Turning Challenges Into Action
By Sukhi Sandhu, Chairman, NCASEF
Over the past several months, I have spent a great deal of time talking with franchisees across the country about the challenges they are facing in their stores. The message has been consistent. Operating costs continue to rise, customer traffic remains under pressure, and too many programs designed to increase sales are not producing enough additional profit for the franchisee.
These concerns have been at the center of our NCASEF Board meetings throughout this year. At our first-quarter meetings, I told the Board that profitability must remain our overriding priority. Franchisee income declined for three straight years, and that trend cannot continue. We have repeatedly brought this issue directly to SEI leadership, and we have made it clear that growing sales alone is not enough. Growth must translate into stronger bottom-line results for franchisees.
At the same time, I want to be equally clear about something else: NCASEF and franchisees are aligned with SEI’s North Star strategy.
We understand the need to grow fresh food and foodservice, expand digital and delivery through 7NOW, and provide our customers with consistently clean, well-run stores and a better overall experience. Franchisees are ready and willing to execute that strategy. But successful execution must also create sustainable economics for the franchisees being asked to deliver it at store-level.
Increased sales must translate into increased franchisee income. New initiatives must take into account the labor, product costs, waste, maintenance, and other expenses required to execute them successfully. A strategy is sustainable only when everyone participating in it has the opportunity to succeed.
Our discussions with SEI have focused heavily on several areas where we believe meaningful improvements can be made.
One is 7NOW. NCASEF supports delivery and understands its importance to the future of our business and the North Star strategy. But the economics have to work. Franchisees have raised legitimate concerns about labor requirements, delivery costs, canceled orders, and the amount of time employees spend fulfilling orders. At our second-quarter Board meeting, we asked the invited SEI guests to reconsider the delivery cost structure and restore financial support as longer-term solutions are developed. We have also pushed for labor requirements to be based on the actual time it takes stores to fulfill orders rather than simply the number of orders received.
Food profitability is another major priority. We all understand that fresh food and foodservice will play a larger role in the future of 7-Eleven. But increasing food sales cannot come at the expense of franchisee margins. Product costs, promotional pricing, shelf life, waste, and labor all have to be considered when determining whether a program truly benefits the store. We have raised these issues with SEI and continue working through our NCASEF committees to identify ways to improve the economics of foodservice.
Fuel commissions remain another important part of these discussions. Systemwide gallons have declined, yet SEI’s gasoline gross profit percentage has increased significantly compared with the pre-pandemic period. Franchisees continue to be compensated primarily based on gallons rather than the profit being generated from fuel. NCASEF believes the economics deserve another look to determine whether franchisees are receiving an equitable share of the value being created at the pump.
Our work also goes far beyond these three areas. Rising labor expenses, maintenance costs, required store supplies, technology problems, pricing discrepancies, and equipment downtime all affect the bottom line. During our second-quarter meetings, Board members pointed out that franchisee operating expenses are increasing faster than income. We also questioned the cost of certain required supplies after learning that similar products may be available elsewhere at much lower prices. I asked our Store Profitability Committee to compare those costs so we can have facts in hand when discussing the issue with SEI.
Technology must also make stores more efficient, not create additional work. Register delays, system crashes, and other technology problems can seem small when viewed individually, but every unnecessary delay adds labor and frustrates customers and employees. We continue raising these issues through our Digital/IT/7NOW/RIS Committee and directly with SEI.
One frustration I heard earlier this year was that issues were being raised repeatedly without franchisees knowing what happened afterward. That criticism was fair. At our first-quarter meeting, we discussed the need for a better system to track issues and determine whether they were pending, resolved, or still unsatisfactory. By our third-quarter Board meeting in New York, NCASEF had begun formally tracking outstanding operational issues.
That tracking process is important because our responsibility does not end when we raise a concern. We have to follow it through. Today, our officers and committees continue discussions with SEI involving franchisee profitability around 7NOW, fuel commissions, food sales, maintenance, and ultimately changes to the Franchise Agreement. Some of these issues will take time to resolve, but we will continue pressing for answers and measurable progress.
There are also encouraging signs. Recent results show franchisee income improving compared with last year, including strong gains in July and positive year-to-date growth. We welcome that progress. At the same time, after three consecutive years of declining franchisee income, our focus must remain on whether those improvements can be sustained and built upon over the long term.
Our conversations with SEI are continuing, and they increasingly include the larger question of franchisee profitability. We appreciate SEI leadership’s willingness to engage in those discussions. NCASEF will continue bringing forward ideas and working collaboratively toward solutions that strengthen franchisee income and create a healthier and more sustainable system.
In the middle of all these challenges, we also had an opportunity this summer to see just how strong our franchisee community remains.
Our Golden Anniversary 50th Annual Convention and Trade Show in New York City was a tremendous success. Approximately 2,500 franchisees and vendor partners came together from across the country to celebrate 50 years of NCASEF. We broke attendance records, and the enthusiasm throughout convention week was incredible.
Just as important was what happened on the trade show floor. Franchisees came ready to do business, and our vendor partners responded with strong deals and incentives. The result was record-breaking orders during the trade show. That success matters because the purpose of our convention has never been simply to bring people together. We want franchisees to return to their stores with opportunities that can help them increase sales and improve profitability.
That success also reinforced how important trade shows are to franchisees, our vendor partners and local FOAs. We are now working with SEI on the ordering process for future NCASEF and FOA trade shows, including the issues surrounding EDI orders. Our goal is to take the lessons learned from processing National Convention orders and develop a workable solution that allows these events to continue delivering value to franchisees and vendor partners.
The convention also demonstrated the value of the relationships NCASEF has built with our vendor community. Our vendors have consistently supported franchisees, our FOAs, and our charitable efforts. This year, convention attendees, FOAs, vendor partners and sponsors helped raise $350,711 for Children’s Miracle Network, bringing NCASEF’s total contributions to CMN since 2022 to approximately $2.5 million.
I believe there is an important connection between what we accomplished in New York and the work taking place every day throughout our system.
I have often described our system as a three-legged stool—franchisees, SEI and our vendor partners. Each leg depends on the others. Our Golden Anniversary Convention demonstrated what can happen when all three are strong and working toward a common objective.
The same principle must guide us as we pursue the North Star strategy and address franchisee profitability. Franchisees understand where the business needs to go, and we are prepared to do our part to get there. But we must make sure that growth, execution, and profitability move forward together.
We will continue advocating for better 7NOW economics. We will continue pushing for stronger food margins and a more equitable fuel commission structure. We will continue addressing maintenance, technology, operating costs, and the many other issues that affect franchisees every day. And we will continue tracking those issues so our members can see where progress is being made and where more work remains.
Fifty years ago, franchisees came together because they understood they were stronger with a unified voice. That principle is just as important today.
Our Golden Anniversary gave us an opportunity to celebrate everything NCASEF has accomplished during those 50 years. Now our responsibility is to build on that strength and work with SEI and our vendor partners toward a more profitable and sustainable future for every franchisee in the system.
North Star gives us the direction. Strong franchisee economics make that journey sustainable. And working together is how we will get there.