Do All Roads Lead To An IPO Of 7-Eleven, Inc.? Let’s Play 20 Questions

By Eric Karp, General Counsel To NCASEF

Twenty Questions originated as a spoken parlor game that encouraged deductive reasoning and creativity. It originated in the United States by Maggie Noonan and was played widely in the 19th century. It escalated in popularity during the late 1940s, when it became the format for a successful weekly radio quiz program.

In the traditional game, the “answerer” chooses something that the other players, the “questioners,” must guess. If a questioner guesses the correct answer, they win and become the answerer for the next round. If 20 questions are asked without a correct guess, then the answerer has stumped the questioners and gets to be the answerer for another round.

In its most recent quarterly Presentation Materials dated October 9, 2025, the parent company of SEI reported on the status of what it refers to as Management Initiatives. The first one mentioned on slide 25 is Pursue IPO of SEI by 2H 2026. Under Progress, the presentation states: Launched a project and the practical preparations for its materialization is making progress as scheduled.

What are those practical preparations? At least part of the answer can be found in a 26-page PowerPoint presentation entitled Transformation of 7-Eleven, issued on August 6, 2025 which presents specific goals involving significant increases in revenue, gross profit and earnings per share, such that EBITDA grows by 45 percent or at the compound rate of 7 percent per year through 2030. The plan seeks to deliver shareholder returns far in excess of what has been experienced in the past, which is what triggered the unsuccessful ValueAct and ACT initiatives.

These understandable and perfectly reasonable objectives to increase the financial performance of the company are grounded in attempting to do an IPO at the highest price possible. There is nothing unusual or improper about that. But my concern is that the various initiatives which SEI’s parent company believes will create those conditions are likely to have a material and lasting impact on franchisees throughout the country.

In the previous issue of Avanti, my colleague, Thomas Ayres provided an overview of what would happen if there was an IPO. This included making capital available for system improvements and initiatives and the availability of additional information concerning the financial performance of the company. We continue with that theme by exploring the pathway to the intended IPO.

Here are my Twenty Questions:

SEI’s parent company aims to rebuild and offer distinctive food offerings through aggressive investment in stores and restaurants. This will involve expanding the number of stores with restaurants to more than 2,000 by 2030.

1. How much of this aggressive investment will be in franchised stores?
2. What is the projected cost of this conversion, and can it be accomplished without an IPO?
3. What provision will be made for franchised stores that are too small or too old to accommodate a restaurant format?
4. For franchised stores that are converted, will they operate under the same franchise agreement or some other document? What will be the specific terms and conditions of that arrangement?

      The parent company aims to open 1,300 new large format stores by 2030.

5. Will these stores be made available for franchising and if so on what specific terms and conditions?
6. What commitments can be made to lessen the impact on existing stores in close proximity to the new large format stores?
7. What data was used to project that these new large format stores will generate average daily sales 45 percent higher than the existing portfolio of stores?

Another stated goal is to redefine convenience with delivery in less than 30 minutes. This will involve expanding 7NOW’s geographic and service coverage as well as subscriptions for 7NOW Gold Pass to 8,500 stores by 2030.

8. What data demonstrates that 7NOW is an additional source of revenue for both franchised and company owned stores?
9. In light of the fact that 7NOW sales are an increasing percentage of revenue for every store in the system, are sales through that channel more or less profitable than in-store sales?
10. Will franchised stores share in subscription revenue and if so, on what basis?

For the most recent six months, SEI’s total store sales were down 7.8 percent year over year and revenue from operations was down 9.3 percent. But selling, general and administrative expenses were down 1.6 percent, resulting in a 5.5 percent increase in operating income. The goal of the parent company over the next five years is to continue in that fashion with expenses growing slower than top line revenue and gross profit.

11. Can SEI commit that service and support to franchisees will not be reduced or compromised in light of these limits on expenses?
12. To what extent will this drive for higher operating income leading to an IPO come at the expense of franchisee gross profit, net income and resale value?

Another stated goal is to change the perception of the value and quality of products, especially food, by growing private brand revenue by an average rate of 6.5 percent per year through 2030. The data presented states that private brands have an average gross profit percentage of 51.3 percent.

13. What data demonstrates that private brands have an average gross profit 18.3 percent higher than non-private brand products?
14. Given the degree of its control over private brands, will SEI commit in a binding fashion to maintaining that advantage as private brand products grow?
15. In 2019, SEI stopped providing information from which franchisee gross profit could be calculated. When will it restore the disclosure of that information?

SEI’s parent company also announced an intention to maximize fuel vertical integration opportunities, yielding $400 Million additional EBITDA by 2030. For the first three months of FY 2025, CPG was down 1 percent and gas sales down 1.9 percent YOY. In the next quarter, CPG rose to an increase of 2.9 percent and sales dropped by 4.8 percent. According to the Brief Summary issued by SEI’s parent company, the average number of retail gallons of gas sold per store decreased for the last six consecutive quarters.

16. What percentage of the 8,214 stores with gasoline are franchised?
17. Do stores with gasoline have higher or lower merchandise sales, same store sales and numbers of customers?
18. Will SEI acknowledge that increasing profit on gasoline comes at the expense of franchisees, who are paid on the number of gallons pumped?
19. Why not moderate the drive for profit in a way that not only increases the number of gallons pumped but the number of merchandise sales to customers? Same store sales and the number of customers have each declined for the last 6 calendar quarters.
20. How will the proposed vertical integration of the gasoline business affect retail gasoline pricing and the number of gallons sold?

More than 56 percent of the stores in the system are franchised. Over the last six months, sales at company stores declined by 5.3 percent, while sales at franchised stores declined by only 0.1 percent and franchise commissions paid by franchisees increased by 3.7 percent. The franchisees in this system have a serious stake in its future, whether or not there is an IPO.

If SEI provides specific, detailed and written answers to these questions, I would be more than happy to surrender my space in the next issue of Avanti Magazine for those responses.