Is SEI Sowing Discord In The Franchisee Community?

By Michael Jorgensen, executive vice chairman, NCASEF

The last year has been a particularly difficult one for franchisees. We now have a contract, the 2019 Agreement, where SEI has squeezed just about every nickel and dime that they can from us, and many franchisees felt coerced into signing it rather than give up their stores and and walk away from their livelihoods. We all supported a class-action lawsuit initiated by four franchisees against SEI just before the signing of the contract (it was a unanimous vote of the Board of Directors), because of the overwhelming control that SEI exercises over every aspect of the operation of the stores.

            While, on March 14, 2018, United States District Court Judge John F. Walter, in the Central District of California, Western Division, granted judgment on the lawsuit in 7-Eleven’s favor, that decision was soon overturned. On April 30, 2018, the California Supreme Court issued a landmark decision in the Dynamex case, and then the Ninth Circuit Court of Appeals vacated the district court decision and ruled the court should not have granted judgement for 7-Eleven. Two months later the Ninth Circuit Court of California made a decision in the case of Vazquez vs. Jan-Pro Franchising, which strengthened the four franchisees’ case, and confirmed that the ABC test codified in Dynamex applies to franchisees.

            Over the course of this lawsuit, and the signing of the 2019 Franchise Agreement, franchisee leaders have been pulled in different directions—by SEI, by the National Coalition, by their own franchisees, and by the national publicity surrounding these events. You may have noticed that the officers of the NCASEF have chosen to speak out publicly about the lawsuit, about SEI’s business practices, about the difficulties franchisees are having with the new agreement, about store level gross margin and profitability, and now, about SEI’s claims surrounding the coronavirus support for franchisees.

            Franchisee unity is a wonderful thing when it happens, but it is a shifting, amorphous and fluid concept that ebbs and flows with each major event. I believe that SEI enjoys playing the field and manipulating franchisees in the process, and I believe the company is fostering a split in the franchisee community. Some franchisees are responding because they are fearful of getting shut out and what might happen if they are.

            SEI leadership has chosen to freeze out the National Coalition leadership and FOA leaders according to who supported whom in our national elections, who supports the lawsuit and who doesn’t, and who speaks up for franchisee rights in meetings of the NBLC, the CEO Roundtable, and ZLCs. Have you noticed that the NBLC (National Business Leadership Council), which replaced the PLC (the President’s Leadership Council), is composed largely of franchisees who are not elected representatives of their FOAs? Prior to last year’s election when the 2019-2020 NBLC was announced, only five members of the NCASEF Board of Directors were selected out of 52 spots. After the NCASEF’s November election, when the NBLC expanded to 67 members, 11 additional Board members were added. The President’s Leadership Council from 15 years ago was comprised of all FOA presidents. Politics at its best.

            The National Coalition now is left to articulate the continuing problems with our system, and even though we are the only elected representatives of franchisees, SEI has chosen to not have any such dialogue with us at all, even after our repeated requests for open and honest discussion. We have chosen to articulate our problems publicly and in the press because our repeated outreach to Dallas continues to be rebuffed. SEI does have dialogue with some NCASEF Board members, but mostly with those who speak out against what we publicly articulate, so the message is clear—you are with us or you are against us.

            SEI is making a concerted effort to create a division amongst franchisees and is further trying to create a wedge by forcing people further to one side or the other—there is no center. Franchisees need to be aware that their natural instincts for self-preservation compounds the problem, because unfortunately, many franchisees have two faces depending on the venue. The face presented to SEI will either denounce the National Coalition or be empathetic when confronted by SEI, while the other face, the one presented to FOAs or NCASEF leadership, will claim outrage at SEI’s actions, and full support of all measures being taken and programs implemented to assist franchisees. They will praise the National Coalition for what they know we are doing on their behalf.

            Remember, our full Board vote to support the misclassification lawsuit was unanimous. If everyone was honest, I believe we would be able to address the issues and move forward once and for all with a new culture and a new approach to addressing franchisee concerns. Honesty is the first step toward unity.

            SEI’s CEO constantly refers to the NBLC and CEO Roundtable as the way the company gets feedback from franchisees and solves problems. Yet corporate wants folks on these committees who generally agree with SEI’s strategies and don’t make too many waves in meetings. What NCASEF has wanted from the beginning is accountability and transparency, collaboration, and representation for the rights of franchisees. I hope all NBLC and CEO Roundtable members understand what an immense responsibility they have for representing franchisees—high volume, low volume, BCP, traditional, rural, urban, seasonal, commuter, neighborhood, single-store and multi-store franchisees. Every franchisee participating on these committees is beholden to SEI for their position, which can be rescinded at any time.

            Why, you might ask, is SEI continuing to foster divisions in the franchisee community? They tell us, we have all of our protocols in place. We have our CEO Roundtable, our NBLC, our ZLC, and we don’t need you. Everything that gets accomplished gets accomplished because of these groups. The answer is that the most threatening thing ever for SEI would be to have a franchisee group that is fully woke, and fully united.

            It is easier and more towards their purposes to create an atmosphere where SEI controls the whole dialogue. The National Coalition is critical of the company when franchisees get a raw deal, and we want to impart this criticism to SEI not to harm the system, but to improve the system for ALL stakeholders. But with SEI, if you are critical, you risk getting frozen out. This is why it is crucial to have folks on these committees who are not nominated by SEI. The fact that SEI continues to call out the NBLC and the CEO Roundtable, and ignore the National Coalition, is a perfect example of how the company is using that to undermine elected franchisee representatives. Can the NBLC really give critical feedback?

            They tell us they have all the information they need, and they are right. They know all the issues, but don’t address them and instead play politics among the franchisees. National Coalition representatives don’t have a seat at the table, and they have closed every other channel for us to be constructively critical, so the only available avenue is through public statements. SEI says that is not good for the brand, but they are simply wrong. Every move we make is to strengthen and protect franchisees and therefore, the brand.

            This should be alarming to every franchisee. We should not be forced to take sides against each other. Every time you as a franchisee hear that the National Coalition is making waves and damaging the brand, remember the facts. We are the elected representatives of franchisees; we are not handpicked for political purposes or to control franchisees. We are always willing to speak openly about the issues and tackle those most important to franchisees regardless of their sensitivity. Foremost, we love this brand and we all do better when we all work together. It’s time for SEI to develop a new strategy.