Are We Profit Partners Only?
As 7-Eleven franchisees, we love our brand. Our stores allow us to make a good living while providing friendly services to our customers and building strong ties with our communities. But times are changing. Unlike in the past, when our only worry was a competing c-store, these days we’re being bombarded with additional competition. This includes big-box retailers going smaller, with everyone from auto stores to Home Depot selling snacks, to online retailers offering some of the very products we sell in our store with the convenience of home delivery. We are being clobbered by legislative issues like minimum wage increases, bag and sugar taxes, and smoking bans. Our business environment is changing faster than ever, and it is becoming difficult for franchisees to keep up. We are starting to see not only our low volume stores go below equity, but middle to high volume stores as well.
Although it’s depressing enough to suddenly see sales decline due to circumstances unforeseen or beyond your control, it becomes even worse when we realize that we can’t expect much help from our franchisor. In such scenarios a franchisee experiences a sudden sales and GP dollar decrease, and our franchisor continues to apply and charge a higher percentage split based on the previous rolling 12 months gross profit formula (GGPS), instead of making exceptions for the impacted store(s). There are clear directions in place for Corporate in Dallas to help drowning franchisees, but the directions seem to get lost when they reach the franchisees. This has hit home for me since I have experienced a financial impact so bad that I am driving an Uber on the side to make ends meet.
I have a $2 million merchandise sales store located in a major shipyard. When a ship is there to overhaul, business is great. My estimate is that SEI made a minimum of $300,000-$400,000 annually from my store alone. In the previous eight years, SEI has accumulated over $3 million from this one store. Now, however, my sales have dropped due to the absence of ships in the dock for the last five months and I have been writing checks without SEI’s help. When I approached our franchisor for assistance, they said I should dig into my savings or go to the bank to get a loan. This is NOT a true partnership. It should be a two-way street and our franchisor needs to help struggling franchisees, whether the situation may be temporary or permanent.
Our franchisor’s proposal was to move me into a different store, but all of the stores they showed me had a much lower gross profit, and would not have been a viable decision on my end. The experience I went through made me realize how low volume stores are struggling and why so many franchisees have second jobs like driving Uber or Lyft for supplemental income to pay their bills. Our franchisor’s business strategies such as hot food and driving sales with low margin items, come with a burden on the franchisee due to higher labor hours that negatively impact their bottom line. I believe in those programs, but they need to be simplified and come with higher gross profit margins. Under the current business model, I believe we no longer have a marketable agreement that is fair to the franchisees.
Split change was also an option and was denied. They were taking more than 53 percent and I received 47 percent all these years. Now, when I’m struggling, why can’t we change the split? I tend to be very vocal when I advocate for my fellow franchisees, and I believe that has not made dealing with SEI on this matter any easier, but I would rather sacrifice and continue to drive for Uber in order to pay my bills than let my franchisees down.
Understand that I’m not going against the brand. I’m just trying to send a strong message about what we have to go through. Franchisees shouldn’t be in this position. SEI should do something to help struggling franchisees when we go under equity. The company has made millions of dollars on my store, yet they have not spent any money on it since the 1980s. Not so long ago, they sent a project remodel proposal to Dallas and it was denied because “they didn’t have the money.” Yet, they have $3.1 billion available to buy Sunoco gas stations.
Somewhere along the way SEI needs to realize that franchisees don’t want to bring down the system, we just want to improve it. Help the struggling franchisees and invest to remodel their stores.