Working On The Challenges
By Sukhi Sandhu, NCASEF Chairman
There are many challenges that franchisees and the system are currently facing. Among them are the AR Gap, store safety, delivery issues, and rising operational expenses that include labor costs, inflation, and rising credit card swipe fees, and others. However, NCASEF is diligently working with SEI to address these issues and put them behind us so we can move forward to increase sales and profitability for franchisees and all 7-Eleven stakeholders.
The AR Gap has been a major pain point for franchisees. The cause of the AR Gap is not anyone’s fault in particular; it’s more a byproduct of COVID, which has disrupted not only our personal lives, but the operations, logistics, and staffing of our vendors and franchisor. Nevertheless, we have expressed our concerns about the AR Gap and other accounting issues—like the backlog of MASC cases—to SEI, and we’re working with them on permanent solutions. For their part, SEI has allocated additional resources into accounting and is working with the wholesalers, including CoreMark and McLane, to address these cases.
We have also been meeting with our wholesalers to improve the delivery process and fill rates so we have products available on our store shelves for our customers. We’ve been developing and improving a long-term solution for the AR Gap by way of store check-in simplification (SCIS). We’ve been working with SEI, their Logistics team and our wholesale partners to fine tune the SCIS process and make it efficient and accurate so we don’t have to face AR Gaps and our entire delivery and fill rate process is improved.
The profitability around 7NOW has been another challenge. SEI had temporarily suspended its policy of subsidizing the program’s delivery fees, but we had numerous meetings and discussions with our franchisor, and we mutually agreed that franchisee profitability is critical to the success of the program. We all realize that 7Now is a very important program for the brand, but franchisees need to know that it will also be profitable for them so they will invest time and effort into the program to maximize its potential. SEI agreed with this and decided to continue subsidizing the delivery fee, which will be retroactive from the time it was suspended on July 1.
Another topic that we’re engaging with SEI on is store safety. We have requested to form a cross-functional, multi-departmental committee with our franchisor that will look at every obstacle store safety generates, even the challenges that it provides, such as logistics. There is work being done with the Asset Protection department to test crime prevention products and other solutions. There’s even an ongoing test where some stores are allowed to close from midnight to five in the morning to see if that reduces the number of incidents occurring in the stores.
Pass through windows are being tested, which would allow franchisees to serve customers after hours without letting them into the store. It’s being piloted in 10 stores in Northern California and Dallas, Texas, and will be installed in 126 stores by Q1 2023. Then there is the Live View Technology program, which involves deploying cameras to monitor fuel theft, loitering, homeless people, vandalism, theft, robbery, and employee and customer safety. Unfortunately, there is no simple solution to crime because it is more of a societal issue than a 7-Eleven issue, but we are looking into ways to ensure our stores, staff, customers, and franchisees are safe.
We are also working with SEI to form a committee to address our insurance premium increases and the fact that insurance companies are not renewing or offering new Business Owners Policies (BOP) because of the heighten crime plaguing convenience stores. As you know, BOPs protect you from liability claims and lawsuits; safeguards your building, equipment, and inventory; and cover you financially if your business unexpectedly shuts down from a covered loss. This isn’t just happening to 7-Eleven stores, but to other convenience retailers, as well. This new committee will look for solutions to both premium increases and BOP renewal problems.
Labor is another hot issue we’re tackling, the shortage and the rising cost. Presently, labor is the number one expense for franchisees—it accounts for as much as 70 percent of our total expenses and has increased 25 percent in the last three years. Although store sales are up, franchisee labor expenses are outpacing any financial gains we’re making from sales. It’s already tough for us to keep up with the market prevailing wages but come January several states are going to implement more minimum wage hikes. This is one of the many reasons we’re working with SEI to increase overall franchisee profitability.
In terms of finding workers for our stores, we’re looking at reasonably priced third-party staff recruitment companies to help us find eligible employees. We’re also supporting several legislative measures on the federal level that will help widen the labor pool, such as one that gives retirees relief from Social Security penalties for returning to the workforce, and another that would lift the top and bottom age limits for eligibility for the Earned Income Tax Credit, which affects lower income workers. We’re also supporting federal programs that will bring in more foreign workers via the H2C visa program and Ukrainian workers program.
Rising credit card swipe fees is becoming a very big problem, so we’ve partnered with SEI’s Government Affairs team to visit our representatives in Washington, D.C. recently and ask them to support two bi-partisan bills that will lower swipe fees by bringing competition to the credit card processing market. The House bill, the Credit Card Competition Act, would require banks to allow credit card transactions to be processed over at least two unaffiliated card payment networks. The Senate version of the bill would also require that credit cards to be processed over at least two unaffiliated networks—Visa or Mastercard plus a network such as NYCE, Star or Shazam. We plan to keep the pressure on our elected officials to make sure these bills are passed so we can get some relief from credit card fees.
The pin pad issue, which was making life difficult at the store level, is being addressed. After expressing concerns over the faulty devices, SEI committed to ordering brand new pin pads for our stores. The Item Master issue also appears to be behind us. SEI’s IT department feels like they have a handle on the situation, but if any stores continue to have problems with Item Master they are encouraged to bring it to the IT department’s attention for resolution.
Your NCASEF leadership is committed to resolving all issues so we can focus on increasing sales and profits. Whether it’s store safety, credit card swipe fees, or increased operational expenses, we’re working to address all of them. And the key to successfully resolving all of these issues is open and honest communication—not only between NCASEF, SEI and vendors, but also amongst franchisees. That’s why I and the other NCASEF officers travel across the country to attend as many local FOA events as possible—to meet and talk and listen to franchisees so we can bring your system issues to SEI’s attention and help resolve them.
Before I sign off, I would like to acknowledge and thank everyone who united to help out after Hurricane Ian tore through Florida in late September. Great kudos to everyone working together, from franchisees and local FOA leadership, to SEI’s Facility Maintenance and Operations and suppliers and vendors. It was truly inspiring to see how the 7-Eleven family came together to not only help the stores impacted by the storm, but to support the communities and first responders, as well.