Strengthening Our Partnership For Success

Sukhi Sandhu, NCASEF Chairman

Recently, I and the NCASEF officers had a productive meeting with SEI leadership to discuss several pressing issues that have been weighing on franchisees and our system. To my knowledge, this meeting was historic as it marked the first time all NCASEF officers have sat down with SEI’s executive team for a direct and candid conversation about the challenges we are facing. Now more than ever, collaboration and open communication between franchisees and SEI is essential so we can work together on developing long-term, sustainable solutions.

Across the retail industry sales and foot traffic have been declining in 2024, and 7-Eleven hasn’t been immune to these trends. As such, franchisees are feeling the pinch. Our store operational costs are rising and our revenues are not keeping pace, creating a financial squeeze that’s impacting our net income. It’s a situation that calls for urgent action—not only from SEI, but from all franchisees and our supply partners, as well. The truth is we are all part of the same ecosystem, and if one part is under strain, it affects all stakeholders.

One of the significant challenges facing franchisees today is the rising cost of labor. Market-driven wage increases have hit many areas hard—for example in California, where the minimum wage for fast food restaurants has surged to $20 an hour. This puts franchisees in the difficult position of competing for labor at much higher costs, without a corresponding increase in revenue to offset these expenses. Therefore, we need to explore ways to manage operational costs while also finding new opportunities to drive revenue.

To begin, the “Quality Visits” with area leaders should focus on both business growth and franchisees’ net income. These visits should be centered around meaningful discussions to grow foot traffic and top-line sales, while considering the financial health of franchisees.

In addition, leveraging existing programs is key to driving both revenue and customer loyalty. We need to maximize the potential of 7Rewards, 7NOW, fresh foods, and 7-Select private brand items. These initiatives enhance customer engagement, increase margins, and drive sales. Fresh foods and private brands, in particular, offer substantial margin growth opportunities, which is why they are a priority for our stores. The 7Rewards program, in particular, is a powerful way to build customer loyalty. When customers see the value in staying loyal to 7-Eleven, they’re more likely to make repeat visits, which increases foot traffic to our stores and creates opportunities for higher sales.

The 7NOW program is necessary because it allows us to compete in the rapidly growing e-commerce and delivery space. As consumer demand for delivery rises, 7NOW positions us to meet this need thanks to the proximity of our stores and our 24/7 operations. To make 7NOW more profitable, franchisees, SEI, and vendors must work together. Vendors, who benefit from increased sales through 7NOW, can help by offering us the lowest price of goods. Further profitability can be achieved by reducing the fixed costs of the 7NOW equipment maintenance fees, supplies, and delivery fees. Through these efforts, the 7NOW program can become a more sustainable and lucrative venture for everyone involved.

Franchisees are also looking for programs and products that can help drive foot traffic without adding to our labor costs. Working with SEI, we could explore options that allow us to attract customers without further straining our already limited resources. One example would be deploying more lottery kiosks to eliminate the labor requirement from that category. Another low labor, revenue generating option is to add skill games to stores in municipalities and states that allow it.

Retail theft has also become a growing concern that is affecting our bottom lines. In certain regions, like California, franchisees find it nearly impossible to prosecute shoplifters and dishonest employees caught stealing due to legal constraints. This “new normal” of increased theft is contributing to higher audit variances and added stress to franchisees’ bottom lines. However, one way franchisees can help alleviate this challenge is by becoming more involved in local and state legislative affairs. Working with lawmakers to advocate for stronger laws that deter criminals can be a key step toward reducing theft and protecting our stores, employees, and customers. We also need support from our franchisor and their Government Relations Department to provide resources and expertise in helping us build stronger relationships with our elected officials.

Disposable income among our customer base has decreased, so they’re purchasing less and looking for value wherever they can find it. We need to introduce new, budget-friendly products and categories that resonate with today’s consumers. Exclusive items and better cost structures from our vendor partners can help give us a competitive edge, driving both sales and gross profits. Since vendors are a critical part of the 7-Eleven ecosystem, we need their continued support in providing products that can appeal to customers while keeping costs manageable for our stores.

But offering great deals alone isn’t enough—we need to ensure that customers know about them. This is where marketing plays a vital role. We need effective marketing strategies to spread the word about our deals, promotions, and value-priced items. By highlighting these offers through targeted campaigns, we can attract and retain new customers, reinforcing the perception that 7-Eleven is a destination for value. From social media to in-store signage and radio ads, every effort must be made to showcase the savings we offer and build customer loyalty in this competitive landscape.

We should also be on the constant lookout for new, exciting products. I encourage you all to attend your local FOA trade shows, our annual NCASEF convention, the 7-Eleven Experience, and industry events like the NACS Show and the Sweets and Snacks Expo. At these events you could potentially find the next big-ticket items—which could be national or regional—that would help drive more foot traffic and sales to your stores. Attending trade shows is also a good way to educate yourselves on industry trends and to explore new categories and revenue sources.

Due to inflation and the rising cost of goods, our booked inventory is now higher than it used to be, and in most cases, it’s financed. With interest rates also being higher than in recent years, this has become an increased expense we must contend with. Therefore, it is important that we manage our inventory carefully and increase our turnover rate. We need to eliminate slow-moving and dead items from our shelves, and focus on stocking products that are consistently selling in order to lower our total booked inventory. While this requires action at the store level, we also need the support of SEI’s category managers and merchandisers to help identify and remove underperforming products and introduce new, high-potential items.

