Gasoline In 2023: Are The Prices At The Pump Working For Anyone?

By Eric H. Karp, Esq., General Counsel To NCASEF

For the standing room only crowd that attended my report at the 2023 NCASEF Convention, I gave an overview of a number of subjects regarding the state of the 7-Eleven system, necessarily focusing on gasoline sales, which over the last several years have been an increasing percentage of SEI’s revenue and profit. The acquisition of the Sunoco and Speedway chains have accelerated this phenomenon.

A few highlights for those who were unable to attend:

• SEI now has more than 8,200 stores with gasoline, up from approximately 3,376 stores at the end of 2017.
• SEI gross profit on gasoline sales rose more than tenfold from 2011, rising from $533 million in that year to more than $5.7 billion in 2023.
• In 2022, more than 78 percent of SEI’s revenue came from the sale of gasoline.
• SEI gross margin from the retail sale of gasoline rose from 24.09 cents in 2019 to 34.85 cents in 2020—the year in which the pandemic began—an increase of nearly 45 percent. It rose again to 35.77 cents in 2021 and 42.14 cents in 2022.
• In the three years before the pandemic (2017-2019), SEI’s gross margin percentage from the sale of gasoline, from the combination of its retail and wholesale businesses, averaged 8.9 percent; in the three years since the onset of the pandemic (2020-2022) its average gross margin rose to 12.4 percent.
• These numbers have consequences because in 2022 SEI’s total revenue from gasoline was $13.6 billion and it sold 6.2 billion gallons.

In its Brief Summary FY 2022* on April 6 2023, SEI ‘s parent company reported that merchandise gross profit in calendar year 2022 was 34 percent, down from 34.2 percent the year before. In explaining this development to investors, it stated the following: “A decrease in gross profit on merchandise was outweighed by growth in gross profit on fuel, leading to a year-on-year increase in the overall gross profit margin factor.”

Something even more interesting has been happening in 2023 which every franchisee should take note of. The balance of this article contains a lot of numbers, but I think it’s important to walk through them carefully and analytically.

Same store retail sales started off strong in January with a 6.4 percent year-over-year increase, but then fell to 4.5 percent in February, 3.3 percent in March, and 2 percent in April. It continued its downward trend through August (the most recent month for which these figures are available) when the same store sales increase was just 0.2 percent.

Here are year-to-date same store retail sales by month through August 2023 compared to the monthly rates of inflation as calculated by the U.S. Bureau of Labor Statistics. The same store sales increase and the rate of inflation for January 2023 were identical. In the ensuing seven months, the rate of inflation was materially higher than the increase in sales.

The statistics regarding fuel sales are equally concerning. Again, January of 2023 showed a 2.6 percent year-over-year increase in fuel sales dollars. But every month thereafter through August has shown a year-over-year decrease in fuel sales, with the deepest decreases occurring in May, June and July.

A similar story appears with respect to gasoline gallons sold at retail, which were modestly positive in the first quarter but have been negative from April through August. Notice that the retreat in fuel gallons every month from April through August is substantially less than the reduction in fuel sales year-over-year.

At the same time the retail price at the pump has been increasing. In the first quarter retail prices averaged $3.467 per gallon, in the second quarter $3.613, and for July and August averaged $3.74 per gallon.

I will leave it to the reader to interpret these numbers, but notice a few things.

• From March to April, the average retail price was increased by $0.20, but the number of gallons dropped from an increase of 2.9 percent in March to a decrease of 4.7 percent in April, and fuel sales revenue for the month was 18.8 percent lower than the same month the year before.
• Similarly, the average retail price increased by $0.24 from July to August, and the number of fuel gallons dropped by 2 percent and sales were down 6.6 percent for the month, year-over-year. Are these correlations or simply coincidences?

Thinking about the story that these numbers tell us, raises a number of questions.

• What would happen if SEI chose to price its gasoline at the pump at reduced levels that would yield gross profit similar to that which it experienced pre-pandemic?
• Would that not increase the number of gallons sold resulting in elevated revenue to SEI and higher gasoline commissions paid to franchisees, higher transaction counts, and elevated merchandise sales, resulting in additional gross profit split dollars in favor of franchisees and SEI, not to mention the customer goodwill that it would generate?

How about a good faith and transparent dialogue on these questions?

 (* See https://www.7andi.com/en/ir/file/library/kh/pdf/2023_0406khe.pdf)

The Unseen Crisis—Employee Turnover In The Retail Industry

By Teeto Shirajee, NCASEF Vice Chairman

The retail industry is no stranger to challenges, from evolving consumer behaviors to increasing competition from e-commerce giants. However, there is an often-overlooked crisis within retail businesses that deserves attention: the high employee turnover rate. This unaddressed crisis is not only detrimental to the profitability and overall success of retail companies, but also poses a significant risk to the industry’s future.

