The 2019 Franchise Agreement

At the February 15-18 National Coalition Board meeting in Monterey, 7-Eleven, Inc. VP Greg Franks gave a presentation on the development of the 2019 contract to 78 assembled presidents and vice presidents representing the 43 Franchise Owner’s Associations around the country. It was the first time SEI has spoken about the 2019 contract at a National Coalition meeting, and it was good to see that they are interested in talking with us about the new agreement. We hope that they will ultimately give us a seat at the table and the opportunity to provide franchisee input in new agreement discussions.

Greg told us the rollout progress to date includes company discussion of ad hoc changes—billbacks, CDC volume shortfalls, gross income support, paid-outs, maintenance, and the high rent amendment—plus SEI executive interviews, and interviews of select franchisees. He said the new franchise agreement framework is being developed in 2016, testing and franchisee feedback would be in late 2016 and the first half of 2017, with final changes in 2018 and the rollout in 2019.

There is no doubt the new agreement development process is well underway at 7-Eleven, Inc., and that some serious changes must be made to the current agreement to help franchisees deal with minimum wage increases, more intense competition, the changing business, and other issues. As this is happening, I wanted to give my two cents on some of the changes franchisees would like to see in the contract.

1. Our current contract allows franchisees to buy 15 percent of our store merchandise from vendors of our choice, and we are required to purchase the remaining 85 percent from company-approved vendors. The justification for this arrangement is that franchisees receive the lowest cost of goods under this system, but the promise has not been kept. It is time that the new contract allow franchisees to buy from whomever and wherever we can get the lowest cost of goods to compete in the current business environment.
2. The current 10-year term is too short to recover the high current franchisee fees. The new contract must be extended to 15 years without the 20 percent renewal fee to refranchise your own store!
3. Franchisees must be guaranteed an annual total income of at least $75,000, considering the fact that it is a 24/7 job, 365 days a year and it requires a great deal of knowhow, expertise and persistence to be a 7-Eleven franchisee. The new minimum wage requirements, currently on the rise in municipalities, states and towns across the country to $15 per hour, will require that a store must do at least $1.5 million in sales annually. This is a most critical issue for the survival of low volume store operators.
4. SEI must not open another store within a mile of an existing store to help maintain the income of the current existing store. The current operator should be approached first to franchise that store.
5. The process to qualify to become a multiple franchisee should be quick, simple and fair without any kind of exploitation on the part of SEI towards franchisees.
6. The current franchisee fee is too high, and it is affecting the goodwill value and the retirement plans of current franchisees if they want to leave the system.
7. Franchisees must be a part of any negotiations by SEI with the vendors to ensure the lowest cost of goods.
8. SEI must reconsider its decision on gasoline and increase the current gasoline commission from 1.5 cents per gallon to at least 3.5 cents per gallon due to the higher costs of operating a gas store, especially during the winter season.

These are my thoughts. If you have input on the issues involved in the new agreement, please send them up the line to your local FOA or contact the NCASEF National Office to provide your input. If we can have any impact at all on the formulation of the new agreement, now is the time.