The truth about the technology all around us today is that it is here to stay whether we like it or not. The younger generations—Generation X, Millennials—and even baby boomers do everything on their smart phones, tablets and computers, from communications to television, to reading books, to shopping online, to boarding an airplane. Anyone with a smart phone can stand in a retail store, scan a bar code and find out where else that product is selling and for what price. For those of us in retail, the landscape is changing. The question now is, “How fast?”

I’m not a big fan of texting, but I know if I want to stay connected with people I really have no choice. My daughter is a perfect example of the new communicator who will text as often as talk, and the new hybrid shopper. She’ll spend a half an hour picking out a bottle of wine, but she does not want to spend anywhere near that picking out cereal, so she orders groceries online at PeaPod.com to be delivered. Clearly, if we don’t get our stores involved digitally, the world will pass us by.

For a long time now I have been telling 7-Eleven that they owe franchisees a peek under the tent that tells us what they think the business will look like over the next several years. The smart phone, iPad and laptop computer overnight have become the convergence devices around which our lives operate, and the consumer has become a highly educated shopper with access to multiple shopping outlets. Where are we going to be in three years?

At the recent 7-Eleven USE in Dallas in January, and again at the National Coalition Board of Directors meeting in Tucson in February, SEI VP of Merchandising, Marketing, and Logistics, Jesus Delgado Jenkins, and VP Retail/Business Innovation Rob Chumley made presentations that give us a peak under that tent and show significant changes to the way 7-Eleven is looking at retail in 2012 and beyond.

Jesus spoke about changing consumer behavior, and one of the points that struck me most was that in the current market, consumers are cutting out larger purchases and going for premium smaller purchases. We’ve gone from, “I’m going out on the town tonight,” to “I’ll treat myself to a premium chocolate bar.” This is in sharp contrast to the large dose of private label products franchisees have had lately, but we’re glad that the company is able to understand and move in both directions. Jesus also cited the move to emotional premium purchases, the “feel good or indulgent” movement, and he cited as evidence for this the fact that yogurt is down 5 percent, but more expensive Greek yogurt is up 117 percent.

Another point that Jesus made was that while customers are economizing and retail channels are blurring, technology like apps on the smart phone and Facebook are driving the sale. He said technology is giving customers more choices today than ever before, and I can agree with this. It used to be, “I know I can get it at 7-Eleven,” and consumers would pass three competitors on their way to your store to get a particular product because they knew you carried the item. Now they look it up on their smart phone and find they pass three stores with that item on their way home. Customer loyalty in the future will come in a different way. Today we have to do more than just know our customers by name. Now we have to learn different technologies to attract new customers and build our customer base digitally, or online.

Jesus also told us that at $588 billion, foodservices sales are fifteen times cigarette sales ($40 billion), and that hot and fresh foods will play a big part of 7-Eleven’s future. The overall strategy is to use merchandising, Consolidated Market Rollout (CMR) and fresh food transformation, supported by Business Transformation (BT) to make this transition. He still mentioned that “store product assortment will be driven by the store owner,” and that the main ideas behind BT are to “simplify store operation, to serve guests and to forecast.” He also mentioned a co-prosperity model with franchisees, which I believe is critical. The person that makes the buying decisions in my store is still the person with the MOT in his or her hands, and without co-prosperity, the system is not going to grow.

On day two of the Tucson Board meeting, Rob Chumley described 7-Eleven’s plans for digital innovation and the store of the future. He described five strategic teams—Fresh Food Innovation, Fresh Food Transformation, Next Generation Store Design, Digital Guest Experience, and New Business Development—that could “transform the entire store, and 7-Eleven’s future.”

Rob told us that the store of the future will have many formats, and that there will be nine clusters of stores with a different DNA string for each store. The new store formats will emphasize the guest of the future and the brand experience. This means that the store format may change. Stores in different locations could emphasize different product selections that support local clientele. Not every store will be the same.

Rob started off by telling us that 500,000 apps have been developed for the smart phone in only three years, and that technology is taking over  the retail experience. The path to purchase is lined with digital experiences, and if 7-Eleven wants to stay the leader in this business, we will we have to put the customer in charge and surpass what other chains are doing with technology.

There’s no doubt in my mind this is a major step and 7-Eleven is undergoing some kind of paradigm shift in the use of technology. Rob described no fewer than 16 areas of technology under investigation, including: Guest Identification, Guest Database, Digital Coupons, POS Data Collection, Social Media, Analytics, Targeted Promotions, Loyalty Programs, Payments and Reloads, Cross Marketing, Vendor Portal, Surveys, Gas Integration, GeoSensing, Gaming, and Pre-ordering. Is your head spinning?