Along with managing inventory more efficiently, it is vital to ensure that all revenue-generating equipment in our stores remain fully operational to minimize downtime and prevent disruptions in service. Regular maintenance and timely repairs are essential to keeping key revenue-generating equipment—such as Slurpee machines, coffee stations, and hot food equipment—running smoothly. A significant challenge we face is the unavailability of parts, which delays repairs and negatively impacts both store productivity and the customer experience. Maintenance service providers often struggle with parts supply chain issues, causing further delays. To alleviate this, we need to have critical parts readily available so that repairs can be made swiftly, ensuring that equipment is back up and running as quickly as possible.

Additionally, our Retail Initiative System and IT networks must always be efficient, as any downtime directly affects sales and customer satisfaction. If equipment fails, it can result in customers being unable to purchase their favorite products, ultimately hurting revenue. By prioritizing the maintenance and readiness of all our revenue-generating equipment, we can avoid these costly disruptions and provide a seamless experience for our customers.

To move forward, we need to take a balanced approach where all 7-Eleven stakeholders can prosper together. Co-prosperity is the key—if we can grow top-line sales and gross profits, we can reinvest in our stores, offer competitive wages to our employees, and SEI could budget for capital investments like new, revenue-generating equipment, improving the physical plants of stores, and simplifying store processes. All of this would ultimately create a better experience for our customers and grow our net income.

 I and the NCASEF officers have been communicating these challenges to SEI, and I appreciate that SEI leadership has been receptive to hearing about the difficulties we’re facing on the ground. We’re encouraged by SEI’s willingness to work with us on these issues, and we’re hopeful that we can develop actionable solutions that will have a real impact on franchisee profitability and store operations.

Irresistible Force Meets Immovable Object

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

When you are aligned with your franchisees, you can rule the world.
Franchisees are our primary customers.
No one has more skin in the game.
The metric that matters most to our owners is restaurant level profitability. Franchisees depend on those profits for their income.

These are the thoughts of Cheryl Bachelder, who served as the CEO of the parent company of Popeye’s Louisiana Kitchen from 2007 to 2015. When she joined the company, guest visits, restaurant sales and profitability had been negative for years and the company’s stock price had dropped from $34 in 2002 to $13. The brand was stagnant and the relationship between the company and its franchisees was difficult and contentious. By 2015, the number of franchisees had grown by 33 percent, franchisor revenue was up 68 percent, franchisor net income was up 83 percent, shareholder equity up by 332 percent, and the price of the company’s stock rose by 400 percent.

Commenting on these impressive statistics, Ms. Bachelder stated: “The Popeye’s turnaround has become a case study in what happens when leaders think about serving others—in this case, our franchisees. The test of our leadership is simple: are the people entrusted to our care better off?”

Full disclosure: as General Counsel to the Popeye’s Independent Franchisee Association for many years, I was privileged to witness these events firsthand. Ms. Bachelder later published a book entitled Dare to Serve and was the subject of a prominent Harvard Business Review article, which can be found at The CEO of Popeyes on Treating Franchisees as the Most Important Customers (br.org/2016/10/the-ceo-of-popeyes-on-treating-franchisees-as-the-most-important-customers).

The irresistible force mentioned in the title is the understandable and perfectly reasonable goal and desire of every franchisee to maximize the sales, profitability and the value of their investment in their franchised location. The seemingly immovable object is the fact that the franchisor is also under economic stress based on reductions in its own profitability, and the underperformance of the stock of its parent company.

The reason I bring Popeye’s turnaround to your attention is because the 7-Eleven system is experiencing significant challenges which are very reminiscent of the state of the Popeye’s system in 2007. I illuminate these challenges to this space not to criticize anyone and for no reason other than to demonstrate the gravity of the current situation.

For example, I cite the following statistics, all of which are taken from publicly available sources, and which I am sure come to no surprise to any franchisee in the system:

• Same store sales were down 4.4 percent in July 2024 and 2.7 percent in August, marking the 12th month in a row that same store sales have declined year over year; same store sales had been positive on an annualized basis for each of the years 2014 through 2023;
• In 2024 same store sales at 7-Eleven have consistently underperformed those at Circle K and Caseys;
• Over the last 3½ years, transaction counts have declined faster than spending per customer; year over year transaction count increases fell from 2.3 percent in 2021 to 5.6 percent in the first half of 2024, while average increase in spending per customer fell from 4.9 percent in 2021 to 1.5 percent in the first half of 2024;
• Blended gross margin—for both corporate and franchise stores—was 32.1 percent for the first half of 2024, the lowest recorded first quarter gross profit since that information was first disclosed in 2009; Gross margin as reported by Circle K for the same period was 34.1 percent;
• For the three months ended May 31, 2024, operating income for the overseas component (SEI and certain affiliates) of the parent company’s financial statements was only 21.3 percent of the operating income for the same period the year before;
• The total return on the company’s publicly held shares have seriously lagged applicable stock indices as well as those of their principal competitors, Circle K and Casey’s; and
• Fuel sales and average gallons fell by 11.7 percent and 2.7 percent, respectively in August, compared to declines of 3.7 percent and 4.7 percent, respectively, in July.

This data makes clear that both the franchisor and the franchisee community are under economic pressure and are underperforming their expectations. This is a result of a variety of factors, including those that are internal and external to the system.

