DAYTONA BEACH, Fla. -- Don Hennessy, who has managed company-owned 7-Eleven stores in the Daytona Beach, Fla., area for more than six years, is working on a deal for a franchise in Port Orange, Fla., reported The Daytona Beach News. Hennessy, 61, would pay about $250,000 in cash for the business, but not the real estate, he said. In return, he would get a rent-free store and use of the company's brand and its management support and products.
That sale, according to the newspaper, would likely be the first of a major transformation that 7-Eleven Inc. plans for 32 of its 34 stores in Volusia [image-nocss] County, Fla., all now corporate-owned. The company is seeking to convert its stores there into hybrids that give owner-operators a bigger stake in the business, but still keep the real estate in the hands of the parent corporation.
Hennessy said he believes it would be a great opportunity to get into a bigger store with a company he trusts and to share more directly the profits of a proven performer.
7-Eleven spokesperson Margaret Chabris said franchise owners are more committed to a store's success than employee managers, making the stores more profitable for franchisee and franchiser alike. "They work harder, have family members work in the store," she told the paper. They also want to get more involved in their communities than hired hands, and get to know their customers better, she added.
About 72% of 7-Eleven stores in the United States are franchised, and the company only recently started the sale of corporate stores in Florida. In December, 7-Eleven began offering franchises for sale at 76 stores in all of Volusia and Brevard counties and a small portion of western Seminole County, Michael Da Re, the company's franchise sales manager for Florida, told the Daytona Beach News.
That's all but six units in the territory, which for the moment are being withheld either for use as "training stores" or because the company's leases are too short or for other reasons, added Da Re.
Da Re said the company offered the deals to store managers first and then extended them to the outsiders in January. Potential buyers are vetted in a process that usually takes about four months, he said. The company expects sales of all the company's stores available in the territory to take as much as four years.
Hennessy, who currently runs the company's store in Daytona Beach Shores, is the only manager so far to commit to a deal, Da Re said. "But we have several outside in the process."
In the arrangement 7-Eleven offers, the company carries the costs of real estate, including taxes and lease payments. After profits from sales are calculated—but before the cost of wages is factored in—franchisee and franchiser share what is left over. That money is split "around 50-50," but can vary somewhat based on factors such as the store's overall performance, Chabris said.
From his or her share, the franchise owner covers labor costs, said the report. That is an arrangement that would exclude the franchise owner, and possibly family members, from wage and hour laws such as overtime pay requirements. Hennessy said he would have to provide his own health insurance and profit sharing.
The structure of the deal "is certainly unusual," Jim Combs, a Florida State University management professor, told the paper. The company apparently is trying to keep franchisees from deviating from 7-Eleven policies and to make buying a franchise cheap enough for people willing to work in the store. Many franchises are so costly that investors do not work in the business, he said.
Hennessy, for instance, said he had looked at such other franchise options as Dunkin' Donuts but had found them out of his reach financially.
He said he expects to be able to recover his 7-Eleven investment within five to seven years. In the meantime, "I will be able to pay myself a salary and drag some profits out of it," he told the paper.
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