There is no doubt that franchisees have to become better communicators online with our customers, but this amount of technology boggles the mind. Some franchisees in my generation may have problems adapting to the digital age. We like our face-to-face conversations, and our personal relationships with our customers, and many of us believe the most important thing you can do is greet your customer by name. Today, with more and more being done electronically, it’s still about the social relationship, but the social relationship is migrating to the digital.

SEI is telling us there are untapped markets out there that we are missing, whether it’s a certain age group or demographic. There is a group of social media people with whom we must stay in touch. We saw last Slurpee Day how fast word travels when some stores were inundated with customers as a result of massive messaging and tweets. What if we could raise a customer base online through social media?

I believe that over the years we’ve lost touch with some of our customer base because we’ve lost some of our competitive advantage. We can’t rely just on scale and say we’re the industry leader because we have the most outlets. If we really want to do a better job of selling merchandise to our customers, we have to identify who our customers are and relate to them on their own terms. We also have to change the way we communicate, because technology has changed the way they relate to us.

For years, we have been asking SEI to upgrade the antiquated security surveillance system in our stores. This system is so old it uses VHS tapes—which are hard to find these days—and the parts required to fix it when it breaks down are getting scarce. Now the company has announced that it has embarked on a $40 million project to install a state-of-the-art DVR security surveillance system in every store. Sounds good, but there’s a catch.

The new system consists of three cameras with a 360-degree view to monitor the entire store, but not the back room. One camera is positioned at the door and the other two are inside the store. The new system is pretty sophisticated, as it allows franchisees to monitor their own stores remotely. The cameras can even be zoomed in and out, which allows for better surveillance. The program is currently being rolled out at select stores, but eventually every store will get the new security surveillance system installed.

Now for the catch: SEI said it will use the system to remotely view and monitor stores for marketing purposes and to examine customer behavior, like how many times they go to the candy aisle, how many times they pick up an item and don’t buy it, what the customer traffic pattern is, etc. The company also intends to use the system to remedy some fraud issues in the stores—for example, if there is suspicious activity at the store, Asset Protection will inform the franchisee so he could confront the employee or otherwise solve the problem.

Many franchisees are dubious about SEI’s intentions, however, and are worried the company will use the system to spy on them. They remember all too clearly how the cleanliness survey evolved from an asset that helped improve the image of our stores, into a report that details the store’s operation—everything from how much the store is writing off to how many top sellers it has. Now this survey is used as a factor to determine if you qualify for another store.

National Coalition leadership is in talks with SEI to find out exactly what are the parameters of the company’s remote access to our stores, as it remains unclear what they will do with the information they collect. Is SEI also going to watch the cash register and front door to make sure no one is stealing from us? Is the company going to monitor how often we change the coffee, or if our employees are wearing name badges? There are a million things SEI could do with such access to our stores, but we need to know their intentions, and we need to have it defined.

The new DVR security surveillance system has the potential to become a great asset to franchisees and SEI. For the first time we will be able to monitor our own stores remotely. If the company can give us written assurances that the system will not be used to spy on franchisees, then we can welcome the surveillance system upgrade without worry, as the market data that could be collected from its use will be valuable to all parties involved. For now, we will closely monitor what happens at the first stores with the new system. The National Coalition Board will make a determination about what to do next at our meeting in May.

Time and time again, I am contacted by frantic franchisees who have just been through an audit that resulted in the disclosure of either a cash or inventory shortage. Small shortages, particularly of inventory, are expected in a convenience store, like a 7-Eleven, that has an inventory of thousands of small items that attract shoplifters. But the shortages that prompt the calls to me are often counted in the tens of thousands of dollars and cannot be attributable to normal and expected pilferage.

Often, these shortages bring a franchisee’s net worth far below minimum, and sometimes far below zero. In many cases, the shortages are too large to be covered by the resources of a storeowner. The result: either immediate termination or, for more fortunate owners, the opportunity to enter into a good will sale. In either event, it is like getting hit by a truck or train, and the storeowner no longer has a business from which he can support his or her family.

Here is what I find astounding about those events. In the vast majority of cases that come to my attention, the obvious and proven cause of the shortages is employee fraud, i.e. stealing. Interestingly, the thief is typically not the new clerk or even your younger employees. More often than not, the culprit is a trusted manager or even a close relative (child, brother, nephew, uncle), in whom you feel comfortable placing in their hands your most valuable possession—and typically your one or more stores are greatly your most valuable possession.

Here is the time-honored formula to predict employee fraud: OPPORTUNITY + NEED = THEFT.

