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7-Eleven franchisees square off with their franchisor

As more than 1,100 7-Eleven franchisees meet in Florida this week for their annual convention, conflict with the brand’s franchisor is again front and center

Agreements between 7-Eleven Inc. and thousands of its operators are set to expire in 2019 and 2020, according to the National Coalition of Associations of 7-Eleven Franchisees (NCASEF). “The company is applying heavy pressure for franchisees to sign the new agreement by the end of this year,” the group said.

7-Eleven Inc. denies putting pressure on franchisees. In a statement to CSP Daily News, a website and newsletter that covers the c-store business (and a sister to Restaurant Business), a spokesperson said the company so far has only “distributed a handful of emails and a page on the 7-Eleven intranet.”

In a statement, NCASEF also said the new agreement “further enhances the pervasive control 7-Eleven already exercises over its operators. For years, the company has been eroding franchisee profitability by increasing operating costs. Now, 7-Eleven is aggressively advising franchisees to sign the new deal immediately before its terms get worse.”

7-Eleven responded: “We offer 7-Eleven franchisees world-class training and ongoing corporate support to help their independent businesses succeed. 7-Eleven is committed to franchising and proud of the fact that over 90% of the brand’s stores are operated by franchisees as independent contractors. During the past 10 years, the 7-Eleven brand generated over $15 billion in earnings for small, community-focused businesses across the country. In fact, last year 7-Eleven franchisees collectively earned more money in a single year than any other year ever before. We enjoy a strong, productive relationship with our independent franchisees, which is one reason why Entrepreneur magazine selects 7-Eleven as a Top Franchisor of the Year each year.”

NCASEF Chairman Jay Singh said 7-Eleven's new agreement "lacks understanding of the very real issues [that] are impacting franchisee profitability and quality of life.”

“The agreement they are offering will make it increasingly more difficult for our franchisees to realize a profit for their hard work and dedication to the 7-Eleven system,” he said.

NCASEF's issues with the new agreement include:

  • A $50,000 franchise renewal fee. NCASEF said the fee is among the highest franchise renewal fees in the United States. 7-Eleven said it does not require any capital investment from franchisees (such as for remodels and refreshes) and cited the rival ampm c-store chain as having a similar renewal fee of $55,000; McDonalds, which it says has a $45,000 fee and requires franchisees to pay for remodels and refreshes; Subway, which it says requires franchisees to pay for remodels and refreshes; and Dunkin' Donuts, which it says has an $80,000 fee and requires franchisees to pay for remodels and refreshes.
     
  • A new graduated gross-profit split. NCASEF said it gives 7-Eleven as much as a 59% share off the top, even as franchisees must absorb higher operating costs.
     
  • Franchisees are responsible for maintaining aging store equipment they don’t own and that 7-Eleven won’t replace, said NCASEF.
     
  • No guarantees that the cost of goods franchisees receive from the 7-Eleven supply chain will be lower than what they could buy at a local big-box retailer, NCASEF said.
     
  • One-sided legal provisions that force franchisees to pay 7-Eleven’s court fees even if they win a franchise-related case, give up their right to a jury trial and be subject to the governing laws of the state of Texas regardless of where they operate their stores, said NCASEF.
     

On Oct. 12, 2017, NCASEF filed a lawsuit against 7-Eleven Inc. over profits, costs and control. A judge dismissed the lawsuit in March 2018.

Founded in 1973, Universal City, Texas-based NCASEF includes 44 franchise association members that represent more than 4,600 U.S. 7-Eleven owners. 7-Eleven Inc. puts the number of franchisees in the 7-Eleven system at fewer than 4,300.

Irving, Texas-based 7-Eleven operates, licenses or franchises more than 66,000 stores globally. The retailer is No. 1 on CSP's 2018 Top 202 ranking of c-store chains by number of company-owned retail outlets.

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