BCP Stores And Traditional Stores
SEI has developed somewhere in the neighborhood of 300 or more stores nationally via the Business Conversion Program (BCP), in which independent c-stores, liquor stores, and other businesses can convert to the 7-Eleven brand and receive almost the same benefits as traditional franchisees. Over the last several months we have had a chance to meet with SEI to learn about the BCP program, which SEI is using as a way to increase store volume and open more stores in each area. The benefit of this for SEI is additional sales and revenues, and more stores clustered together so trucks do not have to travel as far to make deliveries.
BCP stores have a franchise fee of $25,000, the franchisee is responsible for all real estate and employees, and SEI supplies almost 100 percent of the equipment. At the initial signing, the franchisee must make an initial down payment of $25-40,000, $8,000 for licenses, permits and bonds, and Net Worth must stay above $35,000. The BCP franchisee orders from McLane, has the benefit of an open account, and pays a royalty fee to 7-Eleven that is around 25 percent of the merchandise gross profits—a 25/75 split. The royalty fee begins in the fourth month of operation. 7-Eleven will co-invest with the BCP franchisee to remodel the store, and the franchisee portion of the remodeling investment could come to $50,000 or more. The term of the BCP Agreement is 10 years.
One of the biggest issues for existing franchisees surrounding the development of BCP stores is encroachment, because BCP stores are exempt (as are new traditional stores) from the half-mile policy, and franchisees with BCP stores receive the same benefits as traditional stores. We always say it is reasonable to compete with another convenience store, but we can’t compete with another 7-Eleven, which has the same products and services. Unless you own the new BCP being developed one-half mile from your store, expect it to affect your income. In our area—the San Fernando Valley, Ventura and High Desert—SEI has 126 new store sites under consideration where they can build either a traditional store or a BCP store. The company opened 40 stores last year, and projects an additional 60 stores for our area in 2012.
Another issue—one I didn’t know—is that SEI supplies Gross Income Support to BCP franchisees who fall below certain income thresholds. The Franchisee Low Volume Incentive Program that SEI announced last September for traditional franchisees is much the same. In both cases, the franchisee gets some help (not enough) if the store falls below the required daily income to support it.
The BCP may be good for franchisees who want a second store and know the 7-Eleven system, but some compensation on gross profit split should be made for franchisees who have their gross sales eroded by the location of a BCP too close to their traditional store. On the other hand, SEI should also allow more existing franchisees to qualify for BCP stores, because we know how the system operates. The bottom line is that SEI wants to open more stores, and franchisees want more stores, but if we can’t level the playing field, too many franchisees will be left on the sidelines.