“Need” can be a problem for all relatively low paid employees, and beyond a franchisee’s control. “Opportunity,” on the other hand, can be subject to control, but the enemy is complacency and sometimes just plain inattention to this part of your business because you are too busy with the day-to-day tasks of running a 7-Eleven store. You simply cannot understand how a long-time and trusted employee can rip you off. BIG, BIG MISTAKE.

Back in the 1980s, at the end of the Cold War when President Regan forged a treaty with the Soviet Union for nuclear disarmament, he knew he couldn’t fully trust the Soviets, so he made sure that the United States was able to ensure compliance with the treaty. He coined the phrase: TRUST BUT VERIFY. What the President was saying is that he could not take any chances with the security of America. That motto should become your mantra when it comes to employee theft.

According to New York forensic accountants Israeloff, Trattner & Co., 85 percent of asset misappropriation cases involve theft or misuse of cash, with cash register theft typically not detected for more than 12 months. Retailers like you are just as likely, or more likely, to be victimized by employee theft of merchandise.

As an example, an employee can easily pocket $50 or more daily by not ringing up a few sales. It doesn’t take much. Once in the habit, and knowing that he can and does get away with it, the habit is hard to break or becomes part of that employee’s regular income. Similarly, and as only one example, an employee who smokes can steal a pack or two a day for himself or a friend, and without detection—unless you make detection a priority.

Here are some things you can do. First and foremost is to institute a system of checks and balances. Don’t give any employee sole authority over the registers or inventory in the store. More than one employee should be able to prepare cash and merchandise reports and deposits. All of you have several cameras in the store that can and do capture cash or inventory theft. The problem is that you can’t or won’t spend the time to at least periodically, and without any warning to your employees, check the videos. Even worse, the job is sometimes left to the very employee/manager who may be the thief. What a sweet deal he thinks he has. This is akin to letting the fox into the hen house. You can be sure this fox will eat the chicken.

Some things to protect yourself:
1. Don’t let any employee, long term or short term, young or old, even close relatives, check the videos for employee theft of cash or merchandise. That is your job or should be performed by a non-employee. Never let employees know when you or a non-employee will be viewing the videos and don’t do it on a set schedule, i.e. every Thursday at 9:00 a.m.
2. Establish and make clear to employees that there is zero tolerance when an employee is caught stealing, and that he or she will be fired immediately—no second chances. This will also put the fear of G-d in your other employees.
3. When employee theft is first discovered, you can be sure it is the tip of the iceberg. Act fast. The longer the fraud continues, the bolder the employee gets and the more expensive for you it becomes.
4. Set up a “tip line” with your employees in which they are advised that any information that is provided to you about a co-employee’s theft will be kept strictly confidential and will be monetarily rewarded.
5. Last, and certainly not least, try not to have a set daily schedule when you arrive at the store and when you leave it. This scenario provides employees with the “window of opportunity” in which they feel they can act with impunity. To the extent possible, don’t let employees know your expected hours in the store on a particular day, and if you leave the store temporarily, don’t give employees the time that you expect to return. Surprise and unannounced visits are important. Always keep employees on edge so that can never know when it is “safe to steal.”

So remember, running a 7-Eleven store is essentially a Mom and Pop operation. There is no hierarchy of executives to share responsibilities. You do it all. Don’t put the survival of your business in the hands of employees. When it comes to employee theft, “business as usual” is not an option.

One of two shocks to hit the 7-Eleven franchise system in 2009 was the announcement by 7-Eleven, Inc. (SEI) of the termination of the four-decades-old policy of sharing 25 percent (later 24 percent) of the gross profit from gasoline sales with the franchisee. A few years earlier, SEI had changed the gasoline amendment for new franchisees to a decreasing gross profit split—the more a store generated in gasoline gross profits, the less the franchisee earned. The company’s goal now seemed to be to line its pockets at the expense of the remaining tenured franchisees.

SEI touted escalating operating, maintenance and environmental expenses as the rationale for this drastic change. The end result was that franchisees previously sharing in the gross profit of gasoline sales would now receive 1.5 cents per gallon, irrespective of SEI’s earnings. SEI reported a breakeven cents per gallon gross profit of 13 cents, and said it earns only 3 cents per gallon net profit. Today, franchisees are concerned the increasing daily environmental requirements cost them more than the income they make from gasoline. As it stands, franchisees earn more from Redbox or Vcom/ATM than from gasoline, with no investment in labor.

With the cessation of gasoline gross profit sharing with franchisees, it seems SEI has attempted to cloak its cost per gallon and its earnings per gallon. One factor that has clouded the true cost of gasoline is SEI’s purchase of Tower Energy, the previous gasoline broker. With little effort this could increase gasoline profits at the upstream subsidiary while depressing profits downstream at the gasoline site.

