Franchisees See 7-Eleven's Massive Expansion as Commitment
Convenience Store Chain Plans to Convert Hard-Pressed Independent Stores into 7-Eleven System DALLAS (Blue MauMau) - In regards to the announcement made last summer by 7-Eleven's 
Japanese parent company, Seven & I Holdings, that a $2.4 billion growth strategy plan was in the works in the U.S. over the next four years. New York franchisee Tariq Khan feels that the expansion showed commitment from the company to the franchise system. Khan, who served as the National Chairman of the National Coalition of Associations of 7-Eleven Franchisees for the past ten years, said, "That is a good benefit for 7-Eleven corporate, which could add to the company's bottom line."
But Margaret Chabris, 7-Eleven's public relations and marketing director in Dallas, said the $2.4 billion growth plan was a figure quoted in a Nikkei Japanese story (Reuters) which 7-Eleven corporate never talked about. She said, "That figure for expansion would include remodels for existing stores, as well as remodels of stores that convert to the 7-Eleven brand under their "business conversion program," which started in 2005. And she said it includes acquisitions, such as White Hen Pantry.
Chabris also clarified that expansion in the U.S. includes several territories outside this country--Mexico, Canada and Puerto Rico. This program targets existing delis, gas stations convenience stores and other "mom and pops," and converts them to the 7-Eleven brand. What's different with the new system is that the store operators keep the land and/or buildings they currently have as independents, and 7-Eleven provides them with proprietary equipment, and updates their store brand to look like a 7-Eleven. She said it would be a different type of financing arrangement than with the traditional store, where the company owns the land or building.
Khan feels the business conversion program will be good for the independent operators, because they don't currently have the infrastructure to support their own businesses. Unlike 7-Eleven operators, independents have been relying on cigarettes and tobacco sales which are declining. He explains that consumers are more health conscious today. But he also says that the entire convenience store industry has been declining. "When they go with 7-Eleven, they go with a proven system which is good," Khan said. And he explained they will receive the same benefits as other franchisees, but they will pay a reduced initial franchise fee, and a lower gross-profit split goes to the company than if the franchisee started new.
Chabris also said that their growth will be in their existing markets, where they already have a number of stores. She said, "We are looking at developing these areas so that we can better leverage our advertising, and our infrastructure of combined distribution centers and commissaries and bakeries, where we have more stores in a concentrated area.
Company to Shed Its 40,000-Plus Employee Burden
In response to reports that 7-Eleven will be selling off its 1,000 company-owned stores, Chabris stated that she would not refer to it as "selling off" those stores. She explained they would be franchising the business at these stores, which are traditionally in Florida, Virginia, Texas, Ohio and Colorado. Although some of their stores may be kept as training stores, she said, "Our goal is to be a fully franchised company in the U.S."
Khan said this shows that the company feels the franchisees are a better fit than their own corporate style. But he also sees it as 7-Eleven shedding its 40,000-plus employee burden. He feels it will be easier for the company to manage because it will be able rid itself of 40,000-plus employees who run their company stores--employees that 7-Eleven currently manages and pays benefits.
In the convenience store business, Khan said the hardest thing today is finding labor. "That is a challenge," he said. "It's not even a choice anymore of looking for a good employee. You are just looking for an able body to work your store." He thinks the company could increase its bottom line of approximately $100 million by selling its company-owned units.
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