These circumstances, as I have repeatedly opined in the past, have made the parent company of 7-Eleven an inviting takeover target. This generated the attempt by ValueAct, which acquired just under 5 percent of the company in the open market, to spin off the convenience store segment of the parent company of SEI into a separate entity in an attempt to increase shareholder value. This proposal was defeated at a meeting of shareholders.

More recently, the parent company of Circle K has made an unsolicited and non-binding offer to purchase the entire company for an amount roughly equal to its current market value. SEI’s parent company has pushed back, characterizing the offer as opportunistic and not reflective of its intrinsic value, which it expects to realize based on the initiatives underway. Circle K then responded on September 8, 2024, stating that their proposal has clear and strategic benefits for both companies, including their customers, employees, franchisees and shareholders. The mention of franchisees by Circle K is in stark contrast to the approach of ValueAct, which seemed to be acting as if the franchisees did not exist.

Circle K has not made clear what benefits would accrue to 7-Eleven franchisees if the purchase was consummated. But we do know from its publicly available franchise disclosure document, that Circle K franchisees pay a royalty of 3 percent of gross sales and advertising contributions aggregating 1.75 percent of gross sales up to $1.5 million of sales per year. Simple math demonstrates that SEI’s share of the gross profit split alone is substantially higher.

As of this writing there is no way to know or assess the likelihood of a transaction involving the parent company of Circle K. But our concern is that the circumstances that led to the unsolicited offer will not soon dissipate. 

Boosting Foot Traffic Thru Product Innovation & Diversity

Nick Bhullar, NCASEF Executive Vice Chair

Driving foot traffic and building customer loyalty are important to the success of our stores, especially in today’s economic climate. We can achieve these goals by focusing on two key strategies: product innovation and diversification. By continuously updating our product mix and offering exclusive items, we can attract new customers and retain existing ones, setting ourselves apart from the competition. But this isn’t a solo effort—it’s a collaborative push between SEI, franchisee leadership, and our valued vendors, all working together to bring fresh, exclusive products to our shelves that drive traffic and ultimately, improve the bottom line for everyone involved.

Product innovation lies at the heart of what makes our stores appealing. When customers know they can find something new and exciting at 7-Eleven, it gives them a compelling reason to visit our stores over others. This might involve introducing seasonal flavors that resonate with current trends, offering unique and fresh food options that cater to the evolving tastes of consumers, or bringing in trendy beverages that aren’t available at other convenience stores. The key is to stay ahead of the curve by keeping our product lineup fresh, diverse, and reflective of the latest consumer preferences. And here’s where our partnerships with vendors become invaluable. By working closely with our suppliers, we can secure exclusive product lines that customers can’t find anywhere else, making our stores a destination for those looking for something different.

Responding to changing market demands is another crucial aspect of product innovation. For instance, with the growing emphasis on health and wellness, offering products that cater to health-conscious customers is a necessity. Collaborating with vendors to bring in low-sugar, organic, or plant-based options can help us attract and retain this valuable consumer demographic.

Beyond tapping into broad market trends, it’s crucial to offer products that cater to the diverse tastes and cultural preferences of our customer base. This means introducing flavors and items that reflect the tastes of the local community, which can vary significantly depending on the region. By working closely with local vendors to bring in products that click with the local population, we create a shopping experience that feels personalized and relevant. This local focus helps drive foot traffic and creates a sense of loyalty among customers who appreciate the personal touch. Franchisees and vendors are on the same page here—working together to ensure that our stores offer a mix that’s both unique and deeply connected to the communities we serve.

Diversification is another critical strategy for driving foot traffic. By expanding our product range, we appeal to a broader audience and meet a wider array of customer needs. Diversification can take many forms, from offering a broader selection of snacks and beverages to introducing entirely new product categories. This approach increases the chances of attracting different customer segments and encourages customers to visit our stores more frequently, knowing they can find a variety of products in one convenient location.

One effective way to implement diversification is through exclusive collaborations and special promotions. These unique offerings can create a buzz around our stores and draw in customers eager to try something new. Whether it’s a limited-edition product or a special partnership with a well-known brand, these initiatives can significantly boost foot traffic and generate excitement among customers. Plus, running promotions that offer great value, like discounts on bundled items or rewards for frequent purchases, can incentivize customers to choose our stores over others. With SEI, franchisee leadership, and vendors all working together, we can ensure these promotions are as compelling and wide-reaching as possible, driving not just sales but also customer loyalty.

The 7Rewards app plays an important role in this strategy, serving as both a customer loyalty program and a powerful tool for driving repeat business. By offering exclusive deals and rewards to members, we encourage more frequent visits and increase customer spending.

The success of our stores hinges on our ability to attract and retain customers through innovative products and a diversified product range. By staying on top of market trends, embracing local flavors, and leveraging technology to enhance customer loyalty, we create a shopping experience that is both unique and compelling. With SEI, franchisee leadership, and vendors all pulling in the same direction, we can build a business model that benefits all stakeholders, ensuring the long-term success and profitability of our stores.

“By continuously updating our product mix and offering exclusive items, we can attract new customers and retain existing ones, setting ourselves apart from the competition.”

“The key is to stay ahead of the curve by keeping our product lineup fresh, diverse, and reflective of the latest consumer preferences.”

“By working closely with local vendors to bring in products that click with the local population, we create a shopping experience that feels personalized and relevant.”

“Whether it’s a limited-edition product or a special partnership with a well-known brand, these initiatives can significantly boost foot traffic and generate excitement among customers.”