Likewise, gasoline site maintenance has been miniscule for the past several years, resulting in the deterioration of 7-Eleven’s curb appeal, which has also reflected negatively on store image. Gasoline pads have not been cleaned, gasoline canopies have not been painted or have not had new decals applied, gasoline price signs are in disrepair, gasoline dispensers are rusting, and the displays are clouded.

One of the most frustrating policies franchisees have had to endure has been the incongruent pricing downloaded to the stores. Gone are the days when franchisees could discuss the gas pricing strategy to maximize sales and gross profits for both SEI and the storeowner. Recently, franchisees have witnessed 20-cent price differences between stores. Budget “targets” now dictate the pricing strategy. When a store has reached its “target,” the pricing strategy shifts to increasing the gasoline price—without regard to competitor pricing—to seemingly gouge our customers. With the gasoline price sign the most prominent sign at a 7-Eleven store, this only reinforces the consumer’s perception of exorbitant pricing at 7-Eleven, which results in decreased customer transactions in the store. It is interesting that SEI has never truly researched the relationship and impact gasoline has on in-store customer transactions and sales.

Additionally, neighboring 7-Eleven stores often have distinctly different gas pricing. SEI has attempted to explain this based on the volume of gallons pumped. Obviously, a store with six or eight dispensers will pump significantly more gasoline than a store with two dispensers. However, even with two dispensers there are stores that have pumped over 100,000 gallons a month!

Gasoline margins for stores are set according to a five-bucket formula developed by SEI. First, an income target is determined for a store. Based on the volume of gallons pumped at a site the price strategy is implemented. The greater the volume, the lower the gross profit per gallon expected. Conversely, the lower the volume, the higher the gross profit per gallon in order to meet the target gross profit earnings.

Unfortunately, this seems to create a self-fulfilling outcome: the fewer gallons pumped, the higher the retail, resulting in the fewer gallons pumped. Consequently, stores have reported a downward spiral in gallons pumped. Stores previously pumping 150,000 gallons a month are now pumping 60,000 gallons a month. The inevitable destiny is the removal of the gasoline equipment. The frustration mounts when a corporate-owned 7-Eleven store has a more competitive gasoline price than neighboring franchised stores. In fact, franchisees have seen the retail gas price increase at a corporate store after it was franchised.

7-Eleven storeowners are always looking for ways to maximize their incomes. SEI needs to do a better job of helping its franchisee partners accomplish this by meeting its obligations. The gas stores need to be more inviting, with clean gasoline pads, attractive equipment, freshly painted dogbones and islands, and gasoline prices that reflect the value offerings inside the store. SEI also needs to ensure that the proper supplies for gasoline sites it is contractually obligated to provide can be ordered, and that franchisees know how to order these supplies. Furthermore, SEI needs to conduct its own price surveys using the latest available technology instead of relying on the antiquated method of franchisees or their employees driving around to view the competition’s prices—a practice that, by the way, exposes both the franchisee and SEI to potential liabilities.

Franchisees remain concerned that the 1.5 cents per gallon for gasoline commission grows more inadequate every day. Inflation gnaws away at the miniscule remuneration paid, and the increasing environmental requirements and liabilities passed by SEI to franchisees greatly outweigh the remaining commission. One has to wonder, where will it end?

A franchisee from my area recently sent me an e-mail regarding a theft procedure adopted by one of her employees that eventually raised a red flag at corporate, resulting in her getting a “bill” for SEI’s share of lost gross profit dollars. The bill was presented in the form of a “Financial Impact” report based on a worksheet charging the store for the theft.

In this case, the employee would scan age-restricted products, press the Exit and No Sale keys when the age verification screen popped up, give the change to the customer, and pocket the money. Since the employee didn’t use the Void or Abort keys, the thefts were much less obvious as the main screen only gives us the option to view and print Voids, the Log File, and the Electronic Journal.

Loss Prevention/Asset Protection provided the franchisee with a report of all the suspicious transactions that included the product, time, amount, transaction number, and employee number so she could investigate. As it turns out, all this information can be found by viewing the Electronic Journal.

On the right-hand bottom corner under Transaction Type there are several options, such as Normal Sale and Customer Return, and a few that can be used by enterprising thieves, like Cancel Age Verification, No Sale, Memory, and Void & Abort Transaction. The most important, however, are PLU Inquiry and No Sale, both of which an employee can use to find out the price of the product and pocket the money by opening the register on No Sale. You can choose any of these options and print them to verify the validity of transactions by looking at your security system if you have cameras installed with register views. I had no knowledge of these options until I got the e-mail from the franchisee and did some research.

