Please Change The Business Model!
SEI’s current business model is badly in need of repair, especially for owners of low-volume stores. We are facing a very bleak future as the world rapidly changes around us and we barely manage to keep up. If 7-Eleven is to remain the top c-store chain in the country, we need a system that fully supports ALL franchisees no matter what obstacles may come our way.
Our biggest challenge at the moment is the minimum wage rate increases occurring in cities and states nationwide. To date, our franchisor has not provided us with a suitable solution to our rising labor costs, especially considering the extra labor hours we now require for the hot foods program. Obtaining the lowest cost of goods would help alleviate the pain of our increasing payrolls, but SEI has not delivered despite years of promises. The fact of the matter is that our franchisor has failed to help the financially struggling franchisees in any real way. SEI has added insult to our injuries by telling already overworked franchisees that they should raise prices and work harder to increase sales to offset the increase in minimum wages.
Another challenge for many franchisees, especially those with low-volume stores, is the hot foods program. This is attributed to many factors, chief of which are lack of a sufficient customer base in many stores to begin with, lack of advertising in main media, writeoffs, and the pitiful lack of store remodels that would make our stores fresh food destinations in our customers’ eyes.
Frankly, you can’t offer foodservice without making the store look like it is in the foodservice business. If SEI wants to have hot foods in every store, including low volume stores that don’t have the customer base, then the company will need to develop a special plan for those stores because financially they will not be able to survive. That’s very clear in Chicagoland. We have a lot of low-volume stores, and after they introduced the hot foods program, those stores are struggling. The hot foods program is simply not working for them.
So I propose the following changes to the business model for our system:
- Unless something is done to help low-volume stores, the current financial environment demands that SEI close these underperforming stores because it requires a good customer base to sell hot foods and be profitable. This is quite evident, especially in Chicagoland, where the hot foods program was launched last year and is not working in low volume stores. The franchisees from these stores should have the opportunity to move to better performing locations.
- There is no questioning that 7-Eleven must move into foodservice, as cigarette and tobacco sales are waning thanks to new laws on the local, state and national levels becoming increasingly more restrictive. However, SEI needs to invest heavily both in store remodels and main media advertising if we want to convince potential customers that 7-Eleven stores are good destinations for hot and fresh food.
- The 50 percent gross profit split is no longer workable because of the increase in our operations costs caused by higher wages and the increased labor hours required for the foodservice business. Franchisees’ share of GP must be more than SEI, depending on the sales volume of the store.
- There should be no conditions placed on storeowners if SEI decides to keep the low-volume stores open, and the company should offer existing franchisees of low-volume stores the same new financial incentives it’s offering to new, prospective buyers of low-volume stores to ensure that they remain in business.
- Since SEI has failed to provide the lowest cost of goods from its hand-picked approved vendors, they now must allow franchisees to buy from vendors of their own choosing—without any restrictions—in order to obtain the best deals they can.
Given that the 2019 Agreement is just around the corner and our National Coalition is presently fighting for franchisee input on the development of the new contract, there is no better time than now to push for these changes. At the very least, we must put pressure on SEI upper management to craft a new Agreement under which franchisees could begin to prosper, ensuring a brighter future for all parties involved.