Looking To The Future

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

Since my last column, in which I reflected on the numerous changes to the 7-Eleven system over the past decade, Convenience Store News published its latest report on the Top 100 chains. The title of the report is “TOP 100-Slow Motion,” reflecting the fact that the ranking of the top chains had changed little from the previous year. Here is a summary of some of the data gleaned from that report:

Note that 7-Eleven retains its #1 ranking, reflecting its overall 8.5 percent U.S. market share, with 42 percent of the units in the top 10 and 60 percent of the units in the top three.

I also looked back at the same ranking for the year 2016, prior to 7-Eleven’s acquisition of the Sunoco chain in 2018 and the Speedway (Marathon Oil) chain in 2021—then ranked #7 and #8, respectively. Also in the Top Ten in 2016 were Shell, Chevron and Exxon, ranked #3, #4 and #6, respectively. These five chains, all linked to major oil companies, were replaced in the Top 10 in 2023 by chains which have experienced significant growth, most especially Casey’s which was ranked #9 in 2016 and #3 in 2023. On the other hand, the 1st and 2nd rankings in 2016 were 7-Eleven and Circle K, and that remained so seven years later.

While many of the top chains have engaged in growth through consolidation, individual store ownership continues to grow faster than the chains. The percentage of convenience stores operated by chains has fallen by more than 2 percent since 2019. So, the U.S. market, which at the end of last year included more than 152,000 convenience stores, continues to be fragmented and over time has gradually become more so. For example, in 2017, the top ten chains amounted to a little more than 26 percent of the convenience store market, but in 2023 they were just under 20 percent of the market.

The signals thus seem clear that more consolidation is in the future, not just for the convenience store industry in general, but also for the 7-Eleven system in particular. There are two separate and distinct sources and reasons for this conclusion:

1. Convenience Store News also recently published its “Industry Report 2024 – A Trying Year.” The report contains a mountain of data which all boils down to what every 7-Eleven franchisee knows about financial results for 2023. As an industry, sales were down 4.7 percent and transaction counts were down 3 percent. But wages were on average up 6.6 percent and total expenses up by 11.3 percent. Inflation was 5.7 percent, down slightly from the year before. And it’s no secret that through April 2024, same store sales in this system have been down for many months in a row. These numbers provide added impetus to merger and acquisition activity within the industry. The smaller operators find it difficult to operate and compete in this environment, and the larger operations have deeper pockets and access to capital.

2. The Seven & I Strategic Committee published a report this past spring telling investors that its areas of focus going forward includes an assertive approach to mergers and acquisitions in the U.S. market. Having already spent more than $24 billion to acquire two chains comprising more than 4,800 locations, the parent company of 7-Eleven has made clear that it intends to continue to grow through acquisitions in the United States. This means that some of the chains on the top ten list are among the likely targets for acquisition. While we certainly have no inside information, it bears noting that Casey’s, designated by Convenience Store News as one of the “convenience store chains to watch going forward”, is led by CEO Darren Rebelez, who was employed by 7-Eleven from 2007 to 2014, occupying the title of Chief Operating Officer when he departed. But Casey’s is not the only potential target as 7-Eleven has acquired firms larger than those ranked #4 thought #10 in the Top Ten.

There is no question that the acquisition of the Sunoco and Speedway chains have altered the profile and culture of this system in material ways. My previous column was built around the theme that the only thing that is constant is change. That has proved true, whether you look to history or to the future.

Contact info
Eric Karp can be reached at 617-512-9004 or ekarp@wfrllp.com

“Note that 7-Eleven retains its #1 ranking, reflecting its overall 8.5 percent U.S. market share.”

“While many of the top chains have engaged in growth through consolidation, individual store ownership continues to grow faster than the chains.”

“The parent company of 7-Eleven has made clear that it intends to continue to grow through acquisitions in the United States.”

Going Back To Basics In 7-Eleven Stores

By Teeto Shirajee, NCASEF Vice Chair

In an era of online shopping and digitized experiences, brick-and-mortar retailers are increasingly challenged to stand out and adapt to changing consumer behaviors. However, within the complex landscape, going back to basics remains a winning strategy in retail. By emphasizing fundamental principles such as customer service, cleanliness, quality, value, and a distinct product assortment, our 7-Eleven stores can create a compelling and memorable in-store experience that surpasses what e-commerce platforms can offer.

At the heart of every successful retail business lies exceptional customer service. Customers who enter a physical store seek personalized attention, guidance, and assistance. By developing a culture of outstanding customer service, 7-Eleven stores can create positive, lasting impressions and build meaningful relationships with their customers. Knowledgeable and attentive staff who actively listen to customer needs, offer product recommendations, and provide prompt and friendly assistance play a pivotal role in creating a memorable shopping experience.

Cleanliness is a fundamental aspect of the in-store experience that significantly impacts customers’ perceptions and overall satisfaction. A clean and well-maintained 7-Eleven store instills confidence in customers, and creates a pleasant and welcoming atmosphere. Attention to detail—such as organized shelves, spotless floors, and clean restrooms—shows that we care about the customer experience. Regular cleaning schedules and the use of eco-friendly cleaning products can further enhance the appeal of the store.

In pursuing a successful retail business, delivering high-quality products is paramount. Customers are increasingly conscious of the value and durability of their purchases. By curating a selection of products known for their quality and reliability, retailers can build trust with customers. Collaborating with our high-quality private brands and conducting thorough quality checks on incoming inventory delivery helps maintain product standards. Investing in training programs to educate staff about product features, benefits, and usage can also instill confidence in customers’ buying decisions.