A Vicious Cycle

Employee turnover has become a common issue plaguing retail businesses across the globe. The cycle often starts with employees feeling undervalued, overworked, and under-compensated. This leads to low job satisfaction, reduced motivation, and ultimately, high turnover rates. As a result, retail companies find themselves in a constant cycle of recruiting and training new employees, which is both time-consuming and costly.

Causes of Employee Turnover

1. Low Wages and Lack of Incentives: Retail employees are frequently paid minimal hourly wages, making it difficult for them to make ends meet. With low pay, limited career growth prospects, and inadequate benefits, employees find it tempting to seek better-paying opportunities elsewhere.
2. High Workload and Stress: Retail jobs are often demanding, requiring employees to handle numerous responsibilities simultaneously and face demanding customers. The constant pressure and stress affect employee motivation, leading to burnout and an increased desire to leave the job.
3. Inadequate Training and Development Opportunities: Retail businesses often prioritize cost-cutting measures, including inadequate training programs for employees. This results in a lack of skill development, leaving employees feeling undervalued and unprepared for their roles, prompting them to search for better opportunities.
4. Limited Career Advancement: Many retail employees perceive a lack of growth potential within their organizations. This absence of clear career paths can discourage individuals from staying long-term, as they feel there is limited room for advancement.

Impacts on Retail Businesses

1. Increased Costs: Employee turnover can be financially burdensome for retail businesses. Costs associated with recruiting, hiring, onboarding, and training new employees rack up quickly, negatively impacting the bottom line.
2. Decreased Customer Experience: Frequent turnover means a constant influx of new employees who lack familiarity with products and services, leading to lower customer satisfaction levels. A decline in customer experience can result in decreased sales and brand loyalty.
3. Poor Employee Morale and Productivity: A constant cycle of hiring and training new employees can act as a demotivator for remaining staff. When colleagues continuously leave, it creates an atmosphere of uncertainty and instability, leading to decreased productivity and employee dissatisfaction.

Solutions and Best Practices

1. Competitive Compensation and Benefits: Retail businesses must offer competitive wages and benefits packages to attract and retain talented individuals. Implementing performance-based incentives and recognition programs can incentivize productivity and loyalty.
2. Ongoing Training and Development: Consistent investment in employee training and development can enhance their skills, job satisfaction, and loyalty. Offering opportunities for skill-building and career advancement within the organization promotes a sense of commitment.
3. Flexible Scheduling: Retail businesses can provide flexible scheduling options to accommodate the needs of their employees. This can improve work-life balance and, in turn, reduce turnover rates.
4. Employee Engagement and Support: Encouraging open communication, soliciting employee feedback, and providing support systems can contribute to a positive work environment. Regularly recognizing employee efforts and achievements fosters a sense of belonging and boosts morale.

The employee turnover crisis in the retail industry is a pressing issue that cannot be ignored. By addressing the root causes and implementing strategies to improve employee satisfaction and retention, retail businesses can break the cycle of high turnover rates. Taking proactive measures to invest in their employees will not only lead to a more stable and motivated workforce, but also enhance the overall success and profitability of the retail industry as a whole.

Building Our Future, Together

By Sukhi Sandhu, NCASEF Chairman

What a whirlwind four days we had at the NCASEF 47th Annual Convention and Trade Show held at Caesars Palace in Las Vegas. The theme of the event was “Building the Brand Together,” and I believe we certainly lived up to it. The convention was packed with franchisees from all across the country, and the venue was filled with positive energy. We were also graced with the presence of SEI executives, whose participation added valuable insights to our discussions. Last, but by no means least, our exhibiting and sponsoring vendors dazzled with their amazing trade show offerings and unwavering support.

The importance of unity in strengthening the 7-Eleven brand can’t be overstated. From franchisees to vendors and SEI representatives, each stakeholder  plays a significant role in driving us forward. We gathered from various corners of the country, each with unique experiences, challenges, and perspectives, but with a common goal: To grow and evolve, both as individual business entities and as an integral part of the broader 7-Eleven network.

Our four-day event was a melting pot of collaboration and innovation. The seminars were meticulously planned to deliver insights, tools, and strategies to strengthen our businesses. The objective of these sessions was simple—inform our franchisees and equip them with the best resources to prosper.

There was also plenty of room for relaxation and networking. The charity golf tournament at the TPC Las Vegas Golf Course benefitting Children Miracle Network Hospitals and the High Roller Observation Wheel were not just entertaining, they also served as poignant reminders of the power of community.