Most of us were never trained how to detect this kind of employee theft, and it is not justified that franchisees should get a bill for SEI’s lost gross profit dollars using some kind of a worksheet without any proper training to detect all this. Franchisees should also be able to view all the details of these transactions much as SEI’s Asset Protection team can so we can verify the validity of transactions like Cancel Age Verification and PLU Inquiry.

Franchisees feel this is a double loss for them, as they have already paid for all these products in the form of Audit Shortages and now have to pay SEI for its lost gross profits. More open discussion and a positive approach will go a long way to solve this issue. Perhaps Asset Protection could start training franchisees on how to detect new types of employee theft as they develop through some kind of special classes or presentations during quarterly sales meetings. In the meantime, however, franchisees can save some money by printing all these transactions and verifying their validity on a daily basis.

Franchisees around the country are very concerned about 7-Eleven’s plans to install new DVR security systems in all franchised stores. Don’t get me wrong. I’m fully in favor of replacing the old VHS systems we have that we can’t even buy tapes for anymore. Franchisees should actually welcome the arrival of the DVR, since we have a right to secure our investment and our livelihood. Many of us have the old VCRs, which haven’t been used for years, and we are still being charged, or we have upgraded the security system at our own expense.

As good and welcomed as the new DVR security systems will be, many franchisees, myself included, are more concerned that 7-Eleven will be able to monitor each and every store remotely from their offices in Dallas. I am worried that market managers are going to watch us remotely at night, see that there is only one clerk on duty and a line of customers, and issue the store an LON because of it.  Our franchisor says it won’t happen, but we remain skeptical. Realistically, no one could possibly monitor over 6,000 stores in real time, but this is the problem: franchisees are upset that Big Brother is coming to watch us and make us less than independent operators. According to the National Coalition’s general counsel, SEI has the right to install any equipment they want in our stores. We need to have 7-Eleven put in writing exactly how they will use the DVR.

If 7-Eleven Loss Prevention really wants to help us, the moment they find out something dubious is going on in our store, they need to come to the franchisee immediately.  The majority of franchisees will be receptive to that and handle the situation by firing the employee or whatever is appropriate. In addition, ninety days is acceptable to us for researching loss, but they could go back and charge us for one year. The one thing that will bring deep division between the franchisees and 7-Eleven is Big Brother watching us and issuing LONs for things we have not even considered. I believe the number of LONs issued will increase as a result of this, not immediately, but it will happen.

Three years ago, I became aware that someone in my store was refunding cartons of cigarettes to himself and pocketing the money.  I watched the tapes and called him in for a meeting and he confessed that he had stolen $3,000.  He had been with me for 11 years, and I didn’t want to fire him.  I would have lost a valuable employee AND $3,000.  I let him pay me back the money over the next couple of months and let him know that I would be watching him more closely.  He is still working for me today. What happens in this situation now, when SEI is involved because it witnessed the theft, either in real time or in researching a loss?

We’ve said it many times before in the 37-year history of the National Coalition: “Franchisees working together can accomplish more than any number of franchisees working independently.” Bringing franchisees together through the work of the National Coalition and local FOAs is my number one goal for 2012. It’s time that we reemphasize franchisees working together, and apply this way of thinking to our FOA organizations in 2012.

When we look back on the last several years, and look forward to 2012, we can celebrate our accomplishments, but we also have to acknowledge that franchisees we will continue to face challenges—from the economy, from competition and from changes to our own 7-Eleven system. I have always thought that the most important role a franchisee organization can play is to “represent the interests of its members.” Franchisee organizations have always existed for this purpose, and no matter how large the group gets, this is our most important mission.

In 2006, the National Coalition consisted of 24 Franchise Owner’s Associations (FOAs) representing approximately 60 percent of 7-Eleven stores, and we have grown to 39 FOAs, representing 86 percent of 7-Eleven stores, in 2011. 7-Eleven currently has around 5,267 franchised stores, added 641 in 2011, and expects to add an additional 750 stores through acquisitions, the Business Conversion Program (BCP) and organic growth in 2012.

Over the past two years, while representing franchisees as Chairman of the National Coalition, I have learned that the franchisee organization has a different mission in regard to the company: “to provide honest, open feedback from the franchisee community in order that the company can adjust and improve the system.”

Over the past two years, by “working with our franchisor to solve problems,” we have:
• seen two new franchise agreements that have not had significant changes;
• eliminated the CDC flat fee so we can see “real” cost of goods;
• made significant changes to the CDC model to get franchisees more involved in the vendor and product selection process;
• made changes to the BT model that helped form the hybrid-model now being deployed in Texas and Florida; and
• increased our legislative activities on national and local levels.

