Transparency And Collaboration—A Greek Myth?
By Michael Jorgensen, Executive Vice Chairman, NCASEF
How can 7-Eleven, one of the world’s oldest and largest franchisors, continue to have a such an avaricious and contentious relationship with it’s franchisees? We form the backbone on which this company was built, and we have a common goal: to make our businesses, and the 7-Eleven brand, a success. We work at this every day, yet we struggle to achieve a transparent, collaborative relationship with our franchisor.
To really get the most out of this business partnership, including with the elected officials of the national and local franchisee organizations, SEI has to be willing to work with the folks who are most committed to the brand: franchisees. SEI needs to let franchisees know about the future of our brand, where the business is going, and how some factors, like digitization and delivery, are going to impact us. We need transparency, but more importantly, we need a seat at the table to help shape the decisions being made by corporate. Currently, franchisees feel underappreciated and left in the dark, causing bitterness and lack of trust.
Good communication demands that we have messages and directives coming down from the decision makers at SEI, but also radiating back from the franchisees, thereby adding to the decision making process. Feedback from the front lines of the company has to be made an invaluable part of this process.
This is all in SEI’s hands to change, yet they do not, which leads us to question whether they still value a peaceful, harmonious relationship with their franchisees. It’s the only answer for their lack of transparency in spite of all the negative press, infighting with franchisees, and legal action on the part of their franchisee customers.
What types of things are we talking about? Billbacks and scanbacks, to start with. The accounting system, how ad money is being spent, vendor negotiations, and now especially, digitization projects like 7Rewards, 7NOW, and Scan And Go. We should be involved in all of these decisions and developments.
Why put everyone through all this? Why not give up the secrecy and control, rather than have the brand be put through this public fight with franchisees? The answer lies in what happens if we do get transparency. The company would have to share fairly with franchisees.
If franchisees had more money, and knew clearly where the business was going, we would continue to invest in 7-Eleven, and the company would benefit. Doesn’t SEI trust us to allocate our additional profits to labor? Instead of fixing the franchisees’ compensation to move the needle and hope that happens, they try their incentives, which don’t last long and don’t necessarily move the brand forward.
Everything takes a leap of faith. The company has to do a better job of trusting franchisees so we can move the business forward in other ways to make money. If we had transparency, we wouldn’t be infighting about these things because we would all know what we are getting.
For instance, rumor has it that SEI will be building fulfillment centers to respond to 7NOW delivery requests. The 2019 contract says, 1) that 7-Eleven can establish convenience or “other” stores, at any site other than your store location; 2) that 7-Eleven can grant others the right to sell any 7-Eleven products, including via the internet or similar electronic mediums; and 3) that they may require franchisees to “arrange for adequate delivery service,” that “we may determine and modify in our sole discretion.” It goes on to say, “You acknowledge and agree that your delivery area is not exclusive and that we and other franchisees may deliver within your delivery area.” What stops 7-Eleven from now creating their own delivery system at their own store that doesn’t have to share 50 percent of sales with anybody?
7-Eleven gets digital customers from our stores. They built an app, and approached vendors to put fully funded deals on the app. Franchisees pushed the app and got their customers to join, but they are still our customers! What did we buy when we bought our stores? We didn’t buy equipment. We looked for sales, gross profit, and daily customer count. Are we now giving our customers right back to the company?
7-Eleven could never have developed an app with 35 million customers without the help of franchisees, yet we are left with the feeling that they rolled a Trojan horse right into our stores. Look at this beautiful gift, an app. Franchisees want transparency as business partners, we want to be told the direction of the company, and we want to be active participants in our future. We don’t want to make less money than the year before. So transparency could go a long way in helping franchisees buy into digitization and be committed to fully helping the company move forward.
For franchisees, this playing field feels fraught with danger, akin to the Volcano God, who needs his sacrifice, which is okay, until he comes for you. Even if you have a $3 million store, they will come for you. So franchisees need to reject certain things until we have a better understanding of how these things affect us. 7NOW is the line in the sand. It is the Trojan horse. Nine hundred stores are capable right now, and another 900 will go live within weeks. Deliveries are now through a third party, and we lack transparency on who gets the order. When a customer comes to my store every day and then signs up for 7-rewards, whose customer is he? One day he places a mobile order and where does it go? I have a corporate store one-half mile from me, and this gives the company the ability to pick winners and losers.
Franchisees need assurance that our customers are OUR customers. 7-Eleven has proven in Japan that they can take over every single product in the store with private brands, so already we know we don’t have control. With the transformation to digital, we give up everything. Franchisees and vendors are funding the transformation to digital, so we need to make sure we are getting something in return. We need to make sure we can trade in that Trojan horse for a real horse that we can ride into the sunset.