Asset Protection: A New Approach

With SEI pursuing an aggressive expansion plan, the number of 7-Eleven stores available for franchising is increasing. Many of these new stores inevitably will be sold to existing franchisees who have proven they can run stores profitably. The others will be sold to newcomers, which is great news, because the more franchisees we have the stronger our system. Yet according to what I’ve been hearing from many of these new franchisees, SEI could be doing a better job of training them on how to look for, and prevent, shortages caused by employee theft.

Recently, I received a call from a franchisee in my area about his latest audit result, and after talking to him for a while I realized he was not fully aware of the different factors relating to audit shortages. The conversation ended with me agreeing to meet with him personally.

This franchisee has been in the system for almost a year and has gone through four audits, out of which the first two audits were reasonably short, the third was also short, but the latest audit was too short. He runs the store with his wife, and they have a manager. He also recently hired an outside accounting service to help check for accounting errors and to ensure all the reports—merchandise reports, S-18s, etc.—were in order. After looking into the paperwork, the possibility of an accounting error leading to the huge shortage was ruled out. I suggested they get a re-audit to make sure the count was right.

I met with the franchisee, his wife and his store manager on a Monday morning around 11 a.m., and the meeting stretched until 3 p.m. The store had a good practice for write–offs and CDC invoice adjustments, and the manager was making sure the computer printout for write–offs matched handwritten notes. However, the store did not have any written policies to cover vendor delivery check–in procedures for McLane or DSD vendors. There was also no system in place for single-sell counts for McLane deliveries or for case counts.

After looking at the Merchandise Sales Calendar, it became clear that the store also had no tolerance policy or parameters in place for Cash Drawer Variations. Cash variations were high, but above all, this store had a huge sales increase with merchandise sales up more than 30 percent for the month of October—a very good sign that shows customers are getting what they want.

The next step in my meeting with them was to establish procedures to go through the Electronic Journal, print and verify voids, refunds, aborted transactions, no sales, PLU inquiry, cancel age verification, etc., and to figure out the validity of all these transactions. Unfortunately, the franchisee, his wife, and manager were not even aware of these procedures at all. It was evident after printing some reports of all the voids, aborted transactions, no sales, and refunds covering a few days that there were one or two dishonest employees in the store.

This franchisee told me that at no time was he trained on how to look for and prevent these types of losses. He has had no contact or feedback from Asset Protection. Our Business Consultants seem more focused on sales numbers and compliance with new policies than teaching loss prevention techniques, and in this franchisee’s case—since sales were on the increase compared to last year—everything seemed fine to them.

Our Asset Protection managers appear to be primarily focused on their own departmental follow-ups, so they rarely visit stores to find out what is going on in the field. Very few times have they even made a presentation about how to save assets or prevent losses during quarterly sales meetings, which are mainly focused on sales increases, fresh foods, new programs, and compliance.

I realize it is very difficult to train every franchisee individually by visiting their stores, but SEI can train franchisees by holding special classes about inventory variation, safety measures, and other related topics at the market level. In-store training for new franchisees is mainly focused on the floor operation of the store and doesn’t present all the information on how to prevent losses, so some materials on the topic should also be included in the new franchisee training in order to create more awareness from the beginning. Local law enforcement officials can also be contacted to shed more light on how to prosecute bad employees if caught stealing, and what kind of evidence is required.

Most franchisees follow all the new programs and I am very sure that all of them will join hands with SEI to reduce losses, so let’s all work together on this issue and get some training classes set up in each market. I can assure SEI as a franchisee representative that all FOAs will try their best to encourage the maximum number of franchisees to take advantage of these classes or other programs chalked out by Asset Protection managers.