Business Transformation And CMR


7-Eleven, Inc. announced in mid-November that the company will deploy its new distribution model, Business Transformation (BT), to the remainder of the stores in the Los Angeles area. Along with that announcement came the news that 7-Eleven has selected Los Angeles and San Diego as the next two areas for Concentrated Market Rollout (CMR).

The intent of CMR is to ensure that all stores in a geographic area are brought up to the current store standard, through AQIP and the addition of hot foods and the new coffee program, which allows for consistent advertising across all stores in a market. In the last year, 7-Eleven completed equipment improvements in over 1,000 stores, and did various interior and exterior upgrades in another 550 stores, as part of the initial East Coast CMR rollout. The majority of the California stores covered by the new deployment will each receive AQIP, hot foods and the new coffee program.

Our customers have told us our stores are in need of upgrading, and we are excited to see the process continue. Any opportunity to expand the CMR rollout and speed up the process of completing all the stores in the system will be welcomed by franchisees and benefit everyone. Franchisees have been asking 7-Eleven for a long time to continue the process of remodeling stores that started in the mid 1990s, but stalled somewhere along the way.

Part of the CMR program is to include an advertising and media campaign that focuses on proprietary beverages, fresh and hot foods, and other promotional items, in the remodeled markets. This advertising is for our customers, to let them all know about our new look, as well as to announce our new products, promotions and services. After remodeling, each store in the CMR program area will have the same programs and equipment.

Since new programs tend to work best when the customer is the first consideration, and the franchisee is the connection to the customer, franchisee feedback and involvement is critical to the success of CMR and BT. Franchisees in these areas need to attend town hall meetings, and be prepared to ask questions and stay involved throughout the entire process.

As business partners, we need to take the emotion out of the equation. The building and the equipment belong to 7-Eleven, but the business belongs to us. AQIP and CMR don’t end with a remodel, they just begin. The online roulette physical plant needs to be right, the product mix needs to be right, and this can only be accomplished with a true partnership. Communicate with your customer every step of the way. Get them excited about the change. Contact your local FOA if you need help or are unsure of what to do. The success of CMR will be determined after the contractors are gone and the work is done. The merchandising and marketing plan that is developed and executed by 7-Eleven and franchisees together is critical. Customer acceptance will be determined by increased sales and profits.

The existing BT consolidation center in Los Angles will be closed and BT stores in the Los Angeles pilot will be transitioned to the McLane Company in the first quarter 2012. The transition target date for recently announced Los Angeles stores is second quarter 2012. (Just after 7-Eleven announced the BT pilot expansion in Los Angeles, the company announced a hybrid distribution model would be rolled out in the Lone Star and both Florida zones at some time in the near future.) McLane will deliver all products currently distributed by the consolidator, including heavy liquids.

Product assortment in Los Angeles BT pilot stores was challenging in the beginning, and continues to increase, but still needs improvement. 7-Eleven has committed to work with franchisees in Los Angeles to get the cost and product selection right, and franchisees are working with 7-Eleven to remove the obstacles that prevent franchisees from ordering the products their customers want.

Franchisees in the Los Angeles market, the local FOAs and the National Coalition will continue to meet with 7-Eleven to address franchisees’ BT issues. The details for the Hybrid BT model still being developed will include many of the components of the Los Angeles model. Franchisees and 7-Eleven will partner with McLane and DSD vendors to pilot an alternative model for BT that provides stores with all the benefits of managed distribution and the inventory management system, while continuing to receive heavy liquids via the DSD channel. Existing DSD vendors and bottlers will provide deliveries following the principles of managed distribution in the Hybrid model. Benefits like electronic check-in, self-billing and populating the “I” in the FMIO will all be part of the Hybrid model.

Some of the benefits of managed distribution are clear. Simplifying the ordering system and an improved check-in process provide franchisees with a better total inventory management tool to help control inventory variation. How quickly we overcome the remaining obstacles and learn from our experiences will determine the success of BT and CMR. One thing is clear: Franchisee have to be an integral part of the process every step along the way.