June 11, 2026

What About Franchisee Gross Profit, Net Profit And Goodwill Value?

By Eric Karp, General Counsel To NCASEF

 

The parent company of 7-Eleven, Inc. (SEI) held an Investor Relations Day on April 23, 2026, based on a detailed PowerPoint presentation, 15 slides of which were devoted to SEI. On the following day, the parent company posted a video of a presentation to investors based on that PowerPoint deck. These presentations followed the decision of the parent company to delay the previously planned public offering of SEI shares to the first quarter of 2027, at the earliest. The presentation was designed to answer questions that investors may have about the financial condition and prospects for the parent company and SEI. But it raised more questions than answers about the role that franchisees will play in the future; questions that we invite SEI to answer.

I urge every reader of this column to review the PowerPoint and the video presentation, which you can find here: https://www.7andi.com/en/ir/library/irday/202702.html.

One of the presenters stated with accuracy that SEI has entered a decisive inflection point in the business. For that reason, the company has developed and presented a detailed plan to address the key challenges faced by the business. Some elements of this plan are already underway.

One of the key challenges identified in slide #2 is “Franchisee profitability.” And while the slides that follow contain detailed plans and goals to develop a modern store network, no concrete steps are identified to make unit level economics for franchisees better than they are at present. And some of the initiatives identified have the potential to reduce franchisee profitability and value; moreover, SEI does not claim that they will increase profitability or value.

Among the five priorities listed on slide #4 under the heading Modern Store Network are a remodel program, building new standard stores, franchising, restaurants, and digital & delivery.

 

Remodel Program

Slide #5 states that more than 7,000 stores will be remodeled by 2030. The stated rationale is that elevating the customer experience requires fundamentally improving existing stores first, which will unlock everything that follows. The presentation states that all stores will receive exterior remodeling and interior store simplification and that locations will be evaluated on a case-by-case basis relative to other program rollouts. Not stated is:

  • How much money the company expects to spend on these remodels.
  • How will remodels be prioritized in a United States network that includes nearly 12,000 total locations across the 7-Eleven, Speedway, Sunoco and Stripes brands.
  • The potential competitive disadvantage for those stores that are deemed not appropriate or ineligible for other program rollouts.
  • Whether these remodels can be carried out if the company does not actually sell shares to the public.

 

New Standard Stores

Slide #6 states that SEI will build 1,300 new stores by 2030, on the basis that new standard stores outperform the existing network with 30 percent more traffic and 44 percent more sales. But in some ways, that is an apples-to-oranges comparison, because SEI concedes in slide #5 that its existing store network needs remodels and refreshes. Not stated is:

  • How much capital will be required to build these stores?
  • The rate at which they will be built, given that over 5 years, that works out to 260 new stores per year, compared to 122 new stores built in 2025.
  • How many of these new stores will have restaurants and thus be counted towards the goal of 1,100 restaurants by 2030?
  • Because it is reasonable to assume that building a new store entails costs materially more than remodeling an existing store, can this program be carried out in the absence of a public offering?

 

Franchising

Slide #7 addresses the goal of creating 2,600 corporate to franchise conversions by 2030, counting the 237 such conversions that occurred in 2025. That works out to approximately 472 such conversions per year over the next five years. According to its 2026 Franchise Disclosure Document, SEI sold an average of 238 franchises per year over the last five years.

This slide appropriately lauds franchisees for their entrepreneurial spirit, local market insight and overall improved performance compared to corporate stores. The slide indicates that “Franchising delivers stronger overall economics,” but that appears to apply to improved economics for SEI. The current franchising model insulates SEI from increases in operating and labor costs. The slide accurately indicates that a strong franchise system enables SEI to grow more rapidly with lower capital intensity, meaning that some material portion of the capital is ultimately furnished by the franchisees through franchise fees. But it does not address:

  • How unit level economics can be improved to incentivize franchisees to buy many more stores than they have in the recent past.
  • How franchisee fees will be set or computed.
  • Which stores will be part of this conversion? Will it include the newly built standard stores, stores with restaurants attached and/or existing other brands such as Sunoco, Speedway and Stripes?
  • Will SEI furnish multi-year store level profit and loss statements for each corporate store its offers to franchisees, which is explicitly permitted under Section 436.5(s)(4) of the FTC’s Franchise Rule?

