Restoring Franchisee Profitability: The Urgent Path Forward

By Sukhi Sandhu, NCASEF Chairman

For the past three years, franchisee net income has continued to decline. That reality is becoming harder to ignore—especially at a time when inflation, labor costs, and everyday operating expenses continue to rise. Whether you are a business owner or a working family, income must move forward, not backward. Yet today, too many franchisees are doing everything possible just to keep their heads above water.

This challenge is particularly difficult for single-store and small multi-store operators. The current model increasingly pushes franchisees toward owning more stores as a path to stability. But growth is not as simple as adding locations. As stores are added, overhead rises quickly—additional managers are required, labor costs increase, and administrative complexity grows. What was once a hands-on small business can quickly begin operating like a corporation, complete with office staff and HR personnel. Meanwhile, the ability for a franchisee to personally work the front line—historically one of the ways to offset labor costs—diminishes. The result is often thinner margins per store, not stronger returns.

Compounding this issue is the growing practice of bundling high-performing stores with weaker locations. While this may serve broader strategic objectives, it can dilute the profitability of strong units. A store that once stood successfully on its own now carries the weight of another, reducing overall return for the franchisee.

These pressures did not emerge overnight. Since the 2019 franchise agreement, more expenses have steadily shifted to the franchise side. Programs and subsidies that once helped offset operational costs—such as support for 7NOW, equipment maintenance, and credit card fees—have been reduced or eliminated. Each change individually may appear manageable, but together they have significantly eroded franchisee profitability over time.

At the same time, SEI continues to invest in important long-term growth strategies. Programs such as 7NOW, expanded food service, and future restaurant concepts represent meaningful opportunities. I support these initiatives. They reflect evolving customer expectations and are essential to keeping the brand competitive.

However, these programs are labor-intensive. They require accuracy, fresh food, clean facilities, well-maintained restrooms, and strong customer service. None of that happens without people. As these initiatives expand, operating costs expand with them—often faster than the incremental income they generate at the store level.

Fuel operations present similar concerns. New stores are larger, with expanded lots and additional pumps. That means higher landscaping expenses, more trash removal, snow clearing, lighting, and ongoing maintenance. Yet the fuel commission has remained at one and a half cents for more than 15 years. Inflation alone has significantly reduced its value, making it increasingly difficult to sustain these expanded operations.

Food service and potential restaurant concepts must also be evaluated through the lens of franchisee net income. These categories can be powerful growth drivers, but they must add to profitability—not consume what little margin remains after rising operational costs. Growth cannot come at the expense of sustainability.

To be clear, conversations with SEI leadership have been healthy and constructive. With new leadership in place following Joe DePinto’s departure, there has been openness and a willingness to engage. That is appreciated. There is a shared understanding that adjustments are necessary.

But franchisees are approaching a breaking point. Net income has declined year after year, and many are asking a simple question: where does this stop? Dialogue is important, but solutions must move with urgency. A model that once provided stability and opportunity no longer delivers the same results for many operators.

Franchisees are actively seeking solutions at the store level—identifying higher-margin products, negotiating stronger vendor programs, and introducing new services to improve profitability. Through local FOAs and NCASEF, franchise leaders are also engaging with state and local lawmakers to advocate for clear, consistent regulations that allow compliant small business owners to compete fairly. This includes efforts around skill games and regulated adult-use categories such as vape and CBD-infused products, where inconsistent enforcement creates competitive disadvantages.

In many markets, customers are shifting to competitors who openly sell products that fall into legal gray areas or operate without proper oversight. When customers leave a 7-Eleven for those purchases, they often complete their entire shopping trip elsewhere. The loss extends beyond a single item—it affects beverages, food service, fuel, and the full market basket.

While I value the ongoing conversations with SEI leadership, dialogue must now translate into measurable action. Every new initiative should be evaluated not only by top-line growth or systemwide expansion, but by one fundamental question: does it increase franchisee net income at the store level?

A sustainable franchise system must reward the operators who carry the daily operational responsibility and financial risk. Without healthy store-level economics, no long-term strategy—no matter how innovative—can succeed. Profitability is not a secondary outcome of growth; it is the foundation that makes growth possible.

Franchisees want to grow with the brand. We believe in the system, and we believe deeply in the long-term strength of 7-Eleven. But for that future to remain viable, profitability must be restored and protected at the store level.

When franchisees are financially strong, the entire ecosystem benefits. The brand becomes more resilient. Vendor partnerships become more productive. Customers receive better service. Communities remain supported.

 Store-level profitability is not simply a franchise issue—it is a systemwide imperative.