Growth of the National Coalition and the 7-Eleven system is something we can all celebrate, because it offers opportunities to franchisees who want to grow in the system. It also brings with it the problems of growth. Encroachment, Business Transformation, CDCs, low volume stores, gasoline policy changes and franchisee profitability are all issues that we need to continue to address with 7-Eleven in 2012. An economy that continues to face challenges, rising gasoline prices, product merchandising, and competition from outside our channel are all issues we need to address together.

As our system grows, so does the need for local FOAs and franchisees across the country to unite, support each other and contribute to the feedback on both national and local levels. Obtaining profitable growth for franchisees is a commitment and an obligation that the National Coalition and each local FOA shares, but it is only by working together and sharing information that we can remove obstacles, spread the word on opportunities, and make a difference. We have a tremendous amount of work to do, but when franchisees make decisions together for the good of the system, those decisions become much easier to make.

I believe the National Coalition is in a better position today to deal with the challenges ahead. While progress on some issues is not where we would like it to be (renewal fee, gas commission, credit card fees, low volume stores), I urge all franchisees to get involved by bringing your issues and your ideas to your local FOA. I urge FOA leaders to work together and be active in representing the franchisees in your area. Meet with local SEI management to help franchisees with problems, stay abreast of the issues in your area, and most importantly, communicate with your members on a regular basis.

The 7-Eleven system is growing, becoming more powerful, harder to manage, and it is changing faster than ever before. We need to stay united, voice our concerns, and share our knowledge to get the most out of the franchise business system.

At any company that utilizes a lot of equipment, good maintenance support as backup is critical. Until 2010, maintenance in our 7-Eleven stores was managed internally through 7-Eleven, using national and local contractors. Early in 2010 we moved to Facilities Maintenance (FM), a big corporation that provides maintenance management services to similar large companies, such as McDonald’s and Exxon.

In January 2010, the transition to FM took place for what were then the Chesapeake and Florida Divisions. In March 2010, franchisees and corporate stores in the rest of the country transitioned, and by May 2010, Canada was added as well. By the summer of 2010, FM was handling all 7-Eleven maintenance. It was a huge transition.

Like any other big transition, some things went smoothly and some things did not. The call center and dispatch were fine, but the learning curve for FM was large and things did not always go as expected. The biggest issues franchisees experienced were contractor response times and repair times—especially on revenue-generating equipment. We had problems with parts not being available and delays receiving authorization to replace a part. P1 and P2 response times were a lot longer than they used to be, and P3 calls were being closed without resolution. Preventive Maintenance (PM) schedules were not being performed, calls were being miscoded (resulting in erroneous billing), and a large number of the non-contract repair charges were excessive, resulting in an escalating number of disputes and requests for credit.

By the end of 2010 franchisees were up in arms and National Coalition leadership got involved. FM management committed, attended three straight Board meetings, and listened diligently to franchisees’ questions and comments. About a year later we are still not where we want to be, but things are improving as FM is starting to learn how we operate.

One of the most important things FM has done is automate dispute resolution through development of www.FM24-7.com. If you receive a charge you don’t feel is legitimate, you can go online, register, and file a dispute. Within ten days you should receive an email notification of the dispute resolution. If you do not agree with the resolution, reply with your comments and the case will be escalated by FM. The entire process, including credit due, should not exceed 30 days. FM management has said the objective is 15 days, but according to feedback from franchisees at the last meeting, we still have work to do because we are not receiving credit back fast enough. The major benefit of the website portal is that we can track our own cases, but so far, only about 10 percent of stores have signed up.

Even with this system, franchisees need more clarification about what is covered under the maintenance contract and what is not. On the 7-Connect homepage under Online System Support Guide (OLSSG), you can find a list of equipment that is 7-Eleven’s responsibility and the responsibility of the franchisee, but the list is neither clear nor complete. FM has committed to updating this list and putting it on their website.

FM tells us that revenue-generating equipment uptime has improved dramatically, to over 99.5 percent nationally, and that response times on P1 and P2 calls have improved. FM says they are committed to more accountability and transparency on the service provider side, mainly through the use of the website portal, including more detail on the actual repair, the technician’s assessment at the store, the billing at FM and details of the repairs performed.

Now a store can log onto the portal and find out information about PMs and the age of their equipment. You can view open or closed cases, and check invoices and expense history. You can view active contracts or report an issue. It has the FM contact list and a link to your FSR. It has a quick checklist to use before calling to avoid nuisance calls. It has information about your disputes. For sure, through the portal you can have a greater awareness of what’s in your store.

Each time a store is visited by a service provider regarding any piece of equipment and the ticket is closed, a satisfaction survey is generated automatically. We can either accept or reject the survey. These surveys are a great tool for franchisees to share their experience with the service provider, yet only 25-30 percent of those emails generate a response. This is a tool I encourage folks to utilize.

