Territory Rights And Encroachment
SEI has stated and demonstrated it is on a growth path in Canada and the United States by continuing to make store acquisitions that add to overall store totals. The company is presently near its goal of 10,000 locations in North America with its recent purchase of 1,108 Sunoco c-stores (with gas), which brings its total number to 9,815 in the U.S. and Canada. While this expansion offers an opportunity to grow within the 7-Eleven system, many storeowners question if an encroachment amendment to our contract is truly necessary to protect our investments. Franchisees are also asking why aren’t we being given first crack at owning a new location coming up in our area?
As I give it some thought and look around my area, I see competition is all around us. It is from retailers that have not competed with us in the past—dollar stores, pharmacy chains, fast food restaurants, big box small format stores—but now we are all fighting for the same customers. One way we are trying to differentiate ourselves from the competition these days is by our product selection. The other is by growing our store count.
SEI has said that the number one advantage of their expansion plan is that it provides opportunity for existing franchisees to become multiple store owners. This opportunity is important, because it allows us to avoid encroachment by purchasing the new store that may be very close to one we already own. This offers a sense of security and comfort that your investments in the system are going to be safe because you won’t be competing against another franchisee so close to your store.
However, one of the disturbing things we are hearing is that many times, even when these new locations open up close to an existing franchisee, the franchisee always appears to be way down on the list of finding out about it. It is my belief that whenever a new store is available close to another 7-Eleven, the franchisee should be notified as a common courtesy so he or she will have the opportunity to decide if they would like that location. A lot of times we find out after the fact, and then the franchisee is at a disadvantage.
When that happens, it creates a negative feeling within the system that franchisees are being left out of the process when we should be totally involved because we already have an investment in the system. It would create a positive feeling if the franchisees were notified and allowed to make the determination if they want that location or not. In a true sense, we are business partners, and as business partners we have a fiduciary duty to disclose what is going on to each other. We used to have a half-mile radius rule, and the current franchisee was always notified and given the first right of refusal. We need to bring that back to the franchisees because it would renew the security that everyone needs to protect our investment and our financial return and allow us to grow into the system.
Our franchisor must realize that we indeed need territory rights. It is something I am hoping we will see down the line. It is becoming more and more necessary with the number of SEI acquisitions to bring everyone to that good, positive feeling that we used to have when encroachment was in our agreement.