The last two evenings of the convention were reserved for moments of celebration and gratitude. The Charity Night Gala and the Grand Banquet were elegantly executed, honoring our unified spirit. The Charity Night Gala in support of CMN Hospitals was an awe-inspiring testament to what we can achieve when we come together for a cause greater than ourselves. Not only did we enjoy silent and live auctions filled with incredible items, but the highlight of the night was the presentation of a $200,000 check to the organization. This charitable act shows that our 7-Eleven community doesn’t just talk about making a difference, we actively participate in bringing about positive change. It was an event that embodied the true essence of unity, and it makes me proud to be a part of this remarkable coalition.

The awards ceremony at the Grand Banquet shined a spotlight on franchisees and vendors who’ve made remarkable contributions to our community. And the mesmerizing performance by renowned Indian recording artist Mika Singh added a special charm to the night that will be etched in our memories for years to come. It was truly the perfect ending to a stellar event.

A pivotal part of our convention was the two-day trade show, where our valued vendors showcased a variety of products and special deals designed to improve our retail offerings and ultimately enhance the customer experience. I want to extend my heartfelt thanks to all vendors who exhibited, as well as those who went above and beyond by sponsoring the convention. Your involvement in our national and local events isn’t just beneficial—it’s essential to our collective prosperity.

To all the franchisees who attended, your active participation added immense value to our convention. The exchange of ideas, the genuine feedback, and the profound commitment to the brand are what make these gatherings worthwhile. Lastly, I want to thank the SEI executives who attended. Your presence underscored the importance of a collaborative relationship between franchisees and the corporate team.

It’s through unity that we’ll continue to build a brand that’s not just profitable, but also impactful and enduring. Each one of us is a building block in the powerhouse that is 7-Eleven. When we come together, whether it’s for a grand event like this convention or in our day-to-day interactions, we fortify our brand.

Let’s carry the message of “Building the Brand Together” into every business decision we make, every customer we serve, and every challenge we overcome. Once again, thank you all for contributing to the overwhelming success of the 47th Annual NCASEF Convention and Trade Show. Here’s to an exciting year ahead, building our brand together, united in purpose and vision

Staying On Top Of Your Store’s Financials

By Raj Singh, NCASEF Vice Chairman

Franchisees should review the following reports on a daily, weekly, and monthly basis in order to analyze how your store is performing and to identify opportunities for improvement. All the reports mentioned below can be accessed on 7-Report.

REPORTS TO MONITOR DAILY

• DMR—Daily Merchandise Report

This report provides information on your Daily Purchases, Beginning and Ending Inventory Level of DMR date, Audit Adjustments, Past Invoices, Price Overrides, Markups and Markdowns, Write Offs, Daily Inventory Sales, and very importantly—MTD GP% of purchases during the month.

• POR—Price Override and Markup/Markdown Report

This report provides information on Price Overrides, Markups/Markdowns, Retail Adjustments and Retail Adjustment Amounts associated with the Sales Transactions of items within a business day. Please note: The POR report is a summary of Inventoried Items Transactions ONLY.

• NIS—Non-Inventoried Sales

This report provides Sales Transactions of Proprietary Beverages, SBT, and Commission Items.

• PSR—Promo Sales Report

This report provides a detailed breakdown of all the Promos/Discounts issued at the store, which helps to check the performance at the Promo level.

• APD—Accounts Payable Report

This report provides information on maintenance charges, amount withdrawn from the Draw Portal, and other business-related miscellaneous amounts that are paid on your behalf.

• ERI—Extended Retail Invoice

This report provides information on the Daily Invoices Detail for purchases that are reported on the DMR for DSD, and provides information on how their retail was calculated—i.e., Suggested Retail Price (SRP), Custom Retail Price (CRP) and Factored (FCTR).

• WDR—Wholesaler Detail Report

This daily report provides very vital and useful information on your purchases, and needs to be reviewed to ensure the accuracy of your Invoice. (Invoice Unit Cost and Retail, Selling Unit Retail Price, Invoice Quantity, Extended Cost and Retail)

REPORTS TO MONITOR WEEKLY

• IMR—Inventory Management Report

Franchisees should review this report every week in order to understand the purchase trend over weekly overage. The IMR reveals information on the irregularity in ordering.

REPORTS TO MONITOR MONTHLY

• AP9—Accounts Payable Summary

This report provides information on your maintenance charges and other miscellaneous amounts that 7-Eleven pays on your behalf. The AP9 is the summary report of the APD.