7-Eleven needs to come up with a gas PM/maintenance program. FM told me at the end of 2010 they would have something in place, and here we are in 2012 and we’re still waiting. It continues to be a big issue.

I would like to encourage everyone to utilize his or her FSR, your go-to person at FM. Seek that person out on the www.FM24-7.com portal. You can go to them with questions or if you are confused about a charge. Overall, the most important thing about Maintenance is not to get frustrated. Do not hesitate to escalate an issue if you are not satisfied with your service or a dispute resolution, because now we can take it to the next level. There is a process in place.

It may sometimes appear that the road to obtaining additional stores by existing franchisees is built upon shifting sands with no clear and consistent policy established by SEI for guidance. Undoubtedly, given the number of inquiries that I receive regarding this issue, a great deal of confusion, disappointment, and even resentment is prevalent in the franchisee community.

In fact, however, SEI has established a “Multiple Policy and Procedure” to determine if an applicant is deserving of additional stores. The most recent policy became effective on September 1, 2011, but is subject to change at any time. In fact, I am advised that a test of a new franchisee selection process will be incorporated into the multiple policy during the first or second quarter of 2012, but I cannot tell you at this time if those changes will significantly impact the multiple criteria.

Before, I let you know some of the essential requirements to obtain a multiple, it is important for you to know that the criteria is policy and was unilaterally established by SEI. Don’t look through your store agreement for any reference to the multiple store criteria—you won’t find it. Moreover, the criteria does not amend any provision of the store agreement and, to a large extent, there is an element of subjectivity by SEI personnel who can either grant or deny an application for a multiple.

Since the granting of a multiple is not guaranteed under the store agreement, SEI can make whatever rules it deems appropriate and can even waive one or more requirements for a particular franchisee-applicant without being obligated to waive the same or similar requirement for a different applicant.

So, what are the essential elements of the 7-Eleven multiple store criteria?

1. First, the requesting franchisee seeking a multiple “must have successfully, continuously, and profitably operated” his or her current store(s) for at least six months. Before additional stores are subsequently granted, all stores must be operating to the satisfaction of the market/zone leadership.

2. The requesting franchisee must actively participate in the weekly sales planning or other appropriate meetings, and embrace the 7-Eleven Business System. The question is, what does “embrace” mean? The term can be subject to varying interpretation by different SEI managers.

3. A thorough business plan must be prepared and submitted detailing the franchisee’s qualifications and plan to increase sales and gross profit and properly control both the current store(s) owned and requested store(s). The plan must also show how the applicant is utilizing and successfully executing the current 7-Eleven Business System. Again—this can be a subjective criteria.

4. Franchisee must be operating under a 2004 or later agreement for each currently operated store. This should not be a problem for the vast majority of franchisees.

5. Net worth must be at or above required minimum for each current store owned by the franchisee for the previous 12 months. As to this criteria, I have often counseled franchisees to have a substantial cushion in their net worth accounts to make certain that the account does not unintentionally fall below minimum. As you can see, the consequences can be greater than just receiving an LON or curable breach.

6. Each store that the applicant owns must have met the 85 Percent Recommended Vendor Purchase requirement for the previous 12 months. Here again, the failure to maintain the 85 percent requirement can result in more than just increasing the 7-Eleven charge by 2 percent.

7. The applicant must disclose all businesses that he or she is invested in and must not have an interest in a competing business that would impair the applicant’s “best efforts” or ability to run a 7-Eleven store—once again, as determined by 7-Eleven.

8. The franchisee’s current store(s) and the new store must be in the same geographical area and within the same zone.

9. Each additional store must have successfully trained and fully empowered managers, must be staffed with employees trained in the sale of age-restricted products (Come of Age Program), and embrace the Business System and utilize all of its processes.

10. All of the usual permits and licenses must be in place by the effective date for the additional store, with the franchisee not having any convictions for violating Tobacco and/or Alcohol Beverage Laws for the prior 12 months, as measured from the date of adjudication. If you did, unfortunately, violate any such laws, and you are contemplating applying for an additional store, it would be a good idea to get an adjudication of the violations as quickly as possible.

11. Of great importance, on the effective date of an additional store being franchised, the franchisee must not be in material breach with respect to all current stores owned. Hint: Keep your net worth account well above the minimum at all times.

12. The applicant cannot have been served (in any store currently owned) with 4 or more Notices of Material Breach within the 2 years prior to the effective date of the new store.

13. All of SEI’s then current policies relating to transfer, the half-mile option, and goodwill policies and procedures will apply to the new store.

