Where Do We Go From Here?


Where do we go from here? This is the big question percolating among members of the franchise community, SEI, and even within the vendor community.

In 1967, Dr. Martin Luther King, Jr. isolated himself from the demands of the civil rights movement he helped found. He rented a small house in Jamaica with no telephone, and labored over his final manuscript. In this prophetic work—entitled, Where Do We Go from Here: Chaos or Community?—he lays out his thoughts, plans, and dreams for America’s future, including the need for better jobs, higher wages, decent housing, and quality education.

Sadly, the country still is not where Dr. King would have wanted it to be. Why? Simply put—corporate greed! This greed is beginning to kill the American dream. Think about the most recent financial meltdown. Who and what caused it? A handful of CEOs who put their self-interest and greed over the greater good. Millions of people lost their homes, retirement savings, pension plans and many other investments, yet not a single Wall Street CEO has gone to prison, let alone been charged with a crime. Finally, the U.S. government had to step in and bring stability to financial markets and calm world economies.

This same virus of rapacious greed has infected the very fabric of our once thriving business model. Policy changes and revisions to the franchise agreement have effectively taken millions of dollars from franchisees and moved it to SEI’s side of the ledger, while sticking franchisees with many expenses that previously belonged to the company. Let’s take a look at what has come our way in the last six years:

• Fifty percent of the credit card swipe fee expense, which is estimated to be well over $80 million.

• Our gasoline income has been taken away, estimated at over $50 million.

• Our 15-year agreement with no renewal fees—gone.

• We now have a 10-year agreement, with renewal fees that will cost hundreds and thousands of dollars.

• A graduated split fee as much as 57 percent in SEI’s favor. Add the 1.75 percent advertising fee and it is nearly 60 percent for SEI and 40 percent to the franchisees. And the more profitable a store is, the more SEI takes.

• The Assured Gross Income (AGI) has been eliminated, and there is ZERO relief for the low volume stores.

• Colossal increases to franchise fees, which wiped away most of our goodwill.

• Encroachment with uncontrolled and senseless growth to pad SEI’s bottom line, with millions of dollars in franchise fees, all to benefit the company only.

Okay, I will stop here. So ask yourself if this is true or not, then ask your field consultant, market manager, zone leader or anyone in SEI—if they were the franchisee, would they be happy?

I did ask this question to the executive team in Los Angeles when they met with us in June. The SEI senior executive in the room answered, “These were policies. They should never have been there in the first place and I don’t know why and or who put them there. We knew these wouldn’t be popular decisions.” Not only were we told that the new agreement is fair and balanced, he stated that “in certain stores the franchisee makes more money than SEI!”

My thoughts and the thoughts of some that gathered after the meeting was that this administration is not going to do anything to change these issues for the betterment of franchisees, and they will continue to take more from us and stick us with more expenses. In my opinion, the system needs a complete overhaul with input from real franchisees that seek real, deep and lasting change for today and the future.

SEI needs to first understand that the relationship is EVERYTHING, and that the actions of one of the parties will always be viewed with suspicion if the relationship is broken. Ultimately, sales and profits suffer and no one gains in the end. Temporary fixes on small and major issues is not the answer, and neither is a “slogan” or “new” program.

Restoring and healing the severely damaged relationship with franchisees must involve permanent, sincere and authentic change on the part of SEI. A revised checklist is not enough. The adversarial aspect inherent in the current agreement requires a totally new contract—today! Band-Aid maintenance and slap dash remodels must give way to high quality investment in facilities because our image begins at the curb. True lowest cost of goods with absolute transparency must also be the order of the day. A former CEO of SEI, now long retired, used to say, “Our job is to get you the highest quality at the lowest cost, and if we don’t shame on us. Your job is to order and sell these products, if you don’t shame on you.”

Until SEI truly embraces and practices what it preaches in their servant leadership culture, the slogan, “If you’re not serving an external customer, then serve someone who is,” becomes empty rhetoric. I want us to go where honest and fruitful conversation can be the norm and not the exception. I want a happy, productive, prosperous and growing franchise community and not chaos. I’m sure you all want the same.

These are my thoughts, and I’d love to hear yours.