7-Eleven franchisees request open accounting of vendor payments

In the wake of its corporate convention, which reportedly drew thousands of vendors and their associates, the National Coalition of Associations of 7-Eleven Franchisees, (NCASEF) is requesting that 7-Eleven, Inc. (SEI) open its books and show how much money it collected from the vendors who pay big money to show their products and services to franchisees and corporate executives.

“We strongly believe that the money 7-Eleven collects from vendors at trade shows should be used to help lower the cost of goods for all franchisees,” said Rehan Hashmi, Vice Chair of the National Coalition. “The company collects millions of dollars for its Japanese parent even as U.S. franchisees are struggling to earn solid profits.”

SEI promotes its business as a way to make “franchise ownership easy and profitable.”  Its website states, “As a franchise owner, you get to leverage 7‑Eleven’s super buying power and offer your customers what they love at great prices, and without cutting into your profit margins. We buy big, so you can get the benefit of negotiated pricing and terms.” According to Item 8 of SEI’s most recent franchise disclosure document, SEI’s revenue in 2018 from franchisee required purchase and/or leases was $2.58B.

But, the reality is that franchisees sometimes pay more for items that they could purchase from warehouse clubs like Costco. The SEI franchise agreement makes no guarantees that franchisees receive the best pricing or most advantageous terms from the supply chain run by the corporation, even as it collects millions from the vendors who help supply stores coast to coast.

The National Coalition, which is an elected, independent body representing more than 7,000 7-Eleven franchised locations in the U.S., has repeatedly asked SEI to apply vendor payments to the cost of goods, but the company has yet to show any accounting. SEI says there is a process in place for its Franchisee Selection Committee to review 7-Eleven’s contracts with vendors, but this committee of just five franchisees is hemmed in by a process shrouded in secrecy and limited in its capacity.

“Franchisees should have a voice on how to best use that money. SEI should not be using the millions it collects to defray expenses they should bear,” said Michael Jorgensen, the National Coalition’s Executive Vice Chairman.

In a 2018 survey of National Coalition members, only 12 percent said they believe 7-Eleven gets the lowest cost of goods from its vendor partner and only 10 percent said 7-Eleven has franchisees’ best interests at heart. Full results of the National Coalition’s survey can be found here.