One primary factor that draws customers to retail stores is the perceived value of their purchase. To remain competitive, we must provide value-driven offerings, like accepting all the funded promotional offers by the vendors and SEI. This includes a balance between competitive pricing, promotions, and exclusive deals. Demonstrating value goes beyond price alone—it encompasses factors like the uniqueness of a product and additional services. By consistently delivering value, we can generate customer loyalty and distinguish ourselves from competitors.

A well-curated assortment of products tailored to customers’ preferences is crucial to a successful 7-Eleven store. We should deeply understand our target audience and offer a wide range of products that cater to their needs and desires. Striking the right balance between popular items, niche products, and new items from Info-Dispatch ensures that customers have various choices. Regularly reviewing and updating the product assortment based on market trends and customer feedback can help our stores stay relevant and meet evolving consumer demands.

In the rapidly changing retail landscape, embracing basic yet essential principles is crucial for success. By prioritizing customer service, cleanliness, quality, value, and the assortment of products, 7-Eleven stores can create a superior in-store experience beyond what online platforms can provide. These core principles build trust and relationships, and differentiate physical retail establishments in an increasingly digital world. By focusing on the fundamental elements customers value most, we can position ourselves as destinations of choice, creating a loyal customer base and driving sustainable growth in our stores.

A Call To Action

Sukhi Sandhu, NCASEF Chairman

In the current economic climate, it’s more urgent than ever that we get involved in legislative affairs that can significantly impact our businesses’ sustainability and growth. Engaging with local, state, and national legislative processes is a strategic imperative that can protect the profitability of our stores and help us thrive during regulatory changes and economic challenges.

One pressing issue many of us face is the proposed bans on flavored tobacco and other age-restricted products. These bans, while designed to improve public health and prevent sales to minors, can severely affect our revenue streams. Flavored tobacco products, including menthol cigarettes, make up a significant portion of our sales. There are many other ways to protect the public’s health and deter sales of age-restricted items to minors that also keep small businesses and the economy going, as well as provide revenue to municipalities via taxes and license and permit fees. 7-Eleven already utilizes Electronic Age and Identity Verification on its branded websites and is working to launch it on the 7Rewards app. Working with SEI we can deploy the latest age verification technology at the store level. We can also train our employees to follow the latest age verification requirements, and as far as protecting the public’s well-being, educational programs can be developed by health organizations.

Interacting with legislators allows us to voice our concerns and advocate for balanced laws and regulations that protect the public without devastating our bottom lines. Participating in public hearings and joining forces with convenience store groups can ensure our perspectives are heard and considered in the decision-making process.

Retail crime—including shoplifting, organized retail theft, and smash-and-grab robberies—is another growing concern that threatens our profits, as well as the safety of our employees and customers. By actively participating in local crime prevention programs and supporting stronger penalties and better enforcement, we can help create safer environments for our stores. Building relationships with local police departments and law enforcement officials—like meeting often with the police chief or district attorney, and inviting police officers to visit your store—and supporting community policing initiatives can build mutual trust and cooperation, making our stores less attractive targets for criminals. Additionally, joining local business associations can amplify our collective voice, pushing for more resources and attention to combat retail crime effectively.

Finding unique items and categories that generate incremental income to offset our increasing operational costs is vital for our growth, and one such opportunity lies in the legalization and regulation of skill games. These games, which require a degree of skill rather than mere chance, can attract customers and provide an additional income source. However, the legality of skill games varies widely across states. Promoting clear and fair legislation at the state level can ensure that these games become a viable option for our stores. Working with state legislators, providing testimony on the economic benefits, and collaborating with other business owners can help push favorable legislation, opening new avenues for revenue not only for our stores, but also for cities and local municipalities through taxing and regulation.

Joining regional and national trade organizations like the National Association of Convenience Stores (NACS), the California Fuels and Convenience Alliance, the New York Association of Convenience Stores, or other small business associations can significantly enhance our ability to influence local, state and federal laws that affect us. Attending the NACS Day on the Hill event, held annually in Washington, D.C., allows us to meet directly with members of Congress and other policymakers. This face-to-face interaction is crucial for discussing critical issues such as credit card swipe fees, labor laws, and other regulations impacting our store operations. By participating in legislative advocacy, we can share our perspectives and campaign for balanced policies that consider the economic realities of running a small business. Labor laws directly affect how we manage our workforce. Through NACS and other trade organizations, we can work to influence these laws in ways that support sustainable business practices.

Understanding the legislative issues that impact our businesses is the first step towards effective advocacy. Regularly reviewing updates from NACS and other industry associations helps us stay informed and prepared. Building relationships with local, state, and federal representatives by inviting them to visit our stores and discussing our challenges and potential solutions can make our voices more influential. Participating in NACS Day on the Hill and other advocacy events provides valuable opportunities to connect with other convenience storeowners and promote our shared interests. Joining local business associations helps us stay informed about local legislative issues and provides a collective voice in promoting favorable policies. Hosting community engagement events in our stores, such as meet-and-greet events with local officials, can gain us support.

For example, on a local level, working with city councils on ordinances that affect store operations, such as license fees and transfer restrictions, can ensure that our interests are represented. On the state level, engaging in discussions about state-mandated restrictions on certain product sales, like alcohol or tobacco, can help mitigate potential negative impacts on our business. Federally, issues like changes to labor rules require our collective voice to ensure that legislation is balanced and considers the needs of small business owners. By having a seat at the table, we can educate lawmakers on how certain laws and regulations affect our businesses, and how much we contribute to the local economy.

