The Issues on our Minds

By Hari Patel, President, Metro NJ FOA, NCASEF Board Member

These days it is becoming increasingly difficult to run a small business like a convenience store. Although we are part of the biggest c-store system around, 7-Eleven franchisees are not immune to the many forces at play that are greatly impacting our industry. Let’s cover just a few of the issues that are keeping many 7-Eleven storeowners up at night.

LABOR PROBLEMS
Franchisees are having trouble finding and keeping employees, for several reasons. It used to be that working in retail was an entryway to employment for recent immigrants, as well as for people looking to get into the workforce. Jobs in retail teach us how to work with fellow employees, how to deal with vendors, and how to take good care of customers. However, the trend that I see is that more and more people want to choose the days and the hours they work. This is hard for retail businesses, especially 7-Eleven. If we allow our employees to choose their work days and hours, we wouldn’t have anyone working our stores on the weekends or during the overnight hours.

Here are a few more reasons we’re having difficulty finding workers:
• The Cool Factor—The typical young person does not want to work at some convenience store where they don’t feel “it is a cool job.”
• Recent immigrants are finding better options, such as ride hailing or food delivery where they can set their own hours.
• The Internet has become a great job resource for people looking from home on their computers or smart phones.
• Gen Z prefers not to communicate directly with customers.
• Most people do not want to work overnights.

MINIMUM WAGE
Most states and cities have chosen to increase their minimum wage rate, many to $15 per hour. Some are already there, while others will get to that rate in a few years after annual increases. When the labor pool is short because other companies are already offering $15 per hour starting salary, franchisees have to pay beyond the minimum wage to attract good sales associates, which puts a big strain on our payroll expenses.

CUSTOM RETAIL PRICING (CRP)
Stores have to custom price their products to cover the minimum wage increases and stay above water. The downside to this is that in some cases we will chase our customers away by raising prices too high. So we have to CRP our store accordingly and try to get the right formula that will give us more profit without scaring away our customers.

VAPING AND E-CIGARETTE BANS
It seems each and every state and municipality wants to be the first one to ban ecigarettes and vaping products, and a few have even proposed banning menthol cigarettes. Franchisees and vendors do not know when we will be completely prohibited from selling these products. This creates uncertainty for suppliers as well as franchisees.

On the federal level, the Trump administration recently announced that they will seek to ban all flavored ecigarette products, including mint and menthol. It will take several weeks for the FDA to develop guidelines for e-cigarette sales, but once implemented, flavored e-cigarettes will be removed from the market within 30 days. If and when this happens franchisees will be stuck with the inventory, which is held in our stores, resulting in loss of sales and inventory. As most vendors will not take returns, they will also have stocks full of their products.

A ban on menthol cigarettes is also brewing, with city after city trying to pass a law where it would be illegal to sell any menthol cigarettes. For 7-Eleven stores, the cigarette category can represent anywhere from 10 percent to 55 percent of their sales. If menthol cigarettes were to be banned, we would see a drastic drop in sales as menthol cigarettes account for 50 percent of cigarette sales for most stores.

NEW NON-FULLY FUNDED PROMOS
As time goes by, we see fewer and fewer fully funded promo items in our stores. Franchisees are more inclined to plus-sell a product when it is fully funded, but most products now are partially funded or have no funding at all. We are switching to the world of blended GP. We have to be smart about our business decisions and which products we bring into our stores. It will dictate if we make money or not. By pushing non-fully funded items at lower cost we are just losing GP and lowering our store’s volume.

Vendors need to understand that higher GP with full funding is the only way that 7-Eleven franchisees will push their products. $1 coffee and 79-cent Big Gulp promos are a hit if we do the promo for a limited time. If we keep that forever, it is no longer a promo—it will be an everyday low price. As our business changes—these days faster than we would like—it is now more important than ever for us to band together so we can meet these challenges as a united front. I encourage you all to join your local FOA so you can share your thoughts, concerns and ideas, and help your fellow franchisees overcome obstacles.