 

Restaurants

Slide #8 states that SEI will invest in 1,100 new restaurants by 2023, citing its data that locations where there are restaurants have 28 percent higher sales and 32 percent higher traffic. This initiative also raises many questions, not the least of which are:

  • What qualifications will be applied to franchisees and their locations who wish to add a restaurant to their convenience store location?
  • To what extent will fresh food sales be cannibalized by the restaurant operation? Will SEI share its experience and data? Does such data take into account both Fast Food and Daily Food, disclosed by SEI’s parent as amounting to 13.2 percent and 3.8 percent of revenue in FY 2025, respectively?
  • The potential competitive disadvantage for those stores that are deemed not large enough or otherwise not appropriate or ineligible for a restaurant operation.
  • Where are the stores that are included in the data regarding sales and traffic? Are they all 7-Eleven stores? Are any of these locations retrofits?
  • How many of these new restaurant locations will be retrofits as opposed to restaurants built in conjunction with new standard stores?
  • What are the average merchandise sales, merchandise traffic counts, number of square feet and merchandise Net Margin of the locations with a restaurant, by brand?
  • Will SEI provide detailed multi-year profit and loss statements for its existing locations that have restaurants?
  • Are any of the locations cited on slide #8 retrofits, as opposed to new stores built with both merchandise and restaurant offerings?
  • Will SEI provide any proposed contract for restaurant sales to be reviewed and commented on at least 30 days prior to issuance?
  • Will SEI charge an advertising fee for restaurant sales?
    • Will that revenue be segregated from advertising contributions from franchise locations that offer only merchandise?
    • Will the advertising be market specific?
    • Will corporate restaurants make the same contribution to the advertising fund, over and above advertising allowances, payments and credits received from vendors?
    • Will franchisee leaders have input into strategic decisions regarding expenditures?

 

Private Brands

Slide #9 presents the goal of increasing private brand sales to $2.6B by 2030—double the sales in 2025—by focusing on high growth categories including nuts and seeds, hydration, Hispanic, and protein. The slide states that private brands yield a gross margin 18 percent higher than national brands.

  • Since SEI affiliate, 7-Eleven Distribution Company, sells private label and proprietary items, will SEI make a binding agreement to maintain these elevated margins?
  • If not, how can franchisees be assured of the impact of private brands on their profit and goodwill value in the out years?
  • How will doubling private brand sales affect the relationships between SEI, as well as franchisees, with national brand manufacturers?

 

Digital and Delivery

Slide #10 states that 7NOW delivery time is down to an industry-leading 27.5 minutes, that the average basket is 80 percent higher than in-store sales, and that this channel has experienced 20 percent same store sales growth. The stated goal is to increase sales to $1.8 billion by 2030 in part by extending the program to 8,500 stores and expanding the number of proprietary products sold. The question is not whether this franchise system needs to compete in this channel, but how the proceeds will be shared between the franchisor and its franchisees. The franchisee community leaders in the National Coalition are deeply concerned about the profitability of 7NOW transactions and how increasing the digital traffic will affect their labor costs. Nothing in this presentation addresses these questions:

  • Will SEI share its internal analyses of 7NOW profitability in corporate stores?
  • Will SEI share its internal analyses of 7NOW profitability in franchised stores?
  • Will franchisees share in the revenue from sales of Gold Pass, offered at $95/year and $55/year as of 5.14.26?
  • What portion of 7NOW customers are in the Gold Pass program?
  • What portion of 7NOW revenue is derived from sales of private label and proprietary items?
  • How are advertising allowances, payments and credits received from vendors and third-party delivery companies accounted for?
  • Who pays for the free drinks, delivery savings, fuel discounts, product discounts, and cash back to Gold Pass subscribers?

 

Conclusion

At the end of 2017, before the Sunoco and Speedway transactions, SEI was nearly 90 percent franchised. By comparison, at the end of 2025, less than 60 percent of the locations in the system were franchised. It is heartening to see SEI’s parent company tell the investment world that franchisees bring stronger local execution and that this is good for the franchisor. Unanswered is the question of whether (a) the array of initiatives announced by the parent company will benefit franchisees by elevating their profit and goodwill value, and (b) any of the advantages to these initiatives, or specific and quantifiable improvements to franchisee profitability and value that may be offered in the future, are enshrined in contract and not in mere policies.