7-Eleven Franchisees Seek Relief from 24-hour Mandate | Financial Buzz

7-Eleven Franchisees Seek Relief from 24-hour Mandate

Faced with a crippling shortage of labor, higher operating costs, lower gross margin and lower net profit, 7-Eleven franchisees are asking their franchisor to reconsider its mandate that stores resume 24/7 operations beginning May 24, 2021. A letter to 7-Eleven Inc. from the local Franchise Owner Association in greater-Philadelphia describes the situation as “very dire.” As the umbrella organization for 41 local franchise owner associations, the National Coalition of Associations of 7-Eleven Franchisees (NCASEF) is calling on 7-Eleven Inc. (SEI) to recalibrate the terms of their current Franchise Agreement to better support their owner/operators.

Despite the relaxation of Covid-related restrictions across the country, employers throughout the service industry are struggling to fill positions. The shortage of workers has led some large, national quick-service restaurant chains to keep dining areas closed and other retailers to curb hours of operation. By NCASEF’s estimate, at least 60 7-Eleven stores that are owned and operated by the company are closed overnight. When the pandemic struck, SEI approved franchisee requests to close overnight. Now, franchisees say finding help to staff overnights will be extremely challenging. Additionally, franchisees in many markets say overnight sales barely cover their cost of labor. And, with the shortage of available workers, many franchisees will be forced to cover the shifts themselves, causing stress to their health and families. Even with SEI’s newly enhanced worker recruitment tool, franchisees say it is hard to compete with other retail companies or delivery services on wages, benefits and flexibility.

“We are already feeling the squeeze. The 7-Eleven Franchise Agreement allows the corporation to keep more than 50 percent of the gross profits of each sale. As labor and other direct store operating expenses keep increasing, franchisees are earning less and working more,” said NCASEF Executive Vice Chairman Michael Jorgensen. “One possible remedy for franchisees is to raise retail prices, but that creates a competitive disadvantage in the marketplace, which can adversely affect sales and profits.”

What’s more, SEI’s fresh foods initiative, which follows a broader emphasis in the convenience store industry, creates a demand for more labor. “7-Eleven wants to be a place that customers think of for fresh food, but our Franchise Agreement is based on a convenience store model, not a quick-service restaurant model. The structure of the agreement is flawed. We need a contract that makes this model workable and profitable for franchisees,” said Jas Dhillon, a Los Angeles area 7-Eleven franchisee and treasurer for NCASEF, which is an elected, independent body representing the interests of more than 7,200 7-Eleven franchised locations in the U.S.

After 7-Eleven franchisees in Japan complained about the difficulty of staying open 24-hours, the Japan Fair Trade Commission published a report suggesting that mandating 24/7 operations could run afoul of the country’s anti-monopoly law by “abusing a superior bargaining position.”

Nearly half of the 7-Eleven stores in the U.S. sell gasoline. SEI is making record profits on gas while franchisees get a set commission of 1.5 cents per gallon, according to Jorgensen. Plus, store employees have to maintain the area around their gas pumps. The point was underscored in a recent report from U.S. Sen. Catherine Cortez Masto of Nevada, which examined deceptive practices in the franchising industry. It said, “Gasoline acts as a loss leader for franchisees and can fail to cover the cost of gas operations.”

“Because of today’s extremely tight labor market, many franchisees will struggle to safely maintain a 24-hour schedule, and the company needs to acknowledge that,” said Jorgensen. “Franchisees have nowhere to turn except to 7-Eleven for relief from crippling labor conditions and unfair contractual terms. The corporation knows the pressure we are under, and their recent public statements mischaracterize the truth about franchisee income.”

About NCASEF: The National Coalition is a trade association for 7-Eleven franchise operators in the U.S. Originally founded in 1973, NCASEF is comprised of 41 separate independent Franchise Owner Associations collectively having more than 4,400 7-Eleven operators as members.

Contacts

Media contact:

Matt Ellis

Ellis Strategies, Inc.

matt@ellisstrategies.com | 617-278-6560