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7-Eleven Franchisee Group Requests Open Accounting of Vendor Payments

NCASEF asks corporation to ‘open its books’ following annual event

SAN ANTONIO The National Coalition of Associations of 7-Eleven Franchisees (NCASEF) is requesting that 7-Eleven Inc. open its books and show how much money it collected from vendors who paid to show their products and services to franchisees and corporate executives at the corporation’s annual 7-Eleven Experience event.

The request is the latest move in a contentious relationship between the convenience-store retailer and some of its store owners. NCASEF has been urging 7-Eleven Inc. to revise its 2019 franchise agreement. Tensions have been mounting over that agreement and other issues.

In November 2018, the NCASEF board took a vote of “no confidence” in the management of 7-Eleven Inc., reflecting franchisees’ belief expressed in a survey that 7-Eleven has failed to focus resources and energy on improving declining store-level net profits. NCASEF said that, instead, 7-Eleven Inc. is “shoring up corporate gross profits at franchisees' expense.” Several leaders of the coalition’s member groups, however, asked the alliance to ease off its rhetoric and actions.

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“We strongly believe that the money 7-Eleven collects from vendors at trade shows should be used to help lower the cost of goods for all franchisees,” Rehan Hashmi, vice chair of the national coalition, said in a press release. “The company collects millions of dollars for its Japanese parent [Seven & i Holdings Co. Ltd.] even as U.S. franchisees are struggling to earn solid profits.”

NCASEF cites 7-Eleven Inc.’s franchising website, which says, “As a franchise owner, you get to leverage 7-Eleven’s super buying power and offer your customers what they love at great prices, and without cutting into your profit margins. We buy big, so you can get the benefit of negotiated pricing and terms.”

NCASEF claims that franchisees sometimes pay more for items that they could purchase for less from warehouse clubs such as Costco. The 7-Eleven Inc. franchise agreement makes no guarantees that franchisees receive the best pricing or most advantageous terms from the supply chain run by the corporation, the coalition said.

7-Eleven Inc.’s revenue in 2018 from franchisee required purchases or leases was $2.58 billion, according to NCASEF, citing the corporation’s most recent franchise disclosure document.

The national coalition, which is an elected, independent body representing more than 7,000 7-Eleven franchised convenience stores in the United States, has “repeatedly” asked 7-Eleven Inc. to apply vendor payments to the cost of goods, “but the company has yet to show any accounting,” the group said. According to NCASEF, 7-Eleven Inc. says there is a process in place for its Franchisee Selection Committee to review 7-Eleven’s contracts with vendors, but this committee of five franchisees “is hemmed in by a process shrouded in secrecy and limited in its capacity."

“Franchisees should have a voice on how to best use that money. [7-Eleven Inc.] should not be using the millions it collects to defray expenses they should bear,” Michael Jorgensen, NCASEF’s executive vice chairman, said in the press release.

In a 2018 survey of NCASEF members, only 12% said they believe 7-Eleven gets the lowest cost of goods from its vendor partner and only 10% said 7-Eleven has franchisees’ best interests at heart, according to the group.

In response to this recent action, 7-Eleven Inc. explained some of the workings of its franchisee event.

“The 2019 7-Eleven Experience (7EE) in Las Vegas was extremely successful. This year’s event drew a record attendance of over 4,500 franchisees and their guests totaling over 8,500 attendees,” a 7-Eleven Inc. spokesperson said in a response to NCASEF's claims provided to CSP Daily News. “Franchisees continue to tell us that this is an important event for them to share best practices and gain tools to help them grow their businesses. 7EE sponsorships go toward the costs of the event and defraying franchisees’ travel costs to the event. Prior to sponsoring 7EE, each participating vendor confirms that their sponsorship dollars cannot be applied to lower the cost of goods. 7-Eleven shares in the cost of goods with franchisees and has a shared interest in obtaining low cost of goods. When 7-Eleven franchisees win, 7-Eleven Inc. wins.”

Founded in 1973, NCASEF is made up of 39 franchise association members who represent more than 4,600 7-Eleven owners in the United States.

Based in Irving, Texas, 7-Eleven operates, franchises or licenses more than 67,000 stores in 17 countries, including 11,800 in North America. It is No. 1 in the Top 40 update to CSP’s 2018 Top 202 ranking of c-store chains by number of company-owned retail outlets.

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