• 11A—Detailed General Ledger

This report provides all the charges that appeared on 48A—Franchise Financial Summary. Apart from the charge details, this report provides Net Activity of the month and beginning balance of all the charges, including your purchases during the month.

• 48A—Franchise Financial Summary

This report provides all the financial information, including profit or loss, balance on Open Account, and Minimum Net Worth.

            The above information is very basic, but is important as it helps you understand your store’s finances. Apart from above reports, franchisees should also review the following Daily/Weekly/Monthly reports in order to understand your store in detail.

DAILY REPORT

• RA1D—Daily Bank Activity

MONTHLY REPORT

• BRS—Final Billback/Scanback report to verify the accuracy of Billback amount in 48A.
• CCE—Monthly Credit Card Fees Expanse Report to verify the accuracy of credit card fees in 48A.
• MAP—Product Margin Report

This is monthly report provides very useful information on the Current Period and Year-to-Date (PSA Category, Cost, Retail, % to the Retail, % to the Purchase Margin, % Purchase Margin Contribution, Ending Inventory, Non-Inventoried Sales, Inventoried Sales, Inventory Turn, Gasoline Sales, Transaction Count, Average Daily Transaction Count, and Average Sales).

All of the above-mentioned reports contain essential information that will help you better understand how your store is operating, and if there are any measures you can take to improve its performance.

The Value Of Franchisee Community Engagement

By Joe Rossi, NCASEF Executive Vice Chair

Now that we’ve made it past the 100 Days of Summer, it seems apt to step back and assess not just our individual accomplishments but also our collective gains as part of the 7-Eleven franchisee community. We’ve weathered many storms together, including the impact of COVID-19 that disrupted the business environment on an unprecedented scale. While we are getting back to some sense of normalcy, there are still challenges we need to address collectively, such as labor issues and crime. Despite these hurdles, one thing remains clear: now is the time to reconnect with our franchisee community.

The past couple of years have been so centered on survival that many of us have inadvertently neglected the community aspect of being a 7-Eleven franchisee. But it’s important to remember that we didn’t get to where we are by isolating ourselves. We built our businesses by getting involved in our stores’ communities, by participating in events that brought people into our stores, and by supporting our fellow franchisees. The power of community isn’t just a feel-good concept, it’s a business imperative. Our local FOA meetings, for example, are not mere social gatherings—they are occasions for mutual learning and growth.

Think about the last time you attended a local FOA meeting or event. These aren’t just opportunities to take a break from your daily grind—they’re crucial venues to share knowledge, solve common problems, and develop strategies for collective success. Even when it feels like there are not enough hours in the day, making time for FOA meetings and events is essential. The value derived from discussing issues with fellow franchisees—often leading to actionable insights—can’t be overstated.

Soon, most local FOAs will host holiday parties. Make it a point to attend. These events offer a unique setting to understand your fellow franchisees as individuals, which can strengthen your professional relationships. After all, business isn’t always just about numbers, it’s also about people. And speaking of numbers, sharing knowledge with other franchisees at the annual NCASEF convention and trade show can also be invaluable. Many franchisees have reported implementing strategies learned at these events that have led to measurable improvements in their store performances.

Mark your calendar now for future franchisee community events, whether they are local FOA meetings, the NCASEF convention, or NCASEF Board meetings. Pre-planning ensures that you’ll make the time to be present and engaged. You might be surprised at how much you can learn from a national meeting, even if it’s not in your immediate locality. The larger the gathering, the broader the cross-section of experience and the richer the potential learning.

The fundamental truth is, we improve through interaction. Some of the most innovative ideas come from casual conversations where someone shares a tactic they’ve been quietly employing at their store. Such insights can be game-changing, bringing about increased revenue or operational efficiencies. Lastly, don’t underestimate the value of subgroups within our larger franchisee community. If you find that your specific subgroup of a handful of 7-Eleven owners—be it regional or issue-focused—is not doing enough, take the initiative to organize activities. An informal lunch with a focused discussion topic can spark ideas that benefit everyone involved.

In a time when it’s easy to get lost in the day-to-day operations of our individual stores, let’s not forget the immense value that lies in franchisee community engagement. Let’s not forget to give back. As we head into the year-end and look forward to 2024, my message to each of you is this: reconnect, engage, and contribute to our franchisee community. It’s good for business and our brand.

Transfers

By Eric H. Karp, Esq., General Counsel To NCASEF

In the last issue of Avanti, we explored the turnover rates of franchised stores, which includes terminations of franchise agreements, non-renewals, repurchases by the franchisor, and abandonments of stores by franchisees. That examination did not include transfers in the calculation of turnover rates. In an excellent companion article in this issue, my colleague, Thomas Ayres, walks through the process of surrendering a franchised store.