Together, we can influence the legislative landscape to create a more favorable environment for our businesses. Involvement in legislative affairs is about protecting our interests and ensuring the growth of our 7-Eleven stores. Let’s take this call to action seriously—engage, advocate, and lead by example. Our efforts today will shape the business landscape of tomorrow.

Small Change, Big Impact: How Your Business Can Help Heal Local Children

Nick Bhullar, NCASEF Executive Vice Chair

As a small business owner, especially as a franchisee of a well-known brand like 7-Eleven, our role in the community extends beyond providing convenient services and products. We are a pillar of support and a beacon of hope for many in our neighborhoods. And we have proven that over and over by participating in many fundraisers and other community events over the years.

At the end of 2023, our stores participated in the fundraising campaign benefiting Children’s Miracle Network Hospitals. Thanks to the unwavering support of franchisees, customers, and associates, we collectively raised over $18 million for CMN Hospitals in 2023. This remarkable achievement directly benefited 107 member hospitals across the communities we serve, providing critical medical care and support to countless children. Your dedication and generosity made a tangible difference, ensuring that local children’s hospitals have the necessary resources to offer life-saving treatments and improve the quality of life for young patients.

As we celebrate the success of our past efforts, I would like to request our community to once again participate in the upcoming round of CMN Hospitals fundraising. I call upon the entire 7-Eleven community to step up and participate in this noble cause. The upcoming round of the initiative presents another opportunity for us to come together and make a significant impact on the health and well-being of children in our local regions.

As we all know, children often form a significant portion of the customer base at 7-Eleven locations. Our stores are frequented by families, and many children enjoy visiting for snacks, drinks, and other kid-friendly products. When parents and community members view 7-Eleven as a partner in supporting children’s health, they are more likely to choose your store over competitors. The sense of a shared mission enhances customer relationships and reinforces the idea that 7-Eleven is more than just a convenience store—it’s a community ally dedicated to making a difference in the lives of local children.

One impactful way to make a significant difference is by participating in money round-up programs to help children in your local region receive critical medical attention. A money round-up program is a simple yet powerful fundraising initiative where customers are asked to round up their total purchase amount to the nearest dollar. The difference is then donated to a specific cause. In this case, the proceeds would go towards CMN Hospitals for children in your local community who are in need of surgeries or other medical interventions. By participating in money raising programs focused on children’s health and wellness, we can align our brand with the values that resonate deeply with their community.

Now, I know we are all thinking, “It’s easier said than done.” So, we have gathered some helpful information from participating franchisees that have had huge success in achieving customer and employee participation. The first and most important step is to train your sales associates to explain the program to customers. They should be able to clearly articulate the purpose of the program and how it helps children in the local area. Role-playing scenarios can help associates practice and become more comfortable with these conversations. It would also help if you provided a simple, effective script for your sales associates to use. For example: “Would you like to round up your total to the nearest dollar to help local children receive medical care? Your small change can make a big difference!”

You can also help your customers understand your mission and objective behind the cause by displaying informative flyers, posters and success stories of children who have been helped by the program. Personal stories resonate with people and can motivate them to contribute.

It is also crucial to set goals for your employees and to celebrate them once those goals have been reached. To further motivate and engage your sales associates, please consider implementing a reward program based on the amount of money raised through the round-up program. Setting achievable milestones and offering incentives—such as gift cards, extra paid time off, or recognition awards—can drive enthusiasm and commitment.

For instance, you could set a goal of $500 raised within a month and reward the team with a catered lunch or a special acknowledgment ceremony. Recognizing and rewarding your employees will boost morale and establish a team-oriented environment where everyone is committed to making a difference in the community. This added incentive will encourage your staff to be proactive in promoting the round-up program, ultimately leading to greater success and a more impactful contribution to children’s medical needs.

By adopting these strategies, 7-Eleven teams can carve out a unique niche in the convenience store market. Unlike other brands that may only focus on the transactional aspect of their business, 7-Eleven can be seen as a community-centric, socially responsible brand. This reputation not only attracts more customers, it also generates long-term loyalty and trust. And by asking customers to round up their purchases to the nearest dollar, we can continue to support our local children’s hospitals and provide essential medical attention to those in need.

 Let’s unite once more in this mission and show that the 7-Eleven family is committed to building healthier, happier communities. Together, we can make a difference, one round-up at a time.

Change Is The Only Constant

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

The Greek philosopher Heraclitus is credited with the idea that the only constant in life is change. More recently and closer to home, Benjamin Franklin is quoted as saying, “When you’re finished changing, you’re finished.” And change has been a major theme in the 7-Eleven franchise system, especially over the last 10 years.

 7-Eleven had less than 8,000 stores in the United States and 82 percent of them were operated by franchisees in 2014. More than 11 percent of its revenue was derived from its share of the gross profit split with franchisees. The company’s net income was approximately $335 million. Gross margin derived from gasoline sales was approximately $833 million and gasoline gross profit was 6.3 percent. SEI was primarily a franchised convenience store company.

Fast forward to 2023, we find a system transformed. By the end of last year, there were more than 12,500 stores in the United States, but only 55 percent of them were franchised. Nearly 63 percent of all locations have gasoline and 75 percent of the company’s revenue is derived from fuel and about 5 percent from its gross profit split with franchised stores. Gross profit from gasoline was approximately 11.9 percent. In 2023, SEI gasoline operations generated more than $5.3 billion in gross margin. SEI operating income in 2023 was $2.9 billion. Currently, SEI is primarily a company owned gasoline retailer.

