Minimum Wage Will Test The 2019 Agreement
Now that the hot summer selling months are behind us and we enter cooler weather, I believe the next two quarters—the last in 2016 and first in 2017—will be a test for our stores and provide some indication of the direction we will be heading, at least for the near future. The big question is, “Are we going to be ready for the challenges coming our way?”
Let’s begin with staffing. Many of our stores are already being impacted by increased minimum wage rates, and many more will feel the pinch soon enough as this movement sweeps across cities and states throughout the country. It is a popular topic among legislators. For those stores dealing with recent minimum wage hikes, labor and ordering have become challenging. The increases have also affected how these stores execute the hot foods program, which is labor intensive, and how they serve their guests. As the minimum wage increases and the hot foods program rolls out nationwide, some stores will be able to adjust accordingly and be fine, while others—particularly low volume stores—are not going to be as fortunate.
The minimum wage and staffing conundrum is especially concerning given that 7-Eleven is transitioning to a foodservice destination. Since higher labor cost is already affecting the staffing decisions of many stores, many franchisees wonder if they still will be able to provide the same level of quick and friendly service to which their guests have become accustomed. They also wonder if minimum staffing on a hot day with more foot traffic than usual will drive guests to our competitors due to longer lines at our registers. This indeed is going to be a challenge. Even trying to focus our peak times of the day will become more important.
We all know minimum wage and labor are intertwined. I already feel the impact in my store, and we still have summertime weather. The minimum wage in San Francisco is at $15 per hour and San Jose is $12. I personally haven’t seen an increase yet in my hometown of Santa Cruz, but it’s a domino effect. Once minimum wage hits in your area, stores will have to increase their current pay schedule to their employees. In the future we will also be impacted by the new manager overtime pay rules issued by the U.S. Department of Labor. The true test will be when franchisees have to sign the new 2019 agreement. Franchisees will have to decide if they want to continue doing this due to the changes in our business environment. Some may choose to go elsewhere. For the lower volume stores, it will be a struggle.
As we deal with these challenges, I think we as franchisees are going to be looking more closely at the promotions we run. You may find they may not all be the best for your store. Now is a good opportunity to select only those promotions that will be most profitable for your individual business, and you ultimately will have to make that decision. Being in stock always helps, also, because it gives the appearance that the store is doing a good business.
The holiday season is a good time to bring in new guests to our stores, because they will be able to see the Extended Product Assortment, which will make the store more inviting. That is a positive. Sales results already are very positive from a lot of stores, so that’s a big plus. I have visited some of these stores, a couple in Dallas and a couple in the Bay area, and they are very inviting, even from the outside walking in.
Ultimately, you are the decision-maker and you need to do what’s best for your store and your guests. At the end of the day we are best suited to measure our stores because no one knows our stores better than we do. It will be a challenging next few months and time will tell if we made the right adjustments to our businesses as we try to find ways to compensate.