Transfers are sales of franchised locations from one franchisee to another franchisee. These transactions can be the result of distress or bad news, such as the death or incapacity of a franchisee, or good news in that a franchisee has reached the stage where he or she wants to retire or engage in other activities. Transfers sometimes occur when 7-Eleven gives a franchisee who has received a termination notice time to attempt to sell the location rather than having it terminated. (Termination notices can often be avoided by curing a default and staying in compliance with the franchise agreement and its operating standards.) Nevertheless, when such a sale is concluded, it is treated as a transfer rather than as a termination.

The number of transfers in the 7-Eleven system has been trending upward. Over the last five complete years, which included the introduction of the so-called 2018 Franchise Agreement and the COVID-19 pandemic, there were a total of 1,170 transfers in the United States. In the previous 5 years, from 2013 to 2017, there were 612 transfers, or approximately one-half of the number from 2018 to 2022.

The definition of a “transfer” and the requirements for transfers are summarized in Item 17 of the Franchise Disclosure Document (“FDD”) and in sections 25(b) and 25 (c) of the 2018 form of the Franchise Agreement.

As a threshold matter, a “transfer” includes not only a sale or assignment of the Franchise Agreement and your interest in the franchised location, but also a transfer of any of the shares of stock in a corporation that may hold the Franchise Agreement, and also any transfer of the membership interests in a limited liability company. In addition, because the franchisee does not own an interest in the furniture, fixtures or equipment, these may not be sold without SEI consent.

Under the Franchise Agreement the person or entity to whom the franchisee sells or proposes to sell his or her location is called a “transferee”—in common parlance, the buyer.

That said, here is a checklist of the eight steps that SEI may require in the event of an assignment:

• Release of Claims by Transferee. The transferee or buyer is required to execute a document that releases SEI from any liability for amounts paid by the transferee or any representations you may make to the transferee regarding the business. While SEI takes an active role in approving both the transferee and the transaction, it insulates itself from any liability to you or the buyer.
• List of Available Stores. In a provision unique to the 7-Eleven system, SEI reserves the right to provide the proposed transferee with a list of all 7-Eleven stores available to purchase in the general area where your store is located. This provision obviously helps the transferee in a variety of ways, but it is not particularly favorable to the franchisee seeking a sale.
• Release of Claims. In order to finalize the transaction, the franchisee must enter into (a) a mutual agreement with SEI to terminate the existing Franchise Agreement, (b) an indemnity in favor of SEI for any claims made by the transferee relating to the transaction, and (c) a general release by you in favor of SEI, which has the effect of wiping out and forever forgiving any claims you may have against your franchisor.
• Franchise Agreement in Effect. In order to be eligible to participate in a sale of your store, no termination of your Franchise Agreement can be pending, and you must be not in Material Breach of the Franchise Agreement. Material Breach is a defined term under Exhibit E to the Franchise Agreement, which in turn refers to 12 separate and distinct events listed in section 26(a) and 16 events listed in section 26(b) of the Franchise Agreement.
• Complete Required Training. SEI is required to approve or disapprove your proposed transferee for training within 60 days after it receives all information regarding the proposed transaction that it may reasonably require. The reasonably required information is not specified in the Franchise Agreement. Training must be successfully completed based on criteria and standards specified by SEI.
• Sign Then-Current Form of Franchise Agreement. The transferee must sign the then-current form of Franchise Agreement which may be materially different (and possibly less favorable to your buyer) than your Franchise Agreement at the time of sale. The transferee must also comply with all then-current financial terms, including those relating to the Down Payment, the 7-Eleven Charge, Franchise Fee, and other matters. These capitalized terms are also defined in Exhibit E to the Franchise Agreement.
• Meet All Qualifications. The transferee must, in the sole opinion of SEI, meet all qualifications to become a franchisee including those general qualifications set forth in the then-current 7-Eleven Operations Manual. According to the 2023 FDD, the Operations Manual contains 1,009 pages. Provisions regarding the Operations Manual can be found in Section 4 of the 2018 form of Franchise Agreement.
• Comply with SEI Right of First Refusal. SEI has a right of first refusal, meaning that it has an opportunity to match any offer you may receive from anyone else to purchase your franchised business. You must notify SEI of any such offer you receive and provide whatever information and documentation regarding that offer that it may require. Once that information is submitted, SEI has 15 days to exercise its right of first refusal, in which event it must close the purchase within 60 days thereafter. It is important to note that such rights of first refusal are more or less standard in franchise agreements in the United States.