In addition, between 2014 and 2023 franchisees experienced the rollout of the so-called new franchise agreement, which transferred many expenses and responsibilities from SEI to its franchisees.

I outline these changes because of the Strategy Committee Recommendations report from the outside (non-management) Directors of Seven & I Holdings Co., Ltd., the parent company of SEI. The report was issued on April 10, 2024. The committee spent many months developing this plan and their work included extensive conversations with significant many shareholders.

In its announcement of the recommendations, the company stated that the committee had provided input to management in advance of the final recommendations, some of which had already been implemented. The company went on to say that We will create a timeline for actioning those items that are being announced today and have started working towards implementation.

From these conversations emerged the common theme that the company needs to accelerate growth in order to realize its global potential, indicating that the current price of its publicly held shares is not a reflection of that potential.

Four primary recommendations to the overall Board emerged:

1. Growth Through Acquisitions. The committee’s top line recommendation is to Accelerate growth and improve profitability and capital efficiency in the North American CVS market with large growth potential. They indicate that there is an opportunity to capitalize on a fragmented convenience store market with a more assertive and flexible approach to financing. The company’s response referred to a more agile and flexible financial discipline, (target Net Debt/EBITDA range of 1.8-2.5). They report to shareholders that the North American CVS business will continue to be a key driver in growth of the overall company. The committee compliments SEI for its ability to integrate acquired assets, and accelerate their sales and profitability, most recently with Speedway. The committee does not specify any particular targets for acquisition, nor does it indicate whether they would be operated under the 7-Eleven banner or whether they would be franchised.
2. Eventual Transition from Gasoline. Once again, the committee voiced its concern over the eventual transition away from gasoline for personal transportation, although both the form of that transition and the time frame remains unclear. But they urge management to develop an explicit plan to address this transition and its potential impact on customer traffic, sales and profit. The importance of such a plan is obvious, given the heavy reliance of the company on gasoline as a source of revenue and profit. The company’s response to the recommendations did not mention this item.
3. Food Production Capability. The committee’s view is that the 7-Eleven system can differentiate itself from competitors by expanding the variety and quality of its food offerings. The Japanese store revenue share for fresh food and hot food is 42 percent, nearly 2 ½ times that of the United States stores. It urges the Board to make investments in food production capability, in-store and through commissaries, in order to accelerate this opportunity. The company’s response also did not include this item.
4. Unified Leadership. The committee recommends that the superstore division of the parent company be spun out into a separate public company, so that the resources can be concentrated on the convenience store segment, which is now 82 percent of its business. The company’s response on this point stated: the company is considering an IPO of the SST business targeting to list as soon as reasonably practicable as one workable option... They also want to create a globally integrated convenience store management structure, including Japan and North America, under a unified leadership. This appears to be an effort to increase the pace of the transition of North American stores to a product mix closer to that of the Japanese stores. Left unsaid in the report is how this integrated management structure would be created, who would lead it, and where it would be based.

One indicator of the company’s embrace of these recommendations was the announcement on April 18, 2024 that Stephen Hayes Dacus, the Chair of the Strategy Committee will be appointed Chairman of the Board of the company upon approval of the Board following the shareholders meeting on May 28, 2024. In order to understand developments that occurred in the past and may happen in the future directly affecting 7-Eleven stores in the United States, we continue to closely monitor, evaluate and report on developments and information from the parent company of your franchisor, as well as its marketplace competitors and publicly held peers.

Neither space nor time permits speculation on how these changes could affect franchisees in the United States. But I can assure you that I will be discussing these and other pressing matters at my presentation at the NCASEF Convention and Trade Show at the Gaylord Palms Resort and Convention Center in Kissimmee, FL July 17-19, 2024. I hope to see each of you there.

Charting A Path Forward

By Sukhi Sandhu, NCASEF Chairman

In these turbulent times, being part of the retail industry feels like navigating through a storm. As a 7-Eleven store owner, I know firsthand the challenges our businesses are facing. But if there’s anything I know about franchisees and the 7-Eleven brand, is that we are resilient, and I am confident we can overcome these present hurdles and come out stronger through collaboration and adaptability.

The economic landscape is shifting, with factors like EBT/SNAP benefits adjustments, rising inflation, and soaring grocery prices impacting our customers. Households have less disposable income, leading to tighter budgets and heightened challenges for us to attract and retain customers. We’re also experiencing shifts in legislation and regulations that add more layers of complexity to our operations—like flavored tobacco bans—and market prevailing wages and insurance rates that are increasing so rapidly it’s making it difficult for us to adjust or offset our operating expenses.

To help us make it through this period, SEI’s merchandising team is working with our vendor partners to introduce more “First, Best, Only” (FBO) items and products exclusive to 7-Eleven, aimed at driving foot traffic and distinguishing our stores in the c-store sector. They are also working with vendors on better costs and promotions that are funded (in some cases fully), as well as to ensure the supply chain is running smoothly so our shelves are always fully stocked with the items our customers crave.

Collaboration with SEI and our vendors is pivotal in this endeavor. Together, we’re responding to the economic changes, creating a dynamic product mix offered at the right price that will bring more customers through our doors. These partnerships are vital, allowing us to leverage collective insights and resources to introduce products and promotions that set us apart.

