Looking At 2015 And Into The Future Of 2016
As the end of 2015 quickly approaches, it’s a good time to look back and reflect on our sales and profits. Sales in many parts of the country have exceeded expectations with good levels of sales increases, and the addition of hot foods has brought new guests to our stores via word of mouth. When I became chairman in January 2014, my first order of business was to strengthen communication with our partner, SEI. Since that time we’ve developed a very open and honest line of communication, and the relationship has vastly improved. With that said, we still have a way to go to get the true value of our relationship.
Looking forward to 2016, the main topic on everyone’s agenda is the minimum wage increases occurring nationwide. It’s affecting many stores with the added expense to their payroll line. In some cases, come the New Year we will have stores being hit with a $3,000 per month increase in payroll as a result of the minimum wage increases. Given that forecasters are predicting a wet and cold winter, which normally means lower sales and profits, many stores are going to struggle to stay afloat financially. The end result will most likely be that the franchisees facing the minimum wage hikes will cut back their labor hours, work more hours in their stores themselves, and operate with a skeleton crew.
Another topic of discussion recently has been the large number of promotions we’ve been getting every month, and the declining gross profit for stores. We understand that the promotions help us stay ahead of the competition, and we have indeed benefitted from the increased sales and customer awareness that we are offering some good deals at good prices. However, with the majority of the “2 for” promos franchisees end up losing gross profits on the second item. In order for the promotions to have a truly positive impact on our store financials, we need to obtain—as we have talked many times before—the lowest possible cost of goods from all of our suppliers. If all of this can be put together, then stores will be able to offset some of their increasing costs.
Nevertheless, we do have challenges ahead of us in 2016. They are challenges that are being created for us, either by the politician, the corporation or the economic climate. In addition to the minimum wage increase, one of our biggest concerns is the 2019 contract that looms over us as we go about our daily business. We are continuously challenged by operational changes to our system, most notably the ordering, handling and selling of hot foods. Also, for the first time in many years 7-Eleven, Inc. has reduced its store network in the United States by closing more stores than it opened in 2015 for a net loss of 54 stores to approximately 8,255 stores nationally.
Whatever changes we encounter, I think it’s extremely important that we all stay focused, on our businesses and our families, and that you communicate any problems or concerns to your local FOA groups and the National Coalition. We on our end will continue to talk and meet with our business partners to bring, hopefully, mutually beneficial resolutions. I am confident that we can all work through this together.