credit card fees were something SEI always took care of on our behalf, and new programs like the roller grill were implemented with few interruptions.

We have been sharing the credit card fees with SEI for about the last six years, and in that time we’ve managed to adjust our budgets to deal with it. But many franchisees fear the minimum wage increases coming just as the company is rolling out the hot foods program will prove too difficult to adapt to by simply tweaking our budgets. While we hope hot foods will be very successful and we will be able to maximize it to it’s fullest to obtain the highest profitability, we doubt that would be enough to offset the increased payroll costs.

We have voiced these concerns to SEI management, and we told them we understand that sometimes expenses can shift to our side of the ledger. But there needs to be a balance wherein increasing expenses aren’t always shifted unto franchisees. I believe SEI should review our store operating costs and make adjustments to our agreement so it’s more favorable to both parties. SEI should sit and discuss with us in good faith the impact the minimum wage increases, credit card fees and the added labor of hot foods are having on some of our stores and work with us on a solution. Higher volume stores are perhaps impacted minimally, but the lower volume stores will struggle with these added costs. Times are changing, and as we continue to talk to SEI management we need to focus on what is good for the store, the franchisee, our guests, and our vendor partners.

One of the best things that can happen to a franchise is having a healthy, profitable system. That’s what we need to achieve. We need to understand these new expenses and do a total evaluation of all stores by volume or location and make it a fair program for everyone. Salaries are totally a franchise expense, as we’re defined as independent contractors, but with the credit card fees and hot foods program there can be some kind of compromise to help some of these stores. Our hope is that SEI can develop a solution quickly so our stores can weather the financial storm headed our way.