But we as franchisees also have a tool at our disposal that is particularly indispensable at moments like these—the ability to adapt and cater directly to our customers’ needs as independent store owners. As franchisees, we possess the autonomy to make decisions that can significantly impact our stores’ success. Our franchise agreement allows us to order 15 percent outside of the Recommended Vendor Purchase Requirement (RVPR). We can use that to help tailor our stores to our customers’ tastes. We can order from local vendors, try new products as NRIs and SSIs, and adjust the retail pricing on some products to increase foot traffic.

This autonomy allows us to make choices that may differ with the broader corporate recommended strategies, but allows us to exercise Retailer Initiative and customize our product mix to the unique preferences and requirements of our local communities. From introducing regional specialties to adopting new product lines that resonate with our customers, our role as independent operators empowers us to drive sales and attract new shoppers by making decisions that sustain and enrich our stores and the communities we serve.

As franchisees, we’re curators of a retail experience that’s as diverse and dynamic as the customers walking through our doors. By staying attuned to their changing needs and preferences, we ensure our stores remain relevant, welcoming, and vibrant. This approach is not just about survival—it’s about thriving and turning challenges into opportunities for growth and connection.

The recent 7-Eleven Experience event stands as a testament to our collective strength and commitment. Seeing record-breaking franchisee attendance was an impressive and powerful demonstration of our unity and dedication to our brand, and each other. Platforms like the 7EE and our NCASEF convention underscore the importance of collaboration, of networking and sharing ideas, and learning from one another to navigate the complexities of our industry together. They also allow us to see and order the latest hot products from our vendor community that could have huge impacts on our sales and profitability.

As we continue to navigate these uncertain times, let us remember the power we hold as franchisees. Our ability to adapt, to customize our stores to meet the evolving needs of our customers, is our greatest asset. It’s through this flexibility and executing at the higher level innovations like FBOs and exclusive products that we’ll not only weather the current storm, but emerge stronger, more connected, and more resilient.

Before I end this column, I would like to extend my heartfelt thanks to Joe Rossi, our former NCASEF Executive Vice Chair, and Romy Singh, our former Treasurer, for their unwavering dedication and service to our franchisee community. Their contributions have laid a strong foundation for our collective success, guiding us through both challenges and triumphs. They were also pivotal in implementing the new collaborative vision of our organization.

I’m thrilled to announce the appointment of Khalid Asad (Vice President of the Kansas City/St. Louis FOA) and Michelle Niccoli (Vice President of the Rocky Mountain FOA) as interim Vice Chairs of NCASEF. Their diverse backgrounds and perspectives, as well as their experience as franchisee leaders, are invaluable assets to our leadership team and I’m looking forward to working with them.

I want to reiterate my commitment to serving you all with every ounce of energy I have. As we look to the future, let’s continue to embrace our independence and nurture a culture of collaboration between all 7-Eleven stakeholders.

Empowering Our Future Through The Ballot Box

Nick Bhullar, NCASEF Executive Vice Chair

Our 7-Eleven business isn’t only about selling products, it’s about being a vital part of the community and a source of convenience in our customers’ busy lives. But as we navigate the waters of commerce, we are increasingly finding ourselves at the mercy of decisions made far from our well-lit aisles and friendly counters. The truth is, more and more our businesses are being influenced by the people that craft our laws. This is why I ask each one of you to vote with the future of our stores in mind this election season.

In a retail landscape dotted with giants, small businesses like ours need advocates in government. From the corridors of local municipalities to the halls of Congress, decisions are being made that directly impact our operations, our profitability, and our ability to serve our communities. We need lawmakers who understand that decisions like credit card swipe fees, menthol bans, raising tobacco license fees, and swift increases in the minimum hourly wage are more than lines in a legislative document, they are currents that can either sweep our businesses to prosperous shores or sink us into troubled waters.

In regard to credit card swipe fees, every time a customer swipes their card, a portion of our hard-earned revenue disappears into a fee. We need representatives who see the value in regulating these fees, ensuring they are fair and do not disproportionately impact small businesses like ours. The balance here is delicate—we are not against the convenience of card payments, but against the unfair burden of excessive fees.

The proposed bans on menthol and other tobacco products are another battleground. While public health is important, abrupt bans without considering the impact on businesses like ours are not the solution. We need legislators who will work with us to find a balance between public health concerns and the economic realities of stores that rely on these sales.

Rising tobacco license fees are a similar concern. Increases in these fees must be balanced with the realities of our operating costs. They should not be punitive, but reflective of a cooperative approach between government and businesses.

Wage policies, particularly around raising the minimum hourly wage, are a critical concern. While we all support fair wages, a sudden and steep increase can be a shock to the system of small businesses. We need lawmakers who understand the need for a phased approach, giving businesses like ours time to adapt without compromising our bottom lines.

Lastly, the rising tide of retail crime is a concern that keeps many of us awake at night. We need strong support from law enforcement and the legal system to protect our employees, our customers, and our investments. Legislators who prioritize effective measures against retail crime will have a direct positive impact on our businesses and communities.

As we stand on the eve of these elections, I urge you to think of these issues as you cast your vote. It’s about choosing representatives who understand the heartbeat of small businesses, who recognize the challenges we face, and who are willing to work alongside us for solutions that benefit our stores and our communities as a whole.

 Together, we can make a difference. Let’s go to the polls and vote for the change we want to see. Let’s vote for the future of our businesses and our communities. Let’s vote for a brighter, more prosperous tomorrow.