Serve, Lead, Do What’s Right. Controlling vs. Motivating

BY MICHAEL JORGENSEN, EXECUTIVE VICE CHAIRMAN, NCASEF

“It’s called servant leadership. Serve, lead, do what’s right. Invert the pyramid—put the customer first, followed by strategy. Then take all your infrastructure and put it to use to meet customers’ needs.” Ten years ago, on May 13, 2010, 7-Eleven CEO Joe DePinto made these remarks to a crowd of faculty, students and friends at the Owen L. Coon Forum, at the Kellogg School of Management, Northwestern University.

He was describing how he demonstrated the concept of servant leadership during his appearance on “Undercover Boss,” a CBS reality series that follows high level chief executives as they work anonymously within their companies. The show is still on. He played clips from the show during his speech to illustrate 7-Eleven’s customer-focused business philosophy.

“We’re here to make people’s lives a little easier,” he said in the clips, which showed him being trained to sell coffee, one of the company’s most popular items. “We’re here to serve people. That’s what 7-Eleven is about as a company—serving people.”

But the way the company serves people is changing, DePinto said. The entrance of the millennial generation into the market, as well as other factors have changed buying patterns. To find out how to meet consumers’ changing needs, 7-Eleven asked customers what they wanted. Quality, service, value, cleanliness and assortment were the five things consumers rated highest. The company then evaluated how it was performing in those five areas. We were focused on the customer.

Fast forward to today. After the launch of the WIN coffee program in New York, additional areas of the country are receiving the program, hoping to evolve with the next generation of 7-Eleven’s coffee program. Orlando is among those areas. I have heard from a number of franchisees in this next wave that we need to meet a certain criteria before installation of the equipment can take place.

The checklist process begins with field consultants conducting a specially designed WIN coffee readiness survey and a detailed long-walk store inspection, followed by a visit from the WIN Coffee readiness team. The WIN coffee readiness team surveys the entire store and is requiring franchisees to detail everything—from building pressure wash and gum removal, to mulching and tree trimming. This is followed by several additional progress visits.

On the other hand I am told that old gas pumps, cracked lots, cracked floor tiles and other issues, which fall on SEI’s side of repair and maintenance, are overlooked. Bottom line, the team is telling franchisees that if they do not satisfy the items on these checklists that their participation in the WIN coffee program, the installation of the equipment, will be in jeopardy. 

I want to be clear here that there are contractual obligations and requirements on behalf of both parties to the agreement. The question is not whether 7-Eleven has the right to demand these items be addressed; it is the manner and direct relationship to the WIN coffee program install that is the concern. If you want to understand why there are issues within our system, such as poor franchisee morale and broken trust, one doesn’t need to look much further.

For me, both the WIN coffee program and the $1 coffee program started more than two years ago at the March 2018 NBLC Meeting, when slides were shared (the deck was also posted on the NBLC section of 7-Hub) that highlighted our customers were not happy paying our prices for coffee. Our prices were too high. These slides also indicated that our customer’s needs were changing, and that they were now seeking different, more specialized coffee products and experiences such as espresso based drinks, as well as coffee made fresh via bean-to-cup machines and cold brew. They also show that this wasn’t an overnight evolution of the customer, it had been happening over a long period of time. Then they unveiled the new coffee platform and beverage wall that they were testing in Texas.

Franchisees have been participating in $1 coffee through 7-Rewards since July of 2019, first through all 7-Rewards members, and more recently the program is being offered to only registered members. There has been a lot of discussion among franchisees about the lack of funding, duration of the promotion, inability to opt out, issues upon opting out, and 7-Eleven setting our pricing. When this promotion started back in July, we were presented with a slide that indicated, “Coffee consumption is growing everywhere but 7-Eleven (10 year decline),” and “Consumers are thinking of 7-Eleven less and less when considering coffee options.”

There was information provided at this year’s SEE, which SEI used to form the business plan for hot beverages. In a survey, 755 people responded to the question “What should 7-Eleven improve in order to motivate you to buy their coffee more often?” Only 6 percent (45) of respondents mentioned lowering prices and an additional 5 percent (38) referred to rewards points. The only piece missing is the timing of the survey.

This $1 coffee promo certainly helped draw more customers into the 7-Rewards program and is now motivating them to register. We are still beginning to understand the value of 7Rewards to our business, something that will take us some time. The easy part to understand is the value that comes in the form of customer loyalty, return trips and happy customers. Franchisees continue to invest in customer acquisition with 7-Rewards and will hope-fully share in all of the future revenues it generates.

Do I believe the $1 coffee program was the right decision for our business? I believe it was for my particular stores, but this will certainly vary by area and individual store circumstance. I also believe 7-Eleven should make the franchisees whole financially and accelerate the installation of the WIN coffee program so all franchisees can again realize positive unit growth along with retail growth, transaction count growth, and everything that comes along with it.

Given the current atmosphere, and 7-Eleven’s history with franchisees, is it really the proper approach to be holding the WIN coffee program and equipment installation hostage over franchisees until they complete a checklist? Wasn’t this program already long overdue? Is this the definition of “Doing What’s Right?” What about our customers? Sure, they are getting their coffee for $1, but only after they do what we want (register with the 7Rewards program), and many customers are still not getting what they want in the majority of our stores still waiting for the WIN coffee installs.

In his article “The Secret to Controlling Other People” published in Psychology Today, Timothy Carey, Ph.D. notes that “When you know an important goal that someone else has, if you can arrange situations so that they only achieve their goal by behaving in certain ways, then you can control their behavior for as long as they continue to pursue that goal.”

Regarding the WIN coffee program, most franchisees have a goal of acquiring the new equipment to get them to the current coffee standard in the c-store industry. In this example, 7-Eleven should, and I can argue does, want to achieve the same goal. However, instead of motivating franchisees to move the needle in the areas pointed out on the Walk and Readiness forms, they are using a control approach. Again, there are contractual obligations, but what happens when there are not?

If you are being controlled it is important to be aware of what is being used to control you. A few examples of goals franchisees have that are used to control them are scrape and rebuild, relocation of existing store, approval for another store, contract renewal, appointments to NBLC or similar committees, etc. It is important to know that 7-Eleven also has goals, many of which are not contractual obligations, which you as a franchisee can use to control them. For example, new item take rate, pre-books, focus items, focus days, custom retail pricing, etc.

In his article Dr. Carey advises, “Whenever you’re feeling as though another person is controlling you in some way—instead of asking them to change what they are doing (which could also be useful), it may be helpful to check your own goals. It may not be easy, but changing your own goals will also change the dynamics of the relationship with the other person.” He concludes, “It’s a fact that, because of the way we are designed, other people can control our behavior. It’s also a fact, though, that they only control our behavior by manipulating the extent to which we are able to achieve goals that are important to us.”

Is this what we have come to? Is this the Servant Leadership organization that we strove to be back in 2010? In a perfect world 7-Eleven and franchisees would work together to have an alignment of goals, so that when everyone works together, everyone wins together. But this only happens when there is transparency and each party can be held accountable to the other. This is what franchisees want, and what franchisees need, but today accountability is all one-sided. It’s a failure of management.