The above points are the major factors that will be considered by SEI in determining whether or not to grant a franchise for an additional store. However, over and above these factors are general considerations by your Zone Leader, Market Manager, and perhaps other evaluators with respect to the operating history of your current store(s) including, but not limited to, customer complaints and comments, net worth and gross profit growth, inventory variations, accuracy and timeliness of accounting reports, use of the RIS System, implementation of SEI’s business system, and the appearance and presentation of the store and employees to customers. Hint: Keep your customer evaluation scores as high as possible—at least 85 percent for 4 months and no more than one month under 80 percent.

In making its determination, SEI has also created a sort of scorecard that, in some cases, imposes even more stringent and additional requirements than the above criteria. The scoring involves, among other things, merchandise ordering and interaction with your Field Consultant. For gasoline stores, SEI is looking for 90 percent price survey compliance. There are 19 requirements for non-gas stores and 20 for gas stores and, in each case, SEI is looking for an applicant passing at least 16 of these requirements.

If you should apply for a multiple, you will be given a timetable within which to submit your application and business plan. In turn, SEI has a certain timetable to accept or deny your application. If denied, your Market Manager or Zone Leader will discuss the reasons for the denial. If the application is granted, you must sign the “then current 7-Eleven Store Agreement” for the additional store, and pay the then current franchise fee without any provision for a refund. An initial denial does not necessarily disqualify the franchisee from requesting another store.

For all of you old timers (franchised in 1991) who signed the Long Term Tenure Rebate Amendment for the store you owned at that time and for all future stores to be owned, you will be required to waive the rebate for all additional stores now being franchised to you. The rebate will still apply to the original stores that you owned in 1991 and any additional stores franchised which did not contain the waiver in the store agreement.

I hope this article provides a reasonably clear and accurate picture of what it takes to become a multiple storeowner. But, as should be obvious, this is SEI’s party and it alone calls the tune. Bottom line—run a profitable and clean operation and generally accept the 7-Eleven business model and promotions, whether or not you like them, and your chances of franchising additional stores are probably pretty good. If you cannot do that, then your chances are probably slim. Always keep in mind, however, that SEI can waive any requirement in a particular situation, i.e., if management feels it is warranted for a specific applicant and under specific circumstances.

One of the features of the 7-Eleven system is the support services provided by 7-Eleven, Inc. (SEI). Among these services are the payroll processing, payroll tax reporting and the payment of withholdings. Unfortunately, the employees hired by franchisees do not always lead exemplary lives. Additionally, these difficult economic times may permeate the family unit, resulting in creditors seeking all remedies legally available to collect a debt. This may include the garnishment of wages.

The garnishment of an employee’s wage is a legal recourse to collect a debt including interest, attorney’s fees and court costs. To garnish an employee’s earnings, the creditor must initiate legal action in the system to obtain a court order compelling an employer to withhold a portion of an employee’s paycheck, which is limited by federal regulations. The employer must then remit the withheld wages to the creditor.

In the 7-Eleven payroll system, SEI will deduct from the franchisee’s employee’s weekly earnings and remit the money withheld from the paycheck to the creditor. The franchisee will receive the court order and is required to respond in a timely manner. If the garnishment is for a former employee or an individual who never worked for the franchisee, it is the franchisee’s responsibility to respond to the court and the creditor. Failure to do so may make the franchisee responsible for the debt.

SEI erroneously distributed an email in August 2011 notifying franchisees to send all garnishment notices via the Dell scanner in the backroom using Option 5, Human Resources. This is incorrect. Accounting Customer Service and the Payroll Department still request the franchisee call to establish a CHD case and then fax the garnishment notice and other included documents. SEI will then answer the garnishment notice and begin the deduction and remittance process.

Multiple store franchisees may have other difficulties. For all the improvements, SEI still has not integrated the payroll system for multiple store owners.

SEI’s payroll system is incapable of deducting a garnishment when a franchisee’s employee works at more than one store. The garnishment can only be assigned to one store. Federal law limits a garnishment from deducting more than fifty percent of the employee’s net pay. Because the SEI system only recognizes earnings applied against the garnishment from the employee’s home store, an insufficient amount or no amount may be garnished from the employee’s paycheck.

7-Eleven used to be touted as a single-store franchise system. The changes in policies by SEI have resulted in franchisees becoming multiple store owners in order to generate a livable income. With multiple stores, a franchisee’s employee may work at more than one location. Due to the shortcomings in the SEI payroll system the multiple-store franchisee should take extra care to ensure a garnishment is properly processed by SEI. This may include changing an employee’s home store to reflect where the employee actually works; working with SEI to have a proportionate amount deducted from the employee’s earnings from the stores actually worked; or scheduling the employee at only one store.

Remember, ultimately the employer is responsible for the garnishment of their employee’s wages. Failure to do so may result in the creditor lawfully requiring the employer to pay the full amount of the garnishment.