One way to measure the health of a franchise system is the extent to which franchisees are able to successfully navigate the many requirements for approval of the sale of their business, as well as their ability to harvest the goodwill value that they have created through their investment and hard work. We hope that this information is helpful to every franchisee in the system, especially those who are currently contemplating the possibility of a transfer.

Overcoming Our Labor Recruitment & Retention Obstacles

By Sukhi Sandhu, NCASEF Chairman

In an increasingly competitive labor market, the battle for reliable employees is growing fierce. The stakes are high, with a constant surge in the employment rate and heightened competition for quality labor. This is especially significant for our stores, where maintaining a consistent and reliable workforce is pivotal to our bottom lines.

Every time an employee leaves, it costs us money and disrupts the workflow. The cost of turnover includes training new employees, dealing with potential errors made by inexperienced staff, and the need for double coverage during the hiring process. This not only impacts our finances, but also the overall efficiency of our operations.

To address this issue, we must first understand the employment rates and the difficulties in recruiting quality employees. The market is saturated with competitors who offer attractive benefits and wages that can be challenging for us to match. For example, Buc-ee’s, a popular convenience store chain, offers impressive hourly rates and various other incentives for their workers. To combat the allure of such competitors, we need to make our positions appealing and create a sense of pride in working for our brand.

I can assure you that the NCASEF officers and Board members have not been sitting idly by—we are taking a proactive approach to tackle our labor recruitment and retention challenges. We have been working with SEI as they develop and introduce the new self-checkout system, which can alleviate some of the workload on our sales associates. By simplifying operations and reducing the burden on our employees, we hope to improve their overall experience and job satisfaction. These discussions were initiated during a CEO Roundtable, where the need to address labor retention was recognized.

Furthermore, we have signed on with Paradox, an artificial intelligence talent recruitment company, to streamline the hiring process. By using their AI assistant, Olivia, we can automate pre-interview screenings and simplify the entire recruitment process. This not only saves time, but also ensures a personalized candidate experience. Additionally, Paradox offers electronic onboarding, further simplifying administrative tasks and reducing the time it takes to integrate new employees. This service is available at a reasonable monthly cost for franchisees, and it provides an efficient talent acquisition solution.

In our efforts to attract and retain employees, we are also exploring healthcare benefits through Dafanie Financial Group. This allows franchisees to provide their employees with comprehensive health insurance plans that may include vision coverage, dental insurance, life insurance, and disability insurance. Offering such benefits will not only help us retain employees, but also enhance their overall well-being.

Another partnership we have established is with T-Mobile. Through this collaboration, franchisees and their employees can access affordable phone services and even receive free smartphones, which will save them money on their monthly bills. Additionally, T-Mobile offers multiple sensor solutions that include temperature monitoring for refrigerators and freezers; energy monitoring; and smart waste bin sensors that would help make our store operations more efficient.

We are also working with Payality, a payroll processing company, to allow stores to fund their employees’ payrolls directly from their open account, similar to ADP. This is not only a step towards simplifying the payroll process but also ensures the accuracy of payroll expenses reflected in financial reports.

Looking at industry trends, we find that many convenience store retailers are implementing measures to improve employee retention. According to a recent survey, pay raises, flexible scheduling, and employee recognition programs are commonly adopted strategies. Furthermore, offering improved training, additional paid time off, and enticing benefits like health insurance and vacation time have also yielded positive results. These efforts have led to a significant decrease in short-term employee turnover, reflecting the positive effects of improved wages and working conditions.

We’re exploring all avenues to recruit quality personnel and provide them with competitive benefits so that they stay longer with us. We understand that employee retention isn’t only about offering competitive pay rates. Factors such as morale, job complexity, and work environment also play significant roles. Therefore, we’re investing in tools and benefits to make the everyday lives of our franchisees and sales associates easier.

These facts point to our unwavering dedication to overcoming our current labor recruitment and retention obstacles, and creating a vibrant and sustainable work environment in our stores. As we look to the future, we will continue to adapt and innovate in our ongoing mission to foster a productive, beneficial, and fulfilling workplace for our valued employees.

The Importance Of Engaging In Legislative Matters

By Joe Rossi, NCASEF Executive Vice Chair

Managing a convenience store is about more than ensuring shelves are stocked and customers are served. It’s also about actively participating in the legislative landscape at both the local and national levels. Our operations can be significantly affected by changes in legislation, such as tobacco flavor bans, credit card swipe fees, minimum wage increases, and modifications to labor laws. Therefore, it is crucial for us as franchisees to voice our concerns and advocate for our interests.

Tobacco sales form a substantial part of our revenue, so the implementation of tobacco flavor bans could impact our financial health. Many customers visit our stores looking for tobacco products, and losing them would also affect secondary sales because these customers usually buy other items along with their packs of cigarettes, like gum, energy drinks, or coffee. So it’s in our interest to oppose such legislation, not by denying the health impacts of tobacco, but by advocating for balanced regulations that consider the potential economic fallout.

Credit card swipe fees are another critical area where we must take a stance. As convenience stores, we often process numerous small transactions daily, each subject to a swipe fee. These fees can accumulate to a significant cost, eating into our margins, so we must advocate for lower fees or at least a reevaluation of the fee structures to better align with the realities of our stores.

The debate around minimum wage increases is multifaceted. While we all want our employees to earn a livable wage, steep increases can place an enormous burden on small businesses like ours. We should campaign for sensible, incremental increases that balance the need for fair wages with the economic realities of operating a small business.

The same applies to labor laws. Legislative changes, such as those related to overtime or sick leave, could significantly increase our operational costs. Again, while we want fair treatment for our employees, it’s essential that these laws consider the viability of small businesses.

So, how do we, as franchisees, make our voices heard? A significant part of this battle is fought through our local FOAs and the National Coalition. These organizations serve as our collective voice, advocating on behalf of all 7-Eleven franchisees.

We need to be active participants in these bodies, understanding proposed legislation, discussing potential impacts, and agreeing on a collective response. It is through these organizations that we can lobby local and national lawmakers, submit testimonials, and work with industry groups to influence legislative outcomes.

Another powerful tool at our disposal is the relationships we build within our communities. As local business owners, we can engage with local stakeholders, including customers, other businesses, and community leaders. We can leverage these relationships to rally support for our cause, reminding them that the success of our stores contributes to the health of the local economy.

Changes in legislation can significantly impact our operations, profitability, and even our ability to serve our communities. So we need to stand up, voice our concerns, and fight for our interests. By doing so, we can help shape a regulatory environment that considers our needs, ensuring the continued success of our stores and the entire 7-Eleven network.

Franchisee Turnover

By Eric H. Karp, Esq., General Counsel To NCASEF

The United States Federal Trade Commission Franchise Rule requires all franchise companies to annually disclose not only the number of franchised locations they have, but a variety of other data regarding increases or decreases in the number of franchised locations and the reasons for those changes.

One of the reasons for this required disclosure is to allow a prospective franchisee to gauge whether the franchisee community is growing or shrinking and in either case, attempt to understand why.

One way of summarizing this data is to estimate the extent to which the franchised locations in the system are turning over, that is to say, changing hands or status, in and if so, how. In my work with the National Coalition and other franchisee associations, I have developed my own definition of turnover, which consists of the following:

(Terminations + Non-renewals + Reacquisitions by the Franchisor + Abandonments of locations) / (total franchised locations at the start of the year + total franchised locations at the end of the year/2).

All of the information necessary to make these calculations can be found in Item 20 of each Franchise Disclosure Document issued by 7-Eleven, Inc. One of our roles as General Counsel is to be a repository of important documents in the system. As such, we maintain a library of Franchise Disclosure Documents going back nearly 20 years.

Transfers are sales of franchised locations from one franchisee to another franchisee. These transactions can sometimes be the result of distress or bad news, such as the death or incapacity of a franchisee, or good news in the sense that a franchisee has reached the stage where he or she wants to retire or engage in other activities. The number of transfers in this system also includes those situations where 7-Eleven gives a franchisee who has received a termination notice a period of time to attempt to sell the location rather than having it terminated. (Termination notices can often be avoided by curing a default and staying in compliance with the franchise agreement and its operating standards.) Nevertheless, when such a sale is concluded, it is treated as a transfer rather than as a termination. This is one of the reasons, as you will see, that the number of terminations in the 7-Eleven system has historically been low. On the other hand, over the past five years there have been nearly 1,200 transfers. It is also the reason that we don’t count this statistic in the turnover rates, because we cannot determine how many of the transfers were good news and how many of the transfers were bad news events.

Before we take a look at turnover rate in the 7-Eleven system, let’s define our terms:

• Terminations. This is an event where the franchisor chooses to terminate the franchise agreement and require the franchisee to leave the business without compensation. As stated, these events are typically quite rare in the system. In fact, over the last 10 years there have been only 26 terminations.
• Non-renewals. If the franchisee completes the term of the franchise agreement, it expires by its own terms and the franchisee elects not to renew and sign a new franchise agreement and thus exit the system, this is treated as a non-renewal. This is the rarest of events in the 7-Eleven System, having occurred only twice in the last 17 years.
• Reacquisition. If the franchisor chooses to purchase the location from the franchisee, this is treated as a reacquisition. It may result from a simple business decision by 7-Eleven or in some instances a pathway to the resolution of a dispute between franchisee and franchisor. Over the past 10 years more than 1,700 locations have been bought back by 7-Eleven.
• Abandonments. If the franchisee simply walks away from the location, including those instances where the franchisees exercise her or his right to terminate the franchise agreement, this is treated as a catch-all for locations where the franchisee is no longer the operator, but it is not the result of a termination, a non-renewal, or a reacquisition. Over the past 10 years, these abandonments have averaged about 75 locations per year.
• Total Franchised Locations. This data can be found in Chart 1 of item 20 of each FDD which discloses the total number of franchised stores in the system at the start and the end of each of the last three complete calendar years. For the purposes of this disclosure and the calculation of the turnover rate, we count only events and locations within the 50 states of the United States. Our analysis started with 2006, when there were 3,525 franchised locations at the start of the year, to 2022 when there were 7,280 such locations at the end of that year, meaning that over that period, the number of franchised locations had doubled.

We analyzed turnover rates in the 7-Eleven system going back 17 years. That detailed study will be included in the presentation that I will make at this year’s Convention and Trade Show in Las Vegas. But for the purpose of this article, I would like to look at just the turnover rates over the last three years in the 7-Eleven system, ending with 2022, summarized on the following chart, averaging 4.5 percent.

For perspective, the average turnover rate for the three years ended 2012 was 1.9 percent.

It occurs to us that many franchisees will not find these numbers surprising given the material number of franchised locations that have changed hands in recent years. The reasons for these events are myriad and complex and we will continue to investigate and bring you our findings.

Our continuing role is to research and report on information that we believe will be of interest to every franchisee in the system. We hope that this information is useful.

Unlocking Success Through Collaboration

By Sukhi Sandhu, NCASEF Chairman

As a 7-Eleven franchisee in California, I’ve experienced first-hand the challenges that our stores have faced due to the recent tobacco flavor bans in our state. The impact on our traffic count has been significant, as these bans not only affected our cigarette and tobacco sales, but also the sales of other products that customers would typically buy along with their tobacco purchases, like gums and energy drinks. The current dire economic climate, coupled with the recent cut in the extra pandemic SNAP/EBT benefits, has further strained our business. But through adversity, we’ve discovered that collaboration is the key to overcoming obstacles and driving success.

When the tobacco flavor ban started having a negative impact on California stores, SEI’s operations and merchandising teams put their heads together to come up with a plan to counteract the declining foot traffic. Their solution was the “California Traffic Driver” initiative, which went above and beyond a regular sales plan promotion. SEI’s Zone operations team, with the help of the Dallas merchandising team, approached manufacturers and fresh food commissaries to put together an aggressive, funded program for our stores.

The initiative’s primary objective was to increase foot traffic through special promotions, without sacrificing gross profit percentages. SEI’s teams worked with the manufacturers to get the best possible cost of goods, enabling our stores to offer the promotions at the value retail price to our customers. This collaborative effort was further strengthened by the alignment of all California FOA leadership and franchisees—ensuring that the promotions would be executed effectively and maximized to their full potential.

The results have been nothing short of astronomical. The success of the California Traffic Driver initiative has caught the attention of other manufacturers, and many more are now inquiring about joining. The initiative’s success not only helped 7-Eleven stores in California with increased foot traffic, but also boosted the unit turns for the manufacturers who had experienced collateral damage from the tobacco flavor ban.

Additionally, the promotions were supported by eye-catching window signs, point-of-purchase displays, banners, and digital marketing through the 7-Eleven app and loyalty programs. This cohesive advertising strategy ensured that the promotions were impossible to miss, driving more customers to our stores.

I can’t help but think about the potential of expanding this successful program to the national level in the future. With all 7-Eleven partners working together, imagine the incredible results we could achieve. It’s time for us to learn from the California Traffic Driver initiative and apply the same collaborative mindset across the board.

The success of the California Traffic Driver initiative sends a clear message to all 7-Eleven stakeholders: when we work together towards a common goal, we can achieve remarkable results. Manufacturers, suppliers, franchisees, and SEI all played a crucial role in overcoming the challenges posed by the California tobacco flavor ban and other headwinds. And although there remain kinks in our system that need to be ironed out, the California Traffic Driver initiative is exemplary of what can be accomplished when we all lock arms and focus on driving business success. Let this example inspire us to continue working together, strengthening our partnerships, and striving